As filed with the Securities and Exchange Commission on
September 10, 1996.
File No.
33-________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF
1933 /X/
__ Pre-Effective
Amendment No. _____ /__/
__
Post-Effective Amendment No. _____ /__/
THE TOCQUEVILLE TRUST
(Exact name of Registrant as Specified in
Charter)
Registrant's Telephone Number, including Area Code:
(212)698-0800
1675 Broadway
New York, New York 100180
(Address of Principal Executive Offices) (Zip
Code)
Francois D. Sicart
President
The Tocqueville Trust
1675 Broadway
New York, New York 10018
(Name and Address of Agent for Service)
with copies to:
Joseph R. Fleming, Esq. Susan J. Penry-
Williams, Esq. Dechert Price & Rhoads
Kramer Levin, Naftalis, Ten Post Office Square - South
& Frankel
Boston, MA 02109 919 Third Avenue
New York, New York 10022
Approximate Date of Proposed Public Offering: As soon
as practicable after this Registration Statement
becomes effective.
It is proposed that this filing will become effective
on October 10, 1996 pursuant to Rule 488(a) under the
Securities Act of 1933.
The Registrant has filed a declaration registering an
indefinite amount of securities pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended.
Accordingly, no filing fee is payable herewith. Not
later than December 30, 1996, the Registrant intends to
file the notice required by Rule 24f-2 for its most
recent fiscal year, which ends October 31, 1996.
THE TOCQUEVILLE TRUST
CROSS-REFERENCE SHEET
Form N-14 Item CAPTION IN PROXY
STATEMENT/PROSPECTUS
1 Cover Page; Cross Reference Sheet
2 Table of Contents (Cover Page)
3 Synopsis; Risk Considerations
4 Synopsis; Information About the
Transaction; Exhibit A
5 Synopsis; Comparison of Investment
Objectives, Policies and
Restrictions; Information About the
Reorganization; Information About
the Funds; Exhibit B
6 Synopsis; Comparison of Investment
Objectives, Policies and
Restrictions; Information About the
Funds; Exhibit B
7 Voting Information
8 Information About the Funds; Voting
Information
9 Not Applicable
FORM N-14 ITEM CAPTION IN STATEMENT OF ADDITIONAL
INFORMATION
10 Cover Page
11 Table of Contents (Cover Page)
12 Statement of Additional Information
of The Tocqueville Government Fund
13 Not Applicable
14 Financial Information
THE TOCQUEVILLE TRUST
CONTENTS OF
REGISTRATION STATEMENT
This Registration Statement contains the following
pages and documents:
Front Cover
Contents Page
Cross-Reference Sheet
Letter to Shareholders (1)
Notice of Special Meeting of Shareholders
PART A - Proxy Statement/Prospectus with
Exhibits
PART B - Statement of Additional Information
PART C - Other Information
Signature Page
Exhibits
[IVY MANAGEMENT, INC. LETTERHEAD]
IVY SHORT-TERM BOND FUND
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
Dear Shareholder:
You are cordially invited to attend a Special
Meeting of Shareholders of Ivy Short-Term Bond Fund
("ISTBF"), a series of the Ivy Fund, to be held on
_________________, 1996 at 10:00 a.m. Eastern Time at
the offices of ISTBF, for the purpose of considering
and voting upon a proposed Agreement and Plan of
Reorganization for ISTBF (the "Plan").
If the Plan is approved by the shareholders of
ISTBF, all or substantially all of the assets and all
identified and stated liabilities of ISTBF will be
exchanged for shares of beneficial interest of The
Tocqueville Government Fund ("TGF") having an aggregate
net asset value equal to the value of ISTBF's aggregate
net assets transferred to TGF. In the reorganization, you will
receive Class A shares of TGF having a net asset value
equal to the value of your Class A or Class B shares.
TGF is a separate series of The Tocqueville Trust,
an open- end diversified management investment company
located in New York, New York. Tocqueville Asset
Management L.P. ("TAM") serves as the investment
adviser to TGF, the other four series of The
Tocqueville Trust, as well as to private clients and select
institutions. As of June 30, 1996, TAM had total assets under
management of approximately $435 million.
The investment objectives of ISTBF and TGF are
similar in that both seek to provide shareholders with
a high level of current income consistent with the
maintenance of principal. Shareholders should
carefully consider, however, both the similarities and
the differences between the investment objectives,
policies and restrictions of the two Funds. These
similarities and differences, as well as other important
information concerning the proposed combination of the Funds, are
described in detail in the Proxy Statement/Prospectus,
which you are encouraged to review carefully.
THE BOARD OF TRUSTEES OF IVY FUND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN. Approval of the Plan
will require the affirmative vote of the holders of a
majority of the outstanding shares of ISTBF. We urge
you to take the time to consider this important matter
and vote now. Whether or not you expect to attend the
meeting, please sign and promptly return the enclosed
proxy in the enclosed postage-prepaid envelope. Your
prompt response will insure that your shares are
counted at the meeting.
Sincerely,
Michael G. Landry
President of Ivy Fund
IVY SHORT-TERM BOND FUND
A Separately Managed Series of
IVY FUND
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
___________________________
Notice of Special Meeting of Shareholders
to be held _________________, 1996
___________________________
August
____, 1996 To the Shareholders of Ivy Short-Term Bond
Fund:
NOTICE IS HEREBY GIVEN that a special meeting of
shareholders of Ivy Short-Term Bond Fund (the "ISTBF"), a
separately managed series of Ivy Fund, will be held at
10:00 a.m. Eastern Time, on ____________________, 1996
at the offices of ISTBF, Via Mizner Financial Plaza,
700 South Federal Highway, Boca Raton, Florida 33432.
The purpose of the special meeting is as follows:
1. To consider and vote on a proposed Agreement
and Plan of Reorganization (the "Plan")
providing for (a) the acquisition of
substantially all of the assets and the
assumption of all identified and stated liabilities of
ISTBF as of the closing of the reorganization by The
Tocqueville Government Fund ("TGF"), in exchange
for shares of beneficial interest of TGF
having an aggregate net asset value equal to
the aggregate value of the assets acquired
(less liabilities assumed) of ISTBF and (b)
the complete liquidation of ISTBF and the pro
rata distribution of TGF shares to shareholders of
ISTBF. Under the Plan, ISTBF's shareholders will
receive Class A shares of TGF having a net asset value
equal as of the effective time of the Plan to the
net asset value of their Class A and Class B
shares of ISTBF.
2. To transact such other business as may
properly come before the meeting or any
adjournments or postponements thereof.
Even if ISTBF's shareholders vote to approve the
Plan, consummation of the Plan is subject to certain
other conditions. See "Information About the
Reorganization -- Plan of Reorganization" in the
attached Proxy Statement/Prospectus.
THE BOARD OF TRUSTEES OF IVY FUND UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.
The close of business on _______________, 1996 has
been fixed as the record date for the determination of
shareholders entitled to notice of and to vote at the
meeting and any adjournments or postponements thereof.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN
THE ENCLOSED POSTAGE- PREPAID ENVELOPE. IN ORDER TO
AVOID THE ADDITIONAL EXPENSE OF FURTHER SOLICITATION,
WE RESPECTFULLY ASK FOR YOUR COOPERATION IN MAILING IN
YOUR PROXY PROMPTLY. If you are present at the
meeting, you may then revoke your proxy and vote in person, as
explained in the Proxy Statement/Prospectus in the section
"Voting Information."
By Order of the Board of
Trustees,
C. WILLIAM FERRIS,
Secretary
PROXY STATEMENT/PROSPECTUS
August _____, 1996
Relating to the acquisition of the assets of
IVY SHORT-TERM BOND FUND
a separate portfolio of
IVY FUND
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
(800) 777-6472
by and in exchange for shares of
THE TOCQUEVILLE GOVERNMENT FUND
a separate portfolio of
THE TOCQUEVILLE TRUST
1675 Broadway
New York, New York 10019
(800) 697-3863
This Proxy Statement/Prospectus is being furnished
to the shareholders of Ivy Short-Term Bond Fund
("ISTBF"), a separate portfolio of Ivy Fund, in
connection with a special meeting of shareholders of
ISTBF to be held at the offices of ISTBF on
________________, 1996 for the purpose of voting on a proposed
reorganization in which all or substantially all of the
assets of ISTBF would be acquired by The Tocqueville
Government Fund ("TGF"), a separate portfolio of The
Tocqueville Trust, in exchange solely for TGF shares
and the assumption by TGF of all identified and stated
liabilities of ISTBF as of the closing date (the
"Reorganization"). Following the Reorganization, ISTBF
would be completely liquidated. ISTBF and TGF are sometimes
referred to herein collectively as the "Funds" or
individually as a "Fund."
This Proxy Statement/Prospectus is first being
mailed to shareholders of ISTBF on or about
_________________, 1996. Information concerning the
voting rights of each Fund shareholder is set forth
under the caption "Voting Information," below.
Representatives of Ivy Management, Inc. (the investment adviser
and manager of ISTBF) or of its affiliates may, without
cost to ISTBF, solicit proxies for management of ISTBF
by means of mail, telephone or personal calls. In
addition, the services of a third-party proxy
solicitation firm may be used, with any such firm's
expenses to be borne by TGF, or in certain circumstances
by Ivy Management Inc.
As a result of the transactions contemplated by
the Reorganization, each shareholder of ISTBF will
receive that number of full and fractional TGF--Class A
shares having an aggregate net asset value equal to the
aggregate net asset value of the shareholder's Class A
and Class B shares of ISTBF held as of immediately
after the close of business on the business day next
preceding the closing date of the Reorganization (the
"Closing"). No sales charge will be imposed in connection with
the issuance of TGF--Class A shares to the Class A and
Class B shareholders of ISTBF pursuant to the
Reorganization. The Reorganization is being structured
as a tax-free reorganization so that no income, gain or
loss will be recognized by ISTBF or its shareholders as
a result thereof (except that ISTBF contemplates that
it will make a distribution immediately prior to the
Reorganization of all of its current year net tax-exempt
income, ordinary taxable income and net realized capital gains,
if any, not previously distributed, which distribution
will be taxable to ISTBF shareholders subject to
taxation).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
This Proxy Statement/Prospectus sets forth
concisely certain information about TGF that a
prospective investor should know before voting on the
proposed Reorganization, and should be retained for
future reference. For a detailed discussion of the
investment objectives and restrictions, operations, policies,
investment risks and other information relating to the
Funds, see (i) the prospectus for ISTBF dated April 30,
1996 (available upon request and without charge by
calling ISTBF's transfer agent at (800) 777-6472), and
(ii) the prospectus for TGF dated February 28, 1996, as
supplemented on June 20, 1996, and on July 31, 1996
which is included herewith and is incorporated by reference
herein. A Statement of Additional Information dated August
_____, 1996 containing additional information about the
Reorganization and the parties thereto (the "SAI") has been
filed with the Securities and Exchange Commission (the
"SEC") and is incorporated by reference into this Proxy
Statement/Prospectus. A copy of the SAI is available
upon request and without charge by writing to TGF at
the address provided above or by calling The
Tocqueville Trust at (800) 697-3863. Shareholders may call the
same number for any other information regarding the Funds.
TGF is an open-end, diversified management
investment company whose investment objective is to
provide high current income consistent with the
maintenance of principal and liquidity through
investments in obligations issued or guaranteed by the
U.S. Treasury, agencies of the U.S. Government or
instrumentalities that have been established or sponsored by
the U.S. Government. In pursuit of its objective, TGF
intends to invest at least 65% of its assets in short
and intermediate-term securities backed by the full
faith and credit of the U.S. Government. Also, at
least 50% of TGF's assets will be invested in U.S.
Treasury bills, notes and bonds. The dollar-weighted
average maturity of TGF is expected to range from 0 to 12 years.
The investment objectives, policies and
restrictions of TGF (and, consequently, the risks of
investing in it) are similar to those of ISTBF, but
differ in certain respects. A comparative discussion
of these differences is contained below under the
caption "Investment Objectives, Policies and Restrictions."
TABLE OF CONTENTS
PAGE
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . .
. . . 1
RISK CONSIDERATIONS . . . . . . . . . . . . . . . . . .
. . . 6
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . .
8
INFORMATION ABOUT THE REORGANIZATION . . . . . . . . .
. . . 13
PERFORMANCE INFORMATION AND CAPITALIZATION . . . . . .
. . . 16
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS . . . . .
. . . 17
INFORMATION ABOUT THE FUNDS . . . . . . . . . . . . . .
. . . 17
VOTING INFORMATION . . . . . . . . . . . . . . . . . .
. . . 18
SYNOPSIS
This summary, which contains certain information
pertaining to the Reorganization, is qualified in its
entirety by reference to the additional information
contained elsewhere in this Proxy Statement/Prospectus,
the prospectus for TGF, which is attached hereto as
Exhibit B and is incorporated by reference herein, the
prospectus for ISTBF, which is incorporated by reference herein,
and the Agreement and Plan of Reorganization, which is
attached to this Proxy Statement/Prospectus as Exhibit
A.
THE PROPOSED REORGANIZATION
The Board of Trustees of Ivy Fund, including the
Trustees who are not "interested persons" of Ivy Fund
(the "Independent Trustees"), as that term is defined
in the Investment Company Act of 1940, as amended (the
"1940 Act"), on behalf of ISTBF, has unanimously
approved an Agreement and Plan of Reorganization (the
"Plan") providing for the acquisition of all or substantially all
of the assets of ISTBF by TGF, in exchange solely for
TGF--Class A shares and the assumption by TGF of all
identified and stated liabilities of ISTBF as of the
closing. In connection with the Reorganization, TGF--
Class A shares will be distributed to Class A and Class
B shareholders of ISTBF, and ISTBF would be completely
liquidated. Each shareholder of ISTBF would cease to
be a shareholder of ISTBF and would receive that number of full
and fractional TGF--Class A shares having a net asset
value equal to the net asset value of the Class A and
Class B shares of ISTBF owned by the shareholder. The
aggregate net asset value of TGF-- Class A shares to be
credited to shareholders of ISTBF shall be equal to the
aggregate net asset value of the Class A and Class B
shares of ISTBF as of immediately after the close of business on
the business day next preceding the Closing. No sales
charge would be imposed in connection with the issuance
of TGF--Class A shares to shareholders of ISTBF
pursuant to the Reorganization.
For the reasons set forth below under "Information
about the Reorganization," the Trustees of Ivy Fund,
including the Independent Trustees, have unanimously
concluded that the Reorganization is in the best
interests of ISTBF and its share- holders and that the
interests of existing shareholders of ISTBF would not
be diluted as a result of the transactions contemplated
by the Reorganization, and therefore has submitted the
Reorganization for approval by shareholders of ISTBF at a Special
Meeting of Shareholders to be held on _________________,
1996 (the "Meeting")(see "Voting Information," below).
THE BOARD OF TRUSTEES OF IVY FUND, ON BEHALF OF ISTBF,
UNANIMOUSLY RECOMMENDS APPROVAL OF THE PLAN EFFECTING
THE REORGANIZATION.
Approval of the Reorganization with respect to
ISTBF requires the affirmative vote of a majority of
all of the votes
entitled to be cast at the special meeting of
shareholders of ISTBF. ISTBF will not bear any of the
costs and expenses of the Reorganization.
TAX CONSEQUENCES
As a condition to closing, the Funds will obtain
an opinion from the law firm Dechert Price & Rhoads,
based on certain facts, assumptions and representations
it shall have received from the Funds, to the effect
that the Reorganization will qualify as a tax-free
reorganization for Federal income tax purposes. (See
"Federal Income Tax Consequences" under "Information About the
Reorganization.")
DIVIDEND POLICY
In general, both of the Funds automatically
reinvest income, dividends and capital gains
distributions in additional shares unless a shareholder
elects to receive dividends and distributions in cash
or by some other payment method. Following the
Reorganization, dividends and distributions paid with respect
to TGF--Class A shares will continue to be reinvested
according to TGF's dividend policy, as follows: TGF
declares and pays dividends monthly, and distributes
net capital gains (if any) annually. Dividends and
distributions of TGF--Class A shares may be reinvested
in Class A shares at net asset value without an
additional sales charge, or received in cash.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
The investment objective of ISTBF is to provide a
high level of current income consistent with a high
degree of principal stability through investing
primarily in short-term U.S. Government securities
(i.e., those maturing in 3 years or less), including
bonds, notes and bills issued by the U.S. Treasury, and
securities issued by agencies or instrumentalities of the U.S.
Government. The principal investment objective of TGF is
to provide high current income consistent with the
maintenance of principal and liquidity through
investments in obligations issued or guaranteed by the
U.S. Treasury, agencies of the U.S. Government or
instrumentalities that have been established or
sponsored by the U.S. Government. There can be no assurance that
either fund will achieve its investment objective.
The Funds' investment policies and restrictions
are compared under the caption "Comparison of
Investment Objectives, Policies and Restrictions,"
below. Although the investment objectives, policies
and restrictions of the Funds (and any attendant
investment risks) are similar, there are significant differences
between ISTBF and TGF about which shareholders of ISTBF
should be aware before voting on the proposed
Reorganization.
FUND ORGANIZATION AND MANAGEMENT
Both of the Funds are open-end, diversified
management investment companies registered under the
1940 Act. ISTBF results from a reorganization of
Mackenzie Short-Term U.S. Government Securities Fund,
which was approved by shareholders on December 30,
1994.
Ivy Management, Inc. ("IMI"), Via Mizner Financial
Plaza, 700 South Federal Highway, Suite 300, Boca
Raton, Florida 33432, a wholly owned subsidiary of
Mackenzie Investment Management Inc. ("MIMI"), provides
business management and investment advisory services to
ISTBF. Ivy Mackenzie Distributors, Inc. ("IMDI"), Via
Mizner Financial Plaza, 700 South Federal Highway, Suite 300,
Boca Raton, Florida 33432, also a wholly owned subsidiary
of MIMI, distributes ISTBF's shares. Ivy Mackenzie
Services Corp. ("IMSC") serves as transfer and
dividend-paying agent and provides various shareholder
and shareholder-related services for ISTBF. MIMI
provides certain administrative, fund accounting and
pricing services for ISTBF. MIMI is a subsidiary of Mackenzie
Financial Corporation ("MFC"), Toronto, Ontario, Canada.
Tocqueville Asset Management L.P. ("TAM"), 1675
Broadway, New York, New York 10019, acts as investment
adviser to TGF under a separate investment advisory
agreement (the "Agreement"). The Agreement provides
that TAM identify and analyze possible investments for
TGF, determine the amount and timing of such
investments, and the form of investment. TAM has the
responsibility of monitoring and reviewing TGF's portfolio, and,
on a regular basis, to recommend the ultimate disposition
of such investments. It is TAM's responsibility to
cause the purchase and sale of securities in TGF's
portfolio, subject at all times to the policies set
forth by The Tocqueville Trust's Board of Trustees. In
addition, TAM also provides certain administrative and
managerial services to TGF. TAM is an affiliate of
Tocqueville Securities L.P., TGF's distributor. Transfer and
dividend-paying agent functions for TGF have been delegated
to and are being performed by Boston Financial Data
Services, Inc., an affiliate of State Street Bank and
Trust Company.
FEES AND EXPENSES
ISTBF: ISTBF pays IMI a monthly fee for business
management and investment advisory services at the
annual rate of 0.60% of ISTBF's average daily net
assets. During the fiscal year ended December 31,
1995, IMI was paid fees of $42,049 from ISTBF. During
the fiscal years ended June 30, 1993 and June 30, 1994 and
the six-month period ended December 31, 1994, MIMI, as
investment adviser to ISTBF when it was a series of The
Mackenzie Funds Inc., received fees of $191,454,
$171,829 and $32,313, respectively, from ISTBF.
ISTBF has adopted pursuant to Rule 12b-1 under the
1940 Act separate distribution plans pertaining to its
Class A and Class B shares (each, a "Plan"). Under
ISTBF's Class A Plan, ISTBF pays IMDI a service fee up
to an amount equal on an annual basis to 0.25% of the
average daily net asset value of ISTBF's outstanding
Class A shares. Under ISTBF's Class B Plan, ISTBF pays IMDI a
service/distribution fee at an annual rate of up to 0.75%
of the average daily net assets attributable to ISTBF's
Class B shares, of which up to 0.25% constitutes a
service fee. During the fiscal year ended December 31,
1995, IMDI was paid $17,428 and $299, respectively,
pursuant to ISTBF's Class A and Class B Plans.
For transfer agency and shareholder services,
ISTBF pays IMSC an annual fee of $20.75 per open Class
A and Class B account, payable in equal monthly
installments. ISTBF also pays IMSC $4.36 for each
account that is closed, and reimburses IMSC monthly for
out-of-pocket expenses. For the fiscal year ended
December 31, 1995, the fees and expenses paid to IMSC totaled
$13,645.
The administrative service fees payable to MIMI
during the fiscal year ended December 31, 1995 totaled
$7,008. For fund accounting and pricing services
provided to ISTBF by MIMI during the fiscal year ended
December 31, 1995, ISTBF paid MIMI $22,290.
TGF: TAM receives a fee from TGF, payable
monthly, for the performance of its services at an
annual rate of 0.50% of the first $500 million of TGF's
average daily net assets, 0.40% of the average daily
net assets in excess of $500 million but not exceeding
$1 billion, and 0.30% of the average daily net assets
over $1 billion. For the period August 14, 1995 to October 31,
1995, TGF paid advisory fees to TAM of $0, because TAM
waived its advisory fee. If TAM had not waived its
fee, TGF would have paid advisory fees to TAM of
$3,453.
TGF has adopted a Rule 12b-1 distribution plan
pertaining to its Class A shares under which TGF may
incur distribution expenses related to the sale of
Class A shares of up to 0.25% per annum of TGF's
average daily net assets. TGF did not pay distribution
expenses for Class A shares for the period August 14,
1995 to October 31, 1995.
ANNUAL FUND OPERATING EXPENSES (AS A PERCENTAGE OF
AVERAGE NET ASSETS):[1]
A table comparing the annual fund operating
expenses for the Class A and Class B shares of ISTBF
with the annual fund operating expenses for TGF--Class
A and the Combined Fund--Class A, had the
Reorganization been consummated, is provided below:
Ivy Ivy
Combined Tocqueville Short-Term Short-
Term (pro forma)[4] Class A Class A
Class B Class A
Management
Fees . . .50% .00%[2] .00%[2]
.25%[5]
12b-1 Service
Fees . . .25% .25% .75%
.25%
Other
Expenses .50%[3] .68% .68%
.50%[5]
_________________________________________________________________
Total Fund
Operating
Expenses 1.25%[3] .93%[3] 1.43%
1.00%[5]
[1] The percentages in the table expressing annual
fund operating expenses are based on (i)
estimated expenses for the year ended October 31,
1996, in the case of TGF, and (ii) amounts
incurred during the fiscal year ended December 31,
1995, in the case of ISTBF.
[2] After expense reimbursements.
[3] After fee waivers.
[4] Both Class A and Class B shares of ISTBF will
become Class A shares of TGF after the
Reorganization.
[5] After fee waivers and/or expense reimbursements.
Under the Agreement, TGF's operating expense ratio
will be capped at 1.00% for at least the first
three years following the Reorganization.
TGF--Class A shares are charged a maximum front-
end sales load of 4.00%, while Class A shares of ISTBF
are charged a maximum front-end sales load of 3.00%.
After the Reorganization, former shareholders of ISTBF
will not pay a front-end or deferred sales load for new
purchases of TGF--Class A shares.
FINANCIAL HIGHLIGHTS FOR TGF
The following is selected financial highlights for
Class A shares and Class B shares of TGF. The
following information from August 14, 1995 (inception
of TGF) through October 31, 1995 has been audited by
McGladrey & Pullen, LLP, independent accountants. The
following information for Class A shares and Class B shares
of TGF for the six month period ended April 30, 1996 is
unaudited. The information presented below should be read in
conjunction with the financial statements and notes
thereto, which appear in the 1995 Annual Report to
Shareholders and the April 30, 1996 Semi-Annual Report
to Shareholders, each of which is incorporated by
reference in the Statement of Additional Information to
this Proxy/Prospectus.
(UNAUDITED)
CLASS A CLASS B CLASS A
CLASS B -------- -------- --
------ -------- FOR THE
PERIOD FROM PER SHARE OPERATING SIX MONTHS
AUGUST 14, 1995 PERFORMANCE (FOR ENDED
TO
A SHARE OUTSTANDING APRIL 30, 1996 OCTOBER
31, 1995 THROUGHOUT THE PERIOD) --------------- -
-------------------
Net asset value,
beginning of period $10.05 $10.05 $10.00
$ 9.97 ------ ------ ---
--- ------ Income from investment
operations:
Net investment income
(loss)(a)(b) 0.25(a) 0.23(b) 0.05(e)
0.04 Net realized and
unrealized gain (0.12) (0.12) 0.05
0.08 ------ ------ -----
--- -------- Total from investment
operations 0.13 0.11 0.10
0.12 ------ ------ -----
--- -------- Less distributions
Dividends from net
investment income (0.22) (0.19) (0.05)
(0.04) Distributions from net
realized gains -- -- --
-- ------ ------ --------
-------- Total distributions (0.22) (0.19)
(0.05) (0.04) ------ ---
--- -------- -------- Change in net asset
value for the period (0.09) (0.08) 0.05
0.08 ------ ------ -----
--- -------- Net asset value, end
of period $ 9.96 $ 9.97 $10.05
$10.05 ------ ------ ---
----- -------
Total Return (c)(d) 1.25%(a) 1.08%(b) 6.26%*
8.42%* RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 for Class A) $9,194 $205 $6,506
$201 Ratio of average net
assets of:
Expenses 1.53%*(a) 1.53%*(b) 2.74%*(e)
-- Net investment income 4.27%*(a) 4.27%*(b)
3.08%*(e) -- Portfolio turnover rate 141%* -- %
0.00% --
--------
(a) Net of fees waived amounting to 0.90% of average
net assets for the period ended April 30, 1996.
(b) Net of fees waived amounting to 1.40% of average
net assets for the period ended April 30, 1996.
(c) Does not include maximum sales charge of 4% for
Class A shares.
(d) Does not include contingent deferred sales charge
for Class B shares. Not annualized.
(e) Net of fees waived amounting to 0.77% of average
net assets for the period ended October 31, 1995.
* Annualized.
PURCHASE, EXCHANGE AND REDEMPTION PROCEDURES
SALES CHARGES OF THE FUNDS
Class A shares of both Funds are sold to investors
at the net asset value next determined after a purchase
order becomes effective (as described below) plus a
varying initial sales charge (the "public offering
price"). The sales charge applied to a purchase of
Class A shares of both Funds decreases as the purchase
amount increases, as described in the table of sales
charges set forth in each Fund's prospectus. The maximum sales
charge on investments in TGF--Class A shares is 4.00% of
the public offering price (4.16% of the net amount
invested) on investments of less than $100,000. The
maximum sales charge on investments in Class A shares
of ISTBF is 3.00% of the public offering price (3.09%
of the net amount invested) on investments of less than
$25,000. In addition, both Funds offer reduced initial
sales charges on Class A shares under certain
circumstances, for example, as a result of a cumulative quantity
discount or for shareholders who execute a Letter of
Intent to purchase, within a specified time period, an
amount qualifying for a reduced sales charge.
Information about such discounts can be found in
ISTBF's prospectus under "Qualifying for a Reduced
Sales Charge," and in TGF's prospectus under "Reduced Initial
Sales Charges on Class A Shares."
Class B shares of TGF (which currently are not
offered to the public) may be sold without an initial
sales charge but will be subject to higher ongoing
expenses than Class A shares and a contingent deferred
sales charge of up to 5% if they are redeemed within
six years of purchase. Class B shares of ISTBF are
offered for sale at net asset value per share, but are subject to
a contingent deferred sales charge of up to 3% if they
are redeemed within six years of purchase. The
contingent deferred sales charge applied to Class B
shares of both Funds decreases as the holding period of
the shares increases.
In addition, both Funds offer Class A shareholders
a cumulative quantity discount due to rights of
accumulation or for shareholders who execute a Letter
of Intent to purchase, within a 13 month period, an
amount qualifying for a reduced sales charge.
SALES CHARGES AFTER THE REORGANIZATION
Notwithstanding the discussion above, no sales
charge will be imposed in connection with ISTBF
shareholders' receipt of TGF- -Class A shares as a
result of the Reorganization. Additionally, following
the Reorganization, former shareholders of ISTBF who
wish to make additional purchases of TGF shares may do so without
paying a front-end or deferred sales load. ISTBF
shareholders who wish to purchase any other class of
shares of TGF that is, or
may in the future be, offered for sale to the public,
subject to applicable eligibility requirements may do
so in accordance with TGF's then current prospectus.
PURCHASES OF THE FUNDS
Shares of ISTBF may be purchased directly through
ISTBF's transfer agent, IMSC, or through registered
securities dealers who have a sales agreement with
IMDI, ISTBF's distributor. ISTBF requires a minimum
initial investment of $1,000, and the minimum
subsequent investment in shares of ISTBF is $100. Shares
of TGF may be purchased from the following entities: (a) TGF's
distributor, Tocqueville Securities; (b) authorized
securities dealers which have entered into sales
agreements with Tocqueville Securities ("Selling
Brokers"); and (c) TGF's transfer agent, State Street
Bank and Trust Company. The minimum initial investment
in The Tocqueville Trust is $5,000, except for 401(k),
IRA, Keogh and other pension and profit sharing plan accounts
where the minimum is $2,000. For example, an investor may
choose to make an initial investment in TGF equal to an
amount which is less than $5,000 so long as such
investor's total initial investment in the Funds of The
Tocqueville Trust is equal to $5,000. The minimum
subsequent investment in the Trust is $1,000.
In general, purchases of shares of ISTBF and TGF
are made at the public offering price next determined
after the purchase order is received. In the case of
TGF, a purchase order becomes effective upon receipt of
the order by Tocqueville Securities, a Selling Broker,
or the Transfer Agent. Purchase orders received prior
to 4:00 p.m. New York time are priced according to the
net asset value per share next determined on that day.
Purchase orders received after 4:00 p.m. New York time
are priced according to the net asset value per share next
determined on the following day.
EXCHANGE FEATURES OF ISTBF (PRIOR TO THE
REORGANIZATION)
Class A shares of ISTBF may be exchanged for Class
A shares of another Ivy or Mackenzie fund upon payment
of the difference, if any, between the sales charge
applied to shares of ISTBF and the applicable sales
charge for the Ivy or Mackenzie fund into which the
exchange is being made. The additional sales charge
will be waived for shares that have been invested for a period of
12 months or longer. No initial sales charge is
assessed at the time of an exchange of Class A shares
of ISTBF for shares of Ivy Money Market Fund. Class B
shares of ISTBF may be exchanged for Class B shares of
another Ivy or Mackenzie Fund on the basis of the
relative net asset value per Class B share, without the
payment of any contingent deferred sales charge that would
otherwise be due upon the redemption of the outstanding Class B
shares. Class B shareholders of ISTBF may also
exchange their Class B shares for shares of Ivy Money
Market Fund. Class B shareholders exercising the
exchange privilege remain subject to ISTBF's contingent
deferred sales charge schedule (or period) following
the exchange if such schedule is higher (or such period
is longer) than the contingent deferred sales charge schedule (or
period) that applies to the Ivy or Mackenzie Fund into
which the exchange is being made. ISTBF's Class B
shares convert automatically into Class A shares of
ISTBF after a period of eight years, based on the
relative net asset value of such shares at the time of
conversion. For purposes of both the conversion
feature and computing the contingent deferred sales charge that
may be payable upon the redemption of Class B shares
acquired through an exchange (prior to conversion), the
holding period of the outstanding Class B shares of
ISTBF will be "tacked" onto the holding period of the
new Ivy/Mackenzie Class B shares. ISTBF shares
acquired through reinvested dividends will not be assessed
a sales charge if subsequently exchanged into another Ivy or
Mackenzie fund.
EXCHANGE FEATURES OF TGF CLASS A SHARES
Subject to certain conditions, Class A shares of
TGF (and Class B shares, when offered to the public)
may be exchanged for Class A and Class B shares,
respectively, of another fund of The Tocqueville Trust
at such fund's then current net asset value. No
initial sales charge is imposed on the Class A shares being
acquired, and no contingent deferred sale charge is imposed on
the Class B share being redeemed, through an exchange.
The dollar amount of the exchange must be at least
equal to the minimum investment applicable to the
shares of the fund acquired through the exchange.
REDEMPTIONS OF THE FUNDS
Shares of both Funds may be redeemed in
accordance with the procedures described in each Fund's
prospectus. If the shares being redeemed were purchased
by check, payment may be delayed for the minimum time
needed to verify that the purchase check has been
honored. This is not normally more than 15 days from the
time of receipt of the check.
RISK CONSIDERATIONS
Because of similarities in the Funds' investment
objectives and restrictions, the risks of investing in
ISTBF are similar to the risks of investing in TGF.
There are significant differences between the Funds,
however, and the risks of investing in either Fund vary
to the degree that their investment objectives,
policies and restrictions vary.
OPTIONS, FUTURES AND FOREIGN CURRENCY
TRANSACTIONS. Subject to the limitations in their
prospectuses, both of the Funds may write covered call
options and for hedging may purchase and sell futures
contracts and options thereon. TGF may enter into
futures contracts which provide for the future acquisition or
delivery of fixed income securities or which are based on
indexes of fixed income securities. This investment
technique is designed only to hedge against anticipated
future changes in interest rates which otherwise might
either adversely affect the value of the TGF's
portfolio securities or adversely affect the prices of
long-term bonds which are intended to be purchased at a
later date. TGF may also purchase options on futures contracts
for hedging purposes.
Investors should be aware that the risks
associated with the use of options and futures are
considerable. Options and futures transactions
generally involve a small investment of cash relative
to the magnitude of the risk assumed, and therefore
could result in a significant loss. For example, a liquid
secondary market for any futures or options contract may not be
available when a futures or options position is sought
to be closed and the fund would remain obligated to
meet margin requirements until the position is closed.
In addition, there may be an imperfect correlation
between price movements in the securities on which the
futures or options contract is based and in the fund's
portfolio securities being hedged. Successful use of
futures or options contracts is further dependent on the
ability of the Fund's manager to predict correctly price
movements in the securities being hedged, and no assurance can be
given that its judgment will be correct. For further
information regarding the Funds' options and/or futures
transactions and their attendant risks, see each Fund's
prospectus and statement of additional information.
FOREIGN SECURITIES. Both Funds may invest in the
securities of foreign issuers. However, TGF may not
invest in securities of foreign issuers other than in
accordance with its investment objective and policies,
if as a result TGF would then have more than 25% of its
total assets (taken at current value) invested in such
foreign securities. In any event, TGF does not currently
intend to invest in the securities of foreign issuers.
Investing in the securities of foreign issuers
involves special risks and considerations not typically
associated with investing in U.S. companies. In many
foreign countries there is less regulation of business
and industry practices, stock exchanges, brokers and
listed companies than in the United States. For
example, foreign companies are not generally subject to
uniform accounting and financial reporting standards, and
foreign securities transactions may be subject to higher
brokerage costs. There also tends to be less publicly
available
information about issuers in foreign countries, and
foreign securities markets of many of the countries in
which the Funds may invest may be smaller, less liquid
and subject to greater price volatility than those in
the United States. Securities issued in emerging
market countries, such as Latin America and certain
eastern European countries, may be even less liquid and
more volatile than securities of issuers operating in more
developed economies (e.g., countries in other parts of Europe).
Generally, price fluctuations in a Fund's foreign
security holdings are likely to be high relative to
those of securities issued in the United States. Other
risks include the possibility of expropriation,
nationalization or confiscatory taxes, foreign exchange
controls (which may include suspension of the ability to
transfer currency from a given country), default in foreign
government securities, difficulties in enforcing foreign
judgments, political or social instability, or other
developments that could adversely affect the Funds'
foreign investments. Investors should also be aware
that many emerging markets countries have experienced
and continue to experience high rates of inflation,
which can create a negative interest rate environment
and erode the value of outstanding financial assets in
those countries.
DEBT SECURITIES. ISTBF may invest in investment-
grade debt securities as well as in corporate debt
securities considered medium or lower grade (commonly
referred to as "high yield" or "junk" bonds).
"Investment grade" debt securities are those rated
Aaa, Aa, A or Baa by Moody's Investors Services, Inc.
("Moody's") or AAA, AA, A or BBB by Standard & Poor's Corporation
("S&P") at the time of purchase). TGF may not invest in
corporate debt securities.
Bonds rated Aaa by Moody's and AAA by S&P are
judged to be of the best quality (i.e., capacity to pay
interest and repay principal is extremely strong).
Bonds rated Aa/AA are considered to be of high quality
(i.e., capacity to pay interest and repay interest is
very strong and differs from the highest rated issues
only to a small degree). Bonds rated A are viewed as having many
favorable investment attributes, but elements may be
present that suggest a susceptibility to the adverse
effects of changes in circumstances and economic
conditions than debt in higher rated categories. Bonds
rated Baa/BBB (considered by Moody's to be "medium
grade" obligations) are considered to have an adequate
capacity to pay interest and repay principal, but certain
protective elements may be lacking (i.e., such bonds lack
outstanding investment characteristics and have some
speculative characteristics).
Securities rated lower than Baa by Moody's or BBB
by S&P, and comparable unrated securities, are
considered to have predominately speculative
characteristics with respect to the
issuer's capacity to pay interest and repay principal.
While high yield debt securities are likely to have
some quality and protective characteristics, these
qualities are largely outweighed by the risk of
exposure to adverse conditions and other uncertainties.
Accordingly, investments in such securities, while
generally providing for greater income and potential
opportunity for gain than investments in higher-rated
securities, also entail greater risk (including the possibility
of default or bankruptcy of the issuer of such securities)
and generally involve greater price volatility than
securities in higher rating categories. IMI seeks to
reduce risk through diversification (including
investments in foreign securities), credit analysis and
attention to current developments and trends in both
the economy and financial markets. Should the rating of
a portfolio security be downgraded, IMI determines whether it is
in ISTBF's best interest to retain or dispose of the
security (unless the security is downgraded below the
rating of C, in which case IMI ordinarily disposes of
the security based on then existing market conditions).
MORTGAGE-BACKED SECURITIES. Both of the Funds may
invest in mortgage-backed securities in accordance with
their stated investment objectives and policies.
Mortgage-backed securities are securities representing
part ownership of a pool of mortgage loans. Although
the mortgage loans in the pool will have maturities of
up to 30 years, the actual average life of the loans
typically will be substantially less because the mortgages
will be subject to principal amortization and may be prepaid
prior to maturity. In periods of falling interest rates,
the rate of prepayment tends to increase, thereby
shortening the actual average life of the security
(generally referred to as "prepayment risk").
Conversely, rising interest rates tend to decrease the
rate of prepayment, thereby lengthening the security's
actual average life (generally referred to as
"extension risk"). Since it is not possible to predict
accurately the average life of a particular pool, and because
prepayments are reinvested at current rates, the market
value of mortgage-backed securities may decline during
periods of declining interest rates.
For a further discussion of the investment
techniques and risk factors that apply to the Funds,
see "Comparison of Investment Objectives, Policies and
Restrictions," below, and the discussion under the
captions "Investment Objective, Policies and Risks" and
"Additional Investment Policies and Risk
Considerations" in the Funds' prospectuses.
COMPARISON OF INVESTMENT OBJECTIVES, POLICIES AND
RESTRICTIONS
INVESTMENT OBJECTIVES:
ISTBF, an open-end, diversified management
investment company, seeks a high level of current
income consistent with a high degree of principal
stability. TGF, also an open-end, diversified
management investment company, seeks to provide high
current income consistent with the maintenance of principal and
liquidity through investments in obligations issued or
guaranteed by the U.S. Treasury, agencies of the U.S.
Government or instrumentalities that have been
established or sponsored by the U.S. Government.
PRIMARY INVESTMENTS:
U.S. GOVERNMENT SECURITIES: ISTBF normally
invests at least 65% of total assets in short-term U.S.
Government securities, including (1) direct obligations
of the U.S. Treasury (such as Treasury bills, notes,
and bonds) and (2) Federal agency obligations
guaranteed as to principal and interest by the U.S.
Treasury (such as GNMA certificates, which are mortgage-backed
securities representing part ownership of a pool of
mortgage loans). Under normal circumstances, GNMA
certificates are expected to provide higher yields than
U.S. Treasury securities of comparable maturity.
Although stated maturities on GNMA certificates
generally range from 25 to 30 years, effective
maturities are usually shorter due to the prepayment of the
underlying mortgages by homeowners. On average, GNMA
certificates are repaid within 12 years and so are classified as
intermediate-term securities. Although ISTBF may
purchase individual securities with a greater maturity,
the dollar-weighted average maturity of ISTBF's
portfolio may not exceed three years. Whenever in
IMI's judgment abnormal market or economic conditions
warrant, ISTBF may, for temporary defensive purposes,
invest without limit in short-term U.S. Government
Securities (maturing in 13 months or less).
In pursuit of its objective, TGF intends to invest
at least 65% of its assets in short and intermediate-
term securities backed by the full faith and credit of
the U.S. Government. Also, at least 50% of TGF's
assets will be invested in U.S. Treasury bills, notes
and bonds. The dollar-weighted average maturity of TGF
is expected to range from 0 to 12 years. The balance
of TGF's assets may be invested in obligations issued or
guaranteed by the U.S. Treasury, agencies of the U.S. Government
or instrumentalities that have been established or
sponsored by the U.S. Government, as well as in
repurchase agreements collateralized by such
securities. TGF may also invest in bond (interest
rate) futures and options to a limited extent.
MORTGAGE-BACKED SECURITIES: ISTBF may invest in
mortgage pass-through securities (such as adjustable
rate mortgage securities, or "ARMs"). ISTBF may also
invest in collateralized mortgage obligations ("CMOs"),
which are securities that are
collateralized by the original mortgage loan (or
mortgage pass- through security) and that redirect the
cash flow of such loan (or pass-through security) to
the individual bond holder(s). TGF may invest up to
35% of its assets in GNMA pass-through certificates.
TGF may also invest up to 35% of its assets in (i)
fixed rate or adjustable rate mortgage-backed securities issued
or guaranteed by the Federal National Mortgage Association
("FNMA") and the Federal Home Loan Mortgage Corporation
("FHLMC"), and (ii) CMOs. TGF will limit investments in
CMOs to 10% of its portfolio, and may only invest in
CMOs that are backed by the full faith and credit of
the U.S. Government, FNMA or FHLMC and are determined
not to be "high-risk" under guidelines issued by the
Federal Financial Institutions Examination Council
("FFIEC").
DEBT SECURITIES: ISTBF may invest up to 35% of
its assets in "investment-grade" debt securities (i.e.,
those rated Aaa, Aa, A or Baa by Moody's Investors
Services, Inc. ("Moody's") or AAA, AA, A or BBB by
Standard & Poor's Corporation ("S&P") at the time of
purchase). ISTBF may invest less than 35% of its net assets in
corporate debt securities considered medium or lower grade
(commonly referred to as "high yield" or "junk" bonds).
ISTBF will not invest in corporate debt securities
that, at the time of investment, are rated less than C
by either Moody's or S&P. TGF may not invest in
corporate debt securities.
FOREIGN SECURITIES: ISTBF may invest up to 20% of
its net assets in debt securities of foreign issuers
meeting the credit quality standards described above
with respect to ISTBF's investments in U.S. Government
Securities, including non-U.S. dollar-denominated debt
securities, American Depository Receipts ("ADRs"),
Eurodollar securities, and debt securities issued,
assumed or guaranteed by foreign governments or political
subdivisions or instrumentalities thereof. TGF may not invest
in securities of foreign issuers other than in
accordance with its investment objective and policies,
if as a result TGF would then have more than 25% of its
total assets (taken at current value) invested in such
foreign securities. In any event, TGF does not
currently intend to invest in the securities of foreign issuers.
RESTRICTED AND ILLIQUID SECURITIES: ISTBF may
invest up to 10% of its net assets in illiquid
securities (including repurchase agreements of more
than seven days' duration and other securities that are
not readily marketable or which have a limited trading
market), up to 50% of which (or 5% of ISTBF's net
assets) may be securities that are subject to restrictions on
resale because they have not been registered under the
Securities Act of 1933 ("Restricted Securities"). TGF
will not invest more than 10% of its net assets in
illiquid securities, including repurchase agreements
with maturities in excess of seven days. TGF may
purchase Restricted Securities without regard to the
limitation on investments in illiquid securities,
provided that a determination is made that such
securities have a readily available trading market.
OPTIONS TRANSACTIONS AND FUTURES CONTRACTS: ISTBF
can use various techniques to increase or decrease its
exposure to changing security prices, interest rates,
currency exchange rates, commodity prices, or other
factors that affect security values. These techniques
may involve derivative transactions such as selling
call options and purchasing put and call options on
U.S. government securities, interest rate futures, foreign
currency futures and foreign currencies that are traded on an
exchange or board of trade. IMI can use these practices
to adjust the risk and return characteristics of
ISTBF's portfolio of investments. ISTBF may only
engage in transactions in interest rate futures,
currency rate futures and options on interest rate
futures and currency futures contracts for hedging
purposes. TGF may write covered call options on optionable
securities or stock indices of the types in which it is
permitted to invest from time to time as TAM determines
is appropriate in seeking to attain TGF's objective.
TGF may write (sell) covered call options in order to
hedge against changes in the market value of the TGF's
securities caused by fluctuating interest rates. TGF
will not write covered call options for speculative
purposes. TGF will receive a premium for writing a covered call
option, which increases TGF's return in the event the
option expires unexercised or is closed out at a
profit. TGF may enter into futures contracts which
provide for the future acquisition or delivery of fixed
income securities or which are based on indexes of
fixed income securities. This investment technique is
designed only to hedge against anticipated future changes in
interest rates which otherwise might either adversely affect
the value of the TGF's portfolio securities or
adversely affect the prices of long-term bonds which
are intended to be purchased at a later date. TGF may
also purchase options on futures contracts for hedging
purposes.
REPURCHASE AGREEMENTS: ISTBF may enter into
repurchase agreements, but will not enter into
repurchase agreements with more than seven days to
maturity if, as a result, more than 10% of ISTBF's net
assets would be invested in illiquid securities that
include such repurchase agreements. TGF may enter into
repurchase agreements subject to resale to a bank or dealer at an
agreed upon price which reflects a net interest gain for
TGF. TGF will receive interest from the institution
until the time when the repurchase is to occur. TGF
will always receive collateral (i.e., U.S. Government
obligations or obligations of its agencies or
instrumentalities, or short-term money market
securities) acceptable to it whose market value is equal to at
least 100% of the amount invested by the TGF, and TGF will
make payment for such securities only upon the physical
delivery or
evidence of book entry transfer to the account of its
custodian. TGF will not invest in repurchase
agreements with maturities in excess of seven days.
COMMON STOCKS: ISTBF may invest up to 5% of its
net assets in dividend paying common stocks (including
adjustable rate preferred stocks). TGF may, but
currently does not intend to make such investments.
ZERO COUPON BONDS AND "WHEN-ISSUED" SECURITIES:
ISTBF may invest in zero coupon bonds in accordance
with ISTBF's credit quality standards and securities
sold on a"when-issued" or firm-commitment basis. TGF
may, but currently does not intend to make such
investments.
LENDING OF PORTFOLIO SECURITIES: ISTBF may lend
its portfolio securities to increase current income.
TGF may not make loans of money or securities other
than (a) through the purchase of publicly distributed
bonds, debentures or other corporate or governmental
obligations, (b) by investing in repurchase agreements,
and (c) by lending its portfolio securities, provided
the value of such loaned securities does not exceed
33-1/3% of its total assets.
BORROWING: Neither Fund may borrow money in
excess of 10% of the value of its total assets from
banks. TGF may not purchase securities while
borrowings exceed 5% of the value of its total assets.
CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES AND
COMMERCIAL PAPER: ISTBF may invest in certificates of
deposit, banker's acceptances and commercial paper
rated Prime-A by Moody's or A-1 by S&P, or, if not
rated by Moody's or S&P, issued by companies having an
outstanding debt issue currently rated Aa or better by
Moody's or AA or better by S&P. TGF does not currently intend to
make such investments.
INVESTMENT RESTRICTIONS:
FUNDAMENTAL INVESTMENT RESTRICTIONS. The
following fundamental policies and investment
restrictions have been adopted by the Funds and except
as noted, such policies and restrictions cannot be
changed without approval by the vote of a majority of
the outstanding voting securities of a Funds, as
defined by the Investment Company Act of 1940, as amended ("the
1940 Act"):
- DIVERSIFICATION: Neither Fund may, with
respect to 75% of its total assets, purchase
any securities (other than obligations issued
or guaranteed by the U.S. Government or its
agencies or instrumentalities) if,
immediately after such purchase, more than 5%
of the value of the Fund's total assets would
be invested in securities of any one issuer;
- REAL ESTATE, COMMODITIES, AND COMMODITY
CONTRACTS. Neither Fund may buy or sell real
estate, commodities, or commodity contracts,
except either Fund may purchase or sell
futures or options on futures, and ISTBF may
purchase and sell (a) securities that are secured by
real estate and (b) securities of issuers that invest
or deal in real estate. ISTBF may not invest in
real estate mortgage loans.
- OIL, GAS AND MINERALS. ISTBF may not invest
in interests in oil, gas and/or mineral
exploration or development programs. TGF may
not invest in precious metals other than in
accordance with its investment objective and
policy, if as a result it would have more
than 10% of its total assets invested in such precious
metals. (TGF's policies regarding oil and gas are
listed as non-fundamental investment restrictions.)
- EXERCISING CONTROL. ISTBF may not invest in
securities for the purpose of exercising
control over or management of the issuer.
TGF has a similar "non- fundamental" policy.
- JOINT INVESTMENT ACCOUNTS. ISTBF may not
participate on a joint or a joint and several
basis in any trading account in securities.
TGF may not participate in a joint investment
account.
- OWNERSHIP OF VOTING SECURITIES. ISTBF may
not purchase the securities of any one issuer
if, immediately after such purchase, ISTBF
would own more than 10% of the issuer's
outstanding voting securities. TGF may not,
with respect to 75% of the value of its assets,
purchase any securities (other than obligations issued
or guaranteed by the U.S. Government or its agencies or
instrumentalities) if, immediately after such
purchase, more than 10% of the outstanding
voting securities of any one issuer would be
owned by TGF.
- PURCHASING SECURITIES ON MARGIN. ISTBF may
not purchase securities on margin, except
such short-term credits as are necessary for
the clearance of transactions. TGF has a
similar "non-fundamental" policy.
- LOANS. Neither Fund may make loans of money
or securities other than (a) through the
purchase of
publicly distributed bonds, debentures or
other corporate or governmental obligations,
(b) by investing in repurchase agreements, or
(c) by lending its portfolio securities,
provided the value of such loaned securities
does not exceed 33-1/3% of its total assets.
- BORROWING. Neither Fund may borrow money in
excess of 10% of the value of a their total
assets from banks. ISTBF must repay all
outstanding borrowings before any additional
investments are made. TGF may not purchase
securities while borrowings exceed 5% of the value of
its total assets.
- INDUSTRY CONCENTRATION. Neither Fund may
concentrate its investments in particular
industries. No more than 25% of the value of
either Fund's assets will be invested in any
one industry.
- UNDERWRITING SECURITIES. Neither Fund may
underwrite securities, except to the extent
that, in connection with the sale of
securities, it may be deemed to be an
underwriter under applicable securities laws.
- SENIOR SECURITIES. Neither Fund may issue
senior securities.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS: The
following restrictions are non-fundamental and may be
changed by each Fund's Board of Trustees, to the extent
permitted by applicable law, regulation or regulatory
policy.
- SHORT SALES. Neither Fund will make short
sales of securities, other than short sales
"against the box," except to the extent
provided otherwise in its prospectus or
statement of additional information.
- UNSEASONED ISSUERS. ISTBF will not purchase
a security if, as a result, it would have
more than 5% of its total assets (taken at
current value) invested in securities of
companies (including predecessors) less than
three years old. TGF will not invest more than
10% of its total assets in the securities of any
company which, including its predecessors, has not been
in the business for at least three years.
- OFFICER AND TRUSTEE OWNERSHIP INTERESTS.
Neither Fund will purchase or retain
securities of an issuer when one or more
officers and Trustees of the Fund or of the
Fund's Investment Advisor (or, in the case of TGF, a
person owning more than 10% of the shares of either)
own beneficially more than 1/2 of 1% of the
securities
of such issuer and such persons owning more
than 1/2 of 1% of such securities together
own beneficially more than 5% of the
securities of such issuer.
- ILLIQUID SECURITIES. Neither Fund will
invest more than 10% if its total net assets
in illiquid securities.
- OTHER INVESTMENT COMPANIES. Neither Fund
will purchase the securities of any other
investment company, if the purchasing Fund,
immediately after such purchase or
acquisition, owns in the aggregate, (i) more than 3% of
the total outstanding voting stock of such investment
company, (ii) securities issued by such
investment company having an aggregate value
in excess of 5% of the value of the total
assets of the Fund, or (iii) securities
issued by such investment company and all
other investment companies having an aggregate value in
excess of 10% of the value of the total assets of the
Fund.
- OIL, GAS AND MINERALS. ISTBF will not
purchase or sell interests in oil, gas or
mineral leases (other than securities of
companies that invest in or sponsor such
programs). TGF will not purchase interests in oil, gas
or other mineral exploration programs; however, this
limitation will not prohibit the acquisition of
securities of companies engaged in the
production or transmission of oil, gas, or
other minerals.
- PURCHASING SECURITIES ON MARGIN. TGF will
not purchase securities on margin except for
short-term credits necessary for clearance of
portfolio transactions, and except to the
extent provided otherwise in its prospectus
or statement of additional information.
- EXERCISING CONTROL. TGF will not invest for
purposes of exercising control or management.
- FOREIGN SECURITIES. TGF will not invest in
securities of foreign issuers other than in
accordance with its investment objective and
policy, if as a result TGF would then have
more than 25% of its total assets (taken at
current value) invested in such foreign
securities.
- WARRANTS. TGF will not invest in warrants
if, at the time of acquisition, the
investment in warrants, valued at the lower
of cost or market value, would exceed 5% of
TGF's net assets.
- REAL ESTATE LIMITED PARTNERSHIP INTERESTS.
ISTBF may not purchase or sell real estate
limited partnership interests. TGF's
policies with respect to Real Estate Limited
Partnership Interests are described in the
paragraph below.
In addition to the foregoing restrictions, each
Fund has adopted certain operating policies in order to
comply with federal and state statutes and/or
regulatory policies. Specifically, ISTBF treats
securities eligible for resale under Rule 144A of the
Securities Act of 1933 as subject to ISTBF's
restriction on investing in Restricted Securities (see
"Restricted and Illiquid Securities" under "Primary Investments,"
above), unless ISTBF's Board determines that such
securities are liquid. In addition, as a matter of
operating policy, TGF will not (i) invest in oil, gas
and other mineral leases; (ii) purchase or sell real
property, including limited partnership interests; and
(iii) invest more than 2% of its net assets in warrants
which are not listed on the New York or American Stock
Exchange nor more than 5% of its net assets in warrants.
Although these policies are not fundamental and may be changed
by The Tocqueville Trust's Board of Trustees without
shareholder approval, these policies will remain in
effect until the federal government or a state either
amends or appeals applicable statues and regulatory
policies.
Whenever an investment policy or investment
restriction set forth in either Fund's prospectus or
statement of additional information states a maximum
percentage of assets that may be invested in any
security or other asset or describes a policy regarding
quality standards, such percentage limitation or
standard shall, unless otherwise indicated, apply to the Fund
only at the time a transaction is entered into.
Accordingly, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease
in the percentage that results from a relative change
in values or from a change in the Fund's net assets or
other circumstances is not considered a violation.
INFORMATION ABOUT THE REORGANIZATION
REASONS AND PURPOSES
The Reorganization has been recommended by the
Board of Trustees of ISTBF as a means of combining
similar investment companies with similar investment
objectives and policies to attempt to achieve enhanced
investment performance and distribution capability, as
well as certain economies of scale and attendant
savings in costs to the Funds and their shareholders.
Achievement of these goals cannot, of course, be
assured. For the reasons set forth below, IMI has recommended to
the Board of Trustees of Ivy Fund that the assets of
ISTBF be
combined with those of TGF. The Board of Trustees of
ISTBF has unanimously approved the Reorganization and
recommends that shareholders of ISTBF vote in favor of
it.
In determining whether to recommend that the
shareholders of ISTBF vote to approve the
Reorganization, the Board of Trustees, with the
assistance and advice of legal counsel, inquired into a
number of matters and considered, among other factors: (a) the
fees and expense ratios of both ISTBF and TGF; (b) the
terms and conditions of the Reorganization and whether
the Reorganization would result in the dilution of
shareholder interests; (c) the compatibility of the
Funds' investment objectives, policies, restrictions
and portfolios; (d) the service features available to
shareholders in each Fund; (e) the costs that would be
incurred by the Funds as a result of the Reorganization; and (f)
the tax consequences of the Reorganization.
The Board of Trustees has determined that the
Reorganization may permit the shareholders of ISTBF to
pursue substantially the same investment goals in a
somewhat larger fund. At its current size, Management
does not believe the ISTBF offers shareholders the most
efficient vehicle for pursuing their investment goals.
Managing a fund with a larger asset base could give the
investment adviser greater investment flexibility and the ability
to select a larger number of portfolio securities with
the attendant benefits of increased diversification.
Additionally, Management has determined that if
the Reorganization is not consummated, and ISTBF
continues as an Ivy Fund, ISTBF expenses will probably
increase in part because Management intends to
eliminate the current voluntary expense reimbursement
arrangement.
AGREEMENT AND PLAN OF REORGANIZATION
The following summary of the proposed Agreement
and Plan of Reorganization (the "Plan") is qualified in
its entirety by reference to the Plan attached to this
Proxy Statement/Prospectus as Exhibit A. The Plan
provides that TGF will acquire all or substantially all
of the assets of ISTBF in exchange solely for TGF--
Class A shares and the assumption by TGF of certain
identified liabilities of ISTBF on the closing date (the "Closing
Date"), or such later date as provided in the Plan. The
Closing Date is expected to be on or about November 22,
1996.
The Board of Trustees of Ivy Fund, on behalf of
ISTBF, and the Board of Trustees of The Tocqueville
Trust, on behalf of TGF, have each determined that the
interests of existing shareholders of their respective
Funds will not be diluted as a result of the
transactions contemplated by the Reorganization, and that
participation in the Reorganization is in the best
interests of shareholders of ISTBF and TGF,
respectively.
The number of full and fractional TGF--Class A
shares to be issued to shareholders of ISTBF will be
determined on the basis of the relative net asset
values per share and aggregate net assets of TGF--Class
A shares and the Class A and Class B shares of ISTBF
computed as of the close of regular trading on the New
York Stock Exchange (normally 4:00 p.m., Eastern time) and after
the declaration of any dividends on the business day next
preceding the Closing Date (the "Valuation Date"). The
net asset value per share with respect to TGF--Class A
shares and Class A and Class B shares of ISTBF will be
determined in each case by dividing each such Class's
assets, less liabilities, by the total number of its
outstanding shares. Portfolio securities of both TGF
and ISTBF will be valued in accordance with the valuation
policies and procedures of TGF as described under "Computation
of Net Asset Value" in TGF's then current statement of
additional information.
ISTBF will endeavor to discharge all of its known
liabilities and obligations prior to the Valuation Date.
The liabilities assumed are expected to relate
generally to expenses incurred in the ordinary course
of ISTBF's operations, such as accounts payable and
accrued expenses relating to custodian and transfer
agency fees, legal and accounting fees, and expenses of
state securities registration of ISTBF's shares. TGF will assume
all liabilities, expenses, costs, charges and reserves
reflected on an unaudited statement of assets and
liabilities of ISTBF prepared on ISTBF's behalf by
MIMI, as ISTBF's administrator, as of the close of
regular trading on the New York Stock Exchange on the
Valuation Date and in accordance with generally accepted
accounting principles consistently applied from the prior audited
period. TGF will assume only those liabilities of ISTBF
reflected in that unaudited statement of assets and
liabilities as of the Closing Date and will not assume
any other liabilities.
On or before the Closing Date, ISTBF intends to
declare and pay a dividend or dividends intended to
have the effect of distributing to ISTBF's shareholders
all of ISTBF's net income and gain that has not been
distributed previously.
Immediately after the Closing Date, ISTBF will
distribute to its shareholders of record, with respect
to each class of its shares, determined as of
immediately after the close of business on the
Valuation Date, on a pro rata basis within that class, the
full and fractional TGF--Class A shares received by ISTBF, and
ISTBF will then be completely liquidated. This
distribution and liquidation will be accomplished by
establishing accounts in the name of ISTBF's
shareholders on the share records of TGF, such accounts
representing the respective pro rata number of full and
fractional TGF--Class A shares attributed to those
shareholders. After the Closing Date, any issued and
outstanding certificates representing Class A shares
and Class B shares of ISTBF will represent Class A
shares of TGF [distributed to the record holders of
ISTBF]. Certificates representing Class A shares and
Class B shares of ISTBF will, upon presentation to the transfer
agent of TGF, be exchanged for Class A shares of TGF. TGF
will issue certificates representing its Class A shares
only upon request.
The consummation of the Plan is subject to the
fulfillment of certain conditions set forth therein,
including, among other things, approval of the
Reorganization by the requisite vote of ISTBF's
shareholders. (See Sections 6, 7 and 8 of the Plan
attached hereto as Exhibit A.) The Plan may be terminated and
the Reorganization abandoned at any time prior to the
Closing Date by either party by resolution of the Board
of Trustees of Ivy Fund, on behalf of ISTBF, or the
Board of Trustees of The Tocqueville Trust, on behalf
of TGF, as the case may be, if circumstances should
develop that, in the opinion of the Board so resolving,
make proceeding with the Plan inadvisable.
TGF or TAM adviser shall have paid or agreed to
pay the first $25,000 of costs incurred by The
Tocqueville Trust and Ivy Fund in connection with the
Reorganization, including the fees and expenses
associated with the preparation and filing of this
Proxy Statement/Prospectus, any other state or federal
qualification and registration fees, and the expenses of printing
and mailing this Proxy Statement/Prospectus, soliciting
proxies and holding the special meeting of ISTBF
shareholders required to approve the Reorganization and
all counsel fees in connection therewith, which
expenses shall be solely and directly related to the
Reorganization within the meaning of Revenue Ruling 73-54,
1973 1 C.B. 187 (all of such costs, fees and expenses referred
to as the "Reorganization Expenses"). All of the
Reorganization Expenses, without considering fees and
expenses of the TGF's and TAM's investment adviser's
counsel and accountants, in excess of $25,000, shall be
paid by the ISTBF's investment adviser.
Approval of the Plan requires the affirmative vote
of a majority of all of the votes entitled to be cast
at the special meeting of shareholders of ISTBF. If
the Reorganization is not approved by ISTBF's
shareholders, the Board of Trustees of Ivy Fund, on
behalf of ISTBF, will consider other possible courses of
action, including continuing to operate ISTBF as it presently
operates, terminating future sales of Fund shares, or
seeking shareholder approval to liquidate ISTBF.
THE BOARD OF TRUSTEES OF IVY FUND, ON BEHALF OF
ISTBF, UNANIMOUSLY RECOMMENDS APPROVAL OF THE PLAN.
DESCRIPTION OF SHARES OF TGF
Each TGF share issued to shareholders of ISTBF
under the Plan would be fully paid and non-assessable
when issued, and transferable without restriction.
There would be no preemptive or conversion rights.
See "Comparative Information on Shareholder Rights" and
TGF's prospectus for additional information with
respect to TGF.
FEDERAL INCOME TAX CONSEQUENCES
The Reorganization is intended to qualify for
Federal income tax purposes as a tax-free
reorganization under Section 368(a)(1) of the Internal
Revenue Code of 1986, as amended, (the "Code").
Accordingly, pursuant to this treatment, shareholders of ISTBF
would not recognize gain or loss upon the receipt of TGF--
Class A shares in exchange for their Class A and Class
B shares of ISTBF. The tax basis of TGF--Class A
shares received would be the same as the basis of ISTBF
shares surrendered. As a condition to the Closing of
the Reorganization, ISTBF and TGF will receive an
opinion from the law firm of Dechert Price & Rhoads to the effect
that the Reorganization will qualify as a tax-free
reorganization for Federal income tax purposes. That
opinion will be based in part upon certain assumptions
and representations made by ISTBF and TGF.
Shareholders of ISTBF should consult their tax
advisers regarding the effect, if any, of the proposed
Reorganization in light of their individual
circumstances. BECAUSE THE FOREGOING DISCUSSION
RELATES ONLY TO THE FEDERAL INCOME TAX CONSEQUENCES OF
THE REORGANIZATION, SHAREHOLDERS OF ISTBF SHOULD ALSO CONSULT
THEIR TAX ADVISERS AS TO STATE, LOCAL AND OTHER TAX
CONSEQUENCES, IF ANY, OF THE REORGANIZATION.
APPRAISAL RIGHTS
There are no appraisal rights under Massachusetts
law for a shareholder of an open-end investment company
registered under the 1940 Act if the value placed on
the shareholder's stock that is the subject of the
transaction is its net asset value. In any event, the
staff of the SEC has taken the position that any rights
to appraisal arising under state law are superseded by the
provisions of Rule 22c-1 under the 1940 Act, which generally
requires that shares of a registered open-end investment
company be valued at their next determined net asset
value. A shareholder of ISTBF may redeem his or her
shares at net asset value prior to the date of the
Reorganization.
BASED UPON THE BOARD OF TRUSTEES' REVIEW, THE BOARD OF
TRUSTEES CONCLUDED THAT THE PARTICIPATION OF ISTBF IN
THE PROPOSED REORGANIZATION WOULD BE IN THE BEST
INTERESTS OF ISTBF AND ITS
SHAREHOLDERS AND THAT THE REORGANIZATION WOULD NOT
RESULT IN THE DILUTION OF EXISTING SHAREHOLDERS'
INTERESTS. THE BOARD OF TRUSTEES, INCLUDING THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMENDS APPROVAL
OF THE REORGANIZATION.
PERFORMANCE INFORMATION AND CAPITALIZATION
PERFORMANCE INFORMATION
The following table compares the performance
history of TGF and ISTBF with the Lipper Index since
August 31, 1995 (TGF commenced operations August 14,
1995):
Lipper
TGF ISTBF ISTBF Intermediate
U.S.
Government Class A Class A Class B
Index
Total Return 3.05% 4.76% 4.18% 3.41%
(As of 6/30/96)
____________________
CAPITALIZATION
The following table shows the capitalization
(unaudited) of the Funds as of June 30, 1996, as well
as the pro forma combined capitalization of both Funds
assuming the Reorganization transpired as of that date:
TOCQUEVILLE
GOVERNMENT IVY SHORT TERM
PRO FORMA FUND BOND
FUND COMBINED CLASS A
Net Assets 9,811,124 5,765,549
15,661,060
Shares outstanding 986,268 592,727
1,574,201
Net asset value per share $9.95 $9.73
$9.95
CLASS B
Net Assets 206 84,387
206
Shares outstanding 21 8,689
21
Net asset value per share $9.95 $9.71
$9.95
The Reorganization is being accounted for by TGF
by the method used for a tax-free reorganization of an
investment
company. Under this method (sometimes referred to as a
"pooling without restatement"), the aggregate net asset
value of TGF-- Class A shares issued in the
Reorganization will equal the combined aggregate net
asset value of ISTBF Class A and Class B shares.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
As a Massachusetts business trust, Ivy Fund is
governed by its Agreement and Declaration of Trust
dated December 21, 1983, as amended and restated
December 10, 1992, and amendments thereto ( "Ivy's
Declaration of Trust"), its By-Laws, and applicable
Massachusetts law. The Tocqueville Trust is governed by its
Declaration of Trust dated September 15, 1986 (the "Trust's
Declaration of Trust") as amended on August 1, 1991 and
August 4, 1995, its By-Laws, and applicable
Massachusetts law. The business and affairs of each of
Ivy Fund and The Tocqueville Trust are managed under
the direction of its Board of Trustees. There are no
material differences between the rights of shareholders
of each Fund.
INFORMATION ABOUT THE FUNDS
ISTBF:
Information concerning the operation and
management of ISTBF is incorporated herein by reference
from its current prospectus dated April 30, 1996. A
copy of the prospectus is available upon request and
without charge by calling (800) 777-6472. Additional
information is included in ISTBF's statement of additional
information dated April 30, 1996, which has been filed with the
SEC. A copy of that statement of additional information
is available upon request and without charge by calling
(800) 777- 6472. Reports and other information filed by
Ivy Fund, including charter documents and shareholder
reports, can be inspected and copied at the Public
Reference Facilities maintained by the SEC, located at
450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Atlanta Regional Office of the Securities and Exchange
Commission, 1375 Peachtree Street, N.E., Suite 788, Atlanta,
Georgia 30367. Copies of such material can also be
obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities
and Exchange Commission, Washington, D.C. 20549 at
prescribed rates.
TGF:
Information concerning the operation and
management of TGF is included in the current prospectus
dated February 28, 1996, which is included herewith and
incorporated by reference herein. Additional
information is included in TGF's statement of
additional information dated February 28, 1996, which has been
filed with the SEC and is available upon request and
without charge by calling TGF at (800) 697-3863. TGF
is subject to the informational requirements of the
Securities Exchange Act of 1934 and in accordance
therewith files proxy material, reports and other
information, including charter documents, with the SEC.
These reports can be inspected and copied at the Public Reference
Facilities maintained by the SEC, located at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the
Atlanta Regional Office of the Securities and Exchange
Commission, 1375 Peachtree Street, N.E., Suite 788,
Atlanta, Georgia 30367. Copies of such material can
also be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities
and Exchange Commission, Washington, D.C. 20549 at
prescribed rates.
CERTAIN AFFILIATIONS:
ISTBF: IMI serves as ISTBF's investment adviser
and administrator. IMDI serves as the principal
distributor of ISTBF's shares. IMSC provides transfer
and dividend-paying agent services for ISTBF, as well
as shareholder and shareholder- related services. IMI,
IMSC and IMDI are all located in Boca Raton, Florida
and are wholly owned subsidiaries of MIMI. MIMI is a
wholly owned subsidiary of MFC, which is located in Toronto,
Ontario, Canada.
TGF: TAM serves as investment adviser to TGF.
Tocqueville Securities L.P. is TGF's distributor, and
is an affiliate of TAM.
SHAREHOLDER PROPOSALS FOR SUBSEQUENT MEETINGS:
ISTBF does not, as a general matter, hold regular
annual or other meetings of shareholders. Any
shareholder who wishes to submit proposals to be
considered at a subsequent meeting of shareholders
should send such proposals to the principal executive
offices of Ivy Fund, located at Via Mizner Financial
Plaza, 700 South Federal Highway, Boca Raton, Florida 33432. It
is suggested that proposals be submitted by certified
mail, return receipt requested.
OTHER BUSINESS:
The Trustees of Ivy Fund know of no other business
to be brought before the Meeting. However, if any
other matters properly come before the Meeting, proxies
will be voted in accordance with the judgment of
persons named as proxies.
If you cannot attend the Meeting in person, please
complete and sign the enclosed proxy and return it in
the envelope provided so that the Meeting may be held
and action taken on the
matters described herein with the greatest possible
number of shares participating.
THE TRUSTEES OF IVY FUND, INCLUDING THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF
THE PLAN OF REORGANIZATION, AND ANY UNMARKED PROXIES
WILL BE SO VOTED.
VOTING INFORMATION
Proxies from the shareholders of ISTBF are being
solicited by the Board of Trustees of Ivy Fund, on
behalf of ISTBF, for the Special Meeting of
Shareholders to be held at 10:00 a.m. Eastern time on
__________________, 1996, at the Trust's offices at Via
Mizner Financial Plaza, 700 South Federal Highway, Boca Raton,
Florida 33432, or at such later time made necessary by
adjournment. A proxy may be revoked at any time at or before
the Meeting by oral or written notice to the Secretary
of ISTBF or by voting in person at the Meeting. Unless
revoked, all properly executed proxies received in time
for the Meeting will be voted in accordance with the
specifications thereon or, in the absence of such
specifications, for approval of the Plan and the
Reorganization.
Proxies are to be solicited by mail. Additional
solicitations may be made by telephone, telegraph or
personal contact by officers, employees or agents of
IMI and its affiliates. _________________________ has
been retained to assist in the solicitation of proxies
in connection with the Reorganization. For its
services,
_________________________________ will be paid a fee
expected to equal approximately [$_________] and will
be reimbursed for its related expenses.
Shareholders of ISTBF of record at the close of
business on ________________, 1996 (the "Record Date")
will be entitled to vote at the Meeting or any
adjournment thereof. The holders of a majority of the
shares of ISTBF outstanding at the close of business on
the Record Date and entitled to vote at the Meeting,
present in person or represented by proxy, will constitute a
quorum for the Meeting. Shareholders are entitled to one
vote for each share held and fractional votes for
fractional shares held.
As of __________________, 1996, as shown on the
books of ISTBF, there were issued and outstanding
_________ shares of common stock of ISTBF. As of
__________________, 1996, as shown on the books of TGF,
there were issued and outstanding ___________ shares of
beneficial interest of TGF.
For purposes of determining the presence of a
quorum for transacting business at the Meeting,
abstentions and broker "non
votes" will be treated as shares that are present, but
which have not been voted. Broker "non-votes" are
proxies received by ISTBF from brokers or nominees when
the broker or nominee neither has received instructions
from the beneficial owner(s) or other person(s)
entitled to vote nor has discretionary power to vote on
a particular matter. Abstentions and broker "non-votes" will
have the effect of a vote AGAINST the proposed Plan and
Reorganization, which proposal requires the affirmative vote
of a majority of all of the votes entitled to be cast
at the Meeting.
In the event that a quorum is not present at the
Meeting or a quorum is present but sufficient votes to
approve the Plan are not received, the persons named as
proxies may propose one or more adjournments of the
Meeting to permit further solicitation of proxies. Any
such adjournment will require the affirmative vote of a
majority of those shares represented at the meeting in
person or by proxy. If a quorum is present, the persons named as
proxies will vote those proxies that they are entitled
to vote FOR the Plan in favor of such an adjournment
and will vote those proxies that they are required to
vote AGAINST the Plan against any such adjournment.
The votes of the shareholders of TGF are not being
solicited, because their approval or consent is not
necessary for the Reorganization to take place.
As of June 30, 1996, the officers and Trustees of
Ivy Fund as a group owned beneficially less than 1% of
the outstanding shares of TGF, and to the best
knowledge of Ivy Fund, as of June 30, 1996, no person
owned of record or beneficially 5% or more of TGF's
outstanding Class A shares.
As of June 30, 1996, the Officers and Trustees of
Ivy Fund as a group owned none of the outstanding Class
A or Class B shares of ISTBF. To the knowledge of Ivy
Fund, as of June 30, 1996, no shareholder owned
beneficially or of record 5% or more of ISTBF's total
outstanding shares, except that Prestige Bank FSB, 710
Old Clairton Road, Pittsburg, PA 15236, owned of record
132,576.876 shares (22.04%), and First National Bank of
Assumption, Carl C. Corzine, President, 141 N. Chestnut St., P.O.
Box 197, Assumption, IL 62510, owned of record
60,273.000 shares (10.02%).
In addition, to the knowledge of the Ivy Fund, as
of June 30, 1996, no shareholder owned beneficially or
of record 5% or more of ISTBF's outstanding shares in
each class, except that of the outstanding Class A
shares of ISTBF, Prestige Bank FSB, 710 Old Clairton
Road, Pittsburgh, PA 15236, owned of record 132,576.876
shares (22.36%), First National Bank of Assumption,
Carl C. Corzine, President, 141 N. Chestnut Street, P.O. Box 197,
Assumption, IL 62510, owned of record 60,273.000 shares
(10.16%),
and Carl D. Rotche, 4364 Bonita Road, Bonita, CA 19902,
owned of record 29,641.657 shares (5.00%), and except
that of the outstanding Class B shares of ISTBF,
Marjorie S. Fraser, 184 Euclid Avenue, Hamburg, NY
14075, owned of record 2,369.611 shares (27.27%),
Kenneth H. and Carmen M. Luk, trustee of the Luk
Revocable Trust, U/A/D 12-18-92, 7151 N. 3rd Street, Phoenix, AZ
85020, owned of record 1,710.962 shares (13.47%),
Delaware Charter Guar. Cust. IRS FBO: Frederick
Fetkowitz, P.O. Box 8963, Wilmington, DE 19899, owned
of record 1,016.913 shares (11.70%), Rita M. Dillon,
Trustee of the Rita M. Dillon Trust U/A/D 12-18- 92,
P.O. Box 1025, Ponte Vedra, FL 32004, owned of record 984.067
shares (11.32%), Carole Jane Champagne, 236 Davis Avenue,
Greenwich, CT 06830, owned of record 727.168 shares
(8.36%), First Trust Corp. Cust. IRA FBO: Ralph V.
Gerrard U/A/D 10-11-94, P.O. Box 173301, Denver, CO
80217-3301, owned of record 627.899 shares (7.22%),
First Trust Corp. Cust. IRA FBO: Marilyn H. Roeters
U/A/D 5-14-92, P.O. Box 173301, Denver, CO 80217-3301
owned of record 574.753 shares (6.61%), and First Trust Corp.
Cust. IRA FBO: Linda L. Stempel U/A/D 10-4-94, P.O. Box
173301, Denver, CO 80217-3301, owned of record 453.402
shares (5.21%).
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the
"Agreement") is made as of this ____ day __________,
1996, by and between The Tocqueville Trust
("Tocqueville Trust"), a business trust organized under
the laws of the Commonwealth of Massachusetts, on
behalf of The Tocqueville Government Fund (the "Acquiring Fund"),
a series of Tocqueville Trust, and Ivy Fund, a business
trust organized under the laws of the Commonwealth of
Massachusetts, on behalf of Ivy Short-Term Bond Fund
(the "Acquired Fund"), a series of Ivy Fund.
This Agreement is intended to be and is adopted as
a plan of reorganization and liquidation pursuant to
Section 368(a) of the United States Internal Revenue
Code of 1986, as amended (the "Code"). The
reorganization (the "Reorganization") will consist of
the transfer of all or substantially all of the assets of the
Acquired Fund to the Acquiring Fund and the assumption by
the Acquiring Fund of all of the identified and stated
liabilities as of the Effective Time (defined below) of
the Acquired Fund in exchange solely for full and
fractional voting shares of beneficial interest, par
value $.01 per share, of the Acquiring Fund (the
"Acquiring Fund Shares"), having an aggregate net asset
value equal to the aggregate value of the assets acquired (less
liabilities assumed) of the Acquired Fund, and the
distribution of the Acquiring Fund Shares to the
shareholders of the Acquired Fund in liquidation of the
Acquired Fund as provided herein, all upon the terms
and conditions hereinafter set forth.
WITNESSETH:
WHEREAS, each of Tocqueville Trust and Ivy Fund is
a registered, open-end management investment company,
with Ivy Fund offering its shares of beneficial
interest in multiple series (each of which series
represents a separate and distinct portfolio of assets
and liabilities) and Tocqueville Trust offering its
shares of beneficial interest in a single series at the
current time;
WHEREAS, the Acquired Fund offers Class A, Class
B, and Class I shares and the Acquiring Fund offers
Class A and Class B shares;
WHEREAS, the Acquiring Fund has ceased offering
Class B shares, and is converting the existing
outstanding Class B shares into Class A shares;
WHEREAS, there are no Class I shares of the
Acquired Fund outstanding and the Acquired Fund has
ceased offering Class I shares;
WHEREAS, the Acquired Fund owns securities which
generally are assets of the character in which the
Acquiring Fund is permitted to invest; and
WHEREAS, Tocqueville Asset Management L.P., the
Acquiring Fund's investment adviser, wishes to effect
the Reorganization;
WHEREAS, the Board of Trustees of each of the
Acquired Fund and the Acquiring Fund has determined
that the exchange of all or substantially all of the
assets of the Acquired Fund for Acquiring Fund Shares
and the assumption of all of the identified and stated
liabilities of the Acquired Fund as of the Effective
Time by the Acquiring Fund is in the best interests of the
shareholders of the Acquired Fund and the Acquiring Fund,
respectively; and
WHEREAS, the purpose of the Reorganization is to
combine the assets of the Acquiring Fund with those of
the Acquired Fund in an attempt to achieve greater
operating economies and increased portfolio
diversification and synergies.
NOW, THEREFORE, in consideration of the promises
and of the representations, warranties, covenants and
agreements hereinafter set forth, the parties hereto
covenant and agree as follows:
1. TRANSFER OF ALL OR SUBSTANTIALLY ALL OF THE ASSETS
OF THE ACQUIRED FUND TO THE ACQUIRING FUND SOLELY
IN EXCHANGE FOR ACQUIRING FUND SHARES, THE
ASSUMPTION OF ALL IDENTIFIED AND STATED
LIABILITIES OF THE ACQUIRED FUND AS OF THE EFFECTIVE
TIME, AND THE LIQUIDATION OF THE ACQUIRED FUND
1.1 Subject to the requisite approval by Acquired
Fund shareholders and to the other terms and conditions
set forth herein and on the basis of the
representations and warranties contained herein, the
Acquired Fund agrees to transfer all or substantially
all of the Acquired Fund's assets as set forth in
Section 1.2 to the Acquiring Fund, and the Acquiring Fund agrees
in exchange therefor (a) to deliver to the Acquired Fund
that number of full and fractional Acquiring Fund
Shares determined in accordance with Article 2, and (b)
to assume all of the identified and stated liabilities
of the Acquired Fund, as set forth in Section 1.3.
Such transactions shall take place as of the effective
time provided for in Section 3.1 (the "Effective
Time").
1.2 (a) The assets of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of all or
substantially all of the Acquired Fund's property,
including, but not limited to, all cash, securities,
commodities, futures, and interest and dividends
receivable which are owned by the Acquired Fund as of
the Effective Time. All of such assets shall be set forth in
detail in an unaudited statement of assets and liabilities
of the Acquired Fund as of the Effective Time (the
"Effective Time Statement"). The Effective Time
Statement shall, with respect to
the listing of the Acquired Fund's portfolio
securities, detail the adjusted tax basis of such
securities by lot, the respective holding periods of
such securities and the current and accumulated
earnings and profits of the Acquired Fund. The
Effective Time Statement shall be prepared in accordance with
generally accepted accounting principals (except for
footnotes) consistently applied from the prior audited
period and shall be certified by the Acquired Fund's
treasurer.
(b) The Acquired Fund has provided the
Acquiring Fund with a list of all of the Acquired
Fund's assets as of the date of execution of this
Agreement. The Acquired Fund reserves the right to
sell any of these securities in the ordinary course of
its business and, subject to Section 5.1, to acquire additional
securities in the ordinary course of its business.
1.3 The Acquiring Fund shall assume all of the
identified and stated liabilities, expenses, costs,
charges and reserves (including, but not limited to,
expenses incurred in the ordinary course of the
Acquired Fund's operations, such as accounts payable
relating to custodian fees, investment management and
administrative fees, legal and audit fees, and expenses of state
securities registration of the Acquired Fund's shares)
reflected in the Effective Time Statement. The
Acquiring Fund shall assume only those liabilities of
the Acquired Fund in the amounts reflected on the
Effective Time Statement and shall not assume any other
liabilities, whether absolute or contingent, known or
unknown, accrued or unaccrued.
1.4 Immediately after the transfer of assets
provided for in Section 1.1 and the assumption of
liabilities provided for in Section 1.3, and pursuant
to the plan of reorganization adopted herein, the
Acquired Fund will distribute pro rata (as provided in
Article 2) to the Acquired Fund's shareholders of record,
determined as of the Effective Time (the "Acquired Fund
Shareholders"), the Acquiring Fund shares received by the
Acquired Fund pursuant to Section 1.1, and all other assets of
the Acquired Fund, if any. Thereafter, no additional
shares representing interests in the Acquired Fund
shall be issued. Such distribution will be
accomplished by the transfer of the Acquiring Fund
Shares then credited to the account of the Acquired
Fund on the books of the Acquiring Fund to open accounts
on the share records of the Acquiring Fund in the names of the
Acquired Fund shareholders representing the numbers and
classes of Acquiring Fund Shares due each such
shareholder. All issued and outstanding shares of the
Acquired Fund will simultaneously be canceled on the
books of the Acquired Fund, although share certificates
representing interests in the Acquired Fund will
represent those numbers and classes of Acquiring Fund Shares
after the Effective Time as determined in accordance with
Article 2. Unless requested by Acquired Fund
shareholders, the Acquiring Fund will not issue
certificates representing the Acquiring Fund Shares
issued in connection with such exchange.
1.5 Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund. Acquiring
Fund Shares will be issued in the manner described in
the Acquiring Fund's Prospectus and Statement of
Additional Information as in effect as of the Effective
Time, except that no front-end sales charges will be
incurred by Acquired Fund Shareholders in connection with their
acquisition of Acquiring Fund Shares pursuant to this
Agreement, and, after the Reorganization, no front-end
sales charges or deferred sales charges will be
incurred by former holders of Acquired Fund Shares when
purchasing additional Acquiring Fund Shares for their
existing account with the Acquiring Fund. In addition,
the Acquiring Fund's operating expense ratio will be
capped at 1.0% for its Class A shares for at least the first
three years following the reorganization.
1.6 Any reporting responsibility of the Acquired
Fund, including, but not limited to, the responsibility
for filing of regulatory reports, tax returns, or other
documents with the Securities and Exchange Commission
(the "Commission"), any state securities commissions,
and any federal, state or local tax authorities or any
other relevant regulatory authority, is and shall
remain the responsibility of the Acquired Fund.
2. VALUATION; ISSUANCE OF ACQUIRING FUND SHARES
The Acquiring Fund shall issue Class A shares in
exchange for the assets and liabilities of the Acquired
Fund which are allocable to its Class A and Class B
shares in accordance with the following procedure:
2.1 The net asset value per share of the Acquired
Fund's and the Acquiring Fund's Class A shares shall be
computed as of the Effective Time and after the
declaration of any dividends or distributions on that
date using the valuation procedures set forth in their
respective declarations of trust and bylaws, their
then-current Prospectuses and Statements of Additional
Information, and as may be required by the Investment Company Act
of 1940, as amended (the "1940 Act").
2.2 (a) The total number of Class A Acquiring
Fund shares to be issued (including fractional shares,
if any) in exchange for the assets and liabilities of
the Acquired Fund which are allocable to the Acquired
Fund's Class A shares shall be determined as of the
Effective Time by multiplying the number of Class A
Acquired Fund shares outstanding immediately prior to the
Effective Time times a fraction, the numerator of which is the
net asset value per share of the Acquired Fund's Class A
shares immediately prior to the Effective Time, and the
denominator of which is the net asset value per share
of the Acquiring Fund's Class A shares immediately
prior to the Effective Time, each as determined
pursuant to Section 2.1.
(b) The total number of Class A Acquiring
Fund shares to be issued (including fractional shares,
if any) in exchange
for the assets and liabilities of the Acquired Fund
which are allocable to the Acquired Fund's Class B
shares shall be determined as of the Effective Time by
multiplying the number of Class B Acquired Fund shares
outstanding immediately prior to the Effective Time
times a fraction, the numerator of which is the net
asset value per share of the Acquired Fund's Class B shares
immediately prior to the Effective Time, and the denominator
of which is the net asset value per share of the
Acquiring Fund's Class A shares immediately prior to
the Effective Time, each as determined pursuant to
Section 2.1.
2.3 Immediately after the Effective Time, the
Acquired Fund shall distribute to the Acquired Fund
Shareholders of the respective classes in liquidation
of the Acquired Fund pro rata within classes (based
upon the ratio that the number of Acquired Fund shares
of the respective classes owned by each Acquired Fund
Shareholder immediately prior to the Effective Time bears to the
total number of issued and outstanding Acquired Fund
shares of such classes immediately prior to the
Effective Time) the full and fractional Class A
Acquiring Fund Shares received by the Acquired Fund
pursuant to Section 2.2. Accordingly, each Class A
Acquired Fund Shareholder shall receive, immediately after the
Effective Time, Class A Acquiring Fund Shares with an
aggregate net asset value equal to the aggregate net
asset value of the Class A Acquired Fund shares owned
by such Acquired Fund Shareholder immediately prior to
the Effective Time; and each Class B Acquired Fund
Shareholder shall receive, immediately after the
Effective Time, Class A Acquiring Fund Shares with an
aggregate net asset value equal to the aggregate net asset value
of the Class B Acquired Fund shares owned by such
Acquired Fund Shareholder immediately prior to the
Effective Time.
3. EFFECTIVE TIME; CLOSING
3.1 The closing of the transactions contemplated
by this Agreement (the "Closing") shall occur as of the
close of normal trading on the New York Stock Exchange
(the "Exchange") (currently, 4:00 p.m. Eastern time),
and after the declaration of any dividends or
distributions on such date, on the fourth business day
following the date on which this Agreement and the
transactions contemplated herein have been approved by the
requisite vote of the holders of the outstanding shares of the
Acquired Fund, or at such time on such later date as
provided herein or as the parties otherwise may agree
in writing (such time and date being referred to herein
as the "Effective Time"). All acts taking place at the
Closing shall be deemed to take place simultaneously as
of the Effective Time unless otherwise agreed to by the
parties. The Closing shall be held at the offices of
Dechert Price & Rhoads, Ten Post Office Square, Boston,
Massachusetts 02109, or at such other place as the
parties may agree.
3.2 The Acquired Fund shall deliver at the
Closing its written instruction to the custodian for
the Acquired Fund,
acknowledged and agreed to in writing by such
custodian, irrevocably instructing such custodian to
transfer to the Acquiring Fund all of the Acquired
Fund's portfolio securities, cash, and any other assets
to be acquired by the Acquiring Fund pursuant to this
Agreement.
3.3 In the event that the Effective Time occurs
on a day on which (a) the Exchange or another primary
trading market for portfolio securities of the
Acquiring Fund or the Acquired Fund shall be closed to
trading or trading thereon shall be restricted, or (b)
trading or the reporting of trading on the Exchange or
elsewhere shall be disrupted so that accurate appraisal
of the value of the net assets of the Acquiring Fund or
the Acquired Fund is impracticable, the Effective Time shall be
postponed until the close of normal trading on the
Exchange on the first business day when trading shall
have ben fully resumed and reporting shall have been
restored.
3.4 The Acquired Fund shall deliver at the
Closing a certificate of its transfer agent stating
that the records maintained by the transfer agent
(which shall be made available to the Acquiring Fund)
contain the names and addresses of the Acquired Fund
shareholders and the numbers and classes of outstanding
Acquired Fund shares owned by each such shareholder as
of the Effective Time. The Acquiring Fund shall certify at
the Closing that the Acquiring Fund Shares required to be
issued by it pursuant to this Agreement have been
issued and delivered as required herein.
3.5 At the Closing, each party to this Agreement
shall deliver to the other such bills of sale,
liability assumption agreements, checks, assignments,
share certificates, if any, receipts or other similar
documents as such other party or its counsel may
reasonable request.
4. REPRESENTATIONS AND WARRANTIES
4.1 The Acquired Fund represents and warrants to
the Acquiring Fund as follows:
(a) Ivy Fund is a business trust duly organized
and validly existing under the laws of the Commonwealth
of Massachusetts with power under its declaration of
trust to own all of its properties and assets and to
carry on its business as it is now conducted;
(b) Ivy Fund is a registered investment company
classified as a management company of the open-end
type, and its registration with the Commission as an
investment company under the 1940 Act, and of each
series of shares offered by Ivy Fund (including the
Acquired Fund shares) under the Securities Act of 1933,
as amended (the "1933 Act"), is in full force and effect;
(c) Shares of the Acquired Fund are registered in
all jurisdictions in which they are required to be
registered under
state securities laws and any other applicable laws,
said registrations, including any periodic reports or
supplemental filings, are complete and current in all
material respects; all fees required to be paid in
connection with such registrations have been paid; and
the Acquired Fund is not subject to any stop orders,
and is fully qualified to sell its shares in any state in
which its shares have been registered;
(d) The Prospectus and Statement of Additional
Information of the Acquired Fund, as of the date hereof
and up to and including the Effective Time, conform and
will conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the
rules and regulations of the Commission thereunder and
do not and will not include any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not materially misleading;
(e) The Acquired Fund is not, and the execution,
delivery and performance of this Agreement will not
result, in a violation of Ivy Fund's declaration of
trust or bylaws or of any material agreement,
indenture, instrument, contract, lease or other
undertaking to which the Acquired Fund is a party or by which it
is bound, except as previously disclosed to the Acquiring
Fund in writing;
(f) Except as previously disclosed to the
Acquiring Fund in writing, no material litigation or
administrative proceeding or investigation of or before
any court or governmental body is presently pending or,
to the best of the Acquired Fund's knowledge,
threatened against the Acquired Fund or any of its
properties or assets. The Acquired Fund is not a party to or
subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and
adversely affects its business or its ability to
consummate the transactions herein contemplated;
(g) The Statement of Assets and Liabilities of
the Acquired Fund as of the end of its most recently
concluded fiscal year has been audited by Coopers &
Lybrand L.L.P., independent accountants, and is in
accordance with generally accepted accounting
principles ("GAAP") consistently applied, and such
statement (a copy of which as been furnished to the Acquiring
Fund) presents fairly, in all material respects, the
financial position of the Acquired Fund as of such date
in accordance with GAAP, and there are no known
material contingent liabilities of the Acquired Fund
required to be reflected on a balance sheet (including
notes thereto) in accordance with GAAP as of such date
not disclosed therein;
(h) Since the end of the Acquired Fund's most
recently concluded fiscal year, there has not been any
material adverse change in the Acquired Fund's
financial condition, assets,
liabilities or business other than changes occurring in
the ordinary course of business, except as otherwise
disclosed to the Acquiring Fund. For the purposes of
this paragraph (h), a decline in net asset value per
share of the Acquired Fund, the discharge or incurrence
of Acquired Fund liabilities in the ordinary course of
business, or the redemption of Acquired Fund shares by
Acquired Fund shareholders, shall not constitute such a
material adverse change;
(i) All material federal and other tax returns
and reports of the Acquired Fund required by law to
have been filed prior to the Effective Time shall have
been filed and shall be correct in all material
respects, and all federal and other taxes shown as due
or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Acquired Fund's
knowledge, no such return is currently under audit and no
assessment shall have been asserted with respect to such
returns;
(j) For each taxable year of its operation
(including the taxable year ending on the Closing
Date), the Acquired Fund has met the requirements of
Subchapter M of the Code for qualification and
treatment as a regulated investment company and has
elected to be treated as such, has been eligible to and has
computed its federal income tax under Section 852 of the Code,
and will have distributed all of its investment company
taxable income and net capital gain (as defined in the
Code) that has accrued through the Closing Date;
(k) All issued and outstanding shares of the
Acquired Fund are, and at the Effective Time will be,
duly and validly issued and outstanding, fully paid and
non-assessable (recognizing that, under Massachusetts
law, Acquired Fund Shareholders could, under certain
circumstances, be held personally liable for obligations
of Ivy Fund). All of the issued and outstanding shares of the
Acquired Fund will, at the Effective Time, be held by the
persons and in the amounts set forth in the records of
the Acquired Fund, as provided in Section 3.4. The
Acquired Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase
any Acquired Fund shares, and there is not outstanding
any security convertible into any Acquired Fund shares
(other than Class B shares which automatically convert to
Class A shares after a specified period);
(l) At the Effective Time, the Acquired Fund will
have good and marketable title to the Acquired Fund's
assets to be transferred to the Acquiring Fund pursuant
to Section 1.2 and full right, power, and authority to
sell, assign, transfer and deliver such assets
hereunder, and upon delivery of and payment for such
assets, the Acquiring Fund will acquire good and
marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might
arise under the 1933 Act other than as disclosed to the
Acquiring Fund in the Effective Time Statement;
(m) The execution, delivery and performance of
this Agreement will have been duly authorized prior to
the Effective Time by all necessary action on the part
of the Acquired Fund's Board of Trustees, and, subject
to the approval of the Acquired Fund shareholders, this
Agreement will constitute a valid and binding
obligation of the Acquired Fund, enforceable in
accordance with its terms, subject, as to enforcement to
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other laws relating to or affecting
creditors' rights and to the application of equitable
principles in any proceeding, whether at law or in
equity;
(n) The information to be furnished by and on
behalf of the Acquired Fund for use in registration
statements, proxy materials and other documents which
may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in
all material respects;
(o) All information pertaining to the Acquired
Fund, Ivy Fund, and their agents and affiliates and
included in the Registration Statement referred to in
Section 5.5 (or supplied by the Acquired Fund, Ivy Fund
or their agents or affiliates for inclusion in said
Registration Statement), on the effective date of said
Registration Statement and up to and including the
Effective Time, will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make statements therein, in
light of the circumstance under which such statements
are made, not materially misleading (other than as may
timely be remedied by further appropriate disclosure);
(p) Since the end of the Acquired Fund's most
recently concluded fiscal year, there have been no
material changes by the Acquired Fund in accounting
methods, principles or practices, including those
required by generally accepted accounting principles,
except as disclosed in writing to the Acquiring Fund;
and
(q) The Effective Time Statement will be prepared
in accordance with generally accepted accounting
principles (except for footnotes) consistently applied
and will present accurately in all material respects
the assets and liabilities of the Acquired Fund as of
the Effective Time, and the values of the Acquired
Fund's assets and liabilities to be set forth in the
Effective Time Statement will be computed as of the Effective
Time using the valuation procedures set forth in the
Acquired Fund's declaration of trust and bylaws, its
then-current Prospectus and Statement of Additional
Information, and as may be required by the 1940 Act.
At the Effective Time, the Acquired Fund will have no
liabilities, whether absolute or contingent, accrued
and unaccrued, which are not reflected in the Effective
Time Statement.
4.2 The Acquiring Fund represents and warrants to
the Acquired Fund as follows:
(a) Tocqueville Trust is a business trust duly
organized and validly existing under the laws of the
Commonwealth of Massachusetts with power under its
declaration of trust to own all of its properties and
assets and to carry on its business as it is now
conducted;
(b) Tocqueville Trust is a registered investment
company classified as a management company of the open-
end type, and its registration with the Commission as
an investment company under the 1940 Act, and of each
series of shares offered by Tocqueville Trust
(including the Acquiring Fund Shares) under the 1933 Act,
is in full force and effect;
(c) Shares of the Acquiring Fund are registered
in all jurisdictions in which they are required to be
registered under state securities laws and any other
applicable laws; said registration, including any
periodic reports or supplemental filings, are complete
and current; all fees required to be paid in connection
with such registrations have been paid; and the
Acquiring Fund is in good standing, is not subject to any stop
orders, and is fully qualified to sell its shares in any
state in which its shares have been registered;
(d) The Prospectus and Statement of Additional
Information of the Acquiring Fund, as of the date
hereof and up to and including the Effective Time,
conform and will conform in all material respects to
the applicable requirements of the 1933 Act and the
1940 Act and the rules and regulations of the commission
thereunder and do not and will not include any untrue statement
of a material fact or omit to state any material fact
necessary to make the statements therein, in light of
the circumstances under which they were made, not
materially misleading;
(e) The Acquiring Fund is not, and the execution,
delivery and performance of the Agreement will not
result, in a violation of its declaration of trust or
bylaws or of any material agreement, indenture,
instrument, contract, lease or other undertaking to
which the Acquiring Fund is a party or by which it is
bound;
(f) No material litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or, to the best
of the Acquiring Fund's knowledge, threatened against
the Acquiring Fund or any of its properties or assets.
The Acquiring Fund is not a party to or subject to the
provisions of any order, decree or judgment of any
court or governmental body which materially and adversely affects
its business or its ability to consummate the
transactions herein contemplated;
(g) The Statement of Assets and Liabilities of
the Acquiring Fund as of the end of its most recently
concluded fiscal year has been audited by McGladrey &
Pullen, LLP, independent accountants, and is in
accordance with GAAP consistently applied, and such
statement (a copy of which has been furnished to the
Acquired Fund) presents fairly, in all material
respects, the financial position of the Acquiring Fund
as of such date in accordance with GAAP, and there are no known
material contingent liabilities of the Acquiring Fund
required to be reflected on a balance sheet (including
notes thereto) in accordance with GAAP as of such date
not disclosed therein;
(h) Since the end of the Acquiring Fund's most
recently concluded fiscal year, there has not been any
material adverse change in the Acquiring Fund's
financial condition, assets, liabilities or business
other than changes occurring in the ordinary course of
business, except as otherwise disclosed to the Acquired
Fund. For the purposes of this paragraph (h), a decline
in net asset value per share of the Acquiring Fund, the discharge
or incurrence of Acquiring Fund liabilities in the
ordinary course of business, or the redemption of
Acquiring Fund shares by Acquiring Fund shareholders,
shall not constitute such a material adverse change;
(i) All material federal and other tax returns
and reports of the Acquiring Fund required by law to
have been filed prior to the Effective Time shall have
been filed and shall be correct in all material
respects, and all federal and other taxes shown as due
or required to be shown as due on said returns and reports
shall have been paid or provision shall have been made for the
payment thereof, and, to the best of the Acquiring Fund's
knowledge, no such return is currently under audit and
no assessment shall have been asserted with respect to
such returns;
(j) For each taxable year of its operation, the
Acquiring Fund as met the requirements of Subchapter M
of the Code for qualification and treatment as a
regulated investment company and has elected to be
treated as such, has been eligible to and has computed
its federal income tax under Section 852 of the Code,
and will do so for the taxable year including the Closing Date;
(k) All issued and outstanding shares of the
Acquiring Fund are, and at the Effective Time will be,
duly and validly issued and outstanding, fully paid and
non-assessable (recognizing that, under Massachusetts
law, Acquiring Fund shareholders could, under certain
circumstances, be held personally liable for obligations
of Tocqueville Trust). The Acquiring Fund Shares to be issued
and delivered to the Acquired Fund for the account of the
Acquired Fund Shareholders, pursuant to the terms of this
Agreement, at the Effective Time will have been duly
authorized and, when so issued and delivered, will be
duly and validly issued and outstanding, fully paid and
non-assessable (recognizing that, under Massachusetts
law, Acquiring Fund Shareholders could, under certain
circumstances, be held
personally liable for obligations of Tocqueville
Trust). The Acquiring Fund does not have outstanding
any options, warrants or other rights to subscribe for
or purchase any Acquiring Fund shares, and there is not
outstanding any security convertible into any Acquiring
Fund shares (other than Class B shares which
automatically convert to Class A shares after a specified
period);
(l) The execution, delivery and performance of
this Agreement will have been duly authorized prior to
the Effective Time by all necessary action on the part
of Tocqueville Trust's Board of Trustees, and at the
Effective Time this Agreement will constitute a valid
and binding obligation of the Acquiring Fund,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other laws related to or
affecting creditors' rights and to the application of
equitable principles in any proceeding, whether at law
or in equity. Consummation of the transactions
contemplated by the Agreement does not require the
approval of the Acquiring Fund's shareholders;
(m) The information to be furnished by and on
behalf of the Acquiring Fund for use in registration
statements, proxy materials and other documents which
may be necessary in connection with the transactions
contemplated hereby shall be accurate and complete in
all material respects;
(n) Since the end of the Acquiring Fund's most
recently concluded fiscal year, there have been not
material changes by the Acquiring Fund in accounting
methods, principles or practices, including those
required by generally accepted accounting principles,
except as disclosed in writing to the Acquired Fund;
and
(o) The Registration Statement referred to in
Section 5.5, on its effective date and up to and
including the Effective Time, will (i) conform in all
material respects to the applicable requirements of the
1933 Act, the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the 1940 Act and the rules
and regulations of the Commission thereunder, and (ii) not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which such statements were
made, not materially misleading (other than as may
timely be remedied by further appropriate disclosure);
provided, however, that the representations and
warranties in clause (ii) of this paragraph shall not apply to
statements in (or omissions from) the Registration
Statement concerning the Acquired Fund, Ivy Fund, and
their agents and affiliates (or supplied by the
Acquired Fund, Ivy Fund, or their agents or affiliates
for inclusion in said Registration Statement).
5. COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED
FUND
5.1 Each of the Acquired Fund and the Acquiring
Fund will operate its business in the ordinary course
between the date hereof and the Effective Time, it
being understood that such ordinary course of business
will include the declaration and payment of customary
dividends and distributions, and any other
distributions that may be advisable (which may include
distributions prior to the Effective time of net income and/or
net realized capital gains not previously distributed).
5.2 The Acquired Fund will call a meeting of its
shareholders to consider and act upon this Agreement and
to take all other action reasonable necessary to obtain
approval of the transactions contemplated herein.
5.3 The Acquired Fund will assist the Acquiring
Fund in obtaining such information as the Acquiring
Fund reasonable requests concerning the beneficial
ownership of the Acquired Fund shares.
5.4 Subject to the provision of this Agreement,
the Acquiring Fund and the Acquired Fund will each
take, or cause to be taken, all actions, and do or
cause to be done, all things reasonable necessary,
proper or advisable to consummate and make effective
the transactions contemplated by this Agreement.
5.5 The parties will provide to each other
information reasonably necessary for the preparation of
the Registration Statement on form N-14 of the
Acquiring Fund (the "Registration Statement"), in
compliance with the 1933 Act and the 1940 Act.
5.6 The Acquiring Fund agrees to use all
reasonable efforts to obtain the approvals and
authorizations required by the 1933 Act, the 1940 Act
and such state blue sky or securities laws as may be
necessary in order to conduct its operations after the
Effective Time.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRED FUND
The obligations of the Acquired Fund to consummate
the transactions provided for herein shall be subject,
at its election, to the performance by the Acquiring
Fund of all the obligations to be performed by it
hereunder at or before the Effective Time, and, in
addition thereto, the following further conditions (any
of which may be waived by the Acquired Fund, in its
sole and absolute discretion):
6.1 All representations and warranties of the
Acquiring Fund contained in this Agreement shall be
true and correct as of the date hereof and, except as
they may be affected by the transactions contemplated
by this Agreement, as of the Effective Time with the
same force and effect as if made at such time;
6.2 The Acquiring Fund shall have delivered to
the Acquired Fund a certificate executed in its name by
its President or a Vice President, in a form reasonably
satisfactory to the Acquired Fund and dated as of the
date of the Closing, to the effect that the
representations and warranties of the Acquiring Fund made in
this Agreement are true and correct at the Effective Time,
except as they may be affected by the transactions
contemplated by this Agreement;
6.3 The Acquiring Fund shall have delivered to
the Acquired Fund the certificate as to the issuance of
Acquiring Fund shares contemplated by the second
sentence of Section 3.4;
6.4 The Acquiring Fund or the Acquiring Fund's
investment adviser shall have paid or agreed to pay the
first $25,000 of costs incurred by the Tocqueville
Trust and Ivy Fund in connection with the
Reorganization, including the fees and expenses
associated with the preparation and filing of the
Registration Statement referred to in Section 5.5 above, any
other state or federal qualification and registration fees,
and the expenses of printing and mailing the
prospectus/proxy statement, soliciting proxies and
holding the Acquired Fund shareholder meeting required
to approve the transactions contemplated by this
Agreement and all counsel fees in connection therewith,
which expenses shall be solely and directly related to
the Reorganization within the meaning of Revenue Ruling 73-54,
1973 1 C.B. 187 (all of such costs, fees and expenses
referred to as the "Reorganization Expenses"). All of
the Reorganization Expenses, without considering fees
and expenses of counsel and accountants to the
Acquiring Fund and the Acquiring Fund's investment
adviser, in excess of $25,000, shall be paid by the
Acquired Fund's investment adviser.
6.5 The Acquired Fund shall have received an
opinion from Kramer, Levin, Naftalis, Nessen, Kamen &
Frankel, counsel to the Acquiring Fund, dated as of the
Closing Date, to the effect that:
(a) Tocqueville Trust has been duly organized and
is validly existing as a business trust under the laws
of the Commonwealth of Massachusetts with requisite
power and authority to own its properties and, to the
knowledge of such counsel, to carry on its business as
presently conducted;
(b) Under federal laws and the laws of the
Commonwealth of Massachusetts, this Agreement has been
duly authorized, executed and delivered by the
Acquiring Fund and, assuming due authorization,
execution and delivery of the Agreement by the Acquired
Fund, constitutes a valid and legally binding obligation
of the Acquiring Fund enforceable against the Acquiring Fund in
accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to
general equitable principles;
(c) The execution and delivery of this Agreement
did not and the exchange of the Acquired Fund's assets
for shares of the Acquiring Fund do not violate (i) the
Acquiring Fund's declaration of trust or bylaws or (ii)
any federal law of the United States or the laws of the
commonwealth of Massachusetts applicable to the
Acquiring Fund, provided, however, that such counsel
may state that it expresses no opinion with respect to
federal or state securities laws, other antifraud laws and
fraudulent transfer laws; and provided further that insofar as
performance by the Acquiring Fund of its obligations
under this Agreement is concerned such counsel may
state that it expresses no opinion as to bankruptcy,
insolvency, reorganization, moratorium or similar laws
of general applicability relating to or affecting
creditors' rights;
(d) All regulatory consents, authorizations,
approvals and filings required to be obtained or made
by the Acquiring Fund under the federal laws of the
United states and the laws of the Commonwealth of
Massachusetts for the consummation of the transactions
contemplated by this Agreement have been obtained or
made.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND
The obligations of the Acquiring Fund to
consummate the transactions provided for herein shall
be subject, at its election, to the performance by the
Acquired Fund of all of the obligations to be performed
by it hereunder at or before the Effective Time and, in
addition thereto, the following conditions (any of
which may be waived by the Acquiring Fund, in its sole
and absolute discretion):
7.1 All representations and warranties of the
Acquired Fund contained in this Agreement shall be true
and correct as of the date hereof and, except as they
may be affected by the transactions contemplated by
this Agreement, as of the Effective Time with the same
force and effect as if made at such time.
7.2 The Acquired Fund shall have delivered to the
Acquiring Fund the Effective Time Statement.
7.3 The Acquired Fund shall have delivered to
the Acquiring Fund a certificate executed in its name
by its President or a Vice President, in a form
reasonably satisfactory to the Acquiring Fund and dated
as of the date of the Closing, to the effect that the
representations and warranties of the Acquired Fund
made in this Agreement are true and correct at the
Effective Time, except as they may be affected by the
transactions contemplated by this Agreement.
7.4 The Acquired Fund shall have delivered to the
Acquiring Fund the written instructions to the
custodian for the Acquired Fund contemplated by Section
3.2.
7.5 The Acquired Fund shall have delivered to the
Acquiring Fund the certificate as to its shareholder
records contemplated by the first sentence of Section
3.4.
7.6 The Acquiring Fund shall have received an
opinion from Dechert Price & Rhoads, counsel to the
Acquired Fund, dated as of the Closing Date, to the
effect that:
(a) Ivy Fund has been duly organized and is
validly existing as a business trust under the laws of
the Commonwealth of Massachusetts with requisite power
and authority to own its properties and, to the
knowledge of such counsel, to carry on its business as
presently conducted;
(b) Under federal laws and the laws of the
Commonwealth of Massachusetts, this Agreement has been
duly authorized, executed and delivered by the Acquired
Fund and, assuming due authorization, execution and
delivery of the Agreement by the Acquiring Fund,
constitutes a valid and legally binding obligation of
the Acquired Fund enforceable against the Acquired Fund
in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability relating to or
affecting creditors' rights and to general equitable
principles;
(c) The execution and delivery of this Agreement
did not and the exchange of the Acquired Fund's assets
for shares of the Acquiring Fund do not violate (i) the
Acquired Fund's declaration of trust or bylaws or (ii)
any federal law of the United States or the laws of the
commonwealth of Massachusetts applicable to the
Acquired Fund, provided, however, that such counsel may state
that it expresses no opinion with respect to federal or
state securities laws, other antifraud laws and
fraudulent transfer laws; and provided further that
insofar as performance by the Acquired Fund of its
obligations under this Agreement is concerned such
counsel may state that it expresses no opinion as to
bankruptcy, insolvency, reorganization, moratorium or similar
laws of general applicability relating to or affecting
creditors' rights;
(d) All regulatory consents, authorizations,
approvals and filings required to be obtained or made
by the Acquired Fund under the federal laws of the
United states and the laws of the Commonwealth of
Massachusetts for the consummation of the transactions
contemplated by this Agreement have been obtained or
made.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND THE ACQUIRED FUND
The following shall constitute further conditions
precedent to the consummation of the Reorganization:
8.1 This Agreement and the transactions
contemplated herein shall have been approved by the
requisite votes of (a) the Board of Trustees of each of
the Acquiring Fund and the Acquired Fund, and (b) the
holders of the outstanding shares of the Acquired Fund
in accordance with the provisions of the Acquired Fund's
Amended and Restated Declaration of Trust, as amended, and By-
Laws and applicable law, and each Fund shall have delivered
certified copies of the resolutions evidencing such
approvals to the other Fund. Notwithstanding anything
herein to the contrary, neither the Acquiring fund nor
the Acquired Fund may waive the conditions set forth in
this Section 8.1.
8.2 As of the Effective Time, no action, suit or
other proceeding shall be, to the knowledge of either
party to this Agreement, threatened or pending before
any court or governmental agency in which it is sought
to restrain or prohibit, or obtain damages or other
relief in connection with, this Agreement or the
transactions contemplated herein.
8.3 All consents of other parties and all other
consents, orders and permits of federal, state and
local regulatory authorities deemed necessary by the
Acquiring Fund or the Acquired Fund to permit
consummation, in all material respects, of the
transactions contemplated hereby shall have been obtained,
except where failure to obtain any such consent, order or
permit would not involve a risk of a material adverse
effect on the assets or properties of the Acquiring
Fund or the Acquired Fund, provided that either party
hereto may for itself waive any of such conditions.
8.4 The Registration Statement shall have become
effective under the 1933 Act, and no stop order
suspending the effectiveness thereof shall have been
issued and, to the best knowledge of the parties
hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
8.5 The parties shall have received the opinion
of Dechert Price & Rhoads addressed to the Acquired
Fund and the Acquiring Fund, dated as of the date of
the closing, and based in part on certain
representations to be furnished by the Acquired Fund and
the Acquiring Fund, substantially to the effect that, based upon
certain facts, assumptions and representations, the
transaction contemplated by this Agreement constitutes
a tax-free reorganization for federal income tax
purposes. The delivery of such opinion is conditioned
upon receipt by Dechert Price & Rhoads of
representations it shall request of Tocqueville Trust
and Ivy Fund. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive
the condition set forth in this paragraph 8.5.
9. INDEMNIFICATION
9.1 The Acquiring Fund agrees to indemnify and
hold harmless the Acquired Fund and each of the
Acquired Fund's trustees and officers from and against
any and all losses, claims, damages, liabilities or
expenses (including, without limitation, the payment of
reasonable legal fees and reasonable costs of
investigation) to which, jointly or severally, the
Acquired Fund or any of its directors or officers may become
subject, insofar as any such loss, claim, damage, liability
or expense (or actions with respect thereto) arises out
of or is based on any breach by the Acquiring Fund of
any of its representations, warranties, covenants or
agreements set forth in this Agreement.
9.2 The Acquired Fund agrees to indemnify and
hold harmless the Acquiring Fund and each of the
Acquiring Fund's directors and officers from and
against any and all losses, claims, damages,
liabilities or expenses (including, without limitation, the
payment of reasonable legal fees and reasonable costs of
investigation) to which, jointly or severally, the Acquiring
Fund or any of its directors or officers may become
subject, insofar as nay such loss, claim, damage,
liability or expense (or actions with respect thereto)
arises out of or is based on any breach by the Acquired
Fund of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF REPRESENTATIONS AND
WARRANTIES
10.1 The Acquiring Fund and the Acquired Fund
agree that neither party has made any representation,
warranty, covenant or agreement not set forth herein
and that this Agreement constitutes the entire
agreement between the parties.
10.2 The representations and warranties contained
in this Agreement or in any document delivered pursuant
hereto or in connection herewith shall survive the
consummation of the transactions contemplated hereby.
11. TERMINATION
This Agreement and the transactions contemplated
hereby may be terminated and abandoned at any time
prior to the Closing:
(a) by either party by resolution of the party's
board of trustees at any time prior to the Effective
Time, if circumstances should develop that, in the good
faith opinion of such board, make proceeding with this
Agreement and such transactions not in the best
interest of the applicable party's shareholders;
(b) by either party by notice to the other,
without liability to the terminating party on account
of such termination (providing the terminating party is
not otherwise in material default or breach of this
Agreement) if the Closing shall not have occurred on or
before ________________ [any thoughts?].
12. AMENDMENTS
This Agreement may be amended, modified or
supplemented in such manner as may be mutually agreed
upon in writing by the authorized officers of the
Acquired Fund and the Acquiring Fund; provided,
however, that following the meeting of the Acquired
Fund shareholders called by the Acquired Fund pursuant to Section
5.2 of this Agreement, no such amendment may have the
effect of changing the provisions for determining the
number of Acquiring Fund Shares to be issued to
Acquired Fund shareholders under this Agreement to the
detriment of such shareholders without their further
approval.
13. NOTICES
Any notice, report, statement or demand required
or permitted by any provisions of this Agreement shall
be in writing and shall be deemed duly given if
delivered or mailed by registered mail, postage
prepaid, addressed to the Acquiring Fund at 1675
Broadway, New York, NY 10018, Attention: President, and
to the Acquired Fund at Via Mizner Financial Plaza, 700 South
Federal Highway, Boca Raton, Florida 33432, Attention:
President.
14. HEADINGS; COUNTERPARTS; ASSIGNMENTS; MISCELLANEOUS
14.1 The Article and Section headings contained in
this Agreement are for reference purposes only and
shall not affect in any way the meaning or
interpretation of this Agreement.
14.2 All agreements, covenants, representations
and warranties made herein by the Acquired Fund, and
all obligations, duties, responsibilities, rights and
privileges created hereunder in the name of the
Acquired Fund, and all actions that are to be taken by
the Acquired Fund, shall be treated as if made, created
or to be taken by Ivy Fund on behalf of the Acquired Fund. The
name "Ivy Fund" is the designation of the Trustees for the
time being under the Amended and Restated Declaration
of Trust dated December 10, 1992, as amended. The
Acquired Fund's obligations hereunder shall not be
binding upon any of the Trust's trustees, shareholders,
nominees, officers, agents, or employees personally,
but shall bind only the trust property of Ivy Fund.
Any persons dealing with Ivy Fund must look solely to trust
property for the enforcement of any claims against Ivy Fund.
No series of Ivy Fund other than the Acquired Fund is
responsible for the Acquired Fund's obligations.
14.3 This Agreement may be executed in any number
of counterparts, each of which shall be deemed an
original and all of which together shall constitute one
and the same agreement.
14.4 This Agreement shall bind and inure to the
benefit of the parties hereto and their respective
successors and assigns, but no assignment or transfer
hereof or of any rights or obligations hereunder shall
be made by either party without the
prior written consent of the other party. Nothing
herein expressed or implied is intended or shall be
construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their
respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
14.5 The validity, interpretation and effect of
this Agreement shall be governed exclusively by the
laws of the Commonwealth of Massachusetts, without
giving effect to the principles of conflict of laws
thereof.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed by its President
or Vice President.
THE TOCQUEVILLE TRUST
on behalf of
THE TOCQUEVILLE GOVERNMENT
FUND
By
___________________________________
Its __________________________________
IVY FUND
on behalf of
IVY SHORT-TERM BOND FUND
By
___________________________________
Its __________________________________
PROSPECTUS
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE ASIA-PACIFIC FUND
THE TOCQUEVILLE EUROPE FUND
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Trust (the "Trust") is a
Massachusetts business trust
consisting of five separate funds (each, a "Fund,"
and collectively, the
"Funds"). Each Fund of the Trust is an open-end,
diversified management
investment company with the following investment
objective:
THE TOCQUEVILLE FUND - This Fund's
investment objective is long-term
capital appreciation primarily through
investments in securities of
United States issuers. There is minimal
emphasis on current income.
THE TOCQUEVILLE SMALL CAP VALUE FUND - This
Fund's investment objective
is long-term capital appreciation primarily
through investments in
securities of small capitalization United
States issuers. For purposes
of this prospectus, a small capitalization
issuer is a company with
market capitalization of less than $1
billion. There is minimal
emphasis on current income.
THE TOCQUEVILLE ASIA-PACIFIC FUND - This
Fund's investment objective is
long-term capital appreciation consistent
with preservation of capital
primarily through investments in securities
of issuers located in Asia
and the Pacific Basin.
THE TOCQUEVILLE EUROPE FUND - This Fund's
investment objective is
long-term capital appreciation consistent
with preservation of capital
primarily through investments in
securities of issuers located in
Europe.
THE TOCQUEVILLE GOVERNMENT FUND - This Fund's
investment objective is
to provide high current income consistent
with the maintenance of
principal and liquidity through investments
in obligations issued or
guaranteed by the U.S. Treasury, agencies
of the U.S. Government or
instrumentalities that have been established
or sponsored by the U.S.
Government.
Tocqueville Asset Management L.P. provides
each Fund with investment
advisory and certain administrative services.
This Prospectus sets forth concisely the
information that a prospective
investor should know before investing in shares of each
Fund and should be read
and retained for future reference. A Statement of
Additional Information, dated
February 28, 1996, containing additional information
about each Fund has been
filed with the Securities and Exchange Commission and
is hereby incorporated by
reference into this Prospectus. A copy of the
Statement of Additional
Information can be obtained without charge by calling
(800) 697-3863 or writing
the Trust at 1675 Broadway, New York, N.Y. 10019.
---------------------------
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK-
-INCLUDING POSSIBLE LOSS
OF PRINCIPAL--AND WILL FLUCTUATE IN VALUE. SHARES
OF THE FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY A BANK AND ARE NOT
INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER
AGENCY.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTA-
TION TO THE CONTRARY IS A CRIMINAL
OFFENSE. -------------------
--------
The date of this Prospectus is
February 28, 1996.
<PAGE>
<TABLE>
TABLE OF CONTENTS
Page
<S> <C>
<C> <C>
Highlights.........................................2
Reduced Initial Sales Charges..................28
Fee Table..........................................5
Methods of Payment.............................29
Selected Financial Information.....................9
Redemption of Shares..............................29
Performance Calculation...........................15
Contingent Deferred Sales Charges..............30
Investment Objective, Policies and Risks....... 18
Shareholder Privileges............................31
Additional Investment Policies and
Dividends, Distributions and Tax Matters..........31
Risk Considerations.......................... 0
Organization and Description of Shares of
Investment Advisor and Investment Advisory the
Trust......................................33
Agreements.....................................23
Custodian, Transfer Agent and Dividend
Distribution Plans................................23
Paying Agent...................................33
Administrative Services Agreements............. 24
Counsel and Independent Accountants...............33
Brokerage Allocation..............................24
Shareholder Inquiries.............................33
Purchase of Shares................................24
Other Information.................................34
Initial Sales Charges..........................26
Purchases at Net Asset Value...................27
</TABLE>
---------------------------
HIGHLIGHTS
WHAT IS THE TOCQUEVILLE TRUST?
The Tocqueville Trust, a business trust
formed under the laws of the
Commonwealth of Massachusetts, is currently
comprised of five series. The
Tocqueville Fund, The Tocqueville Small Cap Value
Fund, The Tocqueville
Asia-Pacific Fund, The Tocqueville Europe Fund and
The Tocqueville Government
Fund are each open-end, diversified management
investment companies, as defined
by the Investment Company Act of 1940, as amended
(the "1940 Act"). Each Fund
offers two classes of shares which may be purchased at
a price equal to the next
determined net asset value per share plus a charge
which, at the election of the
purchaser, may be imposed (i) at the time of purchase
(the "Class A shares"), or
(ii) on a deferred basis (the "Class B shares").
As open-end investment
companies, the Funds have an obligation to redeem
their respective shares held
by an investor at the net asset value of the shares
next determined after
receipt of a redemption request in proper form.
(See "Organization and
Description of Shares of the Trust.")
WHAT IS THE TOCQUEVILLE FUND AND HOW IS ITS INVESTMENT
OBJECTIVE ACHIEVED?
The Tocqueville Fund is an open-end,
diversified management investment
company whose investment objective is long-term capital
appreciation primarily
through investments in securities of United States
issuers. The Fund will invest
in common stocks of companies that are considered by
its investment advisor to
be out of favor and undervalued in relation to their
potential growth or earning
power. The Fund does not intend to engage on an
ongoing basis in short-term
trading. (See "Investment Objective, Policies and
Risks.")
WHAT IS THE TOCQUEVILLE SMALL CAP VALUE FUND AND HOW IS
ITS INVESTMENT OBJECTIVE
ACHIEVED?
The Tocqueville Small Cap Value Fund is
an open-end, diversified
management investment company whose investment
objective is long-term capital
appreciation primarily through investments in
securities of small capitalization
United States issuers. The Fund will invest
substantially all and normally no
less than 65% of its total assets in a diversified
portfolio consisting of
common stocks of small capitalization United
States companies that are
considered by the Investment Advisor to be strong
proprietary businesses, to be
either out of favor or less well known in the
financial community, or to be
undervalued in relation to either their potential
long-term growth or earning
power. The Fund does not intend to engage on an
ongoing basis in short-term
trading. A small capitalization issuer is a company
with market capitalization
of less than $1 billion. (See "Investment Objective,
Policies and Risks.")
- 2 -
<PAGE>
WHAT IS THE TOCQUEVILLE ASIA-PACIFIC FUND AND HOW IS
ITS INVESTMENT OBJECTIVE
ACHIEVED?
The Tocqueville Asia-Pacific Fund is an
open-end, diversified
management investment company which seeks long-
term capital appreciation
consistent with preservation of capital primarily
through investments in
securities of issuers located in Asia and the
Pacific Basin. The Fund will
invest at least 65% of its total assets in securities
of issuers located in Asia
and the Pacific Basin, including common stock,
investment grade debt convertible
into common stock, depository receipts for these
securities and warrants. (See
"Investment Objective, Policies and Risks.")
WHAT IS THE TOCQUEVILLE EUROPE FUND AND HOW IS
ITS INVESTMENT OBJECTIVE
ACHIEVED?
The Tocqueville Europe Fund is an open-end,
diversified management
investment company which seeks long-term capital
appreciation consistent with
preservation of capital primarily through investments
in securities of issuers
located in Europe. The Fund will invest at least
65% of its total assets in
securities of issuers located in Europe, including
common stock, investment
grade debt convertible into common stock,
depository receipts for these
securities and warrants. (See "Investment Objective,
Policies and Risks.")
WHAT IS THE TOCQUEVILLE GOVERNMENT FUND AND HOW IS
ITS INVESTMENT OBJECTIVE
ACHIEVED?
The Tocqueville Government Fund is an open-
end, diversified management
investment company whose investment objective is to
provide high current income
consistent with the maintenance of principal and
liquidity through investments
in obligations issued or guaranteed by the U.S.
Treasury, agencies of the U.S.
Government or instrumentalities that have been
established or sponsored by the
U.S. Government.
The Fund will invest at least 85% of
its assets in short and
intermediate-term securities backed by the full
faith and credit of the U.S.
Government. Also, at least 65% of the Fund's assets
will be invested in U.S.
Treasury bills, notes and bonds. The dollar-weighted
average maturity of the
Fund is expected to range from 0 to 12 years.
The balance of the Fund's assets may be
invested in obligations issued
or guaranteed by the U.S. Treasury, agencies of
the U.S. Government or
instrumentalities that have been established or
sponsored by the U.S.
Government, as well as in repurchase agreements
collateralized by such
securities. The Fund may also invest in bond (interest
rate) futures and options
to a limited extent. (See "Investment Objective,
Policies and Risks.")
WHO MANAGES THE FUNDS?
Tocqueville Asset Management L.P. (the
"Investment Advisor") serves as
each Fund's investment advisor pursuant to an
Investment Advisory Agreement.
Under terms of each Agreement, the Investment Advisor
supervises all aspects of
a Fund's operations and provides investment advisory
services. As compensation,
the Investment Advisor receives a fee based on each
Fund's average daily net
assets. The Investment Advisor also is engaged in
the business of acting as
investment advisor to private accounts with combined
assets of approximately
$500 million. (See "Investment Advisor and Investment
Advisory Contracts.")
DISTRIBUTION PLANS
Each Fund has adopted a distribution plan
for Class A shares and a
distribution plan for Class B shares. The Class A Plan
provides that a Fund may
incur distribution expenses related to the sale of
Class A shares of up to .25%
per annum of the Fund's average daily net assets. The
Class B Plan provides that
a Fund may incur distribution expenses related to the
sale of Class B shares of
up to .75% per annum of the Fund's average daily net
assets. (See "Distribution
Plans").
SPECIAL RISK CONSIDERATIONS
An investor should be aware that there are
risks associated with
certain investment techniques and strategies employed
by the Funds, including
those relating to investments in foreign securities and
option transactions. In
addition, an investor in The Tocqueville Small Cap
Value Fund should be aware
that investments in small capitalization issuers
may be more volatile than
investments in issuers with market capitalization
greater than $1 billion due to
the lack of diversification in the business
activities, and corresponding
greater susceptibility to
- 3 -
<PAGE>
changes in the business cycle of small capitalization
issuers. An investor in
The Tocqueville Government Fund should be aware that
the net asset value of the
Fund will fluctuate as general levels of interest rates
fluctuate. When interest
rates decline, the net asset value of the Fund can be
expected to rise, and,
conversely, when interest rates rise, the net asset
value of the Fund can be
expected to fall. (See "Investment Objective,
Policies and Risks" and
"Additional Investment Policies and Risk
Considerations.")
Each class of shares of a Fund not only
imposes the sales charge at a
different time, but also has differing levels of
sales charges and other
expenses, which may affect performance. (See "Fee
Table" and "Purchase of
Shares.")
- 4 -
<PAGE>
<TABLE>
<CAPTION>
FEE TABLE
CLASS A
CLASS A CLASS B
CLASS B
TOCQUEVILLE FUND SMALL CAP FUND
TOCQUEVILLE FUND SMALL CAP FUND SHAREHOLDER
TRANSACTION EXPENSES:
Maximum Sales Load on Purchases
<S> <C>
<C> <C>
<C> (as a % of offering price).............
4.00% 4.00% None
None Deferred Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as applicable) None
None 5.00%*
5.00%* ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee..................... .75%
.75% .75%
.75% 12b-1 Fee+.........................
.25% .25%*** .75%
.75%*** Other Expenses (after fee
waivers) .54%++ 1.80%++
.54%++ 1.80%++
------ -------
------ -----
Total Operating Expenses (after fee
waivers).......................... 1.54%+++
2.80%+++ 2.04%+++
3.30%+++
CLASS A
CLASS A CLASS B
CLASS B ASIA-
PACIFIC FUND EUROPE FUND ASIA-PACIFIC
FUND EUROPE FUND SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load on Purchases
(as a % of offering price)......... 4.00%
4.00% None
None Deferred Sales Charge (as a percentage
of original purchase price or
redemption proceeds, as applicable) None
None 5.00%*
5.00%* ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee (after fee
waivers)........................... .00%**
.00%** .00%**
.00%** 12b-1 Fees (after fee waivers)+....
.00%*** .00%*** .00%***
.00%*** Other Expenses (after fee waivers).
3.55%++ 4.43%++
3.55%++ 4.43%++
------- -------
------- ------ Total Operating
Expenses (after fee
waivers)........................... 3.55%+++
4.43%+++ 3.55%+++
4.43%+++
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B
GOV'T FUND GOV'T FUND
SHAREHOLDER TRANSACTION EXPENSES:
<S>
<C> <C>
Maximum Sales Load (as a % of offering
price)............... 4.00%
None
Deferred Sales Charge (as a percentage of original
purchase price or
redemption proceeds, as
applicable)......................... None
5.00%*
ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee
.............................................
.50% .50%
12b-1
Fee+.................................................
.25% .75%
Other Expenses (after fee
waivers)........................ .50%++
.50%++
------ ------
Total Operating Expenses (after fee
waivers)............... 1.25%
1.75%
</TABLE>
------------------
* The maximum 5% contingent deferred sales
charge on Class B shares is
applied to redemptions during the first year
after purchase; the charge
declines to 4% for redemptions during the
second and third year after
purchase, to 3% for redemptions during the
fourth and fifth year after
purchase, to 2% for redemptions during the
sixth year after purchase,
thereafter reaching zero after six years.
** With regard to The Tocqueville Asia-Pacific
Fund and Europe Fund, the
management fee of 1.00% on the first $50 million
of the average daily net
assets is currently being waived.
*** The Rule 12b-1 fees of up to .25% for Class A
shares and .75% for Class
B shares are currently being paid by the
Advisor without charge to the
Fund. Under the Fund's Distribution Plan, the
Advisor is permitted to carry
forward expenses not reimbursed by the
distribution fee to subsequent
fiscal years for submission by the Fund for
payment, subject to the
continuation of the Plan. Such amounts are not
recognized in the Fund's
financial statements as expenses and
liabilities, since the Distribution
Plan can be terminated on an annual basis without
further liability to the
Fund.
+ The rule 12b-1 fee may represent the equivalent of
an annual asset-based
sales charge to an investor. As a result of
distribution fees, a long-term
shareholder in the Funds may pay more than the
economic equivalent of the
maximum front-end sales charge permitted by
the Rules of the National
Association of Securities Dealers, Inc.
++ These expenses include legal fees, accounting
fees, transfer agent,
custodial fees and the administrative services
fee. The administrative
services fee is accrued at an annual rate equal
to .15% of average daily
net assets.
+++ At this point, expenses as a percentage of
average net assets are
significantly higher than those incurred by
comparable investment
companies. However, in the event that the Fund's
assets continue to grow
and attain an industry wide average size,
then such expenses as a
percentage of average net assets would decrease to
the industry median.
-5-
<PAGE>
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years
10 Years
--------------- --------------- -------
---- -------------
EXAMPLE FOR THE TOCQUEVILLE FUND Class
A Class B Class A Class B Class A Class B
Class A Class B --------------------------------
------- ------- ------- ------- --
----- ------- ------- -------
You would pay the following expenses on a $1000
investment, assuming (1) 5% annual return and
<S> <C>
<C> <C> <C> <C> <C>
<C> <C> (2) redemption at the end of each time
period: $55 $61 $87 $ 94
$121 $130 $216 $237 You would pay the
following expenses on the
same investment, assuming no redemption:.... $55
$21 $87 $ 64 $121 $110
$216 $237
1 Year 3 Years 5 Years
10 Years
--------------- --------------- -------
---- -------------
EXAMPLE FOR THE TOCQUEVILLE SMALL CAP VALUE FUND
Class A Class B Class A Class B Class A Class
B Class A Class B
------------------------------------------------ ---
---- ------- ------- ------- ------- -------
------- -------
You would pay the following expenses on
a $1000 investment, assuming (1) 5% annual
return and
(2) redemption at the end of each time period: $67
$73 $123 $132 $182 $192
$340 $359 You would pay the following expenses on
the
same investment, assuming no redemption:.... $67
$33 $123 $102 $182 $172
$340 $359
1 Year 3 Years 5 Years
10 Years
--------------- --------------- -------
---- -------------
Class A Class B Class A Class B Class A Class
B Class A Class B
EXAMPLE FOR THE TOCQUEVILLE ASIA-PACIFIC FUND ---
---- ------- ------- ------- ------- -------
------- -------
---------------------------------------------
You would pay the following expenses on a $1000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $74
$76 $144 $139 $217 $204
$407 $382 You would pay the following expenses on
the
same investment, assuming no redemption:.... $74
$36 $144 $109 $217 $184
$407 $382
1 Year 3 Years 5 Years
10 Years
--------------- --------------- --------
--- -------------
EXAMPLE FOR THE TOCQUEVILLE EUROPE FUND
Class A Class B Class A Class B Class A Class
B Class A Class B -----------------------------
---------- ------- ------- ------- ----
--- ------- ------- ------- -------
You would pay the following expenses on a $1000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $83
$84 $169 $164 $256 $245
$478 $456 You would pay the following expenses on
the
same investment, assuming no redemption:.... $83
$44 $169 $134 $256 $225
$478 $456
1 Year 3 Years 5 Years
10 Years
--------------- --------------- --------
--- -------------
EXAMPLE FOR THE TOCQUEVILLE GOVERNMENT FUND
Class A Class B Class A Class B Class A Class
B Class A Class B -----------------------------
-------------- ------- ------- ------- -----
-- ------- ------- ------- -------
You would pay the following expenses on a $1000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period: $52
$58 $78 $85 $106 $115
$185 $206 You would pay the following expenses on
the
same investment, assuming no redemption:.... $52
$18 $78 $55 $106 $ 95
$185 $206
</TABLE>
The purpose of the expense summary
provided above is to assist
investors in understanding the various costs and
expenses that a shareholder in
a Fund will bear directly or indirectly. The "Annual
Fund Operating Expenses"
summary shows the management fee, Rule 12b-1 fee, and
other operating expenses
incurred by each Fund. "Other Expenses" for the
Class A shares of The
Tocqueville Government Fund and the Class B shares for
The Tocqueville Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville
Asia-Pacific Fund, The
Tocqueville Europe Fund, and The Tocqueville
Government Fund are based on
estimated amounts for the current fiscal year. If the
administrative services
fee had not been waived, then total operating expenses
for The Tocqueville Fund
would have been 1.69% for Class A shares and 2.19%
for Class B shares. If the
administrative services fee had not been waived,
total operating expenses for
The Tocqueville Small Cap Value Fund would have been
2.95% for Class A shares
and 3.45% for Class B shares. If the management fee and
administrative services
fee had not been waived and the Rule 12b-1 expenses
had not been paid by the
Investment Advisor, total operating expenses would
have been 2.40% for Class A
shares and 4.72% for Class B shares of The Tocqueville
Europe Fund and 4.22% for
Class A shares and 4.72% for Class B shares of The
Tocqueville Asia-Pacific
Fund. If the management fee and administrative services
fee had not been waived,
then total operating
-6-
<PAGE>
expenses for The Tocqueville Government Fund would
have been 1.40% for Class A
shares and 1.90% for Class B shares. The "Example"
set forth above assumes all
dividends and other distributions are reinvested and
that the percentages under
"Annual Fund Operating Expenses" remain the same in the
years shown. The Class A
shares example includes the initial sales charge and
the Class B shares example
includes the contingent deferred sales charge.
The expenses you pay would
increase if the administrative services fee waivers are
removed.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESSER THAN THOSE SHOWN.
-7-
<PAGE>
SELECTED FINANCIAL INFORMATION
The following is selected, audited,
financial information relating to
the Class A shares and Class B shares of the Funds.
The financial statements
related thereto and the independent accountants'
unqualified reports thereon are
incorporated by reference in the Statement of
Additional Information.
<TABLE>
<CAPTION>
THE
TOCQUEVILLE FUND--CLASS A SHARES
YEAR ENDED OCTOBER 31,
-------------------------------------------------------
---------- ----------
1995
1994 1993 1992 1991 1990 1989
1988 1987**
---- ---- ---- ---- ---- ----
---- ---- ------ Per share operating
performance (For a share outstanding throughout the
period)
<S> <C>
<C> <C> <C> <C> <C> <C>
<C> <C>
Net asset value, beginning of period... $13.74
$13.67 $11.83 $11.33 $10.21 $11.33 $9.98
$8.63 $10.00
-------- ------ ------ ------ ------ ------
----- ----- ------ Income (loss) from investment
operations:
Net investment income (loss)......... 0.15(a)
0.12 0.11 0.17 0.33 0.56 0.33
0.08(a) 0.00(a) Net realized and unrealized gain
(loss) 1.70 0.88 2.55 1.33 1.41
(0.90) 1.29 1.68 (1.37)
----- ---- ---- ----
---- ------ ---- ---- ------ Total
from investment operations..... 1.85 1.00
2.66 1.50 1.74 (0.34) 1.62 1.76 (1.37)
----- ----
---- ---- ---- ------ ---- ----
------ Less distributions:
Dividends from net investment income. (0.11)
(0.14) (0.16) (0.36) (0.51) (0.37) (0.06)
(0.02) .00 Distributions from net realized gains
(1.41) (0.79) (0.66) (0 .64) (0.11) (0.41)
(0.21) (0.39) .00
----- ------ ------ ------- -----
- ------ ------ ------ --- Total
Distributions.............. (1.21) (0 .93)
(0.82) (1.00) (0.62) (0.78) (0.27) (0.41) .00
---- -------
------ ------ ------ ------ ------ ------
--- Change in net asset value for the period 0.33
0.07 1.84 0.50 1.12 (1.12) 1.35
1.35 (1.37)
------ ---- ---- ---- ---- ------
---- ---- ------ Net asset value, end of
period......... $14.07 $13.74 $13.67 $11.83
$11.33 $10.21 $11.33 $9.98 $8.63
======== ====== ======
====== ====== ====== ====== ===== =====
Total Return (b)..................... 16.07 7.7%
23.7% 14.9% 17.7% (3.4)% 16.7% 21.1%
(13.70)% Ratios/supplemental data
$33,438
Net assets, end of period (000)......
$29,140 $27,745 $19,496 $17,388 $13,377 $17,014
$15,515 $9,477 Ratio to average net assets of
Expenses............................. 1.54%
1.54% 1.56% 1.74% 1.96% 1.61% 1.70%
2.09%(a) 2.50%(a)*
Ratio to average net assets of
Net investment income.................. 1.07%
0.87% 0.96% 1.44% 3.38% 4.71% 2.86%
0.85%(a) (0.03)%(a) *
Portfolio turnover rate................ 47%
52% 64% 89% 97% 125% 34%
65% 73% </TABLE>
---------------------------
(a) Net of fees waived amounting to 0.02%, 0.61%
and 0.16% of average net
assets, for the periods ended October 31, 1995,
1988 and 1987, respectively.
(b) Does not include maximum sales load of 4%.
* Annualized.
** From commencement of operations, January 13, 1987.
THE TOCQUEVILLE FUND--
CLASS B SHARES
AUGUST 14, 1995 TO
OCTOBER 31, 1995
Per share operating performance (For a share
outstanding throughout the period)
Net asset value, beginning of period... $14.68
Income (loss) from investment operations: --
Net investment income (loss).........
Net realized and unrealized gain (loss) (0.67)
------
Total from investment operations..... (0.67)
------ Less
distributions:
Dividends from net investment income. --
Distributions from net realized gains --
Total distributions................ -- Change
in net asset value for the period (0.67)
------- Net asset value,
end of period......... $14.01
====== Total return
(c)...................... (4.56)2
Ratios/supplemental data
Net assets, end of period (000)...... $1.91
Ratio to average net assets of
Expenses............................. -
Ratio to average net assets of
Net investment income.................. --
Portfolio turnover rate................ --
---------------------------
(c) Does not include contingent deferred sales charge.
Not annualized.
-8-
<PAGE>
<TABLE>
<CAPTION>
THE TOCQUEVILLE
SMALL CAP VALUE FUND -- CLASS A SHARES
PERIOD FROM
YEAR ENDED AUGUST 1, 1994
OCTOBER 31, 1995 TO OCTOBER 31, 1994
Per share operating performance (For a share
outstanding throughout the period)
<S>
<C> <C>
Net asset value, beginning of
period.................................. $10.22
$ 10.00
-------- ---------
Income (loss) from investment operations:
Net investment income (loss)
....................................... (0.05)(a)
0.02(a)
Net realized and unrealized gain
(loss)............................ 1.96
0.20
-------- ---------
Total from investment operations
................................... 1.91
0.22
-------- -----------
Less Distributions:
Dividends from net investment
income................................ (0.03)
0.00
Distributions from net realized gains
.............................. (0.19)
0.00
------ --------
Total Distributions
............................................ (0.22)
0.00
---------- --------
Change in net asset value for the period
............................. 1.69
0.22
--------- ------
Net asset value, end of
period.......................................$11.91
$ 10.22
========== =======
Total Return
(b)..................................................... 19.22%
2.20%
Ratios/supplemental data
Net assets, end of period
(000)..................................... $9,383
$ 6,755
Ratio to average net assets of
Expenses.........................................................
...
2.50%(a) 2.08%*(a)
Ratio to average net assets of
Net investment
income.................................................
(0.53)% 0.85%*
Portfolio turnover
rate...............................................
87.91% 9.40%
</TABLE>
-------------------
(a) Net of fees waived amounting to 0.33% and 0.75%
of average net assets for
the periods ended October 31, 1995, and 1994,
respectively.
(b) Does not include maximum sales load of 4%.
* Annualized.
-9-
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE FUND --
CLASS B SHARES
PERIOD FROM
AUGUST 14, 1995
TO OCTOBER 31, 1995
Per share operating performance (For a share
outstanding throughout the period)
Net asset value, beginning of
period......................... $12.35
------
Income (loss) from investment operations:
Net investment income
(loss)............................... --
Net realized and unrealized gain
(loss)................... (0.48)
------
Total from investment
operations........................... (0.48)
------
Less Distributions:
Dividends from net investment
income....................... --
Distributions from net realized
gains...................... --
Total
distributions...................................
--
Change in net asset value for the
period..................... (0.48)
------
Net asset value, end of
period............................... $11.87
======
Total Return
(a)............................................
(3.89%)
Ratios/supplemental data
Net assets, end of
period.................................. $192
Ratio to average net assets of
Expenses...................................................
--
Ratio to average net assets of
Net investment
income........................................
--
Portfolio turnover
rate...................................... --
(a) Does not include contingent deferred sales charge.
Not annualized.
-10-
<PAGE>
<TABLE>
<CAPTION>
THE TOCQUEVILLE
ASIA-PACIFIC FUND(A)--CLASS A SHARES
PERIOD FROM
YEAR ENDED
YEAR ENDED YEAR ENDED
NOVEMBER 12, 1991
OCTOBER 31, 1995 OCTOBER 31, 1994
OCTOBER 31, 1993 TO OCTOBER 31, 1992
---------------- ------
---------- ---------------- -------------------
Per share operating performance (For a
share outstanding
throughout the period)
<S> <C>
<C> <C>
<C> Net asset value, beginning of period..
$12.16 $11.26 $10.50
$10.00
--------- ------
------ ------ Income (loss) from
investment operations:
Net investment income (loss) ...... (0
.01)(d) (0.05)(d) (0.21)
(0.07)(b) Net realized and unrealized gain
(loss) (1.39) 1.45
1.62 0.57
------ ----
---- ---- Total from
investment operations ... (1.40)
1 .40 1.41 0.50
------
----- ---- ----
Less Distributions:
Dividends from net investment income 0.00
0.00 0.00
0.00 Distributions from net realized gains
(1.69) (0.50) (0.65)
(0 .00)
------ ----
---- ----- Total distributions
.............. (1.69) (0.50)
(0.65) (0.00)
------
---- ---- ----
Change in net asset value for the period (3.09)
0.90 0.76 0.50
------
---- ----
---- Net asset value, end of period........
$9.07 $12.16 $11.26
$10.50
======= ======
====== ====== Total Return (e)
................... (11.63%)
12.81% 15.0% 5.0%
Ratios/supplemental data
Net assets, end of period (000)..... $4,686
$ 5,187 $3,886
$ 1,898 Ratio to average net assets of
Expenses............................
3.55%(f) 2.82%(d) 4.63%
4.90%*(b) Net investment income
loss.......... 0.26%)(f)
(0.87)%(d) (2.42)% (0 .73)%*(b)
Portfolio turnover rate............... 106%
168% 216%(e) 101%*
</TABLE>
* Annualized.
(a) Effective April 29, 1994, The Tocqueville Euro-
Pacific Fund changed its
investment policies to invest primarily in the
securities of issues located
in Asia and the Pacific Basin. In addition,
the name of the Fund was
changed to The Tocqueville Asia-Pacific Fund.
(b) Net of fees waived amounting to 0.28% of average net
assets, for the period
ended October 31, 1992.
(c) The portfolio turnover rate doubled from the
previous year because the Fund
shifted its asset allocation from primarily
Hong Kong to several other
markets, including Australia, Singapore and
Malaysia. Notwithstanding the
possibility of unforeseen events that may
require the movement of assets,
the Fund does not anticipate an annual
turnover rate of 200% in future
years.
(d) Net of fees waived amounting to 1.00% of
average net assets for the year
ended October 31, 1994.
(e) Does not include maximum front-end sales load of
4.00%. (f) Net of fees waived amounting to 1.27% of
average net assets for the year ended October 31,
1995.
-11-
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC FUND -
CLASS B SHARES
PERIOD FROM
AUGUST 14, 1995
TO OCTOBER 31, 1995
Per share operating performance (For a share
outstanding throughout the period)
Net asset value, beginning of
period...................... $9.35
-----
Income (loss) from investment operations:
Net investment income
(loss)............................ --
Net realized and unrealized gain
(loss)................ (0.32)
------
Total from investment
operations........................ (0.32)
------
Less Distributions:
-- Dividends from net investment
income.................... -- Distributions from
net realized gains................... --
Total
distributions...................................
Change in net asset value for the
period................. (0.32)
------
Net asset value, end of
period............................ $9.03
=====
Total Return
(e)........................................ (3.42%)
Ratios/supplemental data
Net assets, end of
period............................... $193
Ratio to average net assets of
Expenses................................................
-
Net investment
income..................................... --
Portfolio turnover
rate................................... --
-12-
<PAGE>
<TABLE>
<CAPTION>
THE TOCQUEVILLE
EUROPE FUND -- CLASS A SHARES
PERIOD FROM
YEAR ENDED AUGUST 1, 1994
OCTOBER 31, 1995 TO OCTOBER 31, 1994
Per share operating performance (For a share
outstanding throughout the period)
<S> <C>
<C>
Net asset value, beginning of period...........
$10 .02 $ 10.00
----
------ -------
Income (loss) from investment operations:
Net investment income (loss) ................
10.01.(a) (0.04)(a)
Net realized and unrealized gain (loss).....
0 .82 0.06
--
----- -------
Total from investment operations ............
0.81 0.02
--
----- -------
Less distributions:
Dividends from net investment income.........
-- 0.00
Distributions from net realized gains .......
-- 0.00
-------
Total distributions .....................
-- 0.00
-------
Change in net asset value for the period ......
0.81 0.02
--
----- -------
Net asset value, end of period................
$10.83 $10.02
======== ======
Total return (b).............................
8.08% 0.20%
Ratios/supplemental data
Net assets, end of period (000)..............
$6,270 $2,516
Ratio to average net assets of
Expenses.....................................
4.43%(a) 6.18%(a)
Net investment income..........................
(0.53)% (2.47)%
Portfolio turnover rate .....................
109.48% 0.00%
</TABLE>
-------------------
(a) Net of fees waived amounting to 1.28% and 1.00%
of average net assets for
the periods ended October 31, 1995, and 1994,
respectively.
(b) Does not include maximum front-end sales load of
4%. * Annualized.
-13-
<PAGE>
THE TOCQUEVILLE EUROPE FUND -- CLASS
B SHARES
PERIOD FROM
AUGUST 14, 1995
TO OCTOBER 31, 1995
Per share operating performance (For a share
outstanding throughout the period)
Net asset value, beginning of
period............................. $10 .93
-------
Income (loss) from investment operations:
Net investment income
(loss)................................... --
Net realized and unrealized gain
(loss)........................ (0.12)
------
Total from investment
operations............................... (0.12)
------
Less Distributions:
Dividends from net investment
income...........................
--
Distributions from net realized
gains.......................... --
Total
distributions..........................................
--
Change in net asset value for the
period......................... (0.12)
------
Net asset value, end of
period................................... $10.81
======
Total Return
(a).................................................
(1.10%)
Ratios/supplemental data
Net assets, end of
period...................................... $198
Ratio to average net assets of
Expenses.......................................................
--
Ratio to average net assets of
Net investment
income............................................
--
Portfolio turnover
rate.......................................... --
(a) Does not include contingent deferred sales charge.
Not annualized.
-14-
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND --
CLASS A SHARES
PERIOD FROM
AUGUST 14, 1995
TO OCTOBER 31, 1995
Per share operating performance (For a share
outstanding throughout the period)
Net asset value, beginning of
period......................... $10.00
---------
Income (loss) from investment operations:
Net investment income
(loss)............................... (0.05)(a)
Net realized and unrealized gain
(loss).................... 0.05
------
Total from investment
operations.......................... 0.10
Less Distributions:
Dividends from net investment
income....................... (0.05)
Distributions from net realized
gains...................... -
Total
distributions......................................
(0.05)
Change in net asset value for the
period..................... (0 .05
--------
Net asset value, end of period
(000)........................ $10.05
======
Total Return
(b)...........................................
6.26%*
Ratios/supplemental data
Net assets, end of
period.................................. $6,506
Ratio to average net assets of
Expenses...................................................
2.747+(a)
Ratio to average net assets of
Net investment
income........................................
3.087*
Portfolio turnover
rate...................................... 0.00
---------------------------
(a) Net of fees waived amounting to 0.77% of average
net assets, for the period
ended October 31, 1995.
(b Does not include sales load of 4%
* Annualized.
-15-
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND --
CLASS B SHARES
PERIOD FROM
AUGUST 14, 1995
TO OCTOBER 31, 1995
Per share operating performance (For a share
outstanding throughout the period)
Net asset value, beginning of
period........................... $9 .97
--------
Income (loss) from investment operations:
Net investment income
(loss)................................. 0.04
Net realized and unrealized gain
(loss)...................... 0.08
--------
Total from investment
operations............................. 0.12
---------
Less distributions:
Dividends from net investment
income......................... (0.04)
Distributions from net realized
gains........................ -
-------
Total
distributions........................................
(0.04)
Change in net asset value for the
period....................... (0.08
Net asset value, end of
period................................. $10.05
========
Total return
(a).............................................
8.72%*
Ratios/supplemental data
Net assets, end of
period.................................... $2.01
Ratio to average net assets of
Expenses.....................................................
--
Net investment
income..........................................
-
Portfolio turnover
rate........................................ --
--------------------
(a)Does not include contingent deferred sales charge.
* Annualized.
PERFORMANCE CALCULATION
Each Fund calculates performance on a total
return basis for various
periods. The total return basis combines changes in
principal and dividends and
distributions for the periods shown, as well as the
deduction of all charges and
expenses. The total return basis for Class A shares
reflects the deduction of
the maximum initial sales charge at the time of
purchase, and the total return
basis for Class B shares reflects the deduction of
the maximum contingent
deferred sales charge upon redemption of shares held
for the period. Principal
changes are based on the difference between the
beginning and closing net asset
value for the period. Calculations assume
reinvestment of all dividends and
distributions paid by each Fund. Dividends and
distributions are comprised of
net investment and net realized capital gains,
respectively.
Performance will vary from time to time
and past results are not
necessarily representative of future results. A
shareholder should remember that
performance is a function of portfolio management in
selecting the type and
quality of portfolio securities and is affected by
operating expenses.
Comparative performance information may be
used from time to time in
the advertising or marketing of each Fund's
Class A and Class B shares,
including data from Lipper Analytical Services, Inc.
and Morningstar Mutual
Funds. Such comparative performance information will be
stated in the same terms
in which the comparative data and indices are stated.
All advertisements of a
Fund will disclose the maximum sales charge (including
deferred sales charge) to
which investments in shares of the Fund may be subject.
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<PAGE>
The Tocqueville Government Fund will provide
30-day "yield" quotations.
The "yield" quotations of the Fund will be based
upon a hypothetical net
investment income earned by the Fund over a thirty
day or one month period
(which period shall be stated in any advertisement
or communication with a
shareholder). The "yield" is then "annualized" by
assuming that the income
generated over the period will be generated over a
one year period. A "yield"
quotation, unlike a total rate of return quotation,
does not reflect changes in
net asset value.
INVESTMENT OBJECTIVE, POLICIES AND
RISKS
THE TOCQUEVILLE FUND
The investment objective of The Tocqueville
Fund is long-term capital
appreciation. Toward this end the Fund invests in
a diversified portfolio
consisting of common stocks of United States companies
that are considered by
the Investment Advisor to be out of favor and
undervalued in relation to their
potential growth or earning power. Generally, stocks
which have under performed
market indices such as Standard & Poor's Composite
Index for at least one year
and companies which have a historically low stock
price in relation to such
factors as sales, potential earnings or underlying
assets will be considered by
the Investment Advisor to be out of favor. The
Investment Advisor searches for
companies based on its judgment of relative value
and growth potential. The
potential growth and earning power of a company
will be evaluated by the
Investment Advisor either on the basis of past
growth and profitability, as
reflected in their financial statements, or on
the Investment Advisor's
conclusion that the company has achieved better
results than similar companies
in a depressed industry which the Investment
Advisor believes will improve
within the next two years. There is no assurance that
the Investment Advisor's
evaluation will be accurate in its selection of stocks
for the Fund's portfolio
or that the Fund's objective will be achieved. If the
stocks in which the Fund
invests never attain their perceived potential or the
valuation of such stocks
in the marketplace does not in fact reflect
significant undervaluation, there
may be little or no appreciation or a depreciation in
the value of such stocks.
The Fund may invest up to 25% of its total
assets in common stock of
foreign companies which are traded in the United
States or purchase American
Depository Receipts (ADR's). The Fund also may
invest up to 10% of its total
assets in gold bullion from U.S. institutions. Gold
bullion assists the Fund in
its goal of capital appreciation because the price of
gold bullion tends to rise
during periods of economic or political instability.
In addition, the Fund may
invest up to 5% of its net assets in repurchase
agreements which are fully
collateralized by obligations of the U.S.
Government or U.S. Government
agencies. The Fund may also invest up to 5% of
its total assets in debt
instruments convertible into common stock. The Fund
may, from time to time,
borrow up to 10% of the value of its total assets
from banks at prevailing
interest rates as a temporary measure for
extraordinary or emergency purposes.
The Fund may not purchase securities while borrowings
exceed 5% of the value of
its total assets.
Special Considerations. The Investment
Advisor will manage the Fund's
portfolio to assure that the Fund will not acquire or
dispose of gold bullion if
such acquisition or disposition would risk the
Fund's status as a regulated
investment company under the Internal Revenue Code. In
general, the Fund could
fail to qualify as a regulated investment company if
the Fund derived 10% or
more of its gross income from gains from sales or
other dispositions of gold
bullion. The Fund may be required to make less
than optimal investment
decisions, including foregoing the opportunity to
realize gains, if necessary to
permit the Fund to qualify as a regulated investment
company. In addition, the
Fund's investments in gold bullion subject the Fund to
the following risks: the
price of gold bullion may be subject to wide
fluctuation; the market for gold
bullion is relatively limited; the sources of gold
bullion are concentrated in
countries with potential instability; and currently
the market for gold bullion
is unregulated. Investments in gold bullion will
cause the Fund to incur
additional costs for insurance, shipping and storage.
THE TOCQUEVILLE SMALL CAP VALUE FUND
The Tocqueville Small Cap Value Fund's
investment objective is
long-term capital appreciation primarily through
investments in securities of
small capitalization United States issuers. While
the Fund expects to receive
some dividends and interests from its portfolio
investments, income generation
is only an incidental objective of the Fund. In the
pursuit of its objective,
the Fund intends to invest substantially all and
normally no less than 65% of
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<PAGE>
its total assets in a diversified portfolio consisting
of common stocks of small
capitalization United States companies that are
considered by the Investment
Advisor to be strong proprietary businesses, to be
either out of favor or less
well known in the financial community, or to be
undervalued in relation to
either their potential long-term growth or earning
power. Companies with market
capitalizations of less than $1 billion are
deemed to have a small
capitalization and to be generally less well known.
Generally, stocks which have
underperformed market indices such as the Standard &
Poor's Composite Index for
at least one year and companies which have a
historically low stock price in
relation to such factors as sales, potential earnings
or underlying assets will
be considered by the Investment Advisor to be out of
favor. Strong proprietary
businesses generally have some but not
necessarily all of the following
characteristics: capable management; good finances;
strong manufacturing; broad
distribution; and, lastly, products which are somewhat
differentiated from their
competitors.
The Investment Advisor will identify
companies that are undervalued
based on its judgment of relative value and growth
potential. The growth
potential and earning power of a company will be
evaluated by the Investment
Advisor on the basis of past growth and
profitability, as reflected in its
financial statements, on the basis of potential new
products resulting from
research and development spending, or on the
Investment Advisor's conclusion
that the company has achieved better results than
similar companies in a
depressed industry which the Investment Advisor
believes will improve within the
next two years. There is no assurance that the
Investment Advisor's evaluation
will be accurate in its selection of stocks for the
Fund's portfolio or that the
Fund's objective will be achieved. If the stocks in
which the Fund invests never
attain their perceived potential of if the
valuation of such stocks in the
marketplace does not in fact reflect significant
undervaluation, there may be
little or no appreciation or, instead, a
depreciation in the value of such
stocks.
The Fund may invest up to 25% of its total
assets in common stock of
foreign companies which are traded in the United
States or purchase American
Depository Receipts (ADR's). The Fund also may
invest: (1) up to 5% of its net
assets in repurchase agreements which are fully
collateralized by U.S.
Government obligations or obligations of its agencies
or instrumentalities, or
short-term money market securities; and (2) up to
10% of its total assets in
investment grade debt instruments convertible into
common stock. The Fund may,
from time to time, borrow up to 10% of the value of
its total assets from banks
at prevailing interest rates as a temporary
measure for extraordinary or
emergency purposes. The Fund, however, may not
purchase securities while
borrowings exceed 5% of the value of its total assets.
Special Considerations. An investor should be
aware that investment in
small capitalization issuers carry more risks
than issuers with market
capitalization greater than $1 billion. Generally,
small companies rely on
limited product lines, financial resources, and
business activities that may
make them more susceptible to setbacks or downturns.
In addition, the stock of
such companies may be more thinly traded. Accordingly,
the performance of small
capitalization issuers may be more volatile.
THE TOCQUEVILLE ASIA-PACIFIC FUND AND THE TOCQUEVILLE
EUROPE FUND
THE TOCQUEVILLE ASIA-PACIFIC FUND. The
investment objective of The
Tocqueville Asia-Pacific Fund is long-term capital
appreciation consistent with
preservation of capital primarily through investments
in securities of issuers
located in Asia and the Pacific Basin. While the
Investment Advisor may invest
the Fund's assets in securities of issuers in any
country, under normal
conditions at least 65% of the Fund's total assets
will be invested in Asia and
the Pacific Basin countries. Pacific Basin countries
are Australia, Hong Kong,
Indonesia, Japan, Malaysia, New Zealand, Republic of
Korea, Singapore, Taiwan,
Thailand and the Philippines. Asian countries are
India and the People's
Republic of China, which is accessed through
Pacific Basin countries (as
described above), most notably Hong Kong. The
Investment Advisor believes that
it will usually have assets invested in most of the
countries located in Asia
and the Pacific Basin; however, under normal market
conditions the Fund will be
invested in a minimum of five countries. Investments
will not normally be made
in securities of issuers located in the United States
or Canada. The Fund may
from time to time borrow money in an amount up to 5%
of its total assets from
banks for temporary or emergency purposes or to meet
redemptions and pledge up
to 10% of its assets for such borrowings. The Fund
may, from time to time,
borrow up to 10% of the value of its total assets
from banks at prevailing
interest rates as a temporary measure for
extraordinary or emergency purposes.
The Fund may not purchase securities while borrowings
exceed 5% of the value of
its total assets.
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<PAGE>
THE TOCQUEVILLE EUROPE FUND. The
investment objective of The
Tocqueville Europe Fund is long-term capital
appreciation consistent with
preservation of capital primarily through investments
in securities of issuers
located in Europe. While the Investment Advisor may
invest the Fund's assets in
securities of issuers in any country, under normal
conditions at least 65% of
the Fund's total assets will be invested in Europe.
European countries are
Austria, Belgium, Denmark, England, Finland, France,
Germany, Greece, Ireland,
Italy, Luxembourg, Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and
Turkey. The Investment Advisor believes that it
will usually have assets
invested in most of the countries of Europe;
however, under normal market
conditions the Fund will be invested in a minimum of
five countries. Investments
will not normally be made in securities of issuers
located in the United States
or Canada. The Fund may from time to time borrow money
in an amount up to 5% of
its total assets from banks for temporary or
emergency purposes or to meet
redemptions and pledge up to 10% of its assets for
such borrowings. The Fund
may, from time to time, borrow up to 10% of the value
of its total assets from
banks at prevailing interest rates as a temporary
meausre for extraordinary or
emergency purposes. The Fund may not purchase
securities while borrowings exceed
5% of the value of its total assets.
INVESTMENT POLICIES AND RISKS CONCERNING THE
TOCQUEVILLE ASIA-PACIFIC FUND
AND THE TOCQUEVILLE EUROPE
FUND
The Tocqueville Asia-Pacific Fund and The
Tocqueville Europe Fund may
invest in all types of securities, most of which will
be denominated in foreign
currencies. Since opportunities for long-term growth
are primarily expected from
equity securities, each Fund will normally invest
substantially all of its
assets in such securities, including common stock,
investment grade debt
convertible into common stock, depository receipts
for these securities and
warrants. Each Fund may, however, invest in preferred
stock and investment grade
debt securities if the Investment Advisor believes that
the capital appreciation
available from an investment in such securities will
equal or exceed the capital
appreciation available from an investment in equity
securities. Each Fund's
objective is capital appreciation, placing emphasis
on dividends or interest
income only when it believes that such income will have
a favorable influence on
the market value of a security.
All common stock in which each Fund will
invest will be listed on a
foreign stock exchange or traded in an over-the-
counter market. There is no
minimum capitalization requirement for a security to
be eligible for inclusion
in a Fund's portfolio. Each Fund will generally
purchase securities of medium to
large size companies in the principal international
markets, although it may
purchase securities of companies which have a lower
market capitalization on the
smaller regional markets.
By investing in foreign securities, the
Investment Advisor will attempt
to take advantage of differences between economic
trends and performance of
securities markets in various countries. When
allocating investments among
individual countries, the Investment Advisor will
consider various criteria that
in its view are deemed relevant based on its
experience, such as the relative
economic growth potential of the various economies
and the performance of
securities markets in the region, expected levels
of inflation, government
policies influencing business conditions, and
the outlook for currency
relationships. To date, the market values of
securities of issuers located in
different countries have moved relatively independently
of each other and during
certain periods the return on equity investments in
some countries has exceeded
the return on similar investments in the United
States. The Investment Advisor
believes that, in comparison with investment
companies investing solely in
domestic securities, it may be possible to obtain
significant appreciation from
a portfolio of foreign investments and also achieve
increased diversification.
Each Fund will gain increased diversification by
combining securities from
various markets that offer different investment
opportunities and are affected
by different economic trends. International
diversification reduces the effect
that events in any one country will have on a Fund's
entire investment holdings.
Of course, a decline in the value of a Fund's
investments in one country may
offset potential gains from investments in another
country.
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Government Fund's investment
objective is to provide
high current income consistent with the maintenance
of principal and liquidity
through investments in obligations issued or guaranteed
by the U.S.
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<PAGE>
Treasury, agencies of the U.S. Government or
instrumentalities that have been
established or sponsored by the U.S. Government.
In pursuit of its objective, the Fund intends
to invest at least 85% of
its assets in short and intermediateterm securities
backed by the full faith and
credit of the U.S. Government. Also, at least 65% of
the Fund's assets will be
invested in U.S. Treasury bills, notes and bonds. The
dollar-weighted average
maturity of the Fund is expected to range from 0 to 12
years.
The balance of the Fund's assets may be
invested in obligations issued
or guaranteed by the U.S. Treasury, agencies of
the U.S. Government or
instrumentalities that have been established or
sponsored by the U.S.
Government, as well as in repurchase agreements
collateralized by such
securities. The Fund may also invest in bond (interest
rate) futures and options
to a limited extent.
The Fund may invest up to 20% of its assets
in Government National
Mortgage Association pass-through certificates
("GNMA"). GNMA pass-through
certificates are mortgage-backed securities
representing part ownership of a
pool of mortgage loans. Monthly mortgage payments of
both interest and principal
"pass through" from homeowners to certificate
investors, such as the Fund. The
Fund reinvests the principal portion in additional
securities and distributes
the interest portion as income to the Fund's
shareholders. Under normal
circumstances, GNMA certificates are expected to
provide higher yields than U.S.
Treasury securities of comparable maturity.
The mortgage loans underlying GNMA
certificates--issued by lenders such
as mortgage bankers, commercial banks, and savings
and loan associations--are
either insured by the Federal Housing Administration
(FHA) or guaranteed by the
Veterans Administration (VA). Each pool of mortgage
loans must also be approved
by GNMA, a U.S. Government corporation within the U.S.
Department of Housing and
Urban Development. Once GNMA approval is obtained,
the timely payment of
interest and principal on each underlying mortgage
loan is guaranteed by the
"full faith and credit" of the U.S. Government.
Although stated maturities on GNMA
certificates generally range from 25
to 30 years, effective maturities are usually shorter
due to the prepayment of
the underlying mortgages by homeowners. On average,
GNMA certificates are repaid
within 12 years and so are classified as intermediate-
term securities.
The Fund also may invest up to 15% of its
assets in: (i) fixed rate or
adjustable rate mortgage-backed securities issued or
guaranteed by the Federal
National Mortgage Association ("FNMA") and the
Federal Home Loan Mortgage
Corporation ("FHLMC"), and (ii) collateralized mortgage
obligations ("CMOs").
FNMA mortgage securities are pass-through
mortgage-backed securities
that are issued by FNMA, a U.S. Government
sponsored corporation owned by
private stockholders. FNMA mortgage securities are
guaranteed as to timely
payment of principal and interest by FNMA but are not
backed by the full faith
and credit of the U.S.
Government.
FHLMC mortgage securities are mortgage-backed
securities representing
interests in residential mortgage loans pooled by
FHLMC, a U.S. Government
sponsored corporation. FHLMC mortgage securities
are guaranteed as to timely
payment of interest and ultimate collection of
principal but are not backed by
the full faith and credit of the U.S. Government.
CMOs are mortgage securities that are
collateralized by the original
mortgage loan or mortgage pass-through security and
redirect the cash flow of
such loan or pass-through security to the individual
bond holders. The cash
flows may show very different market characteristics
than the original loan
depending on how the CMO is structured. The Fund may
only invest in CMOs that
are backed by the full faith and credit of the U.S.
Government, FNMA or FHLMC
and are determined not to be "high-risk" under
guidelines issued by the Federal
Financial Institutions Examination Council ("FFIEC").
The test established by
FFIEC determines whether additional capital is
required by the institution to
cover potential market risk. In order to qualify as an
eligible investment, a
CMO must meet each of the following criteria: (i)
the weighted average life
("WAL") is under 10 years; (ii) the WAL cannot
shorten more than 6 years or
lengthen more than 4 years in a 300 basis point
interest rate movement;
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<PAGE>
and (iii) the price cannot move more than 17% in a 300
basis point interest rate
movement. FFIEC requires independent verification of
this test.
Special Considerations. Shares of the Fund
are neither insured or
guaranteed by the U.S. Government or its
agencies or instrumentalities.
Moreover, the net asset value of the shares of an
open-end investment company
such as the Fund, which invests in fixed income
securities, changes as the
general levels of interest rates fluctuate. When
interest rates decline, the net
asset value of the Fund can be expected to rise.
Conversely, when interest rates
rise, the net asset value of the Fund can be
expected to decline and the
expected maturity of its mortgaged based securities
may increase, which will
have the effect of increasing the duration of the
Fund's portfolio, resulting in
greater price volatility and investment risk.
The investment policies of the Fund would allow up to
35% of its net assets to
be invested in mortgage-backed securities, such as
GNMA certificates, FNMA
mortgage securities, FHLMC mortgage securities,
and CMOs. Unlike other
government securities, mortgage-backed securities
are subject to "prepayment
risk" and "extensions risk". Prepayment risk is
the possibility that, as
interest rates fall, homeowners are more likely
to refinance their home
mortgages, thereby repaying the principal prior to the
scheduled payment date to
the holders of the securities. The Fund must then
reinvest the unanticipated
principal in government or agency securities, at a
time when interest rates are
falling. Prepayment risk has two important effects on
the Fund:
o When interest rates fall and
additional mortgage payments
must be reinvested at lower
interest rates, the income of
the Fund will be reduced; and
o When interest rates fall,
prices on mortgage-backed
securities will not rise as much
as comparable Treasury
bonds, as bond market investors
anticipate an increase in
mortgage prepayments and a likely
decline in income.
Extension risk is the possibility that, as interest
rates rise, prepayments of
mortgages will decrease, thereby increasing the
expected duration of the Fund's
mortgage-backed securities. As the duration of a
mortgage security increases,
its market value decreases at an accelerating rate.
Accordingly, in an upwardly
moving interest rate environment, mortgage-backed
securities may depreciate more
quickly than other types of debt instruments.
An investor in the Fund should carefully consider the
affects of prepayment risk
and extension risk created by large exposures to
mortgage-backed securities when
comparing this Fund to other government funds.
ADDITIONAL INVESTMENT POLICIES AND RISK
CONSIDERATIONS
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase
agreements subject to resale to a
bank or dealer at an agreed upon price which reflects
a net interest gain for
the Fund. Each Fund will receive interest from the
institution until the time
when the repurchase is to occur.
A Fund will always receive collateral
(i.e., U.S. Government
obligations or obligations of its agencies or
instrumentalities, or short-term
money market securities) acceptable to it whose
market value is equal to at
least 100% of the amount invested by the Fund, and
the Fund will make payment
for such securities only upon the physical delivery
or evidence of book entry
transfer to the account of its custodian. If the
seller institution defaults,
the Fund might incur a loss or delay in the realization
of proceeds if the value
of the collateral securing the repurchase agreement
declines and the Fund might
incur disposition costs in liquidating the
collateral. Each Fund attempts to
minimize such risks specifying the required value of
the underlying collateral.
The Funds will not invest in repurchase agreements
with maturities in excess of
seven days.
ILLIQUID SECURITIES
Each Fund will not invest more than 10% of
its net assets in illiquid
securities, including repurchase agreements with
maturities in excess of seven
days.
RESTRICTED SECURITIES
Each Fund may invest in securities that are
subject to restrictions on
resale because they have not been registered under
the Securities Act of 1933
(the "1933 Act"). These securities are sometimes
referred to as private
placements. Although securities which may be
resold only to "qualified
institutional buyers" in accordance with the
provisions of Rule 144A under the
1933 Act are
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<PAGE>
technically considered "restricted securities," the
Funds may each purchase Rule
144A securities without regard to the limitation on
investments in illiquid
securities described above in the "Illiquid Securities"
section, provided that a
determination is made that such securities have a
readily available trading
market. The Investment Advisor will determine the
liquidity of Rule 144A
securities under the supervision of the Trustees of
the Funds. The liquidity of
Rule 144A securities will be monitored by the
Investment Advisor, and if as a
result of changed conditions, it is determined that a
Rule 144A security is no
longer liquid, a Fund's holdings of illiquid
securities will be reviewed to
determine what, if any, action is required to
assure that the Fund does not
exceed its applicable percentage limitation for
investments in illiquid
securities.
TEMPORARY INVESTMENTS
The Tocqueville Fund, The Tocqueville
Small Cap Value Fund, The
Tocqueville Asia-Pacific Fund, and The Tocqueville
Europe Fund do not intend to
engage in short-term trading on an ongoing basis.
Current income is not an
objective of the Funds, and any current income derived
from a Fund's portfolio
will be incidental. However, when in the Investment
Advisor's opinion, economic
or market conditions warrant a temporary defensive
position, a Fund may invest
up to 100% of its assets in U.S. Government
securities such as Treasury bills,
notes and bonds; cash; or certificates of deposit,
time deposits, bankers'
acceptances and other short-term debt instruments.
It is anticipated that the
annual turnover rate for each Fund should not exceed
150%. A higher rate of
portfolio turnover will result in higher transaction
costs, including brokerage
commissions. Also, to the extent that higher
portfolio turnover results in a
higher rate of net realized capital gains to a Fund,
the portion of the Fund's
distributions constituting taxable capital gains may
increase.
INVESTMENTS IN DEBT SECURITIES
With respect to The Tocqueville Small Cap
Value Fund's, The Tocqueville
Asia-Pacific Fund's, and The Tocqueville Europe
Fund's investment in debt
securities, there is no requirement that all such
securities be rated by a
recognized rating agency. However, it is the
policy of each Fund that
investments in debt securities, whether rated or
unrated, will be made only if
they are, in the opinion of the Investment Advisor,
of equivalent quality to
"investment grade" securities. "Investment grade"
securities are those rated
within the four highest quality grades as
determined by Moody's Investors
Service, Inc. ("Moody's") or Standard & Poor's
Corporation ("Standard &
Poor's"). Securities rated Aaa by Moody's and AAA
by Standard & Poor's are
judged to be of the best quality and carry the
smallest degree of risk.
Securities rated Baa by Moody's and BBB by Standard &
Poor's lack high quality
investment characteristics and, in fact, have
speculative characteristics as
well. Debt securities are interest-rate sensitive,
therefore their value will
tend to decrease when interest rates rise and increase
when interest rates fall.
Such increase or decrease in value of longer-term debt
instruments as a result
of interest rate movement will be larger than the
increase or decrease in value
of shorter-term debt instruments.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Tocqueville Small Cap Value Fund, The
Tocqueville Asia-Pacific
Fund, and The Tocqueville Europe Fund may invest in
other investment companies.
As a shareholder in an investment company, a Fund
would bear its ratable share
of that investment company's expenses, including its
advisory and administration
fees. The Investment Advisor has agreed to waive
its management fees with
respect to the portion of a Fund's assets invested in
shares of other investment
companies.
SHORT SALES
The Tocqueville Fund and The Tocqueville
Small Value Cap Fund will not
make short sales of securities or maintain a short
position unless, at all times
when a short position is open, the Fund owns an equal
amount of such securities
or securities convertible into or exchangeable,
without payment of any further
consideration, for securities of the same issue as,
and equal in amount to, the
securities sold short. This a technique known as
selling short "against the
box." Such a transaction serves to defer a gain or
loss for Federal income tax
purposes.
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<PAGE>
OPTIONS TRANSACTIONS
The Tocqueville Asia-Pacific Fund and The
Tocqueville Europe Fund may
purchase put and call options on securities and on
stock indices to attempt to
hedge a Fund's portfolio and to increase the Fund's
total return. Each Fund may
purchase call options when, in the opinion of the
Investment Advisor, the market
price of the underlying security or index will
increase above the exercise
price. Each Fund may purchase put options when the
Investment Advisor expects
the market price of the underlying security or
index to decrease below the
exercise price. When a Fund purchases a call option it
will pay a premium to the
party writing the option and a commission to the broker
selling the option. If
the option is exercised by a Fund, the amount of the
premium and the commission
paid may be greater than the amount of the brokerage
commission that would be
charged if the security were to be purchased directly.
Each Fund may purchase puts and calls on
foreign currencies that are
traded on a securities or commodities exchange or
quoted by major recognized
dealers in such options for the purpose of protecting
against declines in the
dollar value of foreign securities and against
increases in the dollar cost of
foreign securities to be acquired. If a decline in the
dollar value of a foreign
currency is anticipated, the decline in value
of portfolio securities
denominated in that currency may be partially offset
by purchasing puts on that
foreign currency. If a rise is anticipated in the
dollar value of a foreign
currency in which securities to be acquired are
denominated, the increased cost
of such securities may be partially offset by
purchasing calls on that foreign
currency. However, in the event of rate
fluctuations adverse to a Fund's
position, it would lose the premium it paid and
transactions costs. The Funds
are not purchasing options on foreign currency
futures contracts or entering
foreign currency future contracts. This discussion is a
general summary. See the
Statement of Additional Information for information
concerning each Fund's
options transactions and strategies.
FUTURES AND OPTIONS ON FUTURES TRANSACTIONS
The Tocqueville Government Fund may enter
into futures contracts which
provide for the future acquisition or delivery of
fixed income securities or
which are based on indexes of fixed income securities.
This investment technique
is designed only to hedge against anticipated future
changes in interest rates
which otherwise might either adversely affect the
value of the Fund's portfolio
securities or adversely affect the prices of long-term
bonds which are intended
to be purchased at a later date. If interest rates move
in an unexpected manner,
the Fund will not achieve the full anticipated
benefits of futures contracts or
may realize a loss. The Fund may also purchase options
on futures contracts for
hedging purposes.
Although the Fund is permitted to engage in
the purchase and sale of
futures contracts and options thereon solely for
hedging purposes, the use of
such instruments does involve certain transaction
costs and risks. The Fund's
ability effectively to hedge all or a portion of
its portfolio through
transactions in futures, options on futures or
options on related indexes
depends on the degree to which movements in the value
of the securities or index
underlying such hedging instrument correlate with
movements in the value of the
relevant portion of the Fund's portfolio. The trading
of futures and options on
indexes involves the additional risk of imperfect
correlation between movements
in the futures or option price and the value of the
underlying index. While the
Fund will establish a future or option position only
if there appears to be a
liquid secondary market therefor, there can be no
assurance that such a market
will exist for any particular futures or option
contract at any specific time.
In such event, it may not be possible to close out a
position held by the Fund,
which could require the Fund to purchase or sell the
instrument underlying the
position, make or receive a cash settlement, or meet
ongoing variation margin
requirements. Investments in futures contracts on
fixed income securities and
related indexes involve the risk that if the
Investment Adviser's judgment
concerning the general direction of interest rates
is incorrect, the Fund's
overall performance may be poorer than if it had
not entered into any such
contract.
WRITING COVERED CALL OPTION CONTRACTS
The Tocqueville Government Fund may write
(sell) covered call options
in order to hedge against changes in the market value
of the Fund's securities
caused by fluctuating interest rates. The Tocqueville
Asia-Pacific Fund
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<PAGE>
and The Tocqueville Europe Fund may write covered call
options on securities or
stock indices, but will not write such options if
immediately after such sale
the aggregate value of the obligations under the
outstanding options would
exceed 25% of the Fund's net assets. A call option is
"covered" if the Fund owns
the underlying security covered by the call. The
Funds will not write covered
call option contracts for speculative purposes.
When a covered call option expires
unexercised, the writer realizes a
gain in the amount of the premium received. If the
covered call option is
exercised, the writer realizes either a gain or loss
from the sale or purchase
of the underlying security with the proceeds to the
writer being increased by
the amount of the premium. Any gain or loss from such
transaction will depend on
whether the amount paid is more or less than the
premium received for the option
plus related transaction costs.
Risks associated with writing covered call
option contracts are similar
to the risks discussed in the section concerning
"Futures and Options on Futures
Transactions," above.
RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
GENERAL. Consistent with their respective
investment objectives and
policies, The Tocqueville Fund and The Tocqueville
Small Cap Value Fund may
invest indirectly in foreign assets through ADR's,
which are certificates issued
by U.S. banks representing the right to receive
securities of a foreign issuer
deposited with that bank or a correspondent
bank, and The Tocqueville
Asia-Pacific Fund and The Tocqueville Europe Fund
may directly or indirectly
invest in securities of foreign issuers. Direct and
indirect investments in
securities of foreign issuers may involve risks
that are not present with
domestic investments and there can be no assurance
that a Fund's foreign
investments will present less risk than a portfolio
of domestic securities.
Compared to United States issuers, there is generally
less publicly available
information about foreign issuers and there may be less
governmental regulation
and supervision of foreign stock exchanges,
brokers and listed companies.
Foreign issuers are not generally subject to uniform
accounting, auditing and
financial reporting standards, practices and
requirements comparable to those
applicable to domestic issuers. Securities of some
foreign issuers are less
liquid and their prices are more volatile than
securities of comparable domestic
issuers. Settlement of transactions in some foreign
markets may be delayed or
less frequent than in the United States, which
could affect the liquidity of
each Fund's portfolio. Fixed brokerage commissions
on foreign securities
exchanges are generally higher than in the United
States. Income from foreign
securities may be reduced by a withholding tax at
the source or other foreign
taxes. In some countries, there may also be the
possibility of expropriation or
confiscatory taxation, limitations on the removal of
funds or other assets of a
Fund, political or social instability or revolution,
or diplomatic developments
which could affect investments in those countries.
The value of each Fund's investments
denominated in foreign currencies
may depend in part on the relative strength of the
U.S. dollar, and a Fund may
be affected favorably or unfavorably by exchange
control regulations or changes
in the exchange rate between foreign currencies and the
U.S. dollar. When a Fund
invests in foreign securities they will usually be
denominated in foreign
currency, and the Fund may temporarily hold funds in
foreign currencies. Thus,
each Fund's net asset value per share will be
affected by changes in currency
exchange rates. Changes in foreign currency exchange
rates may also affect the
value of dividends and interest earned, gains and
losses realized on the sale of
securities and net investment income and gains, if
any, to be distributed to
shareholders by each Fund. The rate of exchange
between the U.S. dollar and
other currencies is determined by the forces of supply
and demand in the foreign
exchange markets.
SPECIAL RISKS ASSOCIATED WITH THE THE
TOCQUEVILLE ASIA-PACIFIC FUND. In
addition to the risks described above, there are
risks inherent in any
investment in Hong Kong. In 1984 China and Britain
signed the Sino-British
Declaration which allowed for the termination of
British rule in Hong Kong in
July 1997. The Declaration, however, provided that
the existing capitalist
economic and social system of Hong Kong would be
maintained for 50 years beyond
the date. The Investment Advisor believes that
given the degree of current
interdependence between China and Hong Kong, China
will not dramatically alter
the operation of Hong Kong's economy and Hong Kong
will continue to offer
attractive investment opportunities after China takes
control of Hong Kong.
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<PAGE>
There also are risks inherent in investing
in emerging markets. An
emerging market is any country that the World Bank has
determined to have a low
or middle income economy and may include every
country in the world except the
United States, Australia, Canada, Japan, New
Zealand and most countries in
Western Europe such as Belgium, Denmark, France,
Germany, Great Britain, Italy,
the Netherlands, Norway, Spain, Sweden and Switzerland.
Specifically, any change
in the leadership or policies of the governments of
emerging market countries in
which the Funds invest or in the leadership or policies
of any other government
which exercises a significant influence over those
countries, may halt the
expansion of or reverse certain beneficial economic
policies of such countries
and thereby eliminate any investment opportunities
which may currently exist.
SPECIAL RISKS ASSOCIATED WITH THE TOCQUEVILLE
EUROPE FUND. In addition
to the risks described above, the economies of
European countries may differ
unfavorably from the United States economy in such
respects as growth of
domestic product, rate of inflation, capital
reinvestment, resource
self-sufficiency and balance of payments positions.
Further, such economies
generally are heavily dependent upon international
trade and, accordingly, have
been and may continue to be adversely affected by any
trade barriers, managed
adjustments in relative currency values and other
protectionist measures imposed
or negotiated by countries with which they trade. These
economies also have been
and may continue to be adversely affected by economic
conditions in countries
with which they trade.
The investment objective of each Fund set
forth above and the noted
investment restrictions set forth in the Statement of
Additional Information are
fundamental policies and may not be changed without
prior shareholder approval.
However, the investment strategies and techniques
described above and the noted
investment restrictions set forth in the Statement of
Additional Information are
not fundamental policies of the Funds and may be
changed without prior
shareholder approval. Each Fund will notify
shareholders in writing and amend
the Prospectus accordingly should any such
modifications in investment
strategies or techniques occur. Currently, the Funds
do not contemplate making
any such changes.
INVESTMENT ADVISOR AND INVESTMENT
ADVISORY AGREEMENTS
Tocqueville Asset Management L.P., 1675
Broadway, New York, New York
10019, acts as Investment Advisor to each Fund
under a separate investment
advisory agreement (the "Agreements") which provides
that the Investment Advisor
identify and analyze possible investments for each
Fund, and determine the
amount, timing, and form of such investments. The
Investment Advisor has the
responsibility of monitoring and reviewing each Fund's
portfolio, on a regular
basis, and recommending the ultimate disposition of
such investments. It is the
Investment Advisor's responsibility to cause the
purchase and sale of securities
in each Fund's portfolio, subject at all times to the
policies set forth by the
Board of Trustees. The Investment Advisor is an
affiliate of Tocqueville
Securities L.P., each Fund's distributor.
Francois Sicart serves the Investment Advisor
as the co- manager of The
Tocqueville Fund, The Tocqueville Europe Fund and The
Tocqueville Asia-Pacific
Fund. Mr. Sicart, the majority shareholder of
Tocqueville Management
Corporation, the general partner of the Investment
Advisor, has been a principal
manager of The Tocqueville Fund since its inception
in 1987. Prior to forming
the Investment Advisor, and for the 18 year period
from 1969 to 1986, he held
various senior positions within Tucker Anthony,
Incorporated, where he managed
private accounts.
Robert W. Kleinschmidt serves the Investment
Advisor as the co-manager
of The Tocqueville Fund and The Tocqueville Government
Fund. Mr. Kleinschmidt is
the President of Tocqueville Management
Corporation. He previously held
executive positions at the investment management
firm David J. Greene & Co.
since 1978, resigning as a partner in 1991.
Jean-Pierre Conreur is the portfolio manager
of The Tocqueville Small
Cap Value Fund's portfolio. Mr. Conreur, a graduate of
Lycee Chanzy in 1954, was
employed as a research analyst at Tucker Anthony,
Incorporated from April 1976
to December 1983. From December 1983 to March of
1990, he held the position of
Vice President--Foreign Department at Tucker Anthony.
Since the formation of the
Investment Advisor, Mr. Conreur
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<PAGE>
has held the title of Executive Vice President and
Director of Tocqueville
Management Corporation. He is also a trustee of
the Investment Advisor's
retirement plan.
Christopher P. Culp serves the Investment
Advisor as co- manager of The
Tocqueville Government Fund. He was a Vice President
of Belle Haven Investments
L.P. from 1994 to 1995, before joining the Investment
Advisor, and was (i) an
independent financial consultant from 1993 to 1994,
and (ii) a bond trader with
Swiss Bank Corp. from 1991 to 1993 and with Carroll
McEntee, a subsidiary of
HSBC Corp., from 1990 to 1991.
Under the terms of the Agreements, each Fund
pays the cost of all its
expenses (other than those expenses specifically
assumed by the Investment
Advisor or the Fund's distributor), including the
pro rata costs incurred in
connection with each Fund's maintenance of its
registration under the Securities
Act of 1933, as amended, and the 1940 Act, printing of
prospectuses distributed
to shareholders, taxes or governmental fees, brokerage
commissions, custodial,
transfer and shareholder servicing agent costs,
expenses of outside counsel and
independent accountants, preparation of shareholder
reports, trustees' fees and
shareholder meetings.
The Investment Advisor receives a fee from:
(1) both The Tocqueville
Fund and The Tocqueville Small Cap Value Fund,
payable monthly, for the
performance of its services at an annual rate of .75%
on the first $100 million
of the average daily net assets of each Fund, .70% of
average daily net assets
in excess of $100 million but not exceeding $500
million, and .65% of average
daily net assets in excess of $500 million;
(2) both The Tocqueville
Asia-Pacific Fund and The Tocqueville Europe Fund,
payable monthly, for the
performance of its services at an annual rate of 1.00%
on the first $50 million
of the average daily net assets of each Fund,
respectively, .75% of the average
daily net assets in excess of $50 million but not
exceeding $100 million, and
.65% of the average daily net assets in excess of
$100 million; and (3) The
Tocqueville Government Fund, payable monthly, for
the performance of its
services at an annual rate of .50% on the first $500
million of the average
daily net assets of the Fund, .40% of average daily net
assets in excess of $500
million but not exceeding $1 billion, and .30% of
average daily net assets in
excess of $1 billion. Each fee is accrued daily for
the purposes of determining
the offering and redemption price of such Fund's
shares.
DISTRIBUTION PLANS
Each Fund has adopted a distribution
plan for Class A and a
distribution plan for Class B shares (each a "Plan").
Pursuant to the Class B
Plan, a Fund may incur distribution expenses
related to the sale of Class B
shares of up to .75% per annum of the Fund's average
daily net assets. The Class
B Plan provides that a Fund may incur distribution
expenses related to the sale
of class B shares of up to .75% per annum of such
Fund's average daily net
assets, of which (i) up to .25% of the average daily
net assets attributable to
the Class B shares is payable as service fees to the
distributor, brokers and
servicing agents having agreements with the
distributor or Investment Advisor
for the provision of continuing shareholder
services to customers of such
financial intermediaries who own Class B shares, and
(ii) any amount remaining
(being at least 50% of average daily net assets
attributable to the Class B
share) is payable to the distributor or brokers
during a fiscal year. With
respect to its Class B shares, because of the .75%
annual limitation on the
compensation paid during a fiscal year, compensation
relating to a large portion
of the commissions attributable to sales of Class B
shares in any one year may
be paid by a Fund in fiscal years subsequent thereto.
In determining whether to
purchase Class B shares, investors should consider
that daily compensation
payments could continue until the Distributor (as
herein defined) has been
reimbursed for the commissions paid on sales of Class B
shares.
The Plans provide that a Fund may
finance activities which are
primarily intended to result in the sale of the Fund's
shares, including, but
not limited to, advertising, printing of prospectuses
and reports for other than
existing shareholders, preparation and distribution of
advertising material and
sales literature and payments to dealers and
shareholder servicing agents
including Tocqueville Securities L.P.
("Tocqueville Securities" or the
"Distributor"), the Fund's distributor, who enter into
agreements with the Fund
or Tocqueville Securities. The Plans will only make
payments for expenses
actually incurred on a first-in, first-out basis.
The Plans may carry forward
for an unlimited number of years any unreimbursed
expenses. If a Plan is
terminated in accordance with its terms, the
obligations of the Fund to make
payments pursuant to the Plan will cease and the Fund
will not be required to
make any payments past the date the Plan
terminates; however, Tocqueville
Securities will be entitled to receive all contingent
deferred sales charges
paid or payable with respect to any day subsequent to
termination of the Class B
Plan. (See the Statement of Additional
Information--"Distribution Plan" for
further information about the Plan.)
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<PAGE>
As of October 31, 1995, The Tocqueville Fund,
The Tocqueville Small Cap
Value Fund, The Tocqueville Asia-Pacific Fund, The
Tocqueville Europe Fund, and
The Tocqueville Government Fund had $59,065, $62,300,
$58,702, $52,487, $8,110,
respectively, of unreimbursed distribution expenses
for Class A shares and $0,
$0, $0, $0, $0, respectively of unreimbursed
distribution expenses for Class B
Shares. (See the Statement of Additional
Information--"Distribution Plans" for
further information about the Plans.)
ADMINISTRATIVE SERVICES
AGREEMENTS
Tocqueville Securities supervises
administration of the Funds pursuant
to an Administrative Services Agreement . Under the
Administrative Services
Agreement, Tocqueville Securities supervises the
administration of all aspects
of a Fund's operations, including the Fund's receipt
of services for which the
Fund is obligated to pay, provides the Fund with
general office facilities and
provides, at the Fund's expense, the services of
persons necessary to perform
such supervisory, administrative and clerical
functions as are needed to
effectively operate the Fund. Those persons, as well
as certain employees and
Trustees of the Funds, may be directors, officers or
employees of (and persons
providing services to a Fund may include)
Tocqueville Securities and its
affiliates. For these services and facilities,
Tocqueville Securities receives
with respect to a Fund a fee computed and paid monthly
at an annual rate of .15%
of the average daily net assets of the Fund.
BROKERAGE ALLOCATION
Subject to the supervision of the Board of
Trustees, decisions to buy
and sell securities for each Fund are made by the
Investment Advisor. The
Investment Advisor, subject to obtaining the best
price and execution, may
allocate brokerage transactions in a manner that takes
into account the sale of
shares of each Fund. Generally, the primary
consideration in placing portfolio
securities transactions with broker-dealers for
execution is to obtain, and
maintain the availability of, execution at the best
net price available and in
the most effective manner possible. The Funds'
brokerage allocation policies may
permit each Fund to pay a broker-dealer which
furnishes research services a
higher commission than that which might be charged
by another broker-dealer
which does not furnish research services, provided
that such commission is
deemed reasonable in relation to the value of the
services provided by such
broker-dealer. For a complete discussion of portfolio
transactions and brokerage
allocation, see "Portfolio Transactions and
Brokerage" in the Statement of
Additional Information.
PURCHASE OF SHARES
GENERAL INFORMATION
Class A shares are sold to investors at
the net asset value next
determined after a purchase order becomes effective
(as described below) plus a
varying initial sales charge. Class B shares of the
Fund are sold without an
initial sales charge but are subject to higher
ongoing expenses than Class A
shares and a contingent deferred sales charge payable
upon certain redemptions.
Class B shares automatically convert to Class A shares
in the seventh year after
issuance.
The minimum initial investment in each
Fund is $5,000 except for
401(k), IRA, Keogh and other pension or profit
sharing plan accounts where the
minimum is $2,000. The minimum subsequent investment in
a Fund for
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<PAGE>
all accounts is $1,000. The Distributor may, in
its discretion, waive the
minimum investment requirements for purchases made
via the Pre-Authorized
Investment Plan, which is discussed below in this
Prospectus.
Both Class A and Class B shares of a Fund
may be purchased from the
following entities: (a) the Fund's distributor,
Tocqueville Securities; (b)
authorized securities dealers which have entered
into sales agreements with
Tocqueville Securities (the "Selling Brokers") on a
best efforts basis; and (c)
each Fund's transfer agent, State Street Bank and
Trust Company (the "Transfer
Agent"). Purchases may also be made directly
through each Fund by forwarding
payment, together with the detachable stub from an
account statement or a letter
containing the account number to the Transfer
Agent. When placing orders,
investors shall specify whether the order is for Class
A or Class B shares. All
share purchases that fail to specify a class will
automatically be invested in
Class A shares. Each Fund reserves the right to cease
offering shares for sale
at any time or to reject any order for the purchase of
shares.
A purchase order becomes effective upon
receipt of the order by
Tocqueville Securities, a Selling Broker or the
Transfer Agent. Purchase orders
received prior to 4:00 p.m. New York time are priced
according to the net asset
value per share next determined on that day. Purchase
orders received after 4:00
p.m. New York time are priced according to the net
asset value per share next
determined on the following day.
The net asset value per share is determined
by dividing the market
value of a Fund's investments as of the close of
trading plus any cash or other
assets (including dividends receivable and
accrued interest) less all
liabilities (including accrued expenses) by the
number of Fund shares
outstanding. Each Fund will determine the net asset
value of its shares once
daily as of the close of trading on the New York Stock
Exchange on each "Fund
business day" which is any day on which the Exchange is
open for business.
Investors who already have a brokerage
account with Tocqueville
Securities or a Selling Broker may purchase a Fund's
shares through such broker.
Payment for purchase orders through Tocqueville
Securities or the Selling Broker
must be made to Tocqueville Securities or the
Selling Broker within three
business days of the purchase order. All dealers are
responsible for forwarding
orders for the purchase of a Fund's shares on a timely
basis.
Each Fund's shares normally will be
maintained in book entry form and
share certificates will be issued only on request. The
Distributor reserves the
right to refuse to sell shares of the Funds to any
person.
INITIAL SALES CHARGES ON CLASS A SHARES
The initial sales charge, imposed upon a sale
of Class A shares, varies
according to the size of the purchase as follows:
CONCESSION
INITIAL
SALES CHARGE TO DEALERS
% OF
% OF NET % OF
OFFERING
AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE
INVESTED PRICE
Less than $100,000.................... 4.00
4.16 3.50
$100,000 to $249,999.................. 3.50
3.63 3.00
$250,000 to $499,999.................. 2.50
2.56 2.00
$500,000 to $999,999.................. 1.50
1.52 1.00
$1,000,000 and over................... 1.00
1.01 0.50
The reduced initial charges apply to the
aggregate of purchases of
Class A shares of a Fund made at one time by "any
person", which term includes
an individual, spouse and children under the age of
21, or a trustee or other
fiduciary of a trust, estate or fiduciary account.
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<PAGE>
Upon notice to dealers with whom it has sales
agreements, Tocqueville
Securities may reallow up to the full applicable
initial sales charge on Class A
shares and such dealer may therefore be deemed an
"underwriter" under the
Securities Act of 1933, as amended, during such
periods. The Distributor may,
from time to time, provide promotional incentives
to certain dealers whose
representatives have sold or are expected to sell
significant amounts of one or
all of the funds in the Trust. At various times the
Distributor may implement
programs under which a dealer's sales force may be
eligible to win cash or
material awards for certain sales efforts or under
which the Distributor will
reallow an amount not exceeding the total applicable
initial sales charges on
the sales of Class A shares or the maximum contingent
deferred sales charge of
Class B shares generated by the dealer during such
programs to any dealer that
sponsors sales contests or recognition programs
conforming to criteria
established by the Distributor or participates in
sales programs sponsored by
the Distributor. The Distributor may provide marketing
services to dealers with
whom it has sales agreements, consisting of written
informational material
relating to sales incentive campaigns conducted by
such dealers for their
representatives.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE
SHAREHOLDERS AS OF JANUARY 1, 1994.
Shareholders who held shares of a
Fund within the Tocqueville Trust prior to January 1,
1994, may purchase Class A
shares of any Fund in the Trust at net asset value
without an initial sales
charge for as long as they continue to own shares
of any Fund in the Trust,
provided that there is no change in the account
registration. However, once a
shareholder has closed his account by redeeming all
of his Fund shares for a
period of more than thirty days he will no longer be
able to purchase Class A
shares of the Fund at net asset value without an
initial sales charge.
QUALIFIED PERSONS. There is no initial sales
charge on Class A shares
for "Qualified Persons", which are the following (a)
active or retired Trustees,
Directors, officers, partners or employees (their
spouses and children under age
21) of (i) the Investment Advisor and Distributor
or any affiliates or
subsidiaries thereof (the Directors, officers or
employees of which shall also
include their parents and siblings for all purchases
of Fund shares), (ii)
dealers having a selected dealer agreement with the
Distributor, or (iii) trade
organizations to which the Investment Advisor
belongs and (b) trustees or
custodians of any qualified retirement plan or IRA
established for the benefit
of a person in (a) above.
PURCHASES THROUGH INVESTMENT ADVISERS AND
STATE AUTHORITIES. Purchases
of Class A shares also may be made with no initial
sales charge through a
registered investment adviser who has registered
with the Securities and
Exchange Commission or appropriate state authorities
and who (a) clears such
Fund share transaction through a broker/dealer, bank
or trust company, (each of
whom may impose transaction fees with respect to
such transaction), or (b)
purchases Class A shares for its own account, or an
account for which the
investment adviser has discretion and is
authorized to make investment
decisions.
QUALIFIED AND OTHER RETIREMENT PLANS. In
addition, no initial sales
charge will apply to any purchase of Class A shares by
an investor (a) through a
401(k) Plan sponsored by the Investment Advisor or the
Distributor, through a
401(k) Plan sponsored by an institution which has a
custodial relationship with
the Funds' Custodian or through a discount
broker-dealer which imposes a
transaction charge with respect to such purchase
or (b) through a tax-free
rollover or transfer of assets provided, (i) the IRA
is sponsored by the Funds'
Custodian and the contribution for the tax-free
rollover or transfer of assets
is a distribution from any tax qualified
retirement plan sponsored by an
institution for which the Funds' Custodian serves as
trustee or custodian of
such plan or of any other qualified or nonqualified
retirement or deferred
compensation plan maintained by such institution, or
(ii) the contribution for
the tax-free rollover or transfer of assets is a
distribution from any tax
qualified retirement plan where any portion of
the investor-participant's
account was invested in any fund of the Trust.
RECENTLY REDEEMED SHARES. Class A shares of a
Fund may be purchased at
net asset value by persons who have, within the
previous 30 days, redeemed their
Class A shares of the Fund. The amount which may be
purchased at net asset value
is limited to an amount up to, but not exceeding, the
net amount of redemption
proceeds. Such purchases may also be handled by a
securities dealer, who may
charge the shareholder a fee for this service. In
addition, Class B shareholders
who have redeemed Class B shares and paid a contingent
deferred
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<PAGE>
sales charge in connection with such redemption may
purchase Class A shares with
no initial sales charge (in an amount not exceeding
redemption proceeds) if the
purchase occurs within 30 days of redemption of
the Class B shares. This
privilege is subject to modification or discontinuance
at any time.
REDUCED INITIAL SALES CHARGES ON CLASS A SHARES
CUMULATIVE QUANTITY DISCOUNT. Class A shares
of a Fund may be purchased
by any person at a reduced initial sales charge
which is determined by (a)
aggregating the dollar amount of the new purchase
and the greater of the
purchaser's total (i) net asset value or (ii) cost of
all Class A shares of the
Fund and the other Funds in the Trust, acquired by
exchange from such other
Fund, provided such fund charged an initial sales
load at the time of the
exchange then held by such person and (b) applying
the initial sales charge
applicable to such aggregate. The privilege of the
cumulative quantity discount
is subject to modification or discontinuance at any
time with respect to all
shares purchased thereafter.
GROUP PURCHASES. An individual who is a member
of a qualified group (as
hereinafter defined) may also purchase Class A shares
of a Fund at the reduced
initial sales charge applicable to the group taken
as a whole. The reduced
initial sales charge is based upon the aggregate
dollar value of Class A shares
previously purchased and still owned by the group plus
the securities currently
being purchased and is determined as stated above
under "Cumulative Quantity
Discount". For example, if members of the group had
previously invested and
still held $90,000 of Class A shares and now were
investing $15,000, the initial
sales charge would be 3.50%. In order to obtain such
discount, the purchaser or
investment dealer must provide the Transfer Agent with
sufficient information,
including the purchaser's total cost, at the time
of purchase to permit
verification that the purchaser qualifies for a
cumulative quantity discount,
and confirmation that the order is subject to such
verification. Information
concerning the current initial sales charge
applicable to a group may be
obtained by contacting the Transfer Agent.
A "qualified group" is one which: (a) has
been in existence for more
than six months; (b) has a purpose other than
acquiring Class A shares at a
discount; and (c) satisfies uniform criteria which
enables the Distributor to
realize economies of scale in its costs of
distributing Class A shares. A
qualified group must have more than 10 members, must be
available to arrange for
group meetings between representatives of the Funds
and the members, must agree
to include sales and other materials related to the
Funds in its publications
and mailings to members at reduced or no cost to the
Distributor, and must seek
to arrange for payroll deduction or other bulk
transmission of investments in
the Funds. This privilege is subject to modification
or discontinuance at any
time with respect to all Class A shares purchased
thereafter.
LETTER OF INTENT. Investors in Class A
shares may also qualify for
reduced initial sales charges by signing a Letter of
Intent (the "LOI"). This
enables the investor to aggregate purchases of
Class A shares of a Fund with
purchases of Class A shares of any other fund in the
Trust acquired by exchange,
during a 13-month period. The initial sales charge is
based on the total amount
invested in Class A shares during the 13-month period.
All Class A shares of the
funds currently owned by the investor including the
Funds, if any, will be
credited as purchases (at their current offering
prices on the date the LOI is
signed) toward completion of the LOI. A 90-day back-
dating period can be used to
include earlier purchases at the investor's cost. The
13-month period would then
begin on the date of the first purchase during the 90-
day period. No retroactive
adjustment will be made if purchases exceed the amount
indicated in the LOI. A
shareholder must notify the Transfer Agent or
Distributor whenever a purchase is
being made pursuant to a LOI.
The LOI is not a binding obligation on the
investor to purchase the
full amount indicated; however, on the initial
purchase, if required (or
subsequent purchases if necessary), 5% of the dollar
amount specified in the LOI
will be held in escrow by the Transfer Agent in Class A
shares registered in the
shareholder's name in order to assure payment of
the proper initial sales
charge. If total purchases pursuant to the LOI
(less any dispositions and
exclusive of any distributions on such shares
automatically reinvested) are less
than the amount specified, the investor will be
requested to remit to the
Transfer Agent an amount equal to the difference
between the initial sales
charge paid and the initial sales charge applicable to
the aggregate purchases
actually made. If not remitted within 20 days
after written request, an
appropriate number of escrowed shares will be redeemed
in order to realize the
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difference. This privilege is subject to modification
or discontinuance at any
time with respect to all shares purchased thereunder.
Shareholders will be paid
distributions, either in additional shares or cash,
upon such escrowed shares.
METHODS OF PAYMENT
BY CHECK. Investors who wish to purchase
Class A or Class B shares
directly from the Transfer Agent may do so by
sending a completed purchase
application (included with this Prospectus or
obtainable from the Trust) to
State Street Bank and Trust Company, Attn. [name of
Fund], at P.O. Box 8507,
Boston, Massachusetts 02266- 8507, accompanied by a
check payable to the Fund,
whose shares are being purchased, or the Transfer
Agent for the account of the
Fund in payment for the shares. Purchase applications
sent to the Funds will be
forwarded to the Transfer Agent, and will not be
effective until received by the
Transfer Agent.
BY PRE-AUTHORIZED INVESTMENT PLAN.
Investors who purchase Class A or
Class B shares directly from the Transfer Agent may
do so by pre-authorized
investment plan (see "Pre-Authorized Investment
Plan" on the Purchase
Application) whereby your personal bank account is
automatically debited and the
appropriate Fund account is automatically credited
with a periodic subsequent
investment. Additional full and fractional shares are
credited to your account
on the date your personal bank checking account is
debited. The minimum monthly
investment is $100, and investors may choose to
make their investment on or
about the 5th or 15th day of each month.
While investors may use this option to
purchase Class A or Class B
shares in their IRA or other retirement plan accounts,
neither the Distributor
nor State Street Bank and Trust Company will monitor
the amount of contributions
to ensure that they do not exceed the amount allowable
for Federal tax purposes.
State Street Bank and Trust Company will assume
that all retirement plan
contributions are being made for the tax year in which
they are received.
BY WIRE. Investors who purchase Class A or
Class B shares directly from
the Transfer Agent may also purchase shares by
sending wire instructions to
State Street Bank and Trust Company, ABA #0011 000 028,
Beneficiary Information
BNF--"The Tocqueville Trust", Demand Deposit Account
Number--AC-99046260, Other
Beneficiary Information OBI--"[name of Fund],
Shareholder Name, and Shareholder
Account Number. Purchases by wire may be subject to
a service charge by the
investor's bank. For additional instructions as to how
to purchase by wire call
(800) 626-9402.
REDEMPTION OF SHARES
GENERAL INFORMATION
A shareholder may redeem his Class A
shares in a Fund at any time
without charge. Class B shares are subject to the
contingent deferred sales
charge upon redemption.
In order to redeem Class A or Class B
shares purchased through
Tocqueville Securities or a Selling Broker, the
broker must be notified by
telephone or mail to execute a redemption. A properly
completed order to redeem
Class A or Class B shares received by the broker's
office will be executed at
the net asset value next determined after receipt by
the broker of the order.
Redemption proceeds, minus any applicable contingent
deferred sales charge, will
be held in a shareholder's account with Tocqueville
Securities unless the broker
is instructed to remit all proceeds directly to the
shareholder.
Class A and Class B shares purchased through
the Transfer Agent may be
redeemed by the Transfer Agent at the next
determined net asset value upon
receipt of a request in good order. Payment will be
made for redeemed shares,
minus any applicable contingent deferred sales
charge, as soon as practicable,
but in no event later than three business days after
receipt of a redemption
notification in good order. If the shares being
redeemed were purchased directly
from the Transfer Agent by check, payment may be
delayed for the minimum time
needed to verify that
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the purchase check has been honored. This is not
normally more than 15 days from
the time of receipt of the check by the Transfer Agent.
"Good order" means that
the request complies with the following: (a) the
request must be in writing,
specifying the number of shares or amount of
investment to be redeemed and sent
to the Transfer Agent, Attn. [name of Fund] at
P.O. Box 8507, Boston,
Massachusetts 02266-8507; (b) where share
certificates have been issued, a
shareholder must endorse the certificates and
include them in the redemption
request; (c) signatures on the redemption request and
on endorsed certificates
submitted for redemption must be guaranteed by a
commercial bank which is a
member of the Federal Deposit Insurance Corporation, a
trust company or a member
firm (broker-dealer) of a national securities
exchange (a notary public or a
savings and loan association is not an acceptable
guarantor); and, (d) the
request must include any additional legal documents
concerning authority and
related matters in the case of estates, trusts,
guardianships, custodianships,
partnerships and corporations. Shares may not be
redeemed by telephone. Any
written requests sent to a Fund will be forwarded to
the Transfer Agent and the
effective date of a redemption request will be when
the request is received by
the Transfer Agent. Shareholders who purchased shares
through the Transfer Agent
may arrange for the proceeds of redemption requests
to be sent by Federal Fund
wire to a designated bank account by sending wiring
instructions to State Street
Bank and Trust Company, P.O. Box 8507, Boston,
Massachusetts 02266-8507.
Additional information regarding redemptions may be
obtained by calling (800)
626-9402.
Redemption of the Funds' shares or payments
therefore may be suspended
at such times (a) when the New York Stock Exchange is
closed, (b) when trading
on the New York Stock Exchange is restricted, (c) when
an emergency exists which
makes it impractical for a Fund to either dispose of
securities or make a fair
determination of net asset value, or (d) for such other
period as the Securities
and Exchange Commission may permit for the protection
of a Fund's shareholders.
There is no assurance that the net asset value received
upon redemption will be
greater than that paid by a shareholder upon purchase.
The Funds reserve the right to close an
account that has dropped below
$5,000 in value for a period of three months or longer
other than as a result of
a decline in the net asset value per share.
Shareholders are notified at least
60 days prior to any proposed redemption and are
invited to add to their account
if they wish to continue as shareholders of the Fund.
CONTINGENT DEFERRED SALES CHARGES ON CLASS B SHARES
A contingent deferred sales charge is imposed
upon certain redemptions
of Class B shares. The amount of any applicable
contingent deferred sales charge
will be calculated by multiplying the net asset value
of such shares at the time
of redemption by the applicable percentage shown in the
table below:
CONTINGENT DEFERRED SALES
CHARGE AS
A PERCENTAGE OF NET
REDEMPTION DURING ASSET
VALUE AT REDEMPTION
1st Year Since Purchase...............
5% 2nd Year Since Purchase...............
4% 3rd Year Since Purchase...............
4% 4th Year Since Purchase...............
3% 5th Year Since Purchase...............
3% 6th Year Since Purchase...............
2% 7th Year Since Purchase...............
0%
In determining the applicability and rate of
any contingent deferred
sales charge, Class B shares are redeemed on a
first-in/first-out basis. The
amount of the charge is determined as a percentage of
the lesser of the current
market value or the cost of the shares being redeemed.
Accordingly, redemption
of Class B shares are not subject to a contingent
deferred sales charge to the
extent that the value of such shares represents
capital appreciation of Fund
assets.
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<PAGE>
If a redeeming shareholder owns shares of
both Class A and Class B,
unless the shareholder specifically requests
otherwise, the Class A shares will
be redeemed before any Class B shares.
The holding period of Class B shares acquired
through an exchange with
another fund of the Tocqueville Trust will be
calculated from the date that the
Class B shares were initially acquired in such fund
and those Class B shares
being redeemed will be considered to represent (i)
capital appreciation in other
funds to the extent applicable and (ii) then of
shares held for the longest
period of time. As a result, the contingent deferred
sales charge imposed should
be at the lowest possible rate. The amount of any
contingent deferred sales
charge imposed will reduce the gain or increase the
loss on the amount realized
on redemption for purposes of federal income taxes.
WAIVER OF THE CONTINGENT DEFERRED SALES
CHARGE. The contingent deferred
sales charge for Class B shares will be waived,
subject to confirmation of a
shareholder's status, for: (i) a total or partial
redemption made within one
year of the death of the shareholder; (ii) a
redemption in connection with a
minimum required distribution from an IRA, Keogh or
custodial account under
section 403(b) of the Internal Revenue Code; (iii)
redemptions made from an IRA,
Keogh or custodial account under section 403(b) of
the Internal Revenue Code
through an established Automatic Redemption Plan,
as discussed below; (iv)
distributions from a qualified plan upon
retirement; and (v) a redemption
resulting from an over-contribution to an IRA.
CONVERSION OF CLASS B SHARES. A
shareholder's Class B shares will
automatically convert to Class A shares (and thus be
subject to the lowest
expenses borne by Class A shares) in the seventh
year after the date of
purchase, together with the pro rata portion of all
Class B shares representing
dividends and other distributions paid in
additional Class B shares. The
conversion will be effected at the relative net
asset values per share of the
two classes on the first business day of the
month following the sixth
anniversary of the original purchase occurs. If any
exchanges of Class B shares
during the six-year period occurred, the holding period
for the shares exchanged
will be counted toward the six-year period. At the
time of the conversion the
net asset value per share of the Class A shares may be
higher or lower than the
net asset value per share of the Class B shares; as a
result, depending on the
relative net asset values per share, a shareholder
may receive fewer or more
Class A shares than the number of Class B shares
converted. A shareholder will
not recognize gain or loss upon the conversion of
Class B shares to Class A
shares.
SHAREHOLDER PRIVILEGES
AUTOMATIC REDEMPTION PLAN. A shareholder
owning $10,000 or more of
Class A or Class B shares of a Fund as determined by
the then current net asset
value may provide for the payment monthly or quarterly
of any requested dollar
amount (subject to limits) from his account. A
sufficient number of full and
fractional shares will be redeemed so that the
designated payment is received on
approximately the 1st day of the month following the
end of the selected payment
period. Class B shares will be subject to any
contingent deferred sales charge.
EXCHANGE PRIVILEGE. Subject to certain
conditions, Class A and Class B
shares of a Fund may be exchanged for the Class
A and Class B shares,
respectively, of another Fund of The Tocqueville
Trust at such Fund's then
current net asset value. No initial sales charge
is imposed on the Class A
shares being acquired, and no contingent deferred sales
charge is imposed on the
Class B shares being redeemed, through an exchange.
The dollar amount of the
exchange must be at least equal to the minimum
investment applicable to the
shares of the Fund acquired through such exchange. You
should note that any such
exchange, which may only be made in states where
shares of the Funds in the
Tocqueville Trust are qualified for sale, may
create a gain or loss to be
recognized for federal income tax purposes.
Exchanges must be made between
accounts having identical registrations and
addresses. Exchanges may be
authorized by telephone. In order to protect
itself and shareholders from
liability for unauthorized or fraudulent telephone
transactions, the Funds will
use reasonable procedures in an attempt to verify
the identity of a person
making a telephone exchange request. The Funds
reserve the right to refuse a
telephone exchange request if it believes that the
person making the request is
not the record owner of the shares being exchanged, or
is not authorized by the
shareholder to request the exchange. Shareholders
will be promptly notified of
any refused request for a telephone exchange. As
long as these normal
identification procedures are followed, neither the
Funds nor its agents will be
liable for loss, liability or cost which results from
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<PAGE>
acting upon instructions of a person believed to be a
shareholder with respect
to the telephone exchange privilege. You will not
automatically be assigned this
privilege unless you check the box on the Application
which indicates that you
wish to have the privilege. The exchange
privilege may be modified or
discontinued at any time.
DIVIDENDS, DISTRIBUTIONS, AND TAX
MATTERS
DIVIDENDS AND DISTRIBUTIONS. The Tocqueville
Government Fund declares
and pay dividends monthly. The Tocqueville Fund, The
Tocqueville Small Cap Value
Fund, The Tocqueville Asia-Pacific Fund, and The
Tocqueville Europe Fund pay
dividends annually. The Funds also distribute net
capital gains (if any)
annually. Dividends and distributions of both Class A
and Class B shares may be
reinvested in Class A shares at net asset value without
an initial sales charge.
Shareholders should indicate on the purchase
application whether they wish to
receive dividends and distributions in cash. Otherwise,
all income dividends and
capital gains distributions are automatically
reinvested in the Fund making the
distribution at the next determined net asset value
unless the Transfer Agent
receives written notice from an individual shareholder
prior to the record date,
requesting that the distributions and dividends be
distributed to the investor
in cash.
TAX MATTERS. Each Fund intends to qualify
as a regulated investment
company by satisfying the requirements under
Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"),
including requirements with
respect to diversification of assets, distribution
of income and sources of
income. It is each Fund's policy to distribute to
shareholders all of its
investment income (net of expenses) and any
capital gains (net of capital
losses) in accordance with the timing requirements
imposed by the Code so that
the Fund will satisfy the distribution requirement
of Subchapter M and not be
subject to federal income taxes or the 4% excise tax.
If a Fund fails to satisfy
any of the Code requirements for qualification as
a regulated investment
company, it will be taxed at regular corporate tax
rates on all of its taxable
income (including any capital gains) without any
deduction for distributions to
shareholders, and distributions to shareholders
will be taxable as ordinary
dividends (even if derived from a Fund's net long-
term capital gains) to the
extent of that Fund's current and accumulated earnings
and profits.
Distributions by a Fund of its net investment
income and the excess, if
any, of its net short-term capital gain over its net
long-term capital loss are
generally taxable to shareholders as ordinary income.
These distributions are
treated as dividends for federal income tax purposes.
Because it is anticipated
that The Tocqueville Asia-Pacific Fund's, The
Tocqueville Europe Fund's and The
Tocqueville Government Fund's investment income will
not include dividends from
domestic corporations, none of the ordinary income
dividends paid by such Fund
should qualify for the 70% dividends-received
deduction for corporate
shareholders. Distributions by a Fund of the
excess, if any, of its net
long-term capital gain over its net short-term
capital loss are designated as
capital gain dividends and are taxable to
shareholders as long-term capital
gains, regardless of the length of time a shareholder
has held his shares.
Portions of each Fund's investment income
may be subject to foreign
income taxes withheld at source. The economic effect
of such withholding taxes
or the total return of each Fund cannot be
predicted. The Tocqueville
Asia-Pacific Fund and The Tocqueville Europe Fund may
elect to "pass through" to
its shareholders these foreign taxes, in which event
each shareholder will be
required to include his pro rata portion thereof in
his gross income, but will
be able to deduct or (subject to various limitations)
claim a foreign tax credit
for such amount.
Distributions by a Fund to shareholders
will be treated in the same
manner for federal income tax purposes whether received
in cash or reinvested in
additional shares of the Fund. In general,
distributions by a Fund are taken
into account by the shareholders in the year in which
they are made. However,
certain distributions made during January will be
treated as having been paid by
the Fund and received by the shareholders on December
31 of the preceding year.
A statement setting forth the federal income tax
status of all distributions
made or deemed made during the year, including any
amount of foreign taxes
"passed through", will be sent to shareholders
promptly after the end of each
year. A shareholder who purchases shares of a Fund just
prior to the record date
will be taxed on the entire amount of the dividend
received, even though the net
asset value per share on the date of such purchase may
have reflected the amount
of such dividend.
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<PAGE>
A shareholder will recognize gain or loss
upon the sale or redemption
of shares of a Fund in an amount equal to the
difference between the proceeds of
the sale or redemption and the shareholder's adjusted
tax basis in the shares.
Any loss recognized upon a taxable disposition of
shares within six months from
the date of their purchase will be treated as a long-
term capital loss to the
extent of any capital gain dividends received on such
shares. All or a portion
of any loss recognized upon a taxable disposition
of shares of a Fund may be
disallowed if other shares of the Fund are purchased
within 30 days before or
after such disposition.
Ordinary income dividends paid to non-resident
alien or foreign entity
shareholders generally will be subject to United
States withholding tax at a
rate of 30% (or lower rate under an applicable treaty).
Foreign shareholders are
urged to consult their own tax advisers concerning the
applicability of United
States withholding taxes.
Under the backup withholding rules of the
Code, certain shareholders
may be subject to 31% withholding of federal income
tax on ordinary income
dividends, capital gain dividends and redemption
payments made by the Funds. In
order to avoid this backup withholding, a
shareholder must provide the Funds
with a correct taxpayer identification number (which
for most individuals is
their Social Security number) and certify that it is a
corporation or otherwise
exempt from or not subject to backup withholding.
The foregoing discussion of federal income tax
consequences is based on
tax laws and regulations in effect on the date of
this Prospectus, and is
subject to change by legislative or administrative
action. As the foregoing
discussion is for general information only, a
prospective shareholder should
also review the more detailed discussion of federal
income tax considerations
relevant to the Funds that is contained in the
Statement of Additional
Information. In addition, each prospective
shareholder should consult with his
own tax adviser as to the tax consequences of
investments in the Funds,
including the application of state and local taxes
which may differ from the
federal income tax consequences described above.
ORGANIZATION AND DESCRIPTION OF SHARES
OF THE TRUST
The Trust was organized as a Massachusetts
business trust under the
laws of the Commonwealth of Massachusetts. The
Trust's Declaration of Trust
filed September 17, 1986, permits the Trustees to
issue an unlimited number of
shares of beneficial interest with a par value of
$0.01 per share in the Trust
in an unlimited number of series of shares. On August
19, 1991, the Declaration
of Trust was amended to change the name of the Trust to
"The Tocqueville Trust,"
and on August 4, 1995, the Declaration of Trust was
amended to permit the
division of a series into classes of shares. Each
share of beneficial interest
has one vote and shares equally in dividends and
distributions when and if
declared by a Fund and in a Fund's net assets upon
liquidation. All shares, when
issued, are fully paid and nonassessable. There are no
preemptive or conversion
rights. Fund shares do not have cumulative voting
rights and, as such, holders
of at least 50% of the shares voting for trustees can
elect all trustees and the
remaining shareholders would not be able to elect any
trustees. The Board of
Trustees may classify or reclassify any unissued shares
of the Trust into shares
of any series by setting or changing in any one or more
respects, from time to
time, prior to the issuance of such shares, the
preference, conversion or other
rights, voting powers, restrictions, limitations
as to dividends, or
qualifications of such shares. Any such classification
or reclassification will
comply with the provisions of the 1940 Act.
There will not normally be annual shareholder
meetings. Shareholders
may remove trustees from office by votes cast at a
meeting of shareholders or by
written consent.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND
PAYING AGENT
State Street Bank and Trust Company, 2
Heritage Drive, North Quincy,
Massachusetts 02171, serves as Custodian for each
Fund's portfolio securities
and cash, and as Transfer and Dividend Paying Agent,
and in those capacities
maintains certain financial and accounting books
and records pursuant to
agreements with the Trust. Its mailing address is
P.O. Box 8507, Boston,
Massachusetts 02266-8507.
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<PAGE>
Transfer and Dividend Paying Agent functions
have been delegated to and
are being performed by Boston Financial Data
Services, Inc., an affiliate of
State Street Bank and Trust Company.
COUNSEL AND INDEPENDENT
ACCOUNTANTS
Kramer, Levin, Naftalis, Nessen, Kamin &
Frankel, 919 Third Avenue, New
York, N.Y. 10022, is counsel for the Trust. McGladrey
& Pullen, LLP, 555 Fifth
Avenue, New York, N.Y. 10017-2416, has been appointed
independent accountants
for the Trust.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to
1675 Broadway, New York,
New York 10019, Attention: [name of Fund], or may
be made by calling (800)
626-9402.
OTHER INFORMATION
This Prospectus omits certain information
contained in the registration
statement filed with the Securities and Exchange
Commission. Copies of the
registration statement, including items omitted herein,
may be obtained from the
Commission by paying the charges prescribed under its
rules and regulations. The
Statement of Additional Information included in such
registration statement may
be obtained without charge from the Trust.
No person has been authorized to give any
information or to make any
representations other than those contained in this
Prospectus, and information
or representations not herein contained, if given or
made, must not be relied
upon as having been authorized by the Trust. This
Prospectus does not constitute
an offer or solicitation in any jurisdiction in
which such offering may not
lawfully be made.
The Code of Ethics of the Investment Advisor
and the Funds prohibits
all affiliated personnel from engaging in personal
investment activities which
compete with or attempt to take advantage of a
Fund's planned portfolio
transactions. The objective of the Code of Ethics
of both the Funds and
Investment Advisor is that their operations be
carried out for the exclusive
benefit of a Fund's shareholders. Both organizations
maintain careful monitoring
of compliance with the Code of Ethics.
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<PAGE>
INVESTMENT ADVISOR THE
TOCQUEVILLE FUND
Tocqueville Asset Management L.P.
1675 Broadway THE
TOCQUEVILLE SMALL CAP VALUE FUND
New York, New York 10019
Telephone: (212) 698-0800
THE TOCQUEVILLE
Telecopier: (212) 262-0154
ASIA-PACIFIC FUND
DISTRIBUTOR
THE TOCQUEVILLE
Tocqueville Securities L.P.
EUROPE FUND
1675 Broadway
New York, New York 10019
AND Telephone: (800) 697-3863
Telecopier: (212) 262-0154 THE
TOCQUEVILLE GOVERNMENT FUND
SHAREHOLDERS' SERVICING,
Series of
The Tocqueville Trust
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8507
Boston, Massachusetts 02266-8507
Telephone: (800) 626-9402
BOARD OF TRUSTEES
Francois Sicart -- Chairman
February 28, 1996
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Prospectus
Robert W. Kleinschmidt
Francois Letaconnoux
<PAGE>
PART B
THE TOCQUEVILLE TRUST
STATEMENT OF ADDITIONAL INFORMATION
______________, 1996
_________________________________________________________________
Acquisition of the Assets By and in Exchange for
Shares of of Ivy Short-Term Bond Fund The Tocqueville
Government Fund Via Mizner Financial Plaza (a Series
of The Tocqueville Trust) 700 South Federal Highway
1675 Broadway
Boca Raton, Florida 33432 New York, New York 10019
Telephone: (800) 777-6472 Telephone: (800) 697-3863
This Statement of Additional Information is available
to the shareholders of Ivy Short-Term Bond Fund
("ISTBF") in connection with a proposed transaction
whereby The Tocqueville Government Fund, a series of
shares of The Tocqueville Trust, ("TGF") will acquire
all or substantially all of the assets of ISTBF in
exchange solely for TGF shares and the assumption by TGF of all
identified and stated liabilities of ISTBF.
This Statement of Additional Information of The
Tocqueville Trust consists of this cover page and the
following documents each of which is attached hereto
and incorporated by reference herein:
(1) The Statement of Additional Information of TGF
dated February 28, 1996 and financial statements
and report of independent accountants for TGF, for
the year ended October 31, 1995;
(2) Financial Statements (unaudited) included in the
March 31, 1996 semi-annual report of TGF;
(3) The Statement of Additional Information of ISTBF
dated April 30, 1996, containing financial
statements and report of independent accountants
for ISTBF, for the year ended December 31, 1995;
(4) Financial statements (unaudited) included in the
June 30, 1996 semi-annual report of ISTBF;
(5) Pro forma combining financial statements
(unaudited) of ISTBF and TGF as of June 30, 1996.
This Statement of Additional Information is not a
prospectus. A Proxy Statement/Prospectus dated
_____________, 1996 relating to the reorganization of
ISTBF may be obtained by writing The Tocqueville Trust,
at 1675 Broadway, New York, New York 10019 or calling
The Tocqueville Trust at (800) 697-3863. This Statement
of Additional Information should be read in conjunction with the
Proxy Statement/Prospectus.
STATEMENT OF ADDITIONAL INFORMATION - February 28,
1996
THE TOCQUEVILLE TRUST
The Tocqueville Trust (the "Trust") is a
Massachusetts business trust
consisting of five separate funds (the "Fund" or the
"Funds"). Each Fund is an
open-end, diversified management investment company
with a different investment
objective. The Tocqueville Fund's investment
objective is long-term capital
appreciation primarily through investments in
securities of United States
issuers. The Tocqueville Small Cap Value Fund's
(the "Small Cap Fund")
investment objective is long-term capital
appreciation primarily through
investments in securities of small-capitalization
United States issuers. The
Tocqueville Asia-Pacific Fund's (the "Asia-Pacific
Fund") investment objective
is long-term capital appreciation consistent with
preservation of capital
primarily through investment in securities of issuers
located in Asia and the
Pacific Basin. The Tocqueville Europe Fund's (the
"Europe Fund") investment
objective is long-term capital appreciation
consistent with preservation of
capital primarily through investment in securities of
issuers located in Europe.
The Tocqueville Government Fund's (the "Government
Fund") investment objective
is to provide high current income consistent with the
maintenance of principal
and liquidity through investments in obligations
issued or guaranteed by the
U.S. Treasury, agencies of the U.S. Government or
instrumentalities that have
been established or sponsored by the U.S. Government.
In each Fund, there is
minimal emphasis on current income.
This Statement of Additional Information is
not a prospectus. It should
be read in conjunction with the Trust's current
Prospectuses, copies of which
may be obtained by writing The Tocqueville Trust, 1675
Broadway, New York, New
York 10019 or calling (800) 697-3863.
This Statement of Additional Information
relates to Trust's Prospectus
which is dated February 28, 1996.
TABLE OF CONTENTS
PAGE
Investment Objective, Policy and
Risks....................... 2 Investment
Restrictions...................................... 6
Management................................................... 8
Investment Advisor and Investment Advisory
Agreements....... 10 Distribution
Plans........................................... 11
Administrative Services Plan................................ 12
Portfolio Transactions and
Brokerage......................... 13 Allocation of
Investments.................................... 13
Computation of Net Asset Value............................... 13
Purchase and Redemption of
Shares............................ 14 Tax
Matters.................................................. 14
Performance Calculation......................................
21 General
Information.......................................... 22
Reports .................................................... 23
Financial
Statements......................................... 23
<PAGE>
INVESTMENT OBJECTIVE, POLICY AND
RISKS
THE TOCQUEVILLE FUND
As described in the Trust's Prospectus, The
Tocqueville Fund invests
in common stocks of United States issuers. The
Tocqueville Fund will invest not
only in major corporations whose shares are listed
on the New York Stock
Exchange or the American Stock Exchange, but it will
also invest in securities
traded on regional exchanges or in the over-the-counter
market.
The Fund may invest up to 25% of its total
assets in common stock of
foreign companies which are traded in the United
States or purchase American
Depository Receipts (ADR's) which are certificates
issued by U.S. banks
representing the right to receive securities of a
foreign issuer deposited with
that bank or a correspondent bank. The Fund also may
invest up to 10% of its
total assets in gold bullion only from U.S.
institutions.
The Fund may enter into repurchase
agreements with domestic
broker-dealers, banks and financial institutions, but
may not invest more than
5% of its net assets in repurchase agreements. A
repurchase agreement is a
contract pursuant to which the Fund, against receipt
of securities of at least
equal value, agrees to advance a specified sum to a
broker-dealer, bank or
financial institution which agrees to reacquire the
securities at a mutually
agreed upon time and price. Repurchase agreements,
which are usually for short
periods of one week or less, enable the Fund to
invest its cash reserves at
fixed rates of return. The Fund may enter into
repurchase agreements with
domestic broker-dealers, banks and other financial
institutions, provided the
Fund receives as collateral securities whose market
value at least equals the
amount of the institution's repurchase obligation
and provided the Fund's
custodian always has physical possession of such
securities or there is evidence
of a book entry transfer to the account of the
custodian. To minimize the risk
of loss, the Fund will enter into repurchase
agreements only with institutions
and dealers which the Board of Trustees consider
to be creditworthy. The
Investment Advisor will monitor the creditworthiness
of such institutions and
dealers. If an institution enters into an insolvency
proceeding, the resulting
delay in liquidation of securities serving as
collateral could cause the Fund
some loss, as well as legal expense, if the value of
the securities declined
prior to liquidation.
THE TOCQUEVILLE SMALL CAP VALUE FUND
In the pursuit of its objective, the Fund
invests substantially all
and normally no less than 65% of its assets in
a diversified portfolio
consisting of common stocks of small capitalization
United States companies that
are considered by the Investment Advisor to be strong
proprietary businesses, to
be either out of favor or less well known in the
financial community, or to be
undervalued in relation to either their potential
long-term growth or earning
power. Companies with market capitalizations of less
than $1 billion are deemed
to have a small capitalization and to be generally
less well known. Strong
proprietary businesses generally have some but not
necessarily all of the
following characteristics: capable management,
good finances, strong
manufacturing, broad distribution, and, lastly,
products which are somewhat
differentiated from their competitors.
Generally, stocks which have
underperformed market indices such as the Standard &
Poor's Composite Index for
at least one year and companies which have a
historically low stock price in
relation to such factors as sales, potential earnings
or underlying assets will
be considered by the Investment Advisor to be out of
favor.
The Investment Advisor searches for
companies based on its judgment
of relative value and growth potential. The growth
potential and earning power
of a company will be evaluated by the Investment
Advisor on the basis of past
growth and profitability, as reflected in its financial
statements, on the basis
of potential new products resulting from research and
development spending, or
on the Investment Advisor's conclusion that the
company has achieved better
results than similar companies in a depressed
industry which the Investment
Advisor believes will improve within the next two
years. There is no assurance
that the Investment Advisor's evaluation will be
accurate in its selection of
stocks for the Fund's portfolio or that the Fund's
objectives will be
-2-
<PAGE>
achieved. If the stocks in which the Fund invests
never attain their perceived
potential or if the valuation of such stocks in the
marketplace does not in fact
reflect significant undervaluation, there may be
little or no appreciation or,
instead, a depreciation in the value of such stocks.
The Fund does not intend to engage in
short-term trading on an
ongoing basis. Current income is not an objective of
the Fund, and any current
income derived from the portfolio will be
incidental. However, when in the
Investment Advisor's opinion, economic or market
conditions warrant a temporary
defensive position, the Fund may invest up to
100% of its assets in U.S.
government securities such as Treasury bills,
notes and bonds; cash; or
certificates of deposit, time deposits, bankers'
acceptances and other
short-term debt instruments.
The Fund may invest up to 25% of its total
assets in common stock of
foreign companies which are traded in the United
States or purchase American
Depository Receipts (ADR's), which are
certificates issued by U.S. banks
representing the right to receive securities of a
foreign issuer deposited with
such banks or correspondent banks. In addition, the
Fund may invest up to 5% of
its net assets in repurchase agreements which are
fully collateralized by
obligations of the U.S. Government or
obligations of its agencies or
instrumentalities, or short-term money market
securities. The Fund will not
invest in repurchase agreements with maturities in
excess of seven days. The
Fund may also invest up to 10% of its total assets in
investment grade debt
instruments convertible into common stock. The Fund
may, from time to time,
borrow up to 10% of the value of its total assets
from banks at prevailing
interest rates as a temporary measure for extraordinary
or emergency purposes.
THE TOCQUEVILLE ASIA-PACIFIC FUND AND THE TOCQUEVILLE
EUROPE FUND
The investment objective of the Asia-
Pacific Fund is long-term
capital appreciation consistent with preservation of
capital primarily through
investment in securities of issuers located in Asia
and the Pacific Basin. As
more fully described in the Trust's Prospectus, the
Investment Advisor may
invest the Fund's assets in securities of issuers
domiciled in any country.
However, under normal conditions investments will
be made in Asia and the
Pacific Basin countries. Pacific Basin countries
are Australia, Hong Kong,
Indonesia, Japan, Malaysia, New Zealand, Republic of
Korea, Singapore, Taiwan,
Thailand and the Philippines. Asian countries are India
and the Peoples Republic
of China, which is accessed through Pacific Basin
countries (as described
above), most notably Hong Kong. The Investment
Advisor believes that it will
usually have assets invested in most of the countries
located in Asia and the
Pacific Basin; however, under normal market conditions
the Fund will be invested
in a minimum of five countries. Investments will
not normally be made in
securities of issuers located in the United States or
Canada.
The investment objective of the Europe
Fund is long-term capital
appreciation consistent with preservation of
capital primarily through
investment in securities of issuers located in Europe.
As more fully described
in the Trust's Prospectus, the Investment Advisor may
invest the Fund's assets
in securities of issuers domiciled in any country.
However, under normal
conditions investments will be made in Europe. The
European countries are
Austria, Belgium, Denmark, England, Finland, France,
Germany, Greece, Ireland,
Italy, Luxembourg, Netherlands, Norway, Portugal,
Spain, Sweden, Switzerland and
Turkey. The Investment Advisor believes that it
will usually have assets
invested in most of Europe; however, under normal
market conditions the Fund
will be invested in a minimum of five countries.
Investments will not normally
be made in securities of issuers located in the United
States or Canada.
When allocating investments among
individual countries, the
Investment Advisor will consider various criteria
that in its view are deemed
relevant based on its experience, such as the relative
economic growth potential
of the various economies and securities regions,
expected levels of inflation,
government policies influencing business
conditions, and the outlook for
currency relationships.
-3-
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Government Fund's
investment objective is to provide
high current income consistent with the maintenance
of principal and liquidity
through investments in obligations issued or
guaranteed by the U.S. Treasury,
agencies of the U.S. Government or instrumentalities
that have been established
or sponsored by the U.S. Government. In pursuit of
its objective, the Fund
intends to invest at least 85% of its assets in
short and intermediate-term
securities backed by the full faith and credit of the
U.S. Government. Also, at
least 65% of the Fund's assets will be invested in U.S.
Treasury bills, notes
and bonds. The dollar-weighted average maturity of the
Fund is expected to range
from 0 to 12 years. The balance of the Fund's
assets may be invested in
obligations issued or guaranteed by the U.S.
Treasury, agencies of the U.S.
Government or instrumentalities that have been
established or sponsored by the
U.S. Government, as well as in repurchase agreements
collateralized by such
securities. The Fund may also invest in bond (interest
rate) futures and options
to a limited extent.
The Fund may invest up to 20% of its assets
in Government National
Mortgage Association pass-through certificates
("GNMA"). GNMA pass-through
certificates are mortgage-backed securities
representing part ownership of a
pool of mortgage loans. Monthly mortgage payments of
both interest and principal
"pass through" from homeowners to certificate
investors, such as the Fund. The
Fund reinvests the principal portion in additional
securities and distributes
the interest portion as income to the Fund's
shareholders. Under normal
circumstances, GNMA certificates are expected to
provide higher yields than U.S.
Treasury securities of comparable maturity.
The mortgage loans underlying GNMA
certificates--issued by lenders
such as mortgage bankers, commercial banks,
and savings and loan
associations--are either insured by the Federal
Housing Administration (FHA) or
guaranteed by the Veterans Administration (VA). Each
pool of mortgage loans must
also be approved by GNMA, a U.S. Government
corporation within the U.S.
Department of Housing and Urban Development. Once GNMA
approval is obtained, the
timely payment of interest and principal on each
underlying mortgage loan is
guaranteed by the "full faith and credit" of the U.S.
Government.
The Fund also may invest up to 15% of its
assets in: (i) fixed rate
or adjustable rate mortgage-backed securities
issued or guaranteed by the
Federal National Mortgage Association ("FNMA") and
the Federal Home Loan
Mortgage Corporation ("FHLMC"), and (ii)
collateralized mortgage obligations
("CMOs").
1. WRITING COVERED CALL OPTIONS ON
SECURITIES AND STOCK INDICES
The Asia-Pacific Fund, the Europe Fund and
the Government Fund may
write covered call options on optionable securities
or stock indices of the
types in which they are permitted to invest
from time to time as their
Investment Advisor determines is appropriate in
seeking to attain their
objective. Call options written by a Fund gives the
holder the right to buy the
underlying securities or index from the Fund at a
stated exercise price. Options
on stock indices are settled in cash.
The Asia-Pacific Fund, the Europe Fund and
the Government Fund may
write only covered call options, which means
that, so long as a Fund is
obligated as the writer of a call option, it will own
the underlying securities
subject to the option (or comparable securities or
cash satisfying the cover
requirements of securities exchanges).
The Asia-Pacific Fund , the Europe Fund and
the Government Fund will
receive a premium for writing a covered call option,
which increases the return
of a Fund in the event the option expires
unexercised or is closed out at a
profit. The amount of the premium will reflect,
among other things, the
relationship of the market price of the underlying
security or index to the
exercise price of the option, the term of the option
and the volatility of the
market price of the underlying security or index.
By writing a covered call
option, a Fund limits its opportunity to profit from
any increase in the market
value of the underlying security or index above
the exercise price of the
option.
-4-
<PAGE>
The Asia-Pacific Fund , the Europe Fund
and the Government Fund may
terminate an option that they have written prior to
the option's expiration by
entering into a closing purchase transaction in
which an option is purchased
having the same terms as the option written. A Fund
will realize a profit or
loss from such transaction if the cost of such
transaction is less or more than
the premium received from the writing of the option.
Because increases in the
market price of a call option will generally reflect
increases in the market
price of the underlying security or index, any
loss resulting from the
repurchase of a call option is likely to be
offset in whole or in part by
unrealized appreciation of the underlying security
(or securities) owned by a
Fund.
2. PURCHASING PUT AND CALL OPTIONS ON
SECURITIES AND STOCK INDICES
The Asia-Pacific Fund and the Europe Fund
may purchase put options to
protect their portfolio holdings in an underlying
stock index or security
against a decline in market value. Such hedge
protection is provided during the
life of the put option since a Fund, as holder of the
put option, is able to
sell the underlying security or index at the put
exercise price regardless of
any decline in the underlying market price of the
security or index. In order
for a put option to be profitable, the market price of
the underlying security
or index must decline sufficiently below the exercise
price to cover the premium
and transaction costs. By using put options in this
manner, a Fund will reduce
any profit it might otherwise have realized in its
underlying security or index
by the premium paid for the put option and by
transaction costs, but it will
retain the ability to benefit from future increases in
market value.
The Asia-Pacific Fund and the Europe Fund
may also purchase call
options to hedge against an increase in prices of
stock indices or securities
that they want ultimately to buy. Such hedge
protection is provided during the
life of the call option since a Fund, as holder of the
call option, is able to
buy the underlying security or index at the exercise
price regardless of any
increase in the underlying market price of the security
or index. In order for a
call option to be profitable, the market price of the
underlying security or
index must rise sufficiently above the exercise price
to cover the premium and
transaction costs. By using call options in this
manner, a Fund will reduce any
profit it might have realized had it bought the
underlying security or index at
the time it purchased the call option by the premium
paid for the call option
and by transaction costs, but it limits the loss it
will suffer if the security
or index declines in value to such premium and
transaction costs.
3. BORROWING
Each Fund may, from time to time, borrow
up to 10% of the value of
its total assets from banks at prevailing interest
rates as a temporary measure
for extraordinary or emergency purposes . A Fund may
not purchase securities
while borrowings exceed 5% of the value of its total
assets.
4. REPURCHASE AGREEMENTS
Each Fund may enter into repurchase
agreements subject to resale to a
bank or dealer at an agreed upon price which reflects
a net interest gain for
the Fund. The Funds will receive interest from the
institution until the time
when the repurchase is to occur.
The Funds will always receive as
collateral U.S. Government or
short-term money market securities whose market value
is equal to at least 100%
of the amount invested by a Fund, and the Funds
will make payment for such
securities only upon the physical delivery or evidence
by book entry transfer to
the account of its custodian. If the seller
institution defaults, a Fund might
incur a loss or delay in the realization of
proceeds if the value of the
collateral securing the repurchase agreement
declines and it might incur
disposition costs in liquidating the collateral. The
Funds attempt to minimize
such risks by entering into such transactions
only with well-capitalized
financial institutions and specifying the required
value of the underlying
collateral. The Funds will not invest in repurchase
agreements with maturities
in excess of seven days.
-5-
<PAGE>
CONCLUSION
Unlike the fundamental investment objective
of each Fund set forth on
the cover page of this Statement and the investment
restrictions set forth
below, which may not be changed without shareholder
approval, the Funds have the
right to modify the investment policies described
above without shareholder
approval.
INVESTMENT RESTRICTIONS
The following fundamental policies and
investment restrictions have
been adopted by the Funds and except as noted, such
policies and restrictions
cannot be changed without approval by the vote of a
majority of the outstanding
voting securities of a Fund, as defined by the
Investment Company Act of 1940,
as amended (the "1940 Act").
The Funds may not:
(1) issue senior securities;
(2) concentrate their investments in
particular industries. No more
than 25% of the value of a Fund's assets
will be invested in any one
industry;
(3) with respect to 75% of the value of a
Fund's assets, purchase any
securities (other than obligations issued
or guaranteed by the U.S.
Government or its agencies or
instrumentalities) if, immediately after
such purchase, more than 5% of the value of
the Fund's total assets
would be invested in securities of any one
issuer, or more than 10% of
the outstanding voting securities of any one
issuer would be owned by
the Fund;
(4) make loans of money or securities
other than (a) through the
purchase of publicly distributed bonds,
debentures or other corporate
or governmental obligations, (b) by investing
in repurchase agreements,
and (c) by lending its portfolio securities,
provided the value of such
loaned securities does not exceed 33-1/3% of
its total assets;
(5) borrow money in excess of 10% of the value
of a Fund's total assets
from banks. A Fund may not purchase
securities while borrowings exceed
5% of the value of its total assets;
(6) buy or sell real estate, commodities,
or commodity contracts,
except a Fund may purchase or sell futures or
options on futures;
(7) underwrite securities;
(8) invest in precious metals other than in
accordance with a Fund's
investment objective and policy, if as a
result the Fund would then
have more than 10% of its total assets
(taken at current value)
invested in such precious metals;
(9) participate in a joint investment account.
The following restrictions are non-
fundamental and may be changed by
the Funds' Board of Trustees. Pursuant to such
restrictions, the Funds will not:
(1) make short sales of securities, other than
short sales "against the
box," or purchase securities on margin except
for short-term credits
necessary for clearance of portfolio
transactions,
-6-
<PAGE>
provided that this restriction will not be
applied to limit the use of
options, futures contracts and related
options, in the manner otherwise
permitted by the investment restrictions,
policies and investment
program of a Fund;
(2) invest for purposes of exercising control
or management;
(3) purchase or retain securities of an
issuer when one or more
officers and Trustees of the Fund or of the
Fund's Investment Advisor,
or a person owning more than 10% of the
shares of either, own
beneficially more than 1/2 of 1% of the
securities of such issuer and
such persons owning more than 1/2 of 1% of
such securities together own
beneficially more than 5% of the securities of
such issuer;
(4) purchase the securities of any other
investment company, if a
purchasing Fund, immediately after such
purchase or acquisition, owns
in the aggregate, (i) more than 3% of the
total outstanding voting
stock of such investment company, (ii)
securities issued by such
investment company having an aggregate
value in excess of 5% of the
value of the total assets of the Fund, or
(iii) securities issued by
such investment company and all other
investment companies having an
aggregate value in excess of 10% of the
value of the total assets of
the Fund;
(5) purchase interests in oil, gas or
other mineral exploration
programs; however, this limitation will not
prohibit the acquisition of
securities of companies engaged in the
production or transmission of
oil, gas, or other minerals;
(6) invest more than 10% of a Fund's total
assets in the securities of
any company which, including its predecessors,
has not been in business
for at least three years;
(7) invest more than 10% of its total
net assets in illiquid
securities. Illiquid securities are
securities that are not readily
marketable or cannot be disposed of promptly
within seven days and in
the usual course of business without taking a
materially reduced price.
Such securities include, but are not
limited to, time deposits and
repurchase agreements with maturities
longer than seven days.
Securities that may be resold under Rule
144A or securities offered
pursuant to Section 4(2) of the Securities
Act of 1933, as amended,
shall not be deemed illiquid solely by
reason of being unregistered.
The Investment Advisor shall determine whether
a particular security is
deemed to be liquid based on the trading
markets for the specific
security and other factors;
(8) except The Tocqueville Asia-Pacific Fund
and The Tocqueville Europe
Fund, invest in securities of foreign issuers
other than in accordance
with the respective Fund's investment
objective and policy, if as a
result a Fund would then have more than 25% of
its total assets (taken
at current value) invested in such foreign
securities; and
(9) except The Tocqueville Fund and The
Tocqueville Small Cap Value
Fund, invest in warrants if, at the time of
acquisiton, the investment
in warrants, valued at the lower of cost or
market value, would exceed
5% of a Fund's net assets. For purposes of
this restriction, warrants
acquired by a Fund in units or attached to
securities may be deemed to
be without value.
STATE AND FEDERAL RESTRICTIONS
In order to comply with certain federal
and state statutes and
regulatory policies, as a matter of operating policy,
each Fund will not: (1)
invest in oil, gas and other mineral leases; (2)
purchase or sell real property,
including limited partnership interests; and (3)
invest more than 2% of its net
assets in warrants which are not listed on the New
York or American Stock
Exchange nor more than 5% of its net assets in
warrants. Such warrants will be
valued at the time of acquisition at the lower of cost
or market value. Although
these
-7-
<PAGE>
policies are not fundamental and may be changed by The
Tocqueville Trust's Board
of Trustees without shareholder approval, these
policies will remain in effect
until the federal government or a state either
amends or appeals applicable
statutes and regulatory policies.
MANAGEMENT
The overall management of the business
and affairs of each Fund is
vested with the Board of Trustees. The Board of
Trustees approves all
significant agreements between the Trust or each Fund
and persons or companies
furnishing services to the Funds, including a
Fund's agreement with an
investment advisor, custodian and transfer agent. The
day-to-day operations of
the Funds are delegated to each Fund's officers subject
always to the investment
objectives and policies of each Fund and to general
supervision by the Trust's
Board of Trustees.
The Trustees and officers and their
principal occupations are noted
below. Unless otherwise indicated the address of
each Trustee and executive
officer is 1675 Broadway, New York, New York 10019.
FRANCOIS DANIEL SICART,* CHAIRMAN, PRINCIPAL
EXECUTIVE OFFICER AND TRUSTEE.
Chairman and Chief Executive Officer, Tocqueville
Management Corporation, the
General Partner of Tocqueville Asset Management L.P.
and Tocqueville Securities
L.P. from January, 1990 to present; Chairman and
Chief Executive Officer,
Tocqueville Asset Management Corp. from December,
1985 to January, 1990; Vice
Chairman of Tucker Anthony Management Corporation,
from 1981 to October 1986;
Vice President (formerly general partner) and
other positions with Tucker
Anthony, Inc. from 1969 to January, 1990.
JAMES B. FLAHERTY, TRUSTEE. President and Partner,
Troutbeck Conference Center
and Country Inn from October, 1979 to present; Vice
President, Leedsville Realty
and Construction Corp. from 1980 to present; Associate
Creative Director, Young
and Rubicam Advertising, and Dentsu, Young and
Rubicam from March, 1983 to
February, 1985; Creative Director and Senior Vice
President, Tinker Campbell
Ewald from October, 1977 to November, 1980;
Partner/owner of Freshfields
Restaurant, W. Cornell, CT; President/Creative
Director of JBF Ltd., an
advertising company.
INGE HECKEL, TRUSTEE. Management Consultant, 1988
to present; Executive
Director, Princess Grace Foundation U.S.A. from June,
1986 to September, 1988;
Vice President and Assistant Secretary, The Asia
Society from September, 1984 to
June, 1986; Executive Director, Metropolitan Boston
Zoos from September, 1982 to
July, 1984; President, Bradford College, Bradford,
Massachusetts from September,
1979 to June, 1982; Trustee of Bradford College;
Former Director and Chairman,
Public Relations Committee, International Counsel of
Museums (UNESCO); Former
Director, BayBank/Merrimack Valley; Member, Art
Advisory Board, Mount Holyoke
College Art Museum.
ROBERT KLEINSCHMIDT,* PRESIDENT, PRINCIPAL
OPERATING OFFICER AND TRUSTEE.
President, Tocqueville Asset Management L.P. from
January, 1994 to present and
Managing Director from July, 1991 to January, 1994.
Partner, David J. Greene &
Co., May, 1978 to July, 1991. Assistant Vice President,
Irving Trust Co., July,
1976 to May, 1978.
FRANCOIS LETACONNOUX, TRUSTEE. President, Lepercq de
Neuflize & Co. from July,
1993 to present; Director, Lepercq 99 First
Management Inc. from 1988 to
present; Director, Lepercq de Neuflize & Co.,
Inc. from 1988 to present
(investment bank); Managing Director, Lepercq
Capital Partners (real estate
investment firm), from 1974 to present.
--------
* Interested person of the Funds as defined in the
1940 Act.
-8-
<PAGE>
BERNARD F. COMBEMALE, TRUSTEE. Investment
Management Consultant, 1981 to
present; Chairman and Chief Executive Officer,
Trusthouse Forte Inc., 1984 to
1988; Chairman of the Executive Committee & Director,
Western World Insurance
Company, 1981 to present; Director, Westco Holding
Corporation, 1981 to present;
Director, The French-American Foundation, 1980 to
present; Trustee, The Princess
Grace Foundation -U.S.A., 1980 to present.
JOSEPH COOPER, SECRETARY AND TREASURER. Vice
President and Treasurer,
Tocqueville Management Corporation, the General
Partner of Tocqueville Asset
Management L.P. and Tocqueville Securities L.P. from
January, 1990 to present.
Vice President, Treasurer and Chief Financial
Officer, Tocqueville Asset
Management Corporation from December, 1985 to February,
1990. Self-employed as a
public accountant.
KIERAN LYONS, VICE PRESIDENT AND PRINCIPAL FINANCIAL
OFFICER. Chief Financial
Officer, Tocqueville Management Corporation, the
General Partner of Tocqueville
Asset Management L.P. and Tocqueville Securities
L.P. from January, 1992 to
present. Certified Public Accountant, Pegg & Pegg,
February, 1985 to January,
1992.
Under the terms of the Massachusetts
General Corporation Law, the
Funds may indemnify any person who was or is a
Trustee, officer or employee of
each Fund to the maximum extent permitted by
the Massachusetts General
Corporation Law; provided, however, that any such
indemnification (unless
ordered by a court) shall be made by the Funds
only as authorized in the
specific case upon a determination that
indemnification of such persons is
proper in the circumstances. Such determination shall
be made (i) by the Board
of Trustees, by a majority vote of a quorum which
consists of Trustees who are
neither "interested persons" of the Trust, as defined
in Section 2(a)(19) of the
1940 Act, nor parties to the proceeding, or (ii) if
the required quorum is not
obtained or if a quorum of such Trustees so
directs, by independent legal
counsel in a written opinion. No indemnification will
be provided by a Fund to
any Trustee or officer of the Fund for any
liability to a Fund or it
shareholders to which he would otherwise be subject
by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of duty.
The Funds do not pay direct remuneration to
any officer of a Fund. As
of December 31, 1995, the Trustees and officers as a
group owned beneficially
7.96% of The Tocqueville Fund's outstanding shares,
0% of the Asia-Pacific
Fund's outstanding shares, 0.08% of the Europe Fund's
outstanding shares, and 0%
of the Small Cap Fund's outstanding shares, all of
which were acquired for
investment purposes. Certain of the Trustees and
officers may have investment
discretion for institutional and private accounts which
own shares of the Funds,
however the Trustees and officers do not have the
power to vote such shares and
have disclaimed beneficial ownership of such shares.
For the fiscal year ended
October 31, 1995, the Trust paid the "disinterested"
Trustees $12,000; each
disinterested Trustee received $750 per quarter,
notwithstanding the number of
Board Meetings and Audit Committee Meetings attended.
"Interested" Trustees do
not receive Trustees' fees. The Trust did not reimburse
Trustee expenses.
-9-
<PAGE>
The table below illustrates the compensation
paid to each Trustee for
the Trust's most recently completed fiscal year:
<TABLE>
<CAPTION>
Pension or
Total
Retirement
Compenation
Aggregate Benefits Accrued
Estimated Annual from Fund and
Name of Person, Compensation as Part of Fund
Benefits Upon Fund Complex
Position from Fund Expenses
Retirement Paid to Trustees
<S> <C> <C>
<C> <C>
Francois Sicart $0 $0
$0 $0
Bernard F. Combemale $3,000 $0
$0 $3,000
James B. Flaherty $3,000 $0
$0 $3,000
Inge Heckel $3,000 $0
$0 $3,000
Robert Kleinschmidt $0 $0
$0 $0
Francois Letaconnoux $3,000 $0
$0 $3,000
</TABLE>
INVESTMENT ADVISOR AND INVESTMENT
ADVISORY AGREEMENTS
Tocqueville Asset Management L.P. (the
"Investment Advisor"), 1675
Broadway, New York, New York 10019, acts as the
Investment Advisor to each Fund
under a separate investment advisory agreement
(the "Agreement" or
"Agreements"). Each Agreement provides that the
Investment Advisor identify and
analyze possible investments for each Fund, determine
the amount and timing of
such investments, and the form of investment. The
Investment Advisor has the
responsibility of monitoring and reviewing each
Fund's portfolio, and, on a
regular basis, to recommend the ultimate disposition of
such investments. It is
the Investment Advisor's responsibility to cause
the purchase and sale of
securities in each Fund's portfolio, subject at all
times to the policies set
forth by the Trust's Board of Trustees. In addition,
the Investment Advisor also
provides certain administrative and managerial services
to the Funds.
The Investment Advisor receives a fee from
The Tocqueville Fund and
the Small Cap Fund, payable monthly, for the
performance of its services at an
annual rate of .75% on the first $100 million of the
average daily net assets of
such Fund, .70% of average daily net assets in excess
of $100 million but not
exceeding $500 million, and .65% of average daily net
assets in excess of $500
million. The Investment Advisor receives a fee from
the Asia-Pacific Fund and
the Europe Fund, payable monthly, for the
performance of its services at an
annual rate of 1.00% on the first $50 million of the
average daily net assets of
each Fund, respectively, .75% of the average daily
net assets in excess of $50
million but not exceeding $100 million and .65% of such
assets in excess of $100
million. The Investment Advisor receives a fee from the
Government Fund, payable
monthly, for the performance of its services at an
annual rate of .50% on the
first $500 million of the average daily net assets of
the Fund, .40% of average
daily net assets in excess of $500 million but not
exceeding $1 billion, and
.30% of average daily net assets in excess of $1
billion. The fee is accrued
daily for the purposes of determining the offering and
redemption price of such
Fund's shares. Each fee is accrued daily for the
purposes of determining the
offering and redemption price of such Fund's shares.
The advisory fees are
higher than that paid by most investment companies
but the Board of Trustees
believes it to be reasonable in light of the
services each Fund receives
thereunder. For the years ended October 31, 1993 , 1994
and 1995, The
--------
-10-
<PAGE>
Tocqueville Fund paid advisory fees to the
Investment Advisor of $181,449,
$219,470, and $240,219 respectively. For the years
ended October 31, 1993, 1994
and 1995, the Asia-Pacific Fund paid advisory fees to
the Investment Advisor of
$30,063, $0 and $0, respectively. For the fiscal
years ended October 31, 1994
and 1995, the Investment Advisor waived the
advisory fee. If the Investment
Advisor had not waived its fee, the Asia-Pacific Fund
would have paid advisory
fees to the Investment Advisor of $44,646 and
$48,530, respectively. For the
period August 1, 1994 to October 31, 1994 and the
fiscal year ended October 31,
1995, the Europe Fund paid advisory fees to the
Investment Advisor of $0 and $0,
respectively, because the Investment Advisor waived
its advisory fee. If the
Investment Advisor had not waived its fee, the
Europe Fund would have paid
advisory fees to the Investment Advisor of $4,201 and
$35,890. For the period
August 1, 1994 to October 31, 1994 and the fiscal year
ended October 31, 1995,
the Small Cap Fund paid investment advisory fees to the
Investment Advisor of $0
and $58,456, respectively, because the Investment
Advisor waived either part or
all of its advisory fee. If the Investment Advisor
had not waived its fee, the
Small Cap Fund would have paid advisory fees to the
Investment Advisor of
$11,420 and $62,602, respectively. Finally, for the
period August 14, 1995 to
October 31, 1995, the Government Fund paid advisory
fees to the Investment
Advisor of $0, because the Investment Advisor waived
its advisory fee. If the
Investment Advisor had not waived its fee, the
Government Fund would have paid
advisory fees to the Investment Advisor of $3,453.
The Investment Advisor's fees will be
reduced for any fiscal year by
any amount necessary to prevent each Fund's expenses
from exceeding the most
restrictive expense limitation imposed by the
securities laws or regulations of
any state or jurisdiction in which each Fund's
shares are registered or
qualified for sale. Currently, the most restrictive of
such expense limitations
would require the Investment Advisor to reduce its fee
so that ordinary expenses
(excluding interest, taxes, brokerage commissions
and fees, international
custody fees and extraordinary expenses such as
litigation) for any fiscal year
do not exceed 2.5% of the first $30 million of a
Fund's average daily net
assets, plus 2.0% of the next $70 million, plus 1.5%
of a Fund's average daily
net assets in excess of $100 million. Any expense
reduction will be estimated
and accrued daily and will be subject to
readjustment during the year. The
amount of any such reduction shall be deducted from the
monthly advisory fee, or
if such amount exceeds the monthly fee otherwise
payable, the Investment Advisor
will repay such excess promptly.
Under the terms of the Agreements, each Fund
pays all of its expenses
(other than those expenses specifically assumed by
the Investment Advisor and
each Fund's distributor) including the costs
incurred in connection with the
maintenance of its registration under the Securities
Act of 1933, as amended,
and the 1940 Act, printing of prospectuses distributed
to shareholders, taxes or
governmental fees, brokerage commissions, custodial,
transfer and shareholder
servicing agents, expenses of outside counsel and
independent accountants,
preparation of shareholder reports, and expenses of
Trustee and shareholder
meetings.
Each Agreement may be terminated without
penalty on 60 days' written
notice by a vote of the majority of the Trust's
Board of Trustees or by the
Investment Advisor, or by holders of a majority of
each Fund's outstanding
shares. Each Fund's Agreement will continue for two
years from its effective
date and from year-to-year thereafter provided it
is approved, at least
annually, in the manner stipulated in the 1940 Act.
This requires that each
Agreement and any renewal thereof be approved by a
vote of the majority of the
Fund's Trustees who are not parties thereto or
interested persons of any such
party, cast in person at a meeting specifically called
for the purpose of voting
on such approval.
DISTRIBUTION PLANS
Each Fund has adopted a distribution
plan for Class A and a
distribution plan for Class B shares (each a "Plan").
The Class A Plan provides
that a Fund may incur distribution expenses
related to the sale of Class A
shares of up to .25% per annum of such Fund's average
daily net assets. The
Class B Plan provides that a Fund may incur
distribution expenses related to the
sale of Class B shares of up to .75% per annum of such
Fund's average daily net
assets, of which (i) up to .25% of the average daily
net assets attributable to
the Class B shares is payable as service fees to the
distributor, brokers and
servicing agents having agreements with
-11-
<PAGE>
the distributor or Investment Advisor for the
provision of continuing
shareholder services to customers of such financial
intermediaries who own Class
B shares, and (ii) any amount remaining (being at
least .50% of average daily
net assets attributable to the Class B shares) is
payable to the distributor or
brokers during a fiscal year. With respect to Class
B shares, because of the
.75% annual limitation on the compensation paid
during a fiscal year,
compensation relating to a large portion of the
commissions attributable to
sales of Class B shares in any one year will
be paid by a Fund to the
distributor in fiscal years subsequent thereto. In
determining whether to
purchase Class B shares, investors should consider
that daily compensation
payments and continue until the Distributor has
been reimbursed for the
commissions paid on the sales of Class B shares.
Each plan provides that a Fund may
finance activities which are
primarily intended to result in the sale of each Fund's
shares, including, but
not limited to, advertising, printing of prospectuses
and reports for other than
existing shareholders, preparation and distribution of
advertising material and
sales literature and payments to dealers and
shareholder servicing agents
including Tocqueville Securities L.P. ("Tocqueville
Securities") who enter into
agreements with each Fund or its distributor. The
Class B Plan also provides
that a Fund may finance any other expenses primarily
intended to result in the
sale of the Fund's Class B shares, including, without
limitation, payments to
brokers at the time of the sale of Class B shares, if
applicable, continuing
fees to each such broker, which fee shall begin to
accrue immediately after the
sale of such shares, and accruals for interest.
The Tocqueville Fund paid
$33,888 , $73,157 and $80,011 in distribution
expenses for Class A Shares for
the years ended October 31, 1993 , 1994, and
1995, respectively. The
Asia-Pacific Fund paid $401, $37, and $0 in
distribution expenses for Class A
Shares for the years ended October 31, 1993 , 1994, and
1995, respectively. The
Europe Fund and Small Cap Fund did not pay
distribution expenses for Class A
Shares during the period August 1, 1994 to October 31,
1994 and the fiscal year
ended Octover 31, 1995. The Tocqueville
Government Fund also did not pay
distribution expenses for Class A Shares for the
period from August 14, 1995 to
October 31, 1995. The Tocqueville Fund, Small Cap
Fund, Asia-Pacific Fund,
Europe Fund, and Government Fund did not pay
distribution expenses for Class B
Shares for the period from August 14, 1995 to October
31, 1995.
As of October 31, 1995 The Tocqueville
Fund, Small Cap Fund,
Asia-Pacific Fund, Europe Fund, and Government
Fund had $59,065, $62,300,
$58,702, $52,487, and $8,110, respectively, or
unreimbursed distribution
expenses for Class A Shares and $0, $0, $0, $0,
and $0, respectively of
unreimbursed distribution expenses for Class B shares.
In approving the Plans in accordance with
the requirements of Rule
12b-1 under the 1940 Act, the Trustees (including
the Qualified Trustees)
considered various factors and determined that there is
a reasonable likelihood
that each Plan will benefit its Fund and its
shareholders. Each Plan will
continue in effect from year to year if specifically
approved annually (a) by
the majority of such Fund's outstanding voting
shares or by the Board of
Trustees and (b) by the vote of a majority of the
Qualified Trustees. While the
Plans remain in effect, each Fund's Principal
Financial Officer shall prepare
and furnish to the Board of Trustees a written report
setting forth the amounts
spent by each Fund under the Plan and the purposes for
which such expenditures
were made. The Plans may not be amended to increase
materially the amount to be
spent for distribution without shareholder approval
and all material amendments
to each of the Plans must be approved by the Board
of Trustees and by the
Qualified Trustees cast in person at a meeting
called specifically for that
purpose. While the Plans are in effect, the
selection and nomination of the
Qualified Trustees shall be made by those Qualified
Trustees then in office.
ADMINISTRATIVE SERVICES PLAN
Tocqueville Securities supervises
administration of the Fund pursuant to
an Administrative Services Agreement with the Fund.
Under the Administrative
Services Agreement, Tocqueville Securities supervises
the administration of all
aspects of the Fund's operations, including the
Fund's receipt of services for
which the Fund is obligated to pay, provides the
Fund with general office
facilities and provides, at the Fund's expense,
the services of persons
necessary to perform such supervisory, administrative
and clerical functions as
are
-12-
<PAGE>
needed to effectively operate the Fund. Those
persons, as well as certain
employees and Trustees of the Fund, may be directors,
officers or employees of
(and persons providing services to the Fund may
include) Tocqueville Securities
and its affiliates. For these services and facilities,
Tocqueville Securities
receives with respect to the Fund a fee computed and
paid monthly at an annual
rate of 0.15% of the average daily net assets of the
Fund.
PORTFOLIO TRANSACTIONS AND
BROKERAGE
Subject to the supervision of the Board of
Trustees, decisions to buy
and sell securities for each Fund are made by the
Investment Advisor. The
Investment Advisor is authorized to allocate the
orders placed by it on behalf
of a Fund to such unaffiliated brokers who also
provide research or statistical
material, or other services to the Fund or the
Investment Advisor for the Fund's
use. Such allocation shall be in such amounts and
proportions as the Investment
Advisor shall determine and the Investment
Advisor will report on said
allocations regularly to the Board of Trustees
indicating the unaffiliated
brokers to whom such allocations have been made and
the basis therefor. In
addition, the Investment Advisor may consider sales
of shares of each Fund and
of any other funds advised or managed by the
Investment Advisor as a factor in
the selection of unaffiliated brokers to execute
portfolio transactions for each
Fund, subject to the requirements of best execution.
In selecting a broker to execute each
particular transaction, the
Investment Advisor will take the following into
consideration: the best net
price available; the reliability, integrity and
financial condition of the
broker; the size and difficulty in executing the
order; and, the value of the
expected contribution of the broker to the investment
performance of the Funds
on a continuing basis. Accordingly, the cost of the
brokerage commissions to a
Fund in any transaction may be greater than that
available from other brokers if
the difference is reasonably justified by other
aspects of the portfolio
execution services offered. Subject to such policies
and procedures as the Board
of Trustees may determine, the Investment Advisor
shall not be deemed to have
acted unlawfully or to have breached any duty
solely by reason of its having
caused a Fund to pay an unaffiliated broker that
provides research services to
the Investment Advisor for each Fund's use an amount of
commission for effecting
a portfolio investment transaction in excess of the
amount of commission another
broker would have charged for effecting the
transaction, if the Investment
Advisor determines in good faith that such amount of
commission was reasonable
in relation to the value of the research service
provided by such broker viewed
in terms of either that particular transaction of
the Investment Advisor's
ongoing responsibilities with respect to the Funds.
For the fiscal year ended
October 31, 1994, The Tocqueville Fund, Small Cap Fund,
Asia-Pacific Fund, and
Europe Fund paid total brokerage commissions on
portfolio transactions in the
amount of $84,586, $25,057, $83,423 and $1,116,
respectively, and for the fiscal
year ended October 31, 1995, The Tocqueville Fund,
Small Cap Fund, Asia-Pacific
Fund, Europe Fund, and Government Fund paid total
brokerage commissions on
portfolio transactions in the amount of $71,728,
$71,128, $26,286, $39,142, and
$7,913, respectively.
ALLOCATION OF INVESTMENTS
The Investment Advisor has other advisory
clients which include
individuals, trusts, pension and profit sharing
funds, some of which have
similar investment objectives to the Funds. As such,
there will be times when
the Investment Advisor may recommend purchases
and/or sales of the same
portfolio securities for each Fund and its other
clients. In such circumstances,
it will be the policy of the Investment Advisor to
allocate purchases and sales
among the Funds and its other clients in a manner which
the Investment Advisor
deems equitable, taking into consideration such
factors as size of account,
concentration of holdings, investment objectives, tax
status, cash availability,
purchase cost, holding period and other pertinent
factors relative to each
account. Simultaneous transactions may have an adverse
effect upon the price or
volume of a security purchased by each Fund.
-13
<PAGE>
COMPUTATION OF NET ASSET VALUE
Each Fund will determine the net asset value
of its shares once daily
as of the close of trading on the New York Stock
Exchange on each day that the
Exchange is open for business. It is expected that
the Exchange will be closed
on Saturdays and Sundays and on New Year's Day,
President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day.
Each Fund may make or cause to be made a more frequent
determination of the net
asset value and offering price, which determination
shall reasonably reflect any
material changes in the value of securities and other
assets held by a Fund from
the immediately preceding determination of net asset
value. The net asset value
is determined by dividing the market value of a
Fund's investments as of the
close of trading plus any cash or other assets
(including dividends receivable
and accrued interest) less all liabilities (including
accrued expenses) by the
number of the Fund's shares outstanding. Securities
traded on the New York Stock
Exchange or the American Stock Exchange will be
valued at the last sale price,
or if no sale, at the mean between the latest bid and
asked price. Securities
traded in any other U.S. or foreign market shall
be valued in a manner as
similar as possible to the above, or if not so
traded, on the basis of the
latest available price. Securities sold short
"against the box" will be valued
at market as determined above; however, in
instances where a Fund has sold
securities short against a long position in the
issuer's convertible securities,
for the purpose of valuation, the securities in the
short position will be
valued at the "asked" price rather than the mean of
the last "bid" and "asked"
prices. Investments in gold bullion will be valued
at their respective fair
market values determined on the basis of the mean
between the last current bid
and asked prices based on dealer or exchanges
quotations. Where there are no
readily available quotations for securities they will
be valued at a fair value
as determined by the Board of Trustees acting in good
faith.
PURCHASE AND REDEMPTION OF
SHARES
A complete description of the manner by a
which a Fund's shares may
be purchased and redeemed, including discussions
concerning the front-end sales
load on Class A shares and contingent deferred sales
charge on Class B shares,
appears in the Prospectus under the headings
"Purchase of Shares" and
"Redemption of Shares" respectively.
TAX MATTERS
The following is only a summary of
certain additional tax
considerations generally affecting each Fund and its
shareholders that are not
described in the Prospectus. No attempt is made
to present a detailed
explanation of the tax treatment of each Fund or
its shareholders, and the
discussions here and in the Prospectus are not
intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
Each Fund has elected to be taxed as a
regulated investment company
under Subchapter M of the Internal Revenue Code of
1986, as amended (the
"Code"). As a regulated investment company, a Fund
is not subject to federal
income tax on the portion of its net investment income
(i.e., taxable interest,
dividends and other taxable ordinary income, net of
expenses) and capital gain
net income (i.e., the excess of capital gains over
capital losses) that it
distributes to shareholders, provided that it
distributes at least 90% of its
investment company taxable income (i.e., net investment
income and the excess of
net short-term capital gain over net long-term
capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies
certain other requirements
of the Code that are described below. Distributions
by a Fund made during the
taxable year or, under specified circumstances,
within twelve months after the
close of the taxable year, will be considered
distributions of income and gains
of the taxable year and can therefore satisfy the
Distribution Requirement.
-14-
<PAGE>
In addition to satisfying the Distribution
Requirement, a regulated
investment company must: (1) derive at least 90% of
its gross income from
dividends, interest, certain payments with respect to
securities loans, gains
from the sale or other disposition of stock or
securities or foreign currencies
(to the extent such currency gains are directly
related to the regulated
investment company's principal business of investing in
stock or securities) and
other income (including but not limited to gains
from options, futures or
forward contracts) derived with respect to its
business of investing in such
stock, securities or currencies (the "Income
Requirement"); and (2) derive less
than 30% of its gross income (exclusive of certain
gains on designated hedging
transactions that are offset by realized or
unrealized losses on offsetting
positions) from the sale or other disposition of
stock, securities or foreign
currencies (or options, futures or forward contracts
thereon) held for less than
three months (the "Short-Short Gain Test"). However,
foreign currency gains,
including those derived from options, futures and
forwards, will not in any
event be characterized as Short-Short Gain if they
are directly related to the
regulated investment company's investments in stock or
securities (or options or
futures thereon). Because of the Short-Short Gain Test,
a Fund may have to limit
the sale of appreciated securities that it has held
for less than three months.
However, the Short-Short Gain Test will not prevent
a Fund from disposing of
investments at a loss, since the recognition of a loss
before the expiration of
the three-month holding period is disregarded for
this purpose. Interest
(including original issue discount) received by a
Fund at maturity or upon the
disposition of a security held for less than three
months will not be treated as
gross income derived from the sale or other
disposition of such security within
the meaning of the Short-Short Gain Test. However,
income that is attributable
to realized market appreciation will be treated as
gross income from the sale or
other disposition of securities for this purpose.
In general, gain or loss recognized by a
Fund on the disposition of
an asset will be a capital gain or loss. However,
gain recognized on the
disposition of a debt obligation purchased by a
Fund at a market discount
(generally, at a price less than its principal
amount) will be treated as
ordinary income to the extent of the portion of the
market discount which
accrued during the period of time the Fund held
the debt obligation. In
addition, under the rules of Code Section 988, gain
or loss recognized on the
disposition of a debt obligation denominated in a
foreign currency or an option
with respect thereto (but only to the extent
attributable to changes in foreign
currency exchange rates), and gain or loss
recognized on the disposition of a
foreign currency forward contract, futures contract,
option or similar financial
instrument, or of foreign currency itself, except
for regulated futures
contracts or non-equity options subject to Code
Section 1256 (unless a Fund
elects otherwise), will generally be treated as
ordinary income or loss.
In general, for purposes of determining
whether capital gain or loss
recognized by the Asia-Pacific Fund or the Europe Fund
on the disposition of an
asset is long-term or short-term, the holding
period of the asset may be
affected if (1) the asset is used to close a "short
sale" (which includes for
certain purposes the acquisition of a put option) or is
substantially identical
to another asset so used, (2) the asset is otherwise
held by the Fund as part of
a "straddle" (which term generally excludes a situation
where the asset is stock
and the Fund grants a qualified covered call option
(which, among other things,
must not be deep-in-the-money) with respect thereto)
or (3) the asset is stock
and the Fund grants an in-the-money qualified covered
call option with respect
thereto. However, for purposes of the Short-Short Gain
Test, the holding period
of the asset disposed of may be reduced only in the
case of clause (1) above. In
addition, the Asia-Pacific Fund or the Europe Fund may
be required to defer the
recognition of a loss on the disposition of an asset
held as part of a straddle
to the extent of any unrecognized gain on the
offsetting position.
Any gain recognized by the Asia-Pacific
Fund or the Europe Fund on
the lapse of, or any gain or loss recognized by the
Asia-Pacific Fund or the
Europe Fund from a closing transaction with respect to,
an option written by the
Fund will be treated as a short-term capital gain or
loss. For purposes of the
Short-Short Gain Test, the holding period of an
option written by a Fund will
commence on the date it is written and end on the
date it lapses or the date a
closing transaction is entered into. Accordingly, a
Fund may be limited in its
ability to write options which expire within three
months and to enter into
closing transactions at a gain within three months of
the writing of options.
Transactions that may be engaged in by the
Asia-Pacific Fund and the
Europe Fund (such as regulated futures contracts,
certain foreign currency
contracts, and options on stock indexes and futures
-15-
<PAGE>
contracts) will be subject to special tax treatment as
"Section 1256 contracts."
Section 1256 contracts are treated as if they are
sold for their fair market
value on the last business day of the taxable year,
even though a taxpayer's
obligations (or rights) under such contracts have not
terminated (by delivery,
exercise, entering into a closing transaction or
otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-
end deemed disposition of
Section 1256 contracts is taken into account for the
taxable year together with
any other gain or loss that was previously recognized
upon the termination of
Section 1256 contracts during that taxable year. Any
capital gain or loss for
the taxable year with respect to Section 1256
contracts (including any capital
gain or loss arising as a consequence of the year-
end deemed sale of such
contracts) is generally treated as 60% long-term
capital gain or loss and 40%
short-term capital gain or loss. A Fund, however,
may elect not to have this
special tax treatment apply to Section 1256 contracts
that are part of a "mixed
straddle" with other investments of the Fund that
are not Section 1256
contracts. The IRS has held in several private rulings
(and Treasury Regulations
now provide) that gains arising from Section 1256
contracts will be treated for
purposes of the Short-Short Gain Test as being derived
from securities held for
not less than three months if the gains arise as a
result of a constructive sale
under Code Section 1256.
The Asia-Pacific Fund and the Europe Fund
may purchase securities of
certain foreign investment funds or trusts which
constitute passive foreign
investment companies ("PFICs") for federal income
tax purposes. If a Fund
invests in a PFIC, it may elect to treat the PFIC as a
qualifying electing fund
(a "QEF") in which event the Fund will each year have
ordinary income equal to
its pro rata share of the PFIC's ordinary earnings
for the year and long-term
capital gain equal to its pro rata share of the PFIC's
net capital gain for the
year, regardless of whether the Fund receives
distributions of any such ordinary
earning or capital gain from the PFIC. If the Fund
does not (because it is
unable to, chooses not to or otherwise) elect to
treat the PFIC as a QEF, then
in general (1) any gain recognized by the Fund upon
sale or other disposition of
its interest in the PFIC or any excess distribution
received by the Fund from
the PFIC will be allocated ratably over the Fund's
holding period of its
interest in the PFIC, (2) the portion of such gain or
excess distribution so
allocated to the year in which the gain is recognized
or the excess distribution
is received shall be included in the Fund's gross
income for such year as
ordinary income (and the distribution of such
portion by the Fund to
shareholders will be taxable as an ordinary income
dividend, but such portion
will not be subject to tax at the Fund level), (3) the
Fund shall be liable for
tax on the portions of such gain or excess
distribution so allocated to prior
years in an amount equal to, for each such prior year,
(i) the amount of gain or
excess distribution allocated to such prior year
multiplied by the highest tax
rate (individual or corporate) in effect for such
prior year plus (ii) interest
on the amount determined under clause (i) for the
period from the due date for
filing a return for such prior year until the date
for filing a return for the
year in which the gain is recognized or the excess
distribution is received at
the rates and methods applicable to underpayments of
tax for such period, and
(4) the distribution by the Fund to shareholders of the
portions of such gain or
excess distribution so allocated to prior years (net
of the tax payable by the
Fund thereon) will again be taxable to the
shareholders as an ordinary income
dividend.
Under recently proposed Treasury
Regulations the Asia-Pacific Fund
and the Europe Fund can elect to recognize as gain
the excess, as of the last
day of its taxable year, of the fair market value of
each share of PFIC stock
over the Fund's adjusted tax basis in that share
("mark to market gain"). Such
mark to market gain will be included by the Fund as
ordinary income, such gain
will not be subject to the Short-Short Gain Test, and
the Fund's holding period
with respect to such PFIC stock commences on the
first day of the next taxable
year. If a Fund makes such election in the first
taxable year it holds PFIC
stock, the Fund will include ordinary income from
any mark to market gain, if
any, and will not incur the tax described in the
previous paragraph.
Treasury Regulations permit a regulated
investment company, in
determining its investment company taxable income
and net capital gain (i.e.,
the excess of net long-term capital gain over net
short-term capital loss) for
any taxable year, to elect (unless it has made a
taxable year election for
excise tax purposes as discussed below) to treat
all or any part of any net
capital loss, any net long-term capital loss or any
net foreign currency loss
incurred after October 31 as if it had been incurred in
the succeeding year.
In addition to satisfying the requirements
described above, each Fund
must satisfy an asset diversification test in order
to qualify as a regulated
investment company. Under this test, at the close of
each
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<PAGE>
quarter of a Fund's taxable year, at least 50% of the
value of the Fund's assets
must consist of cash and cash items, U.S. Government
securities, securities of
other regulated investment companies, and
securities of other issuers (as to
which the Fund has not invested more than 5% of the
value of the Fund's total
assets in securities of such issuer and as to which
the Fund does not hold more
than 10% of the outstanding voting securities of such
issuer), and no more than
25% of the value of its total assets may be invested
in the securities of any
one issuer (other than U.S. Government securities
and securities of other
regulated investment companies), or in two or more
issuers which the Fund
controls and which are engaged in the same or
similar trades or businesses.
Generally, an option (call or put) with respect to a
security is treated as
issued by the issuer of the security not the issuer of
the option.
If for any taxable year a Fund does not
qualify as a regulated
investment company, all of its taxable income
(including its net capital gain)
will be subject to tax at regular corporate rates
without any deduction for
distributions to shareholders, and such
distributions will be taxable to the
shareholders as ordinary dividends to the extent of
the Fund's current and
accumulated earnings and profits. Such distributions
generally will be eligible
for the dividends-received deduction in the case of
corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed
on a regulated investment
company that fails to distribute in each calendar year
an amount equal to 98% of
ordinary taxable income for the calendar year and 98%
of capital gain net income
for the one-year period ended on October 31 of such
calendar year (or, at the
election of a regulated investment company having a
taxable year ending November
30 or December 31, for its taxable year (a "taxable
year election")). The
balance of such income must be distributed during the
next calendar year. For
the foregoing purposes, a regulated investment
company is treated as having
distributed any amount on which it is subject to income
tax for any taxable year
ending in such calendar year.
For purposes of the excise tax, a regulated
investment company shall:
(1) reduce its capital gain net income (but not below
its net capital gain) by
the amount of any net ordinary loss for the calendar
year; and (2) exclude
foreign currency gains and losses incurred after
October 31 of any year (or
after the end of its taxable year if it has made a
taxable year election) in
determining the amount of ordinary taxable income for
the current calendar year
(and, instead, include such gains and losses in
determining ordinary taxable
income for the succeeding calendar year).
Each Fund intends to make sufficient
distributions or deemed
distributions of its ordinary taxable income and
capital gain net income prior
to the end of each calendar year to avoid liability for
the excise tax. However,
investors should note that a Fund may in certain
circumstances be required to
liquidate portfolio investments to make sufficient
distributions to avoid excise
tax liability.
Fund Distributions
Each Fund anticipates distributing
substantially all of its
investment company taxable income for each taxable
year. Such distributions will
be taxable to shareholders as ordinary income and
treated as dividends for
federal income tax purposes. Such dividends paid by the
Tocqueville Fund and the
Small Cap Fund will qualify for the 70%
dividends-received deduction for
corporate shareholders only to the extent discussed
below. Such dividends paid
by the Asia-Pacific Fund and the Europe Fund
generally should not qualify for
the 70% dividends-received deduction for corporate
shareholders.
A Fund may either retain or distribute
to shareholders its net
capital gain for each taxable year. Each Fund
currently intends to distribute
any such amounts. If net capital gain is distributed
and designated as a capital
gain dividend, it will be taxable to shareholders as
long-term capital gain,
regardless of the length of time the shareholder has
held his shares or whether
such gain was recognized by a Fund prior to the date
on which the shareholder
acquired his shares. The Code provides, however, that
under certain conditions
only
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<PAGE>
50% of the capital gain recognized upon a Fund's
disposition of domestic "small
business" stock will be subject to tax.
Conversely, if a Fund elects to retain its
net capital gain, the Fund
will be taxed thereon (except to the extent of any
available capital loss
carryovers) at the 35% corporate tax rate. If a Fund
elects to retain its net
capital gain, it is expected that the Fund also will
elect to have shareholders
of record on the last day of its taxable year
treated as if each received a
distribution of his pro rata share of such gain,
with the result that each
shareholder will be required to report his pro rata
share of such gain on his
tax return as long-term capital gain, will receive a
refundable tax credit for
his pro rata share of tax paid by the Fund on the gain,
and will increase the
tax basis for his shares by an amount equal to the
deemed distribution less the
tax credit.
Ordinary income dividends paid by the
Tocqueville Fund and the Small
Cap Fund with respect to a taxable year will
qualify for the 70%
dividends-received deduction generally available to
corporations (other than
corporations, such as S corporations, which are not
eligible for the deduction
because of their special characteristics and other
than for purposes of special
taxes such as the accumulated earnings tax and the
personal holding company tax)
to the extent of the amount of qualifying dividends
received by the Fund from
domestic corporations for the taxable year. A dividend
received by the Fund will
not be treated as a qualifying dividend (1) if it has
been received with respect
to any share of stock that the Fund has held for less
than 46 days (91 days in
the case of certain preferred stock), excluding for
this purpose under the rules
of Code Section 246(c)(3) and (4): (i) any day more
than 45 days (or 90 days in
the case of certain preferred stock) after the date
on which the stock becomes
ex-dividend and (ii) any period during which the Fund
has an option to sell, is
under a contractual obligation to sell, has made and
not closed a short sale of,
is the grantor of a deep-in-themoney or otherwise
nonqualified option to buy, or
has otherwise diminished its risk of loss by
holding other positions with
respect to, such (or substantially identical) stock;
(2) to the extent that the
Fund is under an obligation (pursuant to a short
sale or otherwise) to make
related payments with respect to positions in
substantially similar or related
property; or (3) to the extent the stock on which
the dividend is paid is
treated as debt-financed under the rules of Code
Section 246A. Moreover, the
dividends-received deduction for a corporate
shareholder may be disallowed or
reduced (1) if the corporate shareholder fails to
satisfy the foregoing
requirements with respect to its shares of the Fund
or (2) by application of
Code Section 246(b) which in general limits the
dividends-received deduction to
70% of the shareholder's taxable income (determined
without regard to the
dividends-received deduction and certain other items).
Since an insignificant
portion of the Asia-Pacific Fund and the Europe Fund
will be invested in stock
of domestic corporations, the ordinary dividends
distributed by the Fund will
not qualify for the dividends-received deduction for
corporate shareholders.
Alternative minimum tax ("AMT") is imposed
in addition to, but only
to the extent it exceeds, the regular tax and is
computed at a maximum marginal
rate of 28% for noncorporate taxpayers and 20% for
corporate taxpayers on the
excess of the taxpayer's alternative minimum taxable
income ("AMTI") over an
exemption amount. In addition, under the
Superfund Amendments and
Reauthorization Act of 1986, a tax is imposed for
taxable years beginning after
1986 and before 1996 at the rate of 0.12% on the
excess of a corporate
taxpayer's AMTI (determined without regard to the
deduction for this tax and the
AMT net operating loss deduction) over $2 million. For
purposes of the corporate
AMT and the environmental superfund tax (which are
discussed above), the
corporate dividends-received deduction is not itself
an item of tax preference
that must be added back to taxable income or is
otherwise disallowed in
determining a corporation's AMTI. However, corporate
shareholders will generally
be required to take the full amount of any dividend
received from the Fund into
account (without a dividends-received deduction) in
determining its adjusted
current earnings, which are used in computing an
additional corporate preference
item (i.e., 75% of the excess of a corporate
taxpayer's adjusted current
earnings over its AMTI (determined without regard to
this item and the AMT net
operating loss deduction)) includable in AMTI.
Investment income that may be received by
the Asia-Pacific Fund and
the Europe Fund from sources within foreign countries
may be subject to foreign
taxes withheld at the source. The United States has
entered into tax treaties
with many foreign countries which entitle a Fund
to a reduced rate of, or
exemption from, taxes
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<PAGE>
on such income. It is impossible to determine the
effective rate of foreign tax
in advance since the amount of each Fund's assets to
be invested in various
countries is not known. If more than 50% of the value
of a Fund's total assets
at the close of its taxable year consist of the stock
or securities of foreign
corporations, a Fund may elect to "pass through" to
the Fund's shareholders the
amount of foreign taxes paid by the Fund. If a Fund so
elects, each shareholder
would be required to include in gross income, even
though not actually received,
his pro rata share of the foreign taxes paid by the
Fund, but would be treated
as having paid his pro rata share of such foreign
taxes and would therefore be
allowed to either deduct such amount in computing
taxable income or use such
amount (subject to various Code limitations) as a
foreign tax credit against
federal income tax (but not both). For purposes of
the foreign tax credit
limitation rules of the Code, each shareholder
would treat as foreign source
income his pro rata share of such foreign taxes plus
the portion of dividends
received from a Fund representing income derived
from foreign sources. No
deduction for foreign taxes could be claimed by an
individual shareholder who
does not itemize deductions. Each shareholder should
consult his own tax adviser
regarding the potential application of foreign tax
credits.
Distributions by a Fund that do not
constitute ordinary income
dividends or capital gain dividends will be treated
as a return of capital to
the extent of (and in reduction of) the shareholder's
tax basis in his shares;
any excess will be treated as gain from the sale of
his shares, as discussed
below.
Distributions by a Fund will be treated in
the manner described above
regardless of whether such distributions are paid
in cash or reinvested in
additional shares of the Fund (or of another fund).
Shareholders receiving a
distribution in the form of additional shares will
be treated as receiving a
distribution in an amount equal to the fair market
value of the shares received,
determined as of the reinvestment date. In addition,
if the net asset value at
the time a shareholder purchases shares of a Fund
reflects undistributed net
investment income or recognized capital gain net
income, or unrealized
appreciation in the value of the assets of the
Fund, distributions of such
amounts will be taxable to the shareholder in the
manner described above,
although such distributions economically constitute a
return of capital to the
shareholder.
Ordinarily, shareholders are required to
take distributions by a Fund
into account in the year in which the distributions are
made. However, dividends
declared in October, November or December of
any year and payable to
shareholders of record on a specified date in such a
month will be deemed to
have been received by the shareholders (and made by
a Fund) on December 31 of
such calendar year if such dividends are actually
paid in January of the
following year. Shareholders will be advised
annually as to the U.S. federal
income tax consequences of distributions made (or
deemed made) during the year.
Each Fund will be required in certain cases
to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends
and capital gain dividends,
and the proceeds of redemption of shares, paid to any
shareholder (1) who has
provided either an incorrect tax identification number
or no number at all, (2)
who is subject to backup withholding by the IRS for
failure to report the
receipt of interest or dividend income properly,
or (3) who has failed to
certify to the Fund that it is not subject to backup
withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss
on the sale or redemption
of shares of a Fund in an amount equal to the
difference between the proceeds of
the sale or redemption and the shareholder's adjusted
tax basis in the shares.
All or a portion of any loss so recognized may be
disallowed if the shareholder
purchases other shares of a Fund within 30 days
before or after the sale or
redemption. In general, any gain or loss arising
from (or treated as arising
from) the sale or redemption of shares of a Fund will
be considered capital gain
or loss and will be long-term capital gain or loss if
the shares were held for
longer than one year. However, any capital loss
arising from the sale or
redemption of shares held for six months or less will
be treated as a long-term
capital loss to the extent of the amount of capital
gain dividends received on
such shares. For this purpose, the special holding
period rules of Code Section
246(c)(3) and (4) (discussed above in connection
with the dividends-received
deduction for corporations) generally will apply in
determining the holding
period of
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<PAGE>
shares. Long-term capital gains of noncorporate
taxpayers are currently taxed at
a maximum rate 11.6% lower than the maximum rate
applicable to ordinary income.
Capital losses in any year are deductible only to
the extent of capital gains
plus, in the case of a noncorporate taxpayer, $3,000 of
ordinary income.
If a shareholder (1) incurs a sales load in
acquiring Class A shares
of a Fund, (2) disposes of such shares less than 91
days after they are acquired
and (3) subsequently acquires shares of the Fund or
another fund at a reduced
sales load pursuant to a right to reinvest at such
reduced sales load acquired
in connection with the acquisition of the shares
disposed of, then the sales
load on the shares disposed of (to the extent of the
reduction in the sales load
on the shares subsequently acquired) shall not be
taken into account in
determining gain or loss on the shares disposed of
but shall be treated as
incurred on the acquisition of the shares subsequently
acquired.
Foreign Shareholders
Taxation of a shareholder who, as to
the United States, is a
nonresident alien individual, foreign trust or estate,
foreign corporation, or
foreign partnership ("foreign shareholder"), depends
on whether the income from
a Fund is "effectively connected" with a U.S. trade
or business carried on by
such shareholder.
If the income from a Fund is not
effectively connected with a U.S.
trade or business carried on by a foreign shareholder,
ordinary income dividends
paid to a foreign shareholder will be subject to U.S.
withholding tax at the
rate of 30% (or lower treaty rate) upon the gross
amount of the dividend.
Furthermore, such a foreign shareholder may be subject
to U.S. withholding tax
at the rate of 30% (or lower treaty rate) on the gross
income resulting from the
Asia-Pacific Fund's or the Europe Fund's election to
treat any foreign taxes
paid by it as paid by its shareholders, but may not
be allowed a deduction
against this gross income or a credit against this U.S.
withholding tax for the
foreign shareholder's pro rata share of such foreign
taxes which it is treated
as having paid. Such a foreign shareholder would
generally be exempt from U.S.
federal income tax on gains realized on the sale of
shares of a Fund, capital
gain dividends and amounts retained by the Fund
that are designated as
undistributed capital gains.
If the income from a Fund is effectively
connected with a U.S. trade
or business carried on by a foreign shareholder, then
ordinary income dividends,
capital gain dividends, and any gains realized upon
the sale of shares of the
Fund will be subject to U.S. federal income tax at the
rates applicable to U.S.
citizens or domestic corporations.
In the case of foreign noncorporate
shareholders, a Fund may be
required to withhold U.S. federal income tax at a rate
of 31% on distributions
that are otherwise exempt from withholding tax (or
taxable at a reduced treaty
rate) unless such shareholders furnish the Fund with
proper notification of its
foreign status.
The tax consequences to a foreign
shareholder entitled to claim the
benefits of an applicable tax treaty may be
different from those described
herein. Foreign shareholders are urged to consult
their own tax advisers with
respect to the particular tax consequences to them of
an investment in a Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of
U.S. federal income tax
consequences is based on the Code and the Treasury
Regulations issued thereunder
as in effect on the date of this Statement of
Additional Information. Future
legislative or administrative changes or court
decisions may significantly
change the conclusions expressed herein, and any such
changes or decisions may
have a retroactive effect with respect to the
transactions contemplated herein.
Rules of state and local taxation of
ordinary income dividends and
capital gain dividends from regulated investment
companies often differ from the
rules for U.S. federal income taxation described above.
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<PAGE>
Shareholders are urged to consult their tax advisers
as to the consequences of
these and other state and local tax rules affecting
investment in a Fund.
PERFORMANCE CALCULATION
For purposes of quoting and comparing the
performance of each Fund to
that of other mutual funds and to other
relevant market indices in
advertisements or in reports to shareholders,
performance may be stated in terms
of total return. Under rules promulgated by the
Securities and Exchange
Commission ("SEC"), a fund's advertising performance
must include total return
quotations calculated according to the following
formula:
P(1 + T)^n = ERV
Where: P = a hypothetical initial
payment of $1,000
T = average annual total
return n = number of years
(1, 5 or 10) ERV = ending
redeemable value of a hypothetical $1,000
payment, made at the beginning
of the 1,5 or 10 year
period, at the end of such
period (or fractional
portion thereof.)
Under the foregoing formula, the time
periods used in advertising
will be based on rolling calendar quarters, updated to
the last day of the most
recent quarter prior to submission of the advertising
for publication, and will
cover 1, 5 and 10 year periods of a Fund's existence
or such shorter period
dating from the effectiveness of the Fund's
Registration Statement. In
calculating the ending redeemable value, all
dividends and distributions by a
Fund are assumed to have been reinvested at net asset
value as described in the
Prospectus on the reinvestment dates during the period.
Total return, or "T" in
the formula above, is computed by finding the average
annual compounded rates of
return over the 1, 5 and 10 year periods (or
fractional portion thereof) that
would equate the initial amount invested to the ending
redeemable value. Any
recurring account charges that might in the future be
imposed by a Fund would be
included at that time.
In addition to the total return quotations
discussed above, a Fund
may advertise its yield based on a 30-day (or one
month) period ended on the
date of the most recent balance sheet included in
the Fund's Post-Effective
Amendment to its Registration Statement, computed by
dividing the net investment
income per share earned during the period by the
maximum offering price per
share on the last day of the period, according to the
following formula:
YIELD = 2[( a - b + 1)^6 - 1]
-----
cd
Where: a = dividends and interest earned during
the period.
b = expenses accrued for the period (net
of reimbursements).
c = the average daily number of shares
outstanding during the
period that were entitled to receive
dividends.
d = the maximum offering price per
share on the last day of the
period.
Under this formula, interest earned on debt
obligations for purposes
of "all above, is calculated by (1) computing the
yield to maturity of each
obligation held by the Fund based on the market
value of the obligation
(including actual accrued interest) at the close of
business on the last day of
each month, or, with respect to obligations
purchased during the month, the
purchase price (plus actual accrued interest), (2)
dividing that figure by 360
and multiplying the quotient by the market value of
the obligation (including
actual accrued interest as referred to above) to
determine the interest income
on the obligation for each day of the subsequent month
that the obligation is in
the Fund's portfolio (assuming a month of 30 days)
and (3) computing the total
of the interest earned on all debt obligations and all
dividends accrued on all
equity securities during the 30-day or one month
period. In computing dividends
accrued, dividend income is recognized by accruing
1/360 of the stated
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<PAGE>
dividend rate of a security each day that the
security is in the Fund's
portfolio. For purposes of "b" above, Rule 12b-1
expenses are included among the
expenses accrued for the period. Undeclared
earned income, computed in
accordance with generally accepted accounting
principles, may be subtracted from
the maximum offering price calculation required
pursuant to "d" above.
Any quotation of performance stated in
terms of yield will be given
no greater prominence than the information prescribed
under the SEC's rules. In
addition, all advertisements containing performance
data of any kind will
include a legend disclosing that such
performance data represents past
performance and that the investment return and
principal value of an investment
will fluctuate so that an investor's shares, when
redeemed, may be worth more or
less than their original cost.
Calculated pursuant to the SEC's formula
and assuming an ending
redeemable value of an initial $1,000 investment, The
Tocqueville Fund's Class A
total return for the 1 year, 5 year and since
inception periods ended October
31, 1995 was 16.01%, 15.89%, and 10.81%, respectively;
the Class A total return
for the Asia-Pacific Fund for the 1 year and since
inception periods ended
October 31, 1995 was -11.63% and 4.79; the total
return for the Europe Fund for
the 1 year and since inception periods ended
October 31, 1995 was 8.08% and
6.59%; the Class A total return for the Small Cap Fund
for the 1 year and since
inception periods ended October 31, 1995 was 19.22% and
17.12%; and the Class A
total return for the Government Fund for the since
inception period to October
31, 1995 was 0.968%. For the 30 day period ended on
the date of the most recent
balance sheet included in this registration
statement, the Government Fund's
yield was 3.46% for Class A shares and 3.07% for Class
B shares, respectively.
For the period from August 14, 1995 to October 31,
1995, the total return of the
Fund, Class B, was -4.56%, the total return of
the Tocqueville
Asia-Pacific Fund, Class B, was - 3.42%, the total
return of the Tocqueville
Europe Fund, Class B, was -1.10%, the total return of
the Tocqueville Small Cap
Value Fund, Class B, was -3,89%, and the total
return of the Tocqueville
Government Fund, Class B, was 1.14%.
GENERAL INFORMATION
ORGANIZATION AND DESCRIPTION OF SHARES OF THE TRUST
The Trust was organized as a Massachusetts
business trust under the
laws of The Commonwealth of Massachusetts. The
Trust's Declaration of Trust
filed September 17, 1986, permits the Trustees to
issue an unlimited number of
shares of beneficial interest with a par value of
$0.01 per share in the Trust
in an unlimited number of series of shares. The Trust
consists of five series,
The Tocqueville Fund, The Tocqueville Small Cap
Value Fund, The Tocqueville
Asia-Pacific Fund, The Tocqueville Europe Fund and
The Tocqueville Government
Fund. On August 19, 1991, the Declaration of Trust
was amended to change the
name of the Trust to "The Tocqueville Trust," and
on August 4 , 1995, the
Declaration of Trust was amended to permit the division
of a series into classes
of shares. Each share of beneficial interest has one
vote and shares equally in
dividends and distributions when and if declared by a
Fund and in the Fund's net
assets upon liquidation. All shares, when
issued, are fully paid and
nonassessable. There are no preemptive, conversion
or exchange rights. Fund
shares do not have cumulative voting rights and, as
such, holders of at least
50% of the shares voting for Trustees can elect all
Trustees and the remaining
shareholders would not be able to elect any Trustees.
The Board of Trustees may
classify or reclassify any unissued shares of the
Trust into shares of any
series by setting or changing in any one or more
respects, from time to time,
prior to the issuance of such shares, the
preference, conversion or other
rights, voting powers, restrictions, limitations
as to dividends, or
qualifications of such shares. Any such classification
or reclassification will
comply with the provisions of the 1940 Act.
Shareholders of each series as
created will vote as a series to change, among other
things, of a fundamental
policy of each Fund and to approve the Investment
Advisory Agreement and
Distribution Plan.
The Trust is not required to hold annual
meetings of shareholders but
will hold special meetings of shareholders when,
in the judgment of the
Trustees, it is necessary or desirable to submit
matters for a shareholder vote.
Shareholders have, under certain circumstances, the
right to communicate with
other shareholders in connection with requesting a
meeting of shareholders for
the purpose of removing one or more Trustees.
Shareholders also have, in certain
circumstances, the right to remove one or more
Trustees without a meeting. No
material amendment may be made to the Trust's
Declaration of Trust without the
affirmative vote of the holders of a majority of the
outstanding shares of each
series affected by the amendment.
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<PAGE>
Under Massachusetts law, shareholders of
a Massachusetts business
trust may, under certain circumstances, be held
personally liable as partners
for its obligations. However, the Trust's
Declaration of Trust contains an
express disclaimer of shareholder liability for acts or
obligations of the Trust
and provides for indemnification and reimbursement of
expenses out of the Trust
property for any shareholder held personally liable
for the obligations of the
Trust. The Trust's Declaration of Trust further
provides that obligations of the
Trust are not binding upon the Trustees individually
but only upon the property
of the Trust and that the Trustees will not be liable
for any action or failure
to act, errors of judgment or mistakes of fact or
law, but nothing in the
Declaration of Trust protects a Trustee against any
liability to which he would
otherwise be subject by reason of wilful
misfeasance, bad faith, gross
negligence, or reckless disregard of the duties
involved in the conduct of his
office.
PRINCIPAL HOLDERS
As February 1, 1996, the following
shareholders each beneficially owned
5% or more of a Fund's shares:
(1) The Tocqueville Europe Fund -
(2) The Tocqueville Asia-Pacific Fund -
(3) The Tocqueville Small Cap Value Fund -
;and
(4) The Tocqueville Government Fund -
The address of the above shareholders is c/o The
Tocqueville Trust, 1675
Broadway, New York, NY 10019.
REPORTS
Shareholders receive reports at least
semi-annually showing each
Fund's holdings and other information. In
addition, shareholders receive
financial statements examined by the Trust's
independent accountants.
FINANCIAL STATEMENTS
The Financial Statements for each Fund
for the fiscal year ended
October 31, 1995 are incorporated by reference
from the Annual Reports to
Shareholders dated October 31, 1995.
-23
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
-------------------------------------------------------
---------- ---------------
DEAR FELLOW SHAREHOLDERS:
In this, our first annual report to shareholders, we
would like to take this
opportunity to reiterate our investment philosophy for
the Tocqueville
Government Fund. As a firm, Tocqueville Asset
Management, the advisor to all of
the equity funds of the Tocqueville Trust, as well as
the Tocqueville
Government Fund, places a premium on capital
preservation. Over the long term,
we believe that capital preservation and enhancement
can best be achieved by
investing primarily in equities. For a wide variety of
reasons, however, we
recognize the need of our clients to have a fixed
income option. The
Tocqueville Government Fund was created to fill that
need.
The Tocqueville Government Fund is not a typical
fixed income fund. Despite
the explosive proliferation of sophisticated fixed
income investment vehicles,
including convertibles, straddles, derivatives,
leveraged long and short sales,
LYONS, TIGRS, CATS, etc., the Tocqueville Government
Fund has a simple, basic
portfolio strategy: Invest only in securities of the
U.S. Government or its
agencies, and only in short to intermediate term
maturities, without employing
leverage, derivatives, or options. We recognize that
these new highly complex
and risky investment vehicles have their place and
serve a purpose in the
investment universe. They do not, however, have a place
or serve a purpose in
the Tocqueville Government Fund. Our Fund's purpose is
to preserve capital
while generating an acceptable current return and to
seek modest capital
appreciation by extending maturities from the short to
intermediate term when
conditions warrant.
Historical empirical data support our view that from
the perspective of
principal risk, investors are inadequately compensated
over long periods of
time for owning long term bonds. For example, at this
writing a five year
Treasury note yields approximately 90% of the yield of
a thirty year bond. Yet,
the capital risk exposure of a five year note is only
one-third of the long
maturity. Our objective is income and capital
preservation, and with this as
our objective we see no need to assume the added risk
of long term bonds.
Ours is a plain vanilla approach in a Baskin Robbins
world of fixed income
funds. But we believe our clients are best served by
the conservative, risk
averse approach that we have taken. While we never
expect the Tocqueville
Government Fund to make the list of top performing
fixed income funds in any
given year, we are quite sure we will not appear on the
worst performing list.
And over the long haul we expect the Fund to attain its
goals, while many of
the high return/high risk funds favored by others will
not.
Since beginning operations on September 5, 1995, the
Tocqueville Government
Fund Class A shares generated an annualized return
during its first 56 days of
6.26%. Initially we were fully invested at a fairly
neutral duration of
approximately five years during a powerful continuation
of the rally in bonds
that persisted throughout 1995. (Our neutral duration
is five to seven years,
our cautious duration is one to three years, and our
bullish duration is nine
to twelve years.) More recently, we have adopted an
even more conservative
posture as current yield levels contain much less
attraction. The negative
returns posted by all bonds in 1994 keep us mindful
that principal
<PAGE>
-------------------------------------------------------
---------- --------------
exposure must be evaluated in the context of total
return. Despite a
substantive percentage of economists who are confident
of a continuation of the
rally to perhaps a 5% long term Treasury bond, we are
just as comfortable with
the case for bonds at 7% or higher.
OUTLOOK
Inflation remains low at around 3% and the outlook is
benign. Still inflation
has been approximately at these levels for the past
five years and the margin
for further substantial gains are slim in our view.
Meanwhile, with a very flat
yield curve, the incentive to extend maturities is
minimal. For both of these
reasons, even the intermediate term fixed income
markets harbor more risk than
is acceptable. Consequently, for the foreseeable
future, we intend to remain in
short term securities.
For 1996 we expect a subdued, yet mildly growing,
economy with inflation
within the bounds of acceptable tolerance. Our major
trading partners, Europe
and Japan, should continue their economic travails,
providing little stimulus
for export growth. Because of our relative ability to
respond and adapt, the
U.S. is emerging as the premier low cost producer in
the industrial world with
respect to labor costs, taxes, and reduced
socialization. The key question
regarding the Federal Reserve is not whether they will
lower rates, but rather
when and by how much. Equally as important is the
question of what rate
structure is priced into the market; for the
discontinuing function of the
market is the perception of the future. A two year
Treasury yield of 5.35%
implies a Fed Funds average of 4 5/8% over the next two
years, assuming a 75
basis point premium to Fed Funds which is the
historical norm. In fact, the Fed
Funds rate has just been lowered to 5 1/4%.
With so much further rate reduction already built
into the market, the margin
for disappointment exceeds the potential reward. There
remain substantial
problems, such as chronic deficits, a persistent
current account deficit in
trade balance, global surplus of dollars, potential
negative political
developments, such as probable casualties in Bosnia,
and more. While we expect
a continuation of moderately positive news, we do not
expect an attendant
appreciation of prices. It is reasonable to expect our
duration to be cautious
to neutral at this interest rate structure. If more
value should present itself
in the form of higher interest rates, our posture would
be re-evaluated.
Robert W. Kleinschmidt
Christopher P. Culp
Portfolio Managers
-------------------------------------------------------
---------- ---------------
This report is not authorized for distribution to
prospective investors
unless preceded or accompanied by a currently effective
prospectus of The
Tocqueville Trust.
2
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
SELECTED FINANCIAL INFORMATION
Period from August 14, 1995 to October
31, 1995
<TABLE>
<CAPTION>
PER SHARE OPERATING PERFORMANCE
(FOR A SHARE OUTSTANDING THROUGHOUT THE CLASS A
PERIOD) -------
<S> <C>
Net asset value, beginning of period...... $10.00
------
Income from investment operations:
Net investment income..................... 0.05(a)
Net realized and unrealized gain ......... 0.05
------
Total from investment operations.......... 0.10
------
Less distributions
Dividends from net investment income...... (0.05)
Distributions from net realized gains..... --
-----
Total distributions....................... (0.05)
------
Change in net asset value for the period.. 0.05
------
Net asset value, end of period............ $10.05
------
Total Return(b)........................... 6.26%*
Ratios/supplemental data
Net assets, end of period (000)........... $6,506
Ratio to average net assets of:
Expenses................................. 2.74%*(a)
Net investment income.................... 3.08%*(a)
Portfolio turnover rate................... 0.00%
<CAPTION>
CLASS B
-------
<S> <C>
Net asset value, beginning of period...... $ 9.97
------
Income from investment operations:
Net investment income..................... 0.04
Net realized and unrealized gain ......... 0.08
------
Total from investment operations.......... 0.12
Less distributions
Dividends from net investment income...... (0.04)
Distribution from net realized gains...... --
------
Total distributions....................... (0.04)
------
Net asset value, end of period............ $10.05
------
Total Return(c)........................... 8.42%*
Ratios/supplemental data
Net assets, end of period................. 201
Ratio to average net assets of:
Expenses................................. --
Net investment income.................... --
</TABLE>
--------
(a)Net of fees waived amounting to 0.77% of average net
assets for the period
ended October 31, 1995.
(b)Does not include maximum sales load of 4%.
(c)Does not include contingent deferred sales charge.
* Annualized.
3
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
INVESTMENTS AS OF OCTOBER 31,
1995
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
% of
Market Net
Par Value
Value Assets
---------
- ---------- ------
<S> <C>
<C> <C>
MORTGAGE RELATED - 34.70%
Federal Home Loan Mortgage Corp.
6.98%, 9/07/2000 $
750,000 $ 751,172 11.55%
6.98%, 9/13/2000
750,000 757,561 11.64%
6.38%, 10/24/2000
750,000 749,086 11.51%
----------
2,257,819
----------
U.S. TREASURY NOTES - 61.33%
5.50%, 4/15/2000
1,000,000 990,625 15.23%
5.875%, 6/30/2000
1,000,000 1,002,811 15.42%
5.75%, 10/31/2000
2,000,000 1,996,250 30.68%
----------
3,989,686
----------
SHORT-TERM INVESTMENTS - 1.13%
U.S. T-Bill, 5.285%, 3/21/96
75,000 73,440 1.13%
----------
TOTAL INVESTMENTS (COST $6,293,165) - 97.16%
6,320,945
OTHER ASSETS & LIABILITIES, NET - 2.84%
184,767
---------
TOTAL NET ASSETS - 100.00%
$6,505,712
----------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
STATEMENT OF ASSETS AND
LIABILITIES
October 31, 1995
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
<S>
<C>
ASSETS
Investments, at value (identified cost $6,293,165)
$6,320,945
Cash
3,646
Receivable for Fund shares sold
160,449
Interest receivable
38,600
Deferred organization expense
22,110
Other assets
4,861
----------
6,550,611
----------
LIABILITIES
Accrued investment adviser's fee
--
Accrued distribution fee
--
Accrued expenses
17,334
Payable for deferred organization expenses
27,565
---------
44,899
----------
NET ASSETS
$6,505,712
----------
At October 31, 1995 net assets consisted of:
Capital paid in
$6,478,762
Accumulated net realized loss
(830)
Net unrealized appreciation
27,780
----------
$6,505,712
----------
CLASS A
NET ASSET VALUE PER SHARE ($6,505,510/647,150 shares
outstanding) $ 10.05
----------
Maximum offering price ($10.05/96%)
$10.47
----------
CLASS B
NET ASSET VALUE PER SHARE AND MAXIMUM OFFERING PRICE
($202/20 shares outstanding)
$10.05
------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
STATEMENT OF OPERATIONS
Period from August 14, 1995 to October
31, 1995 ----------------------------------------------
------------------- ---------------
<TABLE>
<CAPTION>
<S>
<C>
INVESTMENT INCOME
Interest
$40,073
-------
EXPENSES
Investment adviser's fee (Note 2)
3,453
Custodian and fund accounting
8,400
Transfer agent and shareholder services
4,760
Audit
2,240
Legal
1,400
Distribution (Note 4)
Class A
1,727
Class B
--
Administration fee (Note 4)
928
Registration
672
Trustees' fee
280
Other
1,176
-------
Total expenses
25,036
Less: fees waived (Notes 2 and 4)
(6,108)
-------
NET EXPENSES
18,928
-------
NET INVESTMENT INCOME
21,145
-------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized (loss) on investments
(830)
Net unrealized appreciation of investments during the
period 27,780
-------
Net gain on investments
26,950
-------
Net increase in net assets resulting from operations
$48,095
-------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
STATEMENT OF CHANGES IN NET
ASSETS
Period from August 14, 1995 to October
31, 1995 ----------------------------------------------
------------------- ---------------
<TABLE>
<CAPTION>
<S>
<C> INCREASE (DECREASE) IN NET ASSETS
Operations
Net investment income
$ 21,145
Net realized loss
(830)
Net unrealized appreciation
27,780
----------
Net increase resulting from operations
48,095
Distributions to shareholders from net investment
income: Class A
(21,144)
Class B
(1)
Fund share transactions (Note 3)
Class A
6,478,561
Class B
201
----------
Net increase in net assets
6,505,712
NET ASSETS
Beginning of period
--
---------
End of period
$6,505,712
----------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
-------------------------------------------------------
---------- ---------------
Note 1
The Tocqueville Trust (the "Trust") was organized as
a Massachusetts business
trust registered under the Investment Company Act of
1940 as amended, as a
diversified, open-end management investment company.
The Trust consists of five
separate Funds: The Tocqueville Fund, The Tocqueville
Asia-Pacific Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville
Europe Fund and the
Tocqueville Government Fund (the "Funds"). The
following is a summary of
significant accounting principles followed by the Trust
in the preparation of
its financial statements.
-------------------------------------------------------
---------- ---------------
SECURITY VALUATION
Investments in securities, including foreign
securities, traded on an
exchange or quoted on the over-the-counter market are
valued at the last sale
price or, if no sale occurred during the day, at the
mean between closing bid
and asked prices, as last reported by a pricing service
approved by the
Trustees. When market quotations are not readily
available, or when restricted
securities or other assets are being valued, such
assets are valued at fair
value as determined in good faith by or under
procedures established by the
Trustees. Short-term investments are stated at cost
which, together with
accrued interest, approximates market value.
-------------------------------------------------------
---------- ---------------
FEDERAL INCOME TAX
It is the Trust's policy to comply with the
provisions of the Internal
Revenue Code ("Code") applicable to regulated
investment companies and to
distribute all of its taxable income to its
shareholders. It is also the
Trust's intention to distribute amounts sufficient to
avoid imposition of any
excise tax under Section 4982 of the Code. Therefore,
no federal income or
excise tax provision is required.
-------------------------------------------------------
---------- ---------------
DEFERRED ORGANIZATION EXPENSES
Expenses incurred in connection with the organization
of The Tocqueville
Government Fund (the "Fund") are being amortized on a
straight-line basis over
a five-year period from the Fund's commencement of
operations. In the event any
initial shares of The Tocqueville Government Fund are
redeemed during the
amortization period, the proceeds of redemption will be
reduced by the pro-rata
portion of any unamortized organization expenses in the
same proportion as the
number of shares redeemed bears to the number of
initial shares held at the
time of redemption.
-------------------------------------------------------
---------- ---------------
OTHER
Security transactions are accounted for on the trade
date, the date the order
to buy or sell is executed. Interest income is
recognized on the accrual basis
and market discount is accounted for using the
effective interest method. The
Trust uses the first-in, first-out method for
determining realized gain or loss
on investments sold for both financial reporting and
federal tax purposes.
Distributions to shareholders are recorded on the ex-
dividend date. Expenses
incurred by the Trust not specifically identified to a
Fund are allocated on a
basis relative to the size of each Fund's daily net
asset value.
8
<PAGE>
-------------------------------------------------------
---------- ---------------
Note 2
Tocqueville Asset Management L.P. ("Tocqueville"), is
the investment adviser
to the Trust under an Investment Advisory Agreement
approved by shareholders on
February 26, 1990. For its services, Tocqueville
receives a fee from The
Tocqueville Government Fund, payable monthly, at an
annual rate of .50% of the
first $500 million of the Fund's average daily net
assets, .40% of the next
$500 million of average daily net assets, and .30% of
average daily net assets
in excess of $1 billion.
Certain states in which shares of the Trust are
qualified for sale impose
limitations on the expenses of the Trust. The Advisory
Agreement provides that
if, in any fiscal year, the total expenses of the Trust
(excluding taxes,
interest, extraordinary expenses and the distribution
fee but including the
Adviser's fee) exceed the expense limitation applicable
to the Trust imposed by
the securities regulations of any state in which it is
registered to sell
shares, Tocqueville will pay or
reimburse the Trust for that excess up to the amount of
its fee. The most
restrictive limitation currently applicable (excluding
the items described
above) limits a fund to 2.5% of the Trust's first
$30,000,000 of average daily
net assets, 2% of the next $70,000,000, and 1.5% of the
Trust's average daily
net assets over $100,000,000. For the period August 14,
1995 to October 31,
1995, the Adviser has waived its advisory fee of $3,453
due to the expense
limitation referred to above. In addition, the Adviser
has agreed to waive its
fee until the Fund's average daily net assets exceed
$10 million.
-------------------------------------------------------
---------- ---------------
Note 3
The Fund offers two classes of shares: Class A and
Class B shares. Shares of
each class are identical except for the initial sales
load on Class A shares, a
contingent deferred sales charge on Class B shares,
distribution fees and
voting rights on matters effecting a single class. At
October 31, 1995, there
were an unlimited number of shares of beneficial
interest authorized ($0.01 par
value). Transactions in the Fund's shares for the
period from August 14, 1995
to October 31, 1995 were as follows:
<TABLE>
<CAPTION>
Class A
------------------
SHARES AMOUNT
-----
-- ----------
<S> <C>
<C> Shares sold
645,088 $6,457,874
Shares issued on reinvestment of dividends
2,062 20,687
Shares redeemed
-- --
-----
-- ----------
Net increase
647,150 $6,478,561
-----
-- ----------
<CAPTION>
Class B
------------------
SHARES AMOUNT
-----
-- ---------
<S> <C>
<C> Shares sold
20 $ 200
Shares issued on reinvestment of dividends
-- 1
Shares redeemed
-- --
-----
-- ----------
Net increase
20 $ 201
-----
-- ----------
</TABLE>
-------------------------------------------------------
---------- ---------------
9
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 4
Tocqueville Securities L.P. (the "Distributor") acts
as a distributor for
shares of the Fund and purchases shares of the Fund at
net asset value to fill
orders as received from investment dealers. For the
period ended October 31,
1995, the Distributor received no net commissions from
the sale of the Fund's
shares.
The Fund has adopted distribution plans related to
the sale of Class A and
Class B shares pursuant to which the Fund may incur
distribution expenses in
amounts not to exceed 0.25% and 0.75% per annum of the
average daily net assets
of Class A and Class B shares, respectively. Such
expenses may include, but are
not limited to, advertising, printing, and distribution
of sales literature,
prospectuses and other materials, and payments to
dealers and shareholders ser-
vicing agents including the Distributor. Under the
distribution plans, the Dis-
tributor is permitted to carry forward expenses not
reimbursed by the distribu
tion fees to subsequent fiscal years for submission to
the Fund for payment,
subject to the continuation of the Plan. For the period
ended October 31, 1995,
the Distributor has waived distribution fees of $1,727
and 0, respectively for
Class A and Class B shares. The Distributor has
informed the Trust that, as of
October 31, 1995, there were $8,110 in unreimbursed
expenses for the Fund.
Class B shares which are redeemed within six years of
purchase are subject to
a contingent deferred sales charge at rates ranging
from 5% to 0%, charged as a
percentage of the dollar amount subject thereto. There
were no contingent de-
ferred sales charges paid to the Distributor for the
period ended October 31,
1995.
Commissions earned by the Distributor for services
rendered as a registered
broker-dealer in securities transactions for the Fund
for the period ended Oc-
tober 31, 1995 were $7,912.
Pursuant to an Administrative Services Agreement,
effective September 15,
1995, the Fund pays to the Distributor a fee computed
and paid monthly at an
annual rate of 0.15% of the average daily net assets of
the Fund. During the
period ended October 31, 1995, the Distributor waived
administration fees of
$928.
10
<PAGE>
-------------------------------------------------------
---------- ---------------
Note 5
Purchases and sales of investment securities
(excluding short-term
instruments) for the period ended October 31, 1995 were
as follows:
<TABLE>
<CAPTION>
The
Tocqueville
Government
Fund
-----------
<S> <C>
PURCHASES $6,219,211
----------
SALES --
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
Note 6
Unrealized appreciation at October 31, 1995 based on
cost of securities for
Federal tax purposes is as follows:
<TABLE>
<CAPTION>
The
Tocqueville
Government
Fund
-----------
<S> <C>
Gross unrealized appreciation $ 27,789
Gross unrealized depreciation (9)
----------
Net unrealized appreciation $ 27,780
----------
Cost of investments $6,293,165
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
11
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
-------------------------------------------------------
---------- ---------------
INDEPENDENT AUDITOR'S REPORT
To the Board of Trustees and Shareholders
The Tocqueville Government Fund
We have audited the accompanying statement of assets
and liabilities, including
the investment portfolio, of The Tocqueville Government
Fund, a series of The
Tocqueville Trust, as of October 31, 1995, and the
related statement of opera-
tions, changes in net assets, and the selected
financial information for the
period August 14, 1995 to October 31, 1995. These
financial statements and se-
lected financial information are the responsibility of
the Fund's management.
Our responsibility is to express an opinion on these
financial statements and
selected financial information based on our audit.
We conducted our audit in accordance with generally
accepted auditing stan-
dards. Those standards require that we plan and perform
the audit to obtain
reasonable assurance about whether the financial
statements and selected finan-
cial information are free of material misstatement. An
audit includes examin-
ing, on a test basis, evidence supporting the amounts
and disclosures in the
financial statements. Our procedures included
confirmation of securities owned
as of October 31, 1995, by correspondence with the
custodian. An audit also in-
cludes assessing the accounting principles used and
significant estimates made
by management, as well as evaluating the overall
financial statement presenta-
tion. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and selected
financial information
referred to above present fairly, in all material
respects, the financial
position of The Tocqueville Government Fund, a series
of The Tocqueville Trust
as of October 31, 1995, the results of its operations,
the changes in its net
assets, and the selected financial information for the
period then ended, in
conformity with generally accepted accounting
principles.
/s/ McGladrey
& Pullen, LLP
New York, New York
December 1, 1995
12
<PAGE>
INVESTMENT ADVISOR
Tocqueville Asset Management
L.P. 1675 Broadway
New York, New York 10019
Telephone: (212) 698-0800
Telecopier: (212) 262-0154
DISTRIBUTOR
Tocqueville Securities L.P.
1675 Broadway
New York, New York 10019
Telephone: (800) 697-3863
Telecopier: (212) 262-0154
SHAREHOLDERS' SERVICING,
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company
P.O. Box 8507
Boston, Massachusetts 02266-8507
Telephone Toll Free
(800) 626-9402
BOARD OF TRUSTEES
Francois Sicart -- Chairman
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Robert W. Kleinschmidt
Francois Letaconnoux
[LOGO] Tocqueville
THE TOCQUEVILLE
GOVERNMENT FUND
a series of
The Tocqueville Trust
ANNUAL REPORT
October 31, 1995
SEMI-ANNUAL REPORT
April 30, 1996
THE TOCQUEVILLE TRUST
MUTUAL FUNDS
The Tocqueville Fund
The Tocqueville Small Cap Value
Fund
The Tocqueville Asia-Pacific
Fund
The Tocqueville Europe Fund
The Tocqueville Government Fund
[LOGO] Tocqueville
<PAGE>
THE TOCQUEVILLE TRUST
The Tocqueville Fund
-------------------------------------------------------
---------- ---------------
DEAR FELLOW SHAREHOLDERS:
We are pleased to report our results for the
six month period
ended April 30, 1996. Over the period The
Tocqueville Fund gener-
ated a return of 20.05%. This compares with 13.76%
for the S&P 500
index over the same period. While we are very
gratified by the re-
sults, we would like to point out that this period
of superior per-
formance relative to the S&P offsets the previous
six month period
in which we underperformed on a relative basis. For
the twelve
month period ended April 30, 1996, The Tocqueville
Fund generated a
30.94% return compared with 30.19% for the S&P.
Putting relative comparisons aside, the
absolute returns over
the period for The Tocqueville Fund (and the equity
markets in gen-
eral) have been extraordinary. That we have
participated as fully
as we have is somewhat surprising given our
conservative approach,
which typically leads to relative underperformance
during strong
bull markets. Because of fortuitous stock
selection, particularly a
significant position in energy service companies,
our portfolio
stayed well ahead of the market advances during the
past six months. Also benefiting results was the
sharp turnaround in Kmart,
currently our largest position. As of this writing,
shares of Kmart
have advanced 43% since the end of our fiscal year,
and 63% since
our last purchase back in November of 1995.
OUTLOOK
After the spectacular year of 1995, we were
not expecting a
continuation of the gains in 1996. In that respect
we were mistak-
en. Although not as robust, the markets have
continued their above-
trend performance during the early months of
calendar 1996, in
spite of rising interest rates. Our view has not
changed, however.
The market continues to face political
uncertainties, difficult
earnings comparisons going forward, and a less
conciliatory mone-
tary policy, at best. It faces these negatives from
a lofty valua-
tion level, particularly when looked at from the
perspective of av-
erage yield, which would suggest a seriously
overvalued market.
While the market looks more reasonable from an
earnings perspec-
tive, there are still ample signs of overvaluation.
The speculation
in the new issues market is one such sign. The
pervasive exposure
of financial news and information in the popular
culture, an indi-
cation that has been troubling us for a while, is
another. When mu-
tual fund managers start receiving stock tips from
their cab driv-
ers on the way to work, it's time to start worrying
about a market
top.
<PAGE>
-------------------------------------------------------
---------- ---------------
Beyond that, however, are the plethora of
financial news tele-
vision shows (indeed, networks), financial
publications, Internet
web sites, as well as an entire industry devoted to
helping clients
select mutual funds. While these may point to a
level of greater
financial sophistication among the investing
public, and, perhaps,
growing conviction that government social programs
are likely to
fall far short of the retirement needs of most
people, it is still
sobering. The changing age demographics--the aging
of the baby
boomers--could easily mean that we are in the very
early stages of
a long-term boom in savings. Still, the mantra that
stocks can only
go up, or that all market sell-offs are buying
opportunities, and
the widespread acceptance of equities as the
vehicle of choice for
long-term investors, cannot fail to cause alarm in
those of us old
enough to remember bear markets.
All this being said, it remains a market of
stocks, not a
stock market. As stockpickers, we continue to look
for and find eq-
uities that fit our disciplined valuation
parameters. We are com
fortable buying and holding shares of companies
that represent
sound values at reasonable prices. Our portfolio,
while certainly
vulnerable to a market setback, does not contain
the wildly specu-
lative issues that have captured the attention of
much of the fi-
nancial press and the public. We continue to search
for value in
the more mundane and understandable industries.
While this means we
will almost certainly miss the next Netscape or
Microsoft, it also
means that we should avoid the losses that follow
when high flying
expectations come down to earth. With so much of
our personal as-
sets invested in the Fund, this is the approach
that lets us sleep
best at night, particularly in these volatile
times. We hope you
can enjoy a comfortable night's rest, too, knowing
that these are
our guiding principles.
Robert Kleinschmidt
Francois Sicart
Portfolio Managers
2
<PAGE>
-------------------------------------------------------
---------- ---------------
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Kmart Corp. (5.05%) With reasonable
margins, the company could earn
$2.00 per share.
Citicorp (4.91%) An original "Black &
Blue Chip", fundamentals
have improved as
rapidly as the stock price.
Varco International Part of our oil service
package, the company is
(4.15%) a technology leader in
drilling equipment.
Bristol Myers Squibb Solid company selling
at discount to market and
Corp. (4.10%) peer group.
International Business Still a value at less
than 10 times earnings.
Machines (4.02%) Aggressive share
repurchases should boost
results.
BankAmerica Corp. (3.78%) Overcapitalized, buying
back stock and a safe
play on the California
recovery. RJR Nabisco Holdings Recent
favorable litigation developments and a
Corp. (3.73%) probable spin-off
enhance the valuation.
Baker Hughes (3.17%) Part of our oil service
package, the company
should benefit from a
secular uptrend in
drilling.
Sprint Corp (3.15%) Still the best
positioned and most undervalued
of the long distance
carriers. Coast Savings Financial, A
consolidation candidate and possible major
Inc. (3.11%) litigation beneficiary.
</TABLE>
3
<PAGE>
THE TOCQUEVILLE FUND
SELECTED FINANCIAL INFORMATION
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
(UNAUDITED)
----------------------
CLASS A CLASS B
CLASS A CLASS B
------- -------
------- -------
FOR THE SIX
PERIOD FROM
PER SHARE OPERATING MONTHS ENDED
YEAR ENDED OCTOBER 31, AUGUST 14, 1995
PERFORMANCE APRIL 30,
---------------------- TO
(FOR A SHARE OUTSTANDING 1996
1995 1994 1993 1992 OCTOBER 31, 1995
THROUGHOUT THE PERIOD) ----------------------
---- ---- ---- ---- ----------------
<S> <C> <C>
<C> <C> <C> <C> <C>
Net asset value, begin-
ning of period $ 14.07 $ 14.01 $
13.74 $ 13.67 $ 11.83 $ 11.33 $14.68
------- ------- -
------ ------- ------- ------- ------
Income from investment
operations:
Net investment income
(loss) 0.04(a) (0.02)(a)
0.15(d) 0.12 0.11 0.17 --
Net realized and
unrealized gain (loss) 2.61 2.61
1.70 0.88 2.55 1.33 (0.67)
------- ------- -
------ ------- ------- ------- ------
Total from investment
operations 2.65 2.59
1.85 1.00 2.66 1.50 (0.67)
------- ------- -
------ ------- ------- ------- ------
Less distributions
Dividends from net in-
vestment income (0.15) (0.15)
(0.11) (0.14) (0.16) (0.36) --
Distributions from net
realized gains (1.06) (1.06)
(1.41) (0.79) (0.66) (0.64) --
------- ------- -
------ ------- ------- ------- ------
Total distributions (1.21) (1.21)
(1.52) (0.93) (0.82) (1.00) --
------- ------- -
------ ------- ------- ------- ------
Change in net asset
value for the period 1.44 1.38
0.33 0.07 1.84 0.50 (0.67)
------- ------- -
------ ------- ------- ------- ------
Net asset value, end of
period $ 15.51 $ 15.39 $
14.07 $ 13.74 $ 13.67 $ 11.83 $14.01
------- ------- -
------ ------- ------- ------- ------
Total Return (b)(c) 20.1% 19.7%
16.0% 7.7% 23.7% 14.9% (4.56)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe
riod (000 for Class A) $40,054 $51,088
$33,438 $29,140 $27,745 $19,496 $ 191
Ratio of average net as-
sets of:
Expenses 1.47%(a)* 1.97%(a)*
1.57%(e) 1.54% 1.56% 1.74% --
Net investment income 0.54%(a)* 0.54%(a)*
1.07%(e) 0.87% 0.96% 1.44% --
Portfolio turnover rate 33%* --
47% 52% 54% 89% --
</TABLE>
(a)Net of fees waived amounting to 0.15% of average net
assets for the period
ended April 30, 1996.
(b)Does not include maximum sales charge of 4% for
Class A Shares.
(c)Does not include contingent deferred sales charge
for Class B Shares. Not
annualized.
(d)Net of fees waived amounting to 0.02% of average net
assets for the period
ended October 31, 1995.
* Annualized
4
<PAGE>
THE TOCQUEVILLE FUND
INVESTMENTS AS OF APRIL 30,
1996
(unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
Market
% of COMMON STOCKS--92.9% Shares Value
Net Assets -------------------------------------------
-------------------- <S>
<C> <C> <C> BASIC INDUSTRIES--4.3%
Champion International 20,000 $ 965,000
2.41% Longview Fibre Co. of Washington 10,000
176,250 0.44% Newmont Mining Corp.
10,000 578,750 1.44% -----------------------------
----------------------------------
1,720,000 -------------------------
-------------------------------------- CAPITAL GOODS-
-5.5%
Giddings & Lewis, Inc. 25,000 464,063
1.16% Measurex Corp. 25,000
725,000 1.81% Newpark Res., Inc.
15,000 470,625 1.17% Zero Corp.
30,000 540,000 1.35% -------------------------
-------------------------------------
2,199,688
-----------------------------------------------------------
---- CONSUMER BASICS--18.5%
Archer Daniels Midland Co. 20,500 386,938
0.97% Bristol Myers Squibb Corp. 20,000
1,645,000 4.10% Foxmeyer Health Corp.
50,000 975,000 2.43% Hanson PLC
30,000 453,750 1.13% Heinz, H.J. Co.
30,000 1,016,250 2.54% Pepsico, Inc.
15,000 952,500 2.38% RJR Nabisco
Holdings Corp. 50,000 1,493,750 3.73%
Scherer RP Corp. Del. (a) 12,500 493,750 1.23%
-------------------------------------------------------------
-- 7,416,938
---------------------------------------------------------
------ CONSUMER DURABLES--2.2%
Maytag Corp. 40,000 860,000
2.15% -------------------------------------------------
--------------
860,000 ---------------------------------------------
------------------ CONSUMER NON-DURABLES--9.9%
Burlington Industries, Inc. (a) 100,000 1,162,500
2.90% Kmart Corp. 200,000
2,025,000 5.05% Melville Corp.
15,000 583,125 1.45% Systemed, Inc. Del. (a)
70,000 199,062 0.50% -------------------------
--------------------------------------
3,969,687 ---------------------
------------------------------------------ ENERGY--16.7%
Baker Hughes, Inc. 40,000 1,270,000
3.17% Digicon, Inc. 75,000
1,153,125 2.88% Murphy Oil Corp.
25,000 1,115,625 2.78% Tesoro Petroleum Corp. (a)
100,000 1,100,000 2.74% Varco International, Inc.
(a) 100,000 1,662,500 4.15% Western Atlas, Inc.
6,500 390,000 0.97% ----------------
-----------------------------------------------
6,691,250 ------------
---------------------------------------------------
FINANCE--14.1%
BankAmerica Corp. 20,000 1,515,000
3.78% Citicorp 25,000
1,968,750 4.91% -------------------------------------
-------------------------- </TABLE>
(a) Non-income producing security
See Notes to Financial Statements
<TABLE>
<CAPTION>
COMMON STOCKS
Market % of
(CONTINUED) Shares
Value Net Assets
-------------------------------------------------------
---------- -----------
<S> <C>
<C> <C>
Coast Savings Financial, Inc. (a) 40,000
$ 1,245,000 3.11%
Hartford Steam Boilers Insp. & Inc. 10,000
482,500 1.20%
Zurich Reins Centre Hldgs., Inc. 15,000
451,875 1.13%
-------------------------------------------------------
---------- ------------
5,663,125
-------------------------------------------------------
---------- ------------
GENERAL BUSINESS--6.3%
De Luxe Corp. 10,000
350,000 0.87%
Miller, Herman Inc. 25,000
765,625 1.91%
National Education Corp. (a) 100,000
743,750 1.86%
Western Publishing Group, Inc. (a) 50,000
656,250 1.64%
-------------------------------------------------------
---------- ------------
2,515,625
-------------------------------------------------------
---------- ------------
MISCELLANEOUS--1.1%
Cattellus Development (a) 50,000
456,250 1.14%
-------------------------------------------------------
---------- ------------
456,250
-------------------------------------------------------
---------- ------------
TECHNOLOGY--10.6%
Adobe Systems, Inc. 15,000
645,000 1.61%
Amdahl Corp. 10,000
255,000 0.64%
Boeing International Co. 10,000
821,250 2.05%
International Business Machines 15,000
1,612,500 4.02%
Telxon Corp. 40,000
920,000 2.30%
-------------------------------------------------------
---------- ------------
4,253,750
-------------------------------------------------------
---------- ------------
UTILITIES--3.7%
360 Communications Co. 10,000
235,000 0.59%
Sprint Corp. 30,000
1,263,750 3.15%
-------------------------------------------------------
---------- ------------
1,498,750
-------------------------------------------------------
---------- ------------
Total Common Stocks
(Cost $26,227,469)
37,245,063
-------------------------------------------------------
---------- ------------
SHORT-TERM INVESTMENTS--7.1%
Repurchase Agreement, State Street Bank &
Trust Company, dated 4/30/96, due 5/01/96,
4.0%. Collateralized by U.S. Treasury Notes
valued at $2,915,097. Repurchase proceeds
of $2,857,317 (Cost $2,857,000) 2,857,000
2,857,000 7.13%
-------------------------------------------------------
---------- ------------
TOTAL INVESTMENTS
(COST $29,084,469)--100.0%
40,102,063
OTHER ASSETS & LIABILITIES
3,104
-------------------------------------------------------
---------- ------------
TOTAL NET ASSETS--100.0%
$40,105,167
-----------
</TABLE>
5
<PAGE>
THE TOCQUEVILLE FUND
STATEMENT OF ASSETS AND
LIABILITIES
April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C> ASSETS
Investments, at values (identified cost $29,084,469)
$40,102,063
Cash
443
Receivable for Fund shares sold
23,994
Dividends and interest receivable
28,217
Other assets
3,161
-----------
$40,157,878
-----------
LIABILITIES
Payable for Fund shares repurchased
20,865
Accrued investment adviser's fee
23,871
Accrued distribution fee
7,975
-----------
52,711
-----------
NET ASSETS
$40,105,167
-----------
At April 30, 1996 net assets consisted of:
Capital paid in
$27,553,094
Undistributed net investment income
21,675
Net accumulated undistributed realized gain
1,512,804
Net unrealized appreciation
11,017,594
-----------
$40,105,167
-----------
CLASS A
NET ASSET VALUE PER SHARE ($40,054,079/2,581,788 shares
outstanding)
$15.51
------
Maximum offering price ($15.51/96%)
$16.16
------
CLASS B
NET ASSET VALUE PER SHARE AND MAXIMUM OFFERING PRICE
($51,088/3,320 shares outstanding)
$15.39
------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
THE TOCQUEVILLE FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
INVESTMENT INCOME
Dividends (net of $2,588 foreign taxes withheld)
$ 283,789
Interest
77,464
----------
361,253
----------
EXPENSES
Investment adviser's fee (Note 2)
134,419
Custodian and fund accounting
33,670
Transfer agent and shareholder services
18,200
Professional fees
13,650
Distribution (Note 4)
Class A
44,880
Class B
42
Administration fee (Note 4)
27,028
Printing
1,820
Registration
6,370
Trustees fee
5,096
Fidelity bond
2,548
Other
3,640
----------
Total expenses
291,363
Less: Fees waived (Note 4)
(27,028)
----------
Net expenses
264,335
----------
NET INVESTMENT INCOME
96,918
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments
1,771,306
Net unrealized appreciation of investments during the
period 4,846,267
----------
Net gain on investments
6,617,573
----------
Net increase in net assets resulting from operations
$6,714,491
----------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
THE TOCQUEVILLE FUND
STATEMENTS OF CHANGES IN NET
ASSETS
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
APRIL 30,
1996 ENDED
(UNAUDITED) OCTOBER 31, 1995
-----------
------- ----------------
<S> <C>
<C>
INCREASE IN NET ASSETS
Operations
Net investment income $
96,918 $ 343,526
Net realized gain
1,771,306 2,506,947
Net unrealized appreciation (depreciation)
4,846,267 2,103,502
--------
--- -----------
Net increase resulting from operations
6,714,491 4,953,975
Distributions to shareholders from:
Net investment income
Class A
(354,609) (233,851)
Class B
(4) --
Net realized gain on investments
Class A
(2,505,796) (2,995,036)
Class B
(14) --
Fund share transactions (Note 3)
Class A
2,765,597 2,572,904
Class B
47,510 200
--------
--- -----------
Net Increase in net assets
6,667,175 4,298,192
NET ASSETS
Beginning of period
33,437,992 29,139,800
--------
--- -----------
End of period
40,105,167 33,437,992
--------
--- -----------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
THE TOCQUEVILLE FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
-------------------------------------------------------
---------- ---------------
NOTE 1
The Tocqueville Trust (the "Trust") was organized as
a Massachusetts business
trust registered under the Investment Company Act of
1940 as amended, as a di-
versified, open-end management investment company. The
Trust consists of five
separate Funds: The Tocqueville Fund, The Tocqueville
Asia-Pacific Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville
Europe Fund and The
Tocqueville Government Fund (the "Funds"). The
following is a summary of sig-
nificant accounting principles followed by the Trust in
the preparation of its
financial statements.
-------------------------------------------------------
---------- ---------------
SECURITY VALUATION
Investments in securities, including foreign
securities, traded on an ex-
change or quoted on the over-the-counter market are
valued at the last sale
price or, if no sale occurred during the day, at the
mean between closing bid
and asked prices, as last reported by a pricing service
approved by the Trust
ees. When market quotations are not readily available,
or when restricted secu-
rities or other assets are being valued, such assets
are valued at fair value
as determined in good faith by or under procedures
established by the Trustees.
Short-term investments are stated at cost which,
together with accrued inter-
est, approximates market value.
-------------------------------------------------------
---------- ---------------
FEDERAL INCOME TAX
It is the Trust's policy to comply with the
provisions of the Internal Reve-
nue Code ("Code") applicable to regulated investment
companies and to distrib-
ute all of its taxable income to its shareholders. It
is also the Trust's in-
tention to distribute amounts sufficient to avoid
imposition of any excise tax
under Section 4982 of the Code. Therefore, no federal
income or excise tax pro-
vision is required.
-------------------------------------------------------
---------- ---------------
OTHER
Security transactions are accounted for on the trade
date, the date the order
to buy or sell is executed. Dividend income is
recognized on the ex-dividend
date or at the time the Fund becomes aware, whichever
is earlier. Interest in-
come is recognized on the accrual basis and market
discount is accounted for on
a straight-line basis from settlement date. The Trust
uses the first-in, first-
out method for determining realized gain or loss on
investments sold for both
financial reporting and federal tax purposes.
Distributions to shareholders are
recorded on the ex-dividend date. Expenses incurred by
the Trust not specifi-
cally identified to a Fund are allocated on a basis
relative to the size of
each fund's daily net asset value.
-------------------------------------------------------
---------- ---------------
NOTE 2
Tocqueville Asset Management L.P. ("Tocqueville"), is
the investment adviser
to the Trust under an Investment Advisory Agreement
approved by shareholders on
February 26, 1990. For its services, Tocqueville
receives a fee from the
Tocqueville Fund payable monthly, at an annual rate of
.75% of the first $100
million of the
9
<PAGE>
Fund's average daily net assets, .70% of the next $400
million of average daily
net assets, and .65% of average daily net assets in
excess of $500 million.
Certain states in which shares of the Trust are
qualified for sale impose
limitations on the expenses of the Trust. The Advisory
Agreement provides that
if, in any fiscal year, the total expenses of the Trust
(excluding taxes, in-
terest, extraordinary expenses and the distribution fee
but including the Ad-
viser's fee) exceed the expense limitation applicable
to the Trust imposed by
the securities regulations of any state in which it is
registered to sell
shares, Tocqueville will pay or reimburse the Trust for
that excess up to the
amount of its fee. The most restrictive limitation
currently applicable (ex-
cluding the items described above) limits a fund to
2.5% of the Trust's first
$30,000,000 of average daily net assets, 2% of the next
$70,000,000, and 1.5%
of the Trust's average daily net assets over
$100,000,000. No such reimburse-
ment was required for the six months ended April 30,
1996.
-------------------------------------------------------
---------- ---------------
NOTE 3
Effective August 14, 1995 the Fund offered two
classes of shares: Class A and
Class B shares. Shares of each class are identical
except for the initial sales
load on Class A shares, a contingent deferred sales
charge on Class B shares,
distribution fees, and voting rights on matters
effecting a single class. All
Fund shares outstanding before August 14, 1995 were
designated as Class A
shares. At April 30, 1996, there were an unlimited
number of shares of benefi-
cial interest authorized ($0.01 par value).
Transactions in the Fund's shares
were as follows:
<TABLE>
<CAPTION>
CLASS
A ---
---- SIX MONTHS ENDED
YEAR ENDED
APRIL 30, 1996
OCTOBER 31, 1995
----------------
----------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ ------
<S> <C> <C>
<C> <C>
Shares sold 186,678 2,603,971
448,435 $ 5,664,101
Shares issued on reinvestment of
dividends 191,061 2,596,531
230,270 2,634,292
Shares redeemed (171,993) (2,434,905)
(422,865) (5,725,489)
-------- ----------
-------- -----------
Net increase 205,746 2,765,597
255,840 $ 2,572,904
-------- ----------
-------- -----------
<CAPTION>
CLASS
B ---
----
FOR THE PERIOD FROM
AUGUST 14, 1995
SIX MONTHS ENDED
THROUGH
APRIL 30, 1996
OCTOBER 31, 1995
----------------
-------------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ -----
<S> <C> <C>
<C> <C>
Shares sold 3,305 47,498
14 $ 200
Shares issued on reinvestment of
dividends 1 12
-- --
Shares redeemed -- --
-- --
-------- ----------
-------- -----------
Net increase 3,306 47,510
14 $ 200
-------- ----------
-------- -----------
</TABLE>
-------------------------------------------------------
---------- ---------------
10
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 4
Tocqueville Securities L.P. (the "Distributor") acts
as distributor for
shares of the Fund and purchases shares of the Fund at
net asset value to fill
orders as received from investment dealers. For the six
months ended April 30,
1996, the Distributor received net commissions of
$1,662 from the sale of the
Fund's shares.
The Fund has adopted distribution plans related to
the sale of Class A and
Class B shares pursuant to which the Fund may incur
distribution expenses in
amounts not to exceed 0.25% and 0.75% per annum of the
average daily net assets
of Class A and Class B shares, respectively. Such
expenses may include, but are
not limited to, advertising, printing, and distribution
of sales literature,
prospectuses and other materials, and payments to
dealers and shareholders ser-
vicing agents including the Distributor. Under the
distribution plans, the Dis-
tributor is permitted to carry forward expenses not
reimbursed by the distribu
tion fees to subsequent fiscal years for submission to
the Fund for payment,
subject to the continuation of the Plan. The
Distributor has informed the Trust
that, as of March 31, 1996, there were $67,692 in
unreimbursed expenses for the
Fund.
Class B shares which are redeemed within six years of
purchase are subject to
a contingent deferred sales charge at rates ranging
from 5% to 0%, charged as a
percentage of the dollar amount subject thereto. There
were no contingent de-
ferred sales charges paid to the Distributor for the
six months ended April 30,
1996.
Commissions earned by the Distributor for services
rendered as a registered
broker-dealer in securities transactions for the Fund
for the six months ended
April 30, 1996 were $13,066.
Pursuant to an Administrative Services Agreement,
effective September 15,
1995, the Fund pays to the Distributor a fee computed
and paid monthly at an
annual rate of 0.15% of the average daily net assets of
the Fund. During the
six months ended April 30, 1996, the Distributor waived
administration fees of
$27,028.
-------------------------------------------------------
---------- ---------------
11
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 5
Purchases and sales of investment securities
(excluding short-term instru-
ments) for the six months ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
FUND
----------
<S> <C>
PURCHASES
U.S. Government $ --
Other 5,893,915
----------
$5,893,915
----------
SALES
U.S. Government $2,008,438
Other 5,286,289
----------
$7,294,727
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
NOTE 6
Unrealized appreciation at April 30, 1996 based on
cost of securities for
Federal tax purposes is as follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
FUND
-----------
<S> <C>
Gross unrealized appreciation $11,797,181
Gross unrealized depreciation (1,020,567)
-----------
Net unrealized appreciation $10,776,614
-----------
Cost of investments $29,325,449
----------- </TABLE>
-------------------------------------------------------
---------- ---------------
12
<PAGE>
The Tocqueville Small Cap Value Fund
-------------------------------------------------------
---------- ---------------
DEAR FELLOW SHAREHOLDERS:
I am pleased to report that The Tocqueville
Small Cap Value
Fund has continued its solid performance. For the
six month period
ended April 30, 1996, your portfolio of value
stocks posted a 17.11% increase in Net Asset Value
to $13.08 per Class A share.
Since inception on August 1, 1994, the Fund has
appreciated 42.7%.
This matches the performance of the Russell 2000
Index, which is
the most widely accepted benchmark for small cap
stocks. I will try
my best to maintain that performance in the future.
CAUTIOUS OPTIMISM MAINTAINED
Overall, I remain cautiously optimistic about
the long-term
economic outlook for the companies which we hold in
the Fund's
portfolio. Common stocks represented 89% of assets
held on April
30, 1996. U.S. Treasury Bonds and cash equivalents
accounted for
the balance.
I have maintained the investment strategy
which I outlined in
last year's annual report, and I expect to make few
changes in the
near future. FIRST, I continued to reduce the
Fund's exposure to
economically sensitive sectors. These now account
for approximately
16% of all assets. Remaining holdings in these
cyclical sectors in-
clude some of our most price-depressed value
stocks. SECOND, I in-
creased the Fund's exposure to "sunrise industries"
that have re-
cession resistant characteristics. These include
providers of com-
puter software, healthcare, and specialty financial
services.
To be specific, 49% of the Fund's assets are
now invested in
more recession resistant sectors: Computer Software
(17.24%), Healthcare (15.9%), Communications
(10.61%), Financial Services
(9.62%), and Industrial Services (5.69%).
Our next two largest sectors of exposure are
fairly recent ad-
ditions to the portfolio. They contain industries
which had already
suffered profound economic hardship when we
initiated our pur-
chases. These two new sectors include producers of
Consumer Non-Du-
rable Goods (9.68%), and leading providers of
Drilling Equipment &
Services (9.12%). Purchases in the Drilling
Equipment & Services
sector were extremely well timed, and these stocks
have appreciated
substantially in recent months. Below is a list of
our ten largest
positions, which represent 42% of assets.
13
<PAGE>
-------------------------------------------------------
---------- ---------------
TEN LARGEST POSITIONS
<TABLE>
<S> <C>
Unifirst Corp. (5.69%) Uniform mfg.,
renting and cleaning
services
Owens & Minor Corp. (5.21%) Wholesaler of
medical surgical
supplies
Western National Corp. (4.77%) Tax-deferred
annuities & related
products
O'Sullivan Industries Hldgs. Producer of
Ready-To-Assemble
(4.69%) furniture
American Travellers Corp. (3.85%) Defined benefit
coverage for nursing
home care
Boston Technology, Inc. (3.81%) Voice-mail, E-mail
information
processing
Compuware Corp. (3.75%) Computer software,
development tools
Analysts International Corp. Contract
programming services to
(3.64%) businesses
Bindley Western Ind. (3.40%) Wholesale
distribution of prescription
drugs
Scientific-Atlanta Inc. (3.25%) CATV and
satellite communication
hardware
</TABLE>
For the benefit of our new shareholders, I
will review the ba-
sic tenets of my investment strategy.
LONG-TERM ORIENTATION
I believe that successful investing requires
considerable at-
tention to "how much you pay for what you buy,"
considerable pa-
tience coupled with the willingness to accept some
temporary dis-
comfort, and lastly, true long-term commitment.
Central to my thinking is the belief that whatever
is taking place today at a
company is the result of strategies implemented
many months and
possibly years ago. Consequently, most of my
analytical attention
centers on long-term issues, on the theory that if
I am correct in
my long-term assessment of the business prospects
of an enterprise,
short-term market fluctuations are relatively less
important.
In addition, I believe that successful long-
term investments
are those made in "good businesses." Consequently,
most of my bot-
tom-up analytical work centers on picking "good
businesses" from an
entrepreneurial perspective.
14
<PAGE>
-------------------------------------------------------
---------- ---------------
INVESTING WISELY
My concept of "Investing Wisely" means
investing in "good
businesses" when they are already down
significantly in price. To
that end, I follow these time-tested guidelines:
RULE #1: RESTRICT THE MAJORITY OF NEW
PURCHASES TO STOCKS THAT
ARE ALREADY DOWN SUBSTANTIALLY IN PRICE. I very
rarely violate that
value-oriented strategy when making new purchases.
For example, 19
of the 37 stocks (or 39.5% of assets) owned on
April 30, 1996 were
down an average of 28.84% and 44.75% from their
last 12 months' and
prior 60 months' highs, respectively. This implies
that these stocks already had some very significant
price correction before we
acquired them, and that they already went through
some period of
economic hardship. Consequently, many are receiving
scant coverage
from Wall Street, some are even receiving negative
coverage, and
most represent good value.
RULE #2: SYSTEMATICALLY SCREEN THESE "DOWN AND
OUT" STOCKS FOR
FINANCIAL STRENGTH. I believe that financial
weakness is most often
indicative of poor business fundamentals. I want to
avoid investing
in a poor business, no matter how inexpensive it
gets. Conversely,
I have a strong affinity for self-reliant and
practically debt-free
companies. My logic is that people who properly
manage their fi-
nances are least likely to disappoint me. The
average debt-to-capi-
talization ratio of all stocks in the Fund's
portfolio is a very
conservative 21.5%, with an equally strong average
quick ratio
(cash and receivables/current liabilities) of 2.23
times.
RULE #3: "INVEST TO WIN." While this is by far
the most diffi-
cult task, its logic is quite appealing. Starting
from a selection
of stocks that have declined substantially in price
and retained
their financial strength, I attempt to single out
the so-called
"good businesses" that I want to buy and hold for
the long term.
What constitutes a "good business" is obviously
hard to define.
However, I believe that "good businesses" should
have, in addition
to strong finances, some very distinctive features,
which I rank in
the following order of importance.
15
<PAGE>
-------------------------------------------------------
---------- ---------------
PICKING GOOD BUSINESSES
. MANAGEMENT INTEGRITY, REPUTATION AND SOCIAL
RESPONSIBILITY.
I can not identify a single successful long-term
investment lacking
these complementary qualities. I view the level of
integrity at the
top of any organization as the single most critical
ingredient re-
quired for success over the long term. Integrity
directly sets the
tone for the organization's strategies, and it
indirectly sets the
intensity of management's commitment to the
business. Integrity de-
fuses most adversarial labor-management conflicts,
and thus im-
proves productivity. Reputation allows
organizations to hire and
retain the best people available, and to stay ahead
of their compe-
tition. I view social responsibility as the
necessary foundation of
all investment activities.
. GROWTH POTENTIAL. A good investment should
offer its owner
solid prospects of long-term growth, profitability,
and financial
security. It has already been well publicized that
over the very
long term, the fastest growing segments of the
mature US economy
may very well be the so-called service industries.
This is re-
flected in the 29% mix of service businesses in the
Fund's portfo-
lio. Five of our ten largest positions are service
stocks: American
Travellers Life Insurance; Analysts International;
Compuware Corp.;
Unifirst Corp., and Western National Corp.
. NEW PRODUCTS. Good businesses are always
built around very
successful new products. At the moment, seven of
our companies have
new products under development that, if successful
over the long
term, could very significantly improve their
earnings potential.
. PROPRIETARY STRENGTHS. Good businesses often
fashion propri-
etary skills into strong competitive tools. For
example, nearly all
of the emergency room supplies manufactured by
Ballard Medical
Products are protected by patents or proprietary
know-how.
. MARKET SHARE POSITION. Good businesses often
hold high mar-
ket share positions in their industries. Current
portfolio examples
are Cone Mills, which is the world's largest denim
producer; Nabors
Industries, the world's largest land driller,
Telxon Corp., the
leading US bar-code and wireless data capture
systems integrator;
O'Sullivan Industries, the largest US producer of
ready-to-assemble
furniture.
16
<PAGE>
-------------------------------------------------------
---------- ---------------
. HIGH INSIDER OWNERSHIP. I am comfortable
with high levels of
insider ownership, as long as I see little insider
selling. My the-
ory is that insiders with money at risk are most
likely to tend to
the business, and to truly manage the enterprise
for the long term.
On average, insiders owned 22.57% of the stocks in
the Fund's port-
folio, and eight of our stocks had insider
ownership levels of 40%
or more.
. REPEAT SALES AND CUSTOMER BASE. Good
businesses generally
have a close day-to-day working relationship with
their customers.
Over the years, good businesses build up an
installed base of sat-
isfied "pre-sold" customers by simply providing
value-added servic-
es. Such businesses eventually benefit from a
fairly steady flow of
repeat sales, as well as growing maintenance,
repair and overhaul
activities. Eight of our 37 stocks have a
relatively high mix of
repeat sales, and four of these are among our ten
largest posi-
tions: American Travellers Corp., Analysts
International, Unifirst
Corp., and Western National Corp.
In closing, I welcome questions or comments
which you may
have, and I thank you for choosing The Tocqueville
Small Cap Value
Fund to realize your long-term investment
objectives.
Jean-Pierre Conreur
Portfolio Manager
17
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE
FUND
SELECTED FINANCIAL INFORMATION
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
(UNAUDITED)
CLASS A CLASS B
CLASS A CLASS B
------- -------
------- -------
PER SHARE OPERATING FOR THE SIX
PERIOD FROM PERIOD FROM
PERFORMANCE MONTHS ENDED
AUGUST 1, 1994 AUGUST 14, 1995
(FOR A SHARE OUTSTANDING APRIL 30,
YEAR ENDED TO TO
THROUGHOUT 1996
OCTOBER 31, 1995 OCTOBER 31, 1994 OCTOBER 31, 1995
THE PERIOD) --------------------
---------------- ---------------- ----------------
<S> <C> <C> <C>
<C> <C>
Net asset value, begin-
ning of period $ 11.91 $11.87
$10.22 $10.00 $12.35
------- ------
------ ------ ------
Income from investment
operations:
Net investment (loss) (0.25)(a) (0.29)(b)
(0.05)(e) 0.02(f) --
Net realized and
unrealized gain 2.19 2.19
1.96 0.20 (0.48)
------- ------
------ ------ ------
Total from investment
operations 1.94 1.90
1.91 0.22 (0.48)
------- ------
------ ------ ------
Less distributions
Dividends from net in-
vestment income -- --
(0.03) -- --
Distributions from net
realized gains (0.77) (0.77)
(0.19) -- --
------- ------
------ ------ ------
Total distributions (0.77) (0.77)
(0.22) -- --
------- ------
------ ------ ------
Change in net asset
value for the period 1.17 1.13
1.69 0.22 (0.48)
------- ------
------ ------ ------
Net asset value, end of
period $ 13.08 $13.00
$11.91 $10.22 $11.87
------- ------
------ ------ ------
Total Return (c)(d) 17.1% 16.8%
19.22% 2.20% (3.89)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of pe-
riod (000 for Class A) $11,400 $8,943
$9,383 $6,755 $192
Ratio of average net as-
sets of:
Expenses (a)(b) 2.17%*(a) 2.17%*(b)
2.50 %(e) 2.08%*(f) --
Net investment loss (0.84)%*(a) (0.84)%*(b)
(0.53)%(e) 0.85%*(f) --
Portfolio turnover rate 91%* --
87.91 % 9.40%
</TABLE>
--------
(a)Net of fees waived amounting to 0.40% of average net
assets for the period
ended April 30, 1996.
(b)Net of fees waived amounting to 0.90% of average net
assets for the period
ended April 30, 1996.
(c)Does not include maximum sales load of 4% for Class
A shares. (d)Does not include contingent deferred sales
charge on Class B shares. Not
annualized.
(e)Net of fees waived amounting to 0.33% of average net
assets for the period
ended October 31, 1995.
(f)Net of fees waived amounting to 0.75% of average net
assets for the period
ended October 31, 1994.
*Annualized.
18
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE
FUND
INVESTMENTS AS OF APRIL 30,
1996
(unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
Market
% of COMMON STOCKS--89.1% Shares Value
Net Assets --------------------------------------------
------------------ <S>
<C> <C> <C> COMMUNICATIONS/
CONTENT PROVIDER--10.8%
Acclaim Entertainment, Inc. (a) 15,000 $ 154,688
1.36% Boston Technology, Inc. (a) 25,000
434,375 3.81% DMX, Inc. (a)
75,000 150,000 1.32% Scientific-Atlanta, Inc.
20,000 370,000 3.25% Wave Technologies Intl.,
Inc. (a) 24,000 126,000 1.10% --------------------
------------------------------------------
1,235,063 ------------------
-------------------------------------------- COMPUTER
SOFTWARE &
SERVICES--17.2%
Alphanet Solutions (a) 10,000 100,000
0.88% Analysts Intl. Corp. 11,000
415,250 3.64% Compuware Corp. (a)
15,000 427,500 3.75% Keane, Inc. (a)
7,500 295,313 2.59% National Computer Sys.,
Inc. 15,000 326,250 2.86% Platinum Technology
(a) 8,000 117,000 1.03% Symantec Corp.
(a) 10,000 161,250 1.41% Timberline
Software Corp. 7,500 121,875 1.07% ------
--------------------------------------------------------
1,964,438 ----
----------------------------------------------------------
CONSUMER--NON-DURABLE--9.7%
Cone Mills Corp. (a) 25,000 284,375
2.49% Franklin Quest (a) 10,000
270,000 2.37% Nelson Thomas
10,000 136,250 1.20% Tasty Baking Corp.
15,000 163,125 1.43% Ultrak Inc. (a)
20,000 250,000 2.19% ------------------------
--------------------------------------
1,103,750 ----------------------
---------------------------------------- DRILLING
EQUIPMENT &
SERVICES--9.1%
Global Industries, Inc. (a) 4,000 103,000
0.90% Nabors Industries, Inc. (a) 24,000
369,000 3.24% Oceaneering Intl., Inc. (a)
20,000 315,000 2.76% Pool Energy Services Corp. (a)
20,000 252,500 2.21% ---------------------------
-----------------------------------
1,039,500 -------------------------
------------------------------------- FINANCIAL
SERVICES--9.6%
American Travellers Corp. (a) 22,500 438,750
3.85% Life USA Hldgs., Inc. (a) 12,500
114,063 1.00% Western National Corp.
30,000 543,750 4.77% ------------------------------
--------------------------------
1,096,563 ----------------------------
---------------------------------- FURNITURE (RTA)--4.7%
O'Sullivan Industries (a) 75,000 534,375
4.69% -------------------------------------------------
-------------
534,375 -----------------------------------------------
--------------- HEALTH CARE--15.9%
Ballard Medical Products 18,000 357,750
3.14% Bindley Western, Inc. 25,000
387,500 3.40% Novametrix Med. Sys., Inc. (a)
30,000 176,250 1.55% </TABLE>
(a) Non-income producing securities
See Notes to Financial statements
<TABLE>
<CAPTION>
COMMON STOCKS
Market % of
(CONTINUED) Shares
Value Net Assets
-------------------------------------------------------
---------- --------------
<S> <C>
<C> <C>
HEALTH CARE (CONTINUED)
Owens & Minor, Inc. New
44,000 $ 594,000 5.21%
Staar Surgical Co. (a)
10,000 130,000 1.14%
Sullivan Dental Products
15,000 166,875 1.46%
-------------------------------------------------------
---------- --------------
1,812,375
-------------------------------------------------------
---------- --------------
INDUSTRIAL SERVICES--5.7%
Unifirst Corp.
27,000 648,000 5.69%
-------------------------------------------------------
---------- --------------
648,000
-------------------------------------------------------
---------- --------------
MANUFACTURING--3.6%
Gorman Rupp Co.
15,000 221,250 1.94%
Telxon, Corp.
8,000 184,000 1.61%
-------------------------------------------------------
---------- --------------
405,250
-------------------------------------------------------
---------- --------------
SPECIALTY CHEMICALS--2.8%
Sybron Chem, Inc. (a)
15,000 199,688 1.75%
Univar Corp.
10,000 116,250 1.02%
-------------------------------------------------------
---------- --------------
315,938
-------------------------------------------------------
---------- --------------
Total Common Stocks
(Cost $8,077,103)
10,155,252
-------------------------------------------------------
---------- --------------
U.S. GOVERNMENT
AGENCY BONDS--1.7%
U.S. Treasury Notes,
5.5% due 7/31/97
200,000 199,312 1.75%
-------------------------------------------------------
---------- --------------
Total U.S. Government
Agency Bonds
(Cost $197,344)
199,312
-------------------------------------------------------
---------- --------------
SHORT-TERM INVESTMENTS--8.1%
U.S. Treasury Bills, 4.86%, 7/25/96
300,000 296,458 2.60%
U.S. Treasury Bills, 4.76%, 1/09/97
200,000 193,142 1.70%
Repurchase Agreement, State Street Bank & Trust
Company, dated 4/30/96, due 5/01/96, 2%
(Collateralized by U.S. Treasury Notes valued
at $452,781. Repurchase proceeds of $439,024
(Cost $439,000.)
439,000 439,000 3.85%
-------------------------------------------------------
---------- --------------
Total Short-Term Investments
(Cost $928,600)
928,600
-------------------------------------------------------
---------- --------------
TOTAL INVESTMENTS
(COST $9,203,047)--98.9%
$11,283,164
OTHER ASSETS & LIABILITIES,
NET--1.1%
116,465
-------------------------------------------------------
---------- --------------
TOTAL NET ASSETS--100.0%
$11,399,629
-----------
</TABLE>
19
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE
FUND
STATEMENT OF ASSETS AND
LIABILITIES
April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
ASSETS
Investments, at values (identified cost $9,203,047)
$11,283,164
Cash
164
Receivable for investments sold
241,913
Receivable for Fund shares sold
10,790
Dividends and interest receivable
4,424
Deferred organization expense
20,635
Other assets
6,219
-----------
$11,567,309
-----------
LIABILITIES
Payable for investments
purchased
129,025
Accrued investment
adviser's fee
6,707
Accrued
expenses
31,948
-----------
$ 167,680
-----------
NET ASSETS
$11,399,629
-----------
At April 30, 1996 net assets
consisted of:
Capital
paid in
$ 8,957,394
Undistributed net investment
income
(95,887)
Net accumulated undistributed
realized gain
458,005
Net unrealized
appreciation
2,080,117
-----------
$11,399,629
-----------
CLASS A
NET ASSET VALUE PER SHARE ($11,390,558/870,877 shares
outstanding)
$13.08
------
Maximum offering price
($13.08/96%)
$13.63
------
CLASS B
NET ASSET VALUE PER SHARE AND MAXIMUM OFFERING PRICE
($9,071/698 shares
outstanding)
$13.00
------
</TABLE>
See Notes to Financial Statements.
20
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE
FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
INVESTMENT INCOME
Dividends
$ 39,600
Interest
28,374
----------
67,974
----------
EXPENSES
Investment adviser's fee (Note 2)
38,102
Custodian and fund accounting
33,670
Transfer agent and shareholder services
15,470
Professional fees
11,830
Distribution (Note 4)
Class A
25,509
Class B
11
Administration fee (Note 4)
7,653
Printing
1,820
Registration
4,550
Trustees fee
910
Fidelity bond
910
Amortization of organization costs
3,154
Other
497
----------
Total expenses
144,086
Less: Fees waived (Note 4)
(33,173)
----------
Net expenses
110,913
----------
NET INVESTMENT INCOME (LOSS)
(42,939)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments
410,157
Net unrealized appreciation of investments during the
period 1,318,024
----------
Net gain on investments
1,728,181
----------
Net increase in net assets resulting from operations
$1,685,242
----------
</TABLE>
See Notes to Financial Statements.
21
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE
FUND
STATEMENTS OF CHANGES IN NET
ASSETS
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
APRIL 30,
1996 ENDED
(UNAUDITED)
OCTOBER 31, 1995
--------------
---- ----------------
<S> <C>
<C> INCREASE IN NET ASSETS
Operations
Net investment (loss) $
(42,939) $ (41,698)
Net realized gain 410,157
646,730
Net unrealized appreciation 1,318,024
756,936
-----------
---------
Net increase resulting from operations 1,685,242
1,361,968
Distributions to shareholders from:
Net investment income
Class A --
(3,482)
Class B --
0
Net realized gain on investments
Class A
(600,693) (142,447)
Class B
(12) 0
Fund share transactions (Note 3)
Class A 924,582
1,411,298
Class B 8,009
200
-----------
----------
Net increase in net assets 2,017,128
2,627,537
NET ASSETS
Beginning of period 9,382,501
6,754,964
-----------
----------
End of period $11,399,629
$9,382,501
-----------
----------
</TABLE>
See Notes to Financial Statements.
22
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE
FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
-------------------------------------------------------
---------- ---------------
NOTE 1
The Tocqueville Trust (the "Trust") was organized as
a Massachusetts business
trust registered under the Investment Company Act of
1940 as amended, as a di-
versified, open-end management investment company. The
Trust consists of five
separate Funds: The Tocqueville Fund, The Tocqueville
Asia-Pacific Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville
Europe Fund and the
Tocqueville Government Fund (the "Funds"). The
following is a summary of sig-
nificant accounting principles followed by the Trust in
the preparation of its
financial statements.
-------------------------------------------------------
---------- ---------------
SECURITY VALUATION
Investments in securities, including foreign
securities, traded on an ex-
change or quoted on the over-the-counter market are
valued at the last sale
price or, if no sale occurred during the day, at the
mean between closing bid
and asked prices, as last reported by a pricing service
approved by the Trust-
ees. When market quotations are not readily available,
or when restricted secu-
rities or other assets are being valued, such assets
are valued at fair value
as determined in good faith by or under procedures
established by the Trustees.
Short-term investments are stated at cost which,
together with accrued inter-
est, approximates market value.
-------------------------------------------------------
---------- ---------------
FEDERAL INCOME TAX
It is the Trust's policy to comply with the
provisions of the Internal Reve-
nue Code ("Code") applicable to regulated investment
companies and to distrib-
ute all of its taxable income to its shareholders. It
is also the Trust's in-
tention to distribute amounts sufficient to avoid
imposition of any excise tax
under Section 4982 of the Code. Therefore, no federal
income or excise tax pro-
vision is required.
-------------------------------------------------------
---------- ---------------
DEFERRED ORGANIZATION EXPENSES
Expenses incurred in connection with the organization
of The Tocqueville
Small Cap Value Fund (the "Fund") are being amortized
on a straight-line basis
over a five-year period from the Fund's commencement of
operations. In the
event any initial shares of The Tocqueville Small Cap
Value Fund are redeemed
during the amortization period, the proceeds of
redemption will be reduced by
the pro-rata portion of any unamortized organization
expenses in the same pro-
portion as the number of shares redeemed bears to the
number of initial shares
held at the time of redemption.
-------------------------------------------------------
---------- ---------------
OTHER
Security transactions are accounted for on the trade
date, the date the order
to buy or sell is executed. Dividend income is
recognized on the ex-dividend
date or at the time the Fund becomes aware, whichever
is earlier. Interest in-
come is recognized on the accrual basis and market
discount is accounted for on
the effective interest method. The Trust uses the
first-in, first-out method
for determining realized gain or loss on investments
23
<PAGE>
sold for both financial reporting and federal tax
purposes. Distributions to
shareholders are recorded on the ex-dividend date.
Expenses incurred by the
Trust not specifically identified to a Fund are
allocated on a basis relative
to the size of each Fund's daily net asset value.
-------------------------------------------------------
---------- ---------------
NOTE 2
Tocqueville Asset Management L.P. ("Tocqueville"), is
the investment adviser
to the Trust under an Investment Advisory Agreement
approved by shareholders on
February 26, 1990. For its services, Tocqueville
receives a fee from The
Tocqueville Small Cap Value Fund, payable monthly, at
an annual rate of .75% of
the first $100 million of the Fund's average daily net
assets, .70% of the next
$400 million of average daily net assets, and .65% of
average daily net assets
in excess of $500 million.
Certain states in which shares of the Trust are
qualified for sale imposed
limitations on the expenses of the Trust. The Advisory
Agreement provides that
if, in any fiscal year, the total expenses of the Trust
(excluding taxes, in-
terest, extraordinary expenses and the distribution fee
but including the Ad-
viser's fee) exceed the expense limitation applicable
to the Trust imposed by
the securities regulations of any state in which it is
registered to sell
shares, Tocqueville will pay or reimburse the Trust for
that excess up to the
amount of its fee. The most restrictive limitation
currently applicable (ex-
cluding the items described above) limits a fund to
2.5% of the Trust's first
$30,000,000 of average daily net assets, 2% of the next
$70,000,000, and 1.5%
of the Trust's average daily net assets over
$100,000,000. No such reimburse-
ment was required for the six months ended April 30,
1996.
-------------------------------------------------------
---------- ---------------
24
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 3
Effective August 14, 1995 the Fund offered two
classes of shares: Class A and
Class B shares. Shares of each class are identical
except for the initial sales
load on Class A shares, a contingent deferred sales
charge on Class B shares,
distribution fees, and voting rights on matters
effecting a single class. All
Fund shares outstanding before August 14, 1995 were
designated as Class A
shares. At April 30, 1996, there were an unlimited
number of shares of benefi
cial interest authorized ($0.01 par value).
Transactions in the Fund's shares
were as follows:
<TABLE>
<CAPTION>
CLASS A
------- SIX
MONTHS ENDED YEAR ENDED
APRIL 30, 1996
OCTOBER 31, 1995
----------------
----------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ ------
<S> <C> <C>
<C> <C>
Shares sold 167,975
$1,970,920 146,814 $1,651,218
Shares issued on reinvest-
ment of dividends 45,104
523,196 13,078 125,021
Shares redeemed (129,715)
(1,569,534) (33,611) (364,941)
-------- ---------
- ------- ----------
Net increase 83,364
$924,582 126,281 $1,411,298
-------- ---------
- ------- ----------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------
FOR THE
PERIOD FROM
AUGUST 14, 1995
SIX MONTHS ENDED
THROUGH
APRIL 30, 1996
OCTOBER 31, 1995
----------------
----------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ ------
<S> <C> <C>
<C> <C>
Shares sold 681 $
8,000 16 $ 200
Shares issued on reinvestment
of dividends 1
9 -- --
Shares redeemed -- -
- -- --
------ -------
-- ------- --------
Net increase 682 $
8,009 16 $ 200
------ -------
-- ------- --------
</TABLE>
25
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 4
Tocqueville Securities L.P. (the "Distributor") acts
as distributor for
shares of the Fund and purchases shares of the Fund at
net asset value to fill
orders as received from investment dealers. For the six
months ended April 30,
1996, the Distributor received net commissions of $280
from the sale of the
Fund's shares.
The Fund has adopted distribution plans related to
the sale of Class A and
Class B shares pursuant to which the Fund may incur
distribution expenses in
amounts not to exceed 0.25% and 0.75% per annum of the
average daily net assets
of Class A and Class B shares, respectively. Such
expenses may include, but are
not limited to, advertising, printing, and distribution
of sales literature,
prospectuses and other materials, and payments to
dealers and shareholders ser-
vicing agents including the Distributor. Under the
distribution plans, the Dis-
tributor is permitted to carry forward expenses not
reimbursed by the distribu
tion fees to subsequent fiscal years for submission to
the Fund for payment,
subject to the continuation of the Plan. For the six
months ended April 30,
1996, the Distributor has waived distribution fees of
$25,509 and $11, respec-
tively for Class A and Class B shares. The Distributor
has informed the Trust
that, as of March 31, 1996, there were $62,300 in
unreimbursed expenses for the
Fund.
Class B shares which are redeemed within six years of
purchase are subject to
a contingent deferred sales charge at rates ranging
from 5% to 0%, charged as a
percentage of the dollar amount subject thereto. There
were no deferred sales
charges paid to the Distributor for the six months
ended April 30, 1996.
Commissions earned by the Distributor for services
rendered as registered
broker-dealer in securities transactions for the Fund
for the six months ended
April 30, 1996 were $15,941.
Pursuant to an Administrative Services Agreement,
effective September 15,
1995, the Fund pays to the Distributor a fee computed
and paid monthly at an
annual rate of 0.15% of the average daily net assets of
the Fund. During the
six months ended April 30, 1996, the Distributor waived
administration fees of
$7,653.
26
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 5
Purchases and sales of investment securities
(excluding short-term instru-
ments) for the six months ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
SMALL CAP
VALUE FUND
-----------
<S> <C>
PURCHASES
U.S. Government $ --
Other 4,651,759
----------
$4,651,759
----------
SALES
U.S. Government $ --
Other 4,872,740
----------
$4,872,740
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
NOTE 6
Unrealized appreciation at April 30, 1996 based on
cost of securities for
Federal tax purposes is as follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
SMALL CAP
VALUE FUND
----------- <S>
<C>
Gross unrealized appreciation $2,326,985
Gross unrealized depreciation (246,868)
----------
Net unrealized appreciation $2,080,117
----------
Cost of investments $9,203,047
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
27
<PAGE>
[THIS PAGE INTENTIONALLY LEFT
BLANK]
28
<PAGE>
The Tocqueville Asia-Pacific Fund
-------------------------------------------------------
---------- ---------------
DEAR FELLOW SHAREHOLDERS:
During the first half of our fiscal year, from
November 1,
1995 to April 30, 1996, the net asset value of a
Class A share of
The Tocqueville Asia-Pacific Fund increased 15.9%,
vs. an increase
of 18.0% of the Morgan Stanley Pacific Index.
This performance was helped by two factors: 1)
a decision to
increase our portfolio's exposure to the fast
growing economies of
the Philippines and Indonesia, and 2) the good
performance of sev-
eral individual stock selections.
We continue to anticipate short-term economic
and financial
volatility in the region, in response to economic
and financial
trends in the United States, as well as to
political and trade de-
velopments in China. As a result, we plan to invest
the proceeds
from recent subscriptions to the Fund slowly,
taking advantage of
occasional price corrections in individual stocks
or markets.
Fortunately, there is a growing number of
medium-sized, good
quality companies in which to invest in the region.
Very often,
these are companies in industries that would be
mature and slow-
growing in Japan, Europe or the United States.
Locally, however,
the early stage of development and powerful
demographics are al-
lowing them to experience superior growth rates
that are not always
reflected in their stock market valuations.
In addition, we believe that there are
opportunities to
achieve excellent long-term growth by concentrating
on a niche seg-
ment of the market between the two big classes of
investors: large
international institutions whose massive purchases
and sales of
large capitalization stocks can disrupt markets and
move prices
without much fundamental reason, and local
investors who often tend
to be mostly interested in short-term trading.
While still concerned about the possible
impact of a U.S.
slowdown on the economies of the region, we have
grown more confi-
dent about the long-term potential of many of our
portfolio compa-
nies. As a result, we plan to add to these
positions every time op-
portunities arise.
Francois Sicart
Portfolio Manager
29
<PAGE>
-------------------------------------------------------
---------- ---------------
TOP TEN HOLDINGS
<TABLE>
<S> <C>
Woodside Petroleum
(4.11%) Strong exploration activity
should boost profit growth.
Fisher & Paykel
(4.10%) Fairly valued in the decline
whiteware market.
Amploex Ltd. (3.46%) Important underdeveloped
reserves. Mobil should improve
the bid for a takeover.
Manhattan Card Co., Beneficiary of strong credit
card and consumer finance in
(4.59%) Hong Kong.
High growth potential in
China. China Apollo Hldgs. Largest manufacturer
and distributor of tonic and herbal
(3.45%) medicine
drink in China. Strong
marketing should boost brand name.
Rohm Co. (3.39%) Cheap valuation at 19 times
earnings compared to Japanese
market.
Double digit growth in IC
sales should boost results.
DMCI Holdings (3.32%) Lead constructor in
Philippines with strong balance sheet
and huge
order book.
Citra Marga Nusaphala Toll road operator with high
operating and net margins at
(3.13%) 70% and
61%, respectively.
Samsung Electronics Cheap valuation at 4 times
earnings. Lower DRAM
(2.90%) production should stabilize
DRAM price and thus boost its
results.
House of Investment Beneficiary of high growth in
consumer finance and in
(2.85%) road construction.
</TABLE>
30
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC
FUND
SELECTED FINANCIAL INFORMATION
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
(UNAUDITED)
CLASS A CLASS B
CLASS A CLASS
B
------- -------
------- -----
--
FOR THE
PERIOD FROM PERIOD
FROM SIX MONTHS
NOVEMBER 12,
AUGUST 14,
PER SHARE OPERATING ENDED
YEAR ENDED OCTOBER 31, 1991 TO
1995 TO PERFORMANCE APRIL 30,
---------------------- OCTOBER 31,
OCTOBER 31, (FOR A SHARE OUTSTANDING 1996
1995 1994 1993 1992
1994
THROUGHOUT THE PERIOD) -------------------- -
--- ---- ---- ------------ -----
------
<S> <C> <C> <C>
<C> <C> <C> <C>
Net asset value,
beginning of period $ 9.07 $ 9.03 $
12.16 $ 11.26 $ 10.50 $10.00
$9.35
------ ------ ---
----- ------- ------- ------ --
---
Income from investment
operations:
Net investment income
(loss) 0.03(a) 0.01(b)
(0.01)(e) (0.05)(f) (0.21) (0.07)(g)
0.00
Net realized and
unrealized gain 1.41 1.41
(1.39) 1.45 1.62 0.57
(0.32)
------ ------ ---
----- ------- ------- ------ --
---
Total from investment
operations 1.44 1.42
(1.40) 1.40 1.41 0.50
(0.32)
------ ------ ---
----- ------- ------- ------ --
---
Less distributions
Dividends from net
investment income -- --
0.00 0.00 0.00 0.00 -
-
Distributions from net
realized gains -- --
(1.69) (0.50) (0.65) (0.00)
--
------ ------ ---
----- ------- ------- ------ --
---
Total distributions -- --
(1.69) (0.50) (0.65) (0.00)
--
------ ------ ---
----- ------- ------- ------ --
---
Change in net asset
value for the period 1.44 1.42
(3.09) 0.90 0.76 0.50
--
------ ------ ---
----- ------- ------- ------ --
---
Net asset value, end of
period $10.51 $10.45 $
9.07 $ 12.16 $ 11.26 $10.50
$9.03
------ ------ ---
----- ------- ------- ------ --
---
Total Return (c)(d) 15.9% 15.9%
(11.63)% 12.81% 15.00% 5.00%
(3.42)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of year
(000 for Class A) $5,634 $ 224 $
4,686 $ 5,187 $ 3,886 $1,898 $
193
Ratio of average net
assets of:
Expenses 3.44%*(a) 3.44%*(b)
3.55%(e) 2.82%(f) 4.63% 4.90%(g)* -
-
Net investment income 0.46%*(a) 0.46%*(b)
(0.26)%(e) (0.87)%(f) (2.42)% (0.73)%(g)*
--
Portfolio turnover rate 107%* --
106% 168% 216% 101% --
</TABLE>
--------
(a) Net of fees waived amounting to 1.40% of average
net assets for the period
ended April 30, 1996.
(b) Net of fees waived amounting to 1.90% of average
net assets for the period
ended April 30, 1996.
(c) Does not include maximum sales charge of 4% on
Class A shares.
(d) Does not include contingent deferred sales charge
for Class B shares. Not
annualized.
(e) Net of fees waived amounting to 1.27% of average
net assets for the year
ended October 31, 1995.
(f) Net of fees waived amounting to 1.00% of average
net assets for the year
ended October 31, 1994.
(g) Net of fees waived amounting to 0.28% of average
net assets for the period
ended October 31, 1992.
*Annualized
31
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC
FUND
INVESTMENTS AS OF APRIL 30,
1996
(unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
US $
Market % of
COMMON STOCKS--95.5% Shares Value Net Assets
--------------------------------------------------
<S> <C> <C> <C>
AUSTRALIA--17.0%
Ampolex Ltd.(a) 60,000 $205,044 3.64%
Posgold Ltd. 50,000 135,124 2.40%
Crown Ltd.(a) 75,000 153,783 2.73%
QNI Ltd. 35,000 86,613 1.54%
Resolute Samantha 58,571 145,864 2.59%
Woodside Petroleum 40,000 231,283 4.11%
--------------------------------------------------
957,711
--------------------------------------------------
HONG KONG--13.3%
ASM Pacific Tech. 150,000 147,372 2.62%
China Apollo Holdings 700,000 194,558 3.45%
Manhattan Card Co. 340,000 202,185 3.59%
Guangdong Investments 220,000 135,802 2.41%
Yips Hang Cheung 500,000 66,576 1.18%
--------------------------------------------------
746,493
--------------------------------------------------
INDONESIA--10.2%
Astra International 100,000 147,847 2.62%
Bukaka Teknik Utam 35,000 59,996 1.06%
Citra Marga Nusaph 120,000 176,130 3.13%
Pab K Tjiwi Kimia 70,000 73,495 1.30%
Steady Safe 77,000 114,667 2.04%
--------------------------------------------------
572,135
</TABLE>
<TABLE>
---------------------------------------------
<S> <C> <C> <C>
JAPAN--18.2%
Bank of Tokyo 5,250 121,468 2.16%
FCC Co. Ltd. 2,000 74,573 1.32%
H.I.S. Co. 1,000 58,894 1.05%
Honda Motor Co. 5,000 114,250 2.03%
Meitec Corp. 5,000 110,426 1.96%
Mitsui OSK Lines 33,000 119,891 2.13%
Oiles Corp. 2,000 82,604 1.47%
Paramount Bed Co. 2,200 150,390 2.67%
Rohm Co. 3,000 191,022 3.39%
---------------------------------------------
1,023,518
---------------------------------------------
MALAYSIA--7.7%
ACP Industries 25,000 122,387 2.17%
Commerce Asset Hldgs. 13,000 88,680 1.57%
Cycle & Carr Bin 15,000 94,499 1.68%
Road Builder 29,000 128,004 2.27%
---------------------------------------------
433,570
---------------------------------------------
SOUTH KOREA--2.9%
Samsung Electronic 1,200 163,444 2.90%
---------------------------------------------
163,444
---------------------------------------------
</TABLE>
See Notes to Financial Statements
(a) Non-income producing security
<TABLE>
<CAPTION>
US $
Market % of
COMMON STOCKS (CONTINUED) Shares
Value Net Assets
-------------------------------------------------------
---------- --------------
<S> <C>
<C> <C>
NEW ZEALAND--11.9%
Carter Holt Harvey
50,000 $ 118,491 2.10%
Fisher & Paykel
70,400 231,153 4.10%
Fletcher Challenge Paper
50,000 103,036 1.83%
Fletcher Challenge Energy
25,000 53,579 0.95%
Telecom Corp. of New Zealand
25,000 106,127 1.88%
Fletcher Challenge Building
25,000 59,246 1.05%
-------------------------------------------------------
---------- --------------
671,632
-------------------------------------------------------
---------- --------------
PHILIPPINES--7.9%%
DMCI Holdings, Inc.
280,000 187,166 3.32%
House of Investments
600,000 160,428 2.85%
Steniel Manufacturing Corp.
700,000 100,267 1.78%
-------------------------------------------------------
---------- --------------
447,861
-------------------------------------------------------
---------- --------------
SINGAPORE--4.2%
Dev. Bank of Singapore
11,000 139,290 2.47%
United Overseas Bank
10,000 97,460 1.73%
-------------------------------------------------------
---------- --------------
236,750
-------------------------------------------------------
---------- --------------
THAILAND--2.2%
SCF Fin & Sec. Co.
296 786 0.01%
Siam City Bank PLC
40,000 47,931 0.85%
Siam City Credit(a)
235 1,015 0.02%
Thai Farmers Bank
6,400 73,521 1.30%
-------------------------------------------------------
---------- --------------
123,253
-------------------------------------------------------
---------- --------------
Total Common Stocks
(Cost $4,859,334)
5,376,367
-------------------------------------------------------
---------- --------------
SHORT-TERM INVESTMENTS--5.1%
Repurchase Agreement, State Street Bank & Trust
Company, dated 4/30/96, due 5/01/96, 2%
(Collateralized by U.S. Treasury Notes valued
at $300,158. Repurchase proceeds of $290,016
(Cost $290,000.)
290,000 $ 290,000
-------------------------------------------------------
---------- --------------
TOTAL INVESTMENTS
(COST $5,149,334)--100.6%
$5,666,367
OTHER ASSETS & LIABILITIES,
NET--(0.6)%
(32,408)
-------------------------------------------------------
---------- --------------
TOTAL NET ASSETS--100.0%
$5,633,959
----------
</TABLE>
32
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC
FUND
STATEMENT OF ASSETS AND
LIABILITIES
April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
ASSETS
Investments, at values (identified cost $5,149,334)
$5,666,367
Cash
161
Dividends and interest receivable
8,749
Other assets
1,529
----------
$5,676,806
----------
LIABILITIES
Accrued expenses
42,847
----------
42,847
----------
NET ASSETS
$5,633,959
----------
At April 30, 1996 net assets consisted of:
Capital paid in
$5,291,139
Undistributed net investment income (loss)
(168,963)
Net accumulated undistributed realized gain (loss)
(5,250)
Net unrealized appreciation
517,033
----------
$5,633,959
----------
CLASS A
NET ASSET VALUE PER SHARE ($5,633,735/535,528 shares
outstanding) $10.51
----------
Maximum offering price ($10.51/96%)
$10.95
----------
CLASS B
NET ASSET VALUE PER SHARE AND MAXIMUM OFFERING PRICE
($224/21 shares outstanding)
$10.45
----------
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC
FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C> INVESTMENT INCOME
Dividends (net of $4,416 foreign taxes withheld) $
86,364 Interest
13,145
--------
99,509
-------- EXPENSES
Investment adviser's fee (Note 2)
25,507 Custodian and fund accounting
41,860 Transfer agent and shareholder services
15,470 Professional fees
17,290 Distribution (Note 4)
Class A
6,377 Class B
1 Administration fee (Note 4)
3,826 Printing
1,820 Registration
6,370 Trustees fee
910 Fidelity bond
910 Other
3,214
--------
Total expenses 123,555
Less: Fees waived (Note 4)
(35,711)
-
------- Net expenses
87,844
-------- NET INVESTMENT INCOME
11,665
-------- NET REALIZED AND
UNREALIZED GAIN (LOSS):
Net realized gain on:
Investments
131,794 Foreign currency transactions
53,846
--------
185,640
-------- Net unrealized
appreciation (depreciation) on:
Investments
555,024 Foreign currency translation
(3)
--------
555,021
-------- Net gain on
investments 740,661
--------
Net increase in net assets resulting from operations $752,326
-----
--- </TABLE>
See Notes to Financial Statements.
34
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC
FUND
STATEMENTS OF CHANGES IN NET
ASSETS
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
APRIL 30,
1996 ENDED
(UNAUDITED) OCTOBER 31, 1995
-------------
----- ----------------
<S> <C>
<C> INCREASE IN NET ASSETS
Operations
Net investment income (loss) $
11,665 $ (12,765)
Net realized gain (loss)
185,640 (355,199)
Net unrealized appreciation
(depreciation)
555,021 (208,980)
---------
- ----------
Net increase (decrease) resulting from
operations
752,326 (576,944)
Distributions to shareholders from:
Net investment income (loss)
Class A
0 0
Class B
0 0
Net realized gain (loss) on investments
Class A
0 (720,093)
Class B
0 0
Fund share transactions (Note 3)
Class A
194,940 796,982
Class B
0 200
---------
- ----------
Net Increase in net assets
947,266 (499,855)
NET ASSETS
Beginning of period
4,686,693 5,186,548
---------
- ----------
End of period
$5,633,959 $4,686,693
---------
- ----------
</TABLE>
See Notes to Financial Statements
35
<PAGE>
THE TOCQUEVILLE ASIA-PACIFIC
FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
-------------------------------------------------------
---------- --------------
NOTE 1
The Tocqueville Trust (the "Trust") was organized as
a Massachusetts busi-
ness trust registered under the Investment Company Act
of 1940 as amended, as
a diversified, open-end management investment company.
The Trust consists of
five separate Funds: The Tocqueville Fund, The
Tocqueville Asia-Pacific Fund,
The Tocqueville Small Cap Value Fund, The Tocqueville
Europe Fund and The
Tocqueville Government Fund (the "Funds"). The
following is a summary of sig-
nificant accounting principles followed by the Trust in
the preparation of its
financial statements.
-------------------------------------------------------
---------- --------------
SECURITY VALUATION
Investments in securities, including foreign
securities, traded on an ex-
change or quoted on the over-the-counter market are
valued at the last sale
price or, if no sale occurred during the day, at the
mean between closing bid
and asked prices, as last reported by a pricing service
approved by the Trust-
ees. When market quotations are not readily available,
or when restricted se-
curities or other assets are being valued, such assets
are valued at fair
value as determined in good faith by or under
procedures established by the
Trustees. Short-term investments are stated at cost
which, together with ac-
crued interest, approximates market value.
-------------------------------------------------------
---------- --------------
FEDERAL INCOME TAX
It is the Trust's policy to comply with the
provisions of the Internal Reve-
nue Code ("Code") applicable to regulated investment
companies and to distrib-
ute all of its taxable income to its shareholders. It
is also the Trust's in-
tention to distribute amounts sufficient to avoid
imposition of any excise tax
under Section 4982 of the Code. Therefore, no federal
income or excise tax
provision is required.
-------------------------------------------------------
---------- --------------
FOREIGN CURRENCY TRANSLATION
Investments and other assets and liabilities
denominated in foreign curren-
cies are translated to U.S. dollars at the prevailing
rates of exchange. The
Tocqueville Asia-Pacific Fund is engaged in
transactions in securities denomi-
nated in foreign currencies and, as a result, enters
into foreign exchange
contracts. The Fund is exposed to additional market
risk as a result of
changes in the value of the underlying currency in
relation to the U.S. dol-
lar. The value of foreign currency contracts are
"marked to market" on a daily
basis, which reflects the change in the market value of
the contract at the
close of each day's trading, resulting in daily
unrealized gains and/or loss-
es. When the contracts are closed, the Fund recognizes
a realized gain or
loss.
The Fund does not isolate that portion of the results
of operations result-
ing from changes in foreign exchange rates on
investments from the fluctua-
tions arising from changes in market prices of
securities held. Such fluctua-
tions are included with the net realized and unrealized
gain or loss from in-
vestments.
36
<PAGE>
Reported net realized foreign exchange gains or
losses arise from sales of
foreign currencies, currency gains or losses realized
between the trade and
settlement dates on securities transactions, the
differences between the
amounts of dividends, interest, and foreign withholding
taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the
amounts actually received
or paid. Net unrealized foreign exchange gains and
losses arise from changes in
the value of assets and liabilities other than
investments in securities at the
end of the fiscal period, resulting from changes in the
exchange rates.
-------------------------------------------------------
---------- ---------------
OTHER
Security transactions are accounted for on the trade
date, the date the order
to buy or sell is executed. Dividend income is
recognized on the ex-dividend
date or at the time the Fund becomes aware, whichever
is earlier. Interest in-
come is recognized on the accrual basis and market
discount is accounted for on
a straight-line basis from settlement date. The Trust
uses the first-in, first-
out method for determining realized gain or loss on
investments sold for both
financial reporting and federal tax purposes.
Distributions to shareholders are
recorded on the ex-dividend date. Expenses incurred by
the Trust not specifi-
cally identified to a fund are allocated on a basis
relative to the size of
each fund's daily net asset value. It is the Fund's
policy to take possession
of securities as collateral under repurchase agreements
and to determine on a
daily basis that the value of such securities are
sufficient to cover the value
of the repurchase agreements.
-------------------------------------------------------
---------- ---------------
NOTE 2
Tocqueville Asset Management L.P. ("Tocqueville"), is
the investment adviser
to the Trust under an Investment Advisory Agreement
approved by shareholders on
February 26, 1990. For its services, Tocqueville
receives a fee from the Fund,
payable monthly, at an annual rate of 1.00% on the
first $50 million of its av-
erage daily net assets, .75% of the next $50 million of
average daily net as-
sets, and .65% of average daily net assets in excess of
$100 million.
Certain states in which shares of the Trust are
qualified for sale impose
limitations on the expenses of the Trust. The Advisory
Agreement provides that
if, in any fiscal year, the total expenses of the Trust
(excluding taxes, in-
terest, extraordinary expenses and the distribution fee
but including the Ad-
viser's fee) exceed the expense limitation applicable
to the Trust imposed by
the securities regulations of any state in which it is
registered to sell
shares, Tocqueville will pay or reimburse the Trust for
that excess up to the
amount of its fee. The most restrictive limitation
currently applicable (ex-
cluding the items described above) limits a fund to
2.5% of the Trust's first
$30,000,000 of average daily net assets, 2% of the next
$70,000,000, and 1.5%
of the Trust's average daily net assets over
$100,000,000. The Adviser waived
its management advisory fee for the year ended April
30, 1996, aggregating
$25,507, due to this limitation.
-------------------------------------------------------
---------- ---------------
37
<PAGE>
-------------------------------------------------------
---------- --------------
NOTE 3
Effective August 14, 1995 the Fund offered two
classes of shares: Class A
and Class B shares. Shares of each class are identical
except for the initial
sales load on Class A shares, a contingent deferred
sales charge on Class B
shares, distribution fees, and voting rights on matters
effecting a single
class. All Fund shares outstanding before August 14,
1995 were designated as
Class A shares. At April 30, 1996, there were an
unlimited number of shares of
beneficial interest authorized ($0.01 par value).
Transactions in the Fund's
shares were:
<TABLE>
<CAPTION>
CLASS A
-------
SIX MONTHS
ENDED
YEAR ENDED
APRIL 30, 1996
OCTOBER 31, 1995
--------------
----------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ ------
<S> <C> <C>
<C> <C>
Shares sold 30,954
303,823 140,708 $1,243,264
Shares issued on reinvestment
of distributions 0
0 50,479 461,895
Shares redeemed (11,566)
(108,883) (101,157) (908,177)
------- -------
- -------- ----------
Net increase 19,388
194,940 90,030 $ 786,982
------- -------
- -------- ----------
</TABLE>
<TABLE>
<CAPTION>
CLASS B
-------
SIX MONTHS PERIOD
FROM ENDED
AUGUST 14, 1995 APRIL 30, 1996
TO OCTOBER 31, 1995 ------
-----------
----------------------
SHARES AMOUNT SHARES
AMOUNT ------- ------- --
------- ----------
<S> <C> <C> <C>
<C> Shares sold 0 0
21 $ 200
Shares redeemed 0 0 --
--
------- ------- ---------
----------
Net increase 0 0 21
$ 200
------- ------- ---------
----------
</TABLE>
-------------------------------------------------------
---------- -------------
NOTE 4
Tocqueville Securities L.P. (the "Distributor") acts
as distributor for
shares of the Fund and purchases shares of the Fund at
net asset value to fill
orders as received from investment dealers. For the six
months ended April 30,
1996, the Distributor received no net commissions from
the sale of the Fund's
shares.
The Fund has adopted distribution plans related to
the sale of Class A and
Class B shares pursuant to which the Fund may incur
distribution expenses in
an amount not to exceed 0.25% and 0.75% per annum of
the average daily net as-
sets of Class A and Class B shares, respectively. Such
expenses may include,
but are not limited to, advertising, printing, and
distribution of sales lit-
erature, prospectuses and other materials, and payments
to dealers and share-
holders servicing agents including the Distributor.
Under the distribution
plans, the Distributor is permitted to carry forward
expenses not reimbursed
by the distribution fees to subsequent fiscal years for
submission to the Fund
for payment, subject to the continuation of the Plan.
For the six months end-
ed. April 30, 1996, the Distributor has waived
distribution fees of $6,377 and
$1, respectively, for Class A and Class B shares. The
Distributor has informed
the Trust that, as of March 31, 1996 there were $65,479
in unreimbursed ex-
penses for the Fund.
38
<PAGE>
Class B shares which are redeemed within six years of
purchase are subject to
a contingent deferred sales charge at rates ranging
from 5% to 0%, charged as a
percentage of the dollar amount subject thereto. There
were no contingent de-
ferred sales charges paid to the Distributor for the
six months ended April 30,
1996.
Pursuant to an Administrative Services Agreement,
effective September 15,
1995, the Fund pays to the Distributor a fee computed
and paid monthly at an
annual rate of 0.15% of the average daily net assets of
the Fund. During the
six months ended April 30, 1996, the Distributor waived
administration fees of
$3,826.
-------------------------------------------------------
---------- ---------------
NOTE 5
Purchases and sales of investment securities
(excluding short-term instru-
ments) for the six months ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
ASIA-
PACIFIC
FUND
-----------
<S> <C>
PURCHASES
U.S. Government $ --
Other 3,580,639
----------
$3,580,639
----------
SALES
U.S. Government $ --
Other 2,736,127
----------
$2,736,127
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
39
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 6
Unrealized depreciation at April 30, 1996 based on
cost of securities for
Federal tax purposes is as follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
ASIA-
PACIFIC
FUND
-----------
<S> <C>
Gross unrealized appreciation $ 712,780
Gross unrealized depreciation (195,747)
----------
Net unrealized appreciation $ 517,033
----------
Cost of investments $5,149,334
----------
</TABLE>
At April 30, 1996, the Fund had tax basis capital
losses of $347,699 avail-
able to offset future gains through October 31, 2003.
-------------------------------------------------------
---------- ---------------
40
<PAGE>
The Tocqueville Europe Fund
-------------------------------------------------------
---------- ---------------
DEAR FELLOW SHAREHOLDERS:
During the first half of our Fund's fiscal
year, from November
1, 1995 to April 30, 1996, the Net Asset Value of a
Class A share
of The Tocqueville Europe Fund increased 10.8% vs.
8.5% for the
Morgan Stanley Europe Index.
This performance was helped by our decision,
last winter, to
significantly increase our exposure to the French
market in the
midst of massive strikes that were crippling the
country. The end
of the strikes, as well as a stronger tone of the
French Franc
against the D-Mark, have allowed for a significant
easing of mone
tary policy which, in turn, has produced a strong
rally in the
French stock market.
While there may well be a pause in this rally
in the next few
months, we are impressed by the operating progress
made by many me-
dium-sized companies. This is reflected in good
sales growth in
spite of a stagnant domestic economy, as many small
companies have
developed significant export markets over the last
couple of years.
We believe that any recovery in domestic demand
will be accompanied
by a strong expansion of operating margins, and
that this will al-
low for a powerful second leg of the bull market at
some point.
To some extent, similar observations can be
made for other
markets in southern Europe, such as Italy and
Spain. With their
currencies stabilizing (under a less powerful D-
Mark), these coun-
tries seem capable of recovering from both economic
recession and
political instability. Since many medium-sized
companies in these
markets sell at valuations which seem compelling,
we are in the
process of increasing our exposure to Italian and
Spanish stocks,
while reducing positions in Germany--a country only
now discovering
its deep-rooted problems.
However, in Europe as in the United States,
stock selection is
more important than market timing. As a result,
much of our effort
centers on identifying companies with superior
long-term potential
at attractive valuations.
Francois Sicart
Portfolio Manager
41
<PAGE>
TOP TEN HOLDINGS
<TABLE>
<CAPTION>
Lagardere Groupe (4.00%) Defense,
transportation and communications are the main
activities. The
company participates to redefine the
concept of
defense for the European frontier. Improving
debt structure
should boost earnings.
<C> <S>
Carbonne Lorraine (3.71%) World's leading
company in graphite and in elaborated
carbon for
brakes, electrical engines, nuclear
air/watertightness, basic chemical. Carbonne Lorraine
enjoys economic
expansion in North America and in Asia.
UGC Droits Audio Visual (3.61%) The company has
the largest movie collection in France.
European TV
operators might be looking for a takeover to
acquire this
collection. Royal Dutch Petroleum (3.42%) The
world's largest private petroleum and gas company by
turnover and by
reserves. Good management, high
profitability
(the best in the sector) and high yield to
investors
deserves a hold for this company.
SEMA Group (3.27%) One of the
leading European groups in information
technology. Its
know-how in consulting engineering,
integrated
systems, softwares, outsourcing, its networks
in Europe and
Asia, and its past track-record are the
best arms for its
future development.
Rubis et Cie (3.17%) Positioned itself
between public petroleum company and
public/private
distribution companies, Rubis should
benefit from this
arbiter position to strengthen itself
as the first
independent French petroleum storage company
and as the first
French gas storage and distribution
company.
Emin Leydier (2.98%) The last family
group engaged in the production of
corrugated paper
and paper-box. With its new machineries,
and low cost
structure, the group is attempting to
develop in the
Spanish and Asian markets.
Faiveley (2.98%) Faiveley is the
world's leading manufacturer of doors,
pantographs, air
conditioning for rail vehicles, and
event recorders.
By acquiring its German competitor
Hagenuk, Faiveley
strengthens its leading positions in
Europe, Brazil,
Japan and China. The group is a
beneficiary of
lower steel prices and high-value order
books.
Getronics NV (2.70%) Largest
independent Dutch brand supplier of computer
services,
Getronics engages in information technology and
telecommunications. Turnover will reach 2082 million
florins in 1997
(vs 1410 million in 1994) and net profit
137.5 million
florins (vs. 80.2).
Chargeurs S.A. (2.59%) The forthcoming
separation into 2 listed companies should
allow Chargeurs
to get better financing conditions for
its development.
Communication (Pathe), movies (B-Sky-B)
and textile
(Chargeurs Laine).
</TABLE>
42
<PAGE>
THE TOCQUEVILLE EUROPE FUND
SELECTED FINANCIAL INFORMATION
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
(UNAUDITED)
CLASS A CLASS B
CLASS A CLASS B
------- -------
------- -------
FOR THE
PER SHARE OPERATING SIX MONTHS
PERIOD FROM PERIOD FROM
PERFORMANCE ENDED
YEAR ENDED AUGUST 1, 1994 AUGUST 14, 1995
(FOR A SHARE OUTSTANDING APRIL 30,
OCTOBER 31, TO TO
THROUGHOUT 1996
1995 OCTOBER 31, 1994 OCTOBER 31, 1995
THE PERIOD) --------------------- -
---------- ---------------- ----------------
<S> <C> <C>
<C> <C> <C>
Net asset value,
beginning of period $ 10.83 $10.81
$10.02 $10.00 $10.93
------- ------
------ ------ ------
Income from investment
operations:
Net investment income
(loss) (0.04)(a) (0.05)(b)
(0.01)(e) (0.04)(f) --
Net realized and
unrealized gain (loss) 1.21 1.21
0.82 0.06 (0.12)
------- ------
------ ------ ------
Total from investment
operations 1.17 1.16
0.81 0.02 (0.12)
------- ------
------ ------ ------
Less distributions
Dividends from net
investment income -- --
-- -- --
Distributions from net
realized gains -- --
-- -- --
------- ------
------ ------ ------
Total distributions -- --
-- -- --
------- ------
------ ------ ------
Change in net asset
value for the period 1.17 1.16
0.81 0.02 (0.12)
------- ------
------ ------ ------
Net asset value, end of
period $ 12.00 $11.97
$10.83 $10.02 $10.81
------- ------
------ ------ ------
Total Return (c)(d) 10.8% 10.8%
8.08% 0.20% (1.10)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of
period (000 for Class
A) $15,410 $ 219
$6,270 $2,516 $ 198
Ratio of average net
assets of:
Expenses 1.52%*(a) 1.52%*(b)
4.43%(e) 6.18%*(f) --
Net investment income (0.14)%*(a) (0.14)%*(b)
(0.53)%(e) (2.47)%*(f) --
Portfolio turnover rate 112% --
109.48% 0.00% --
</TABLE>
--------
(a) Net of fees waived amounting to 1.40% of average
net assets for the period
ended April 30, 1996.
(b) Net of fees waived amounting to 1.90% of average
net assets for the period
ended April 30, 1996.
(c) Does not include maximum sales charge of 4% for
Class A shares.
(d) Does not include contingent deferred sales charge
for Class B shares. Not
annualized.
(e) Net of fees waived amounting to 1.28% of average
net assets for the year
ended October 31, 1995.
(f) Net of fees waived amounting to 1.00% of average
net assets for the year
ended October 31, 1994.
* Annualized.
43
<PAGE>
THE TOCQUEVILLE EUROPE FUND
INVESTMENTS AS OF APRIL 30,
1996
(unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
US $
COMMON STOCKS AND Market % of
WARRANTS--96.0% Shares Value Net Assets
------------------------------------------------------
<S> <C> <C> <C>
FRANCE--54.8%
ADA 3,600 $ 229,774 1.49%
APEM 4,000 177,939 1.15%
Carbone Lorraine 4,000 571,727 3.71%
Eaux (Cie Generale) 2,000 217,396 1.41%
Casino Guichard Perr 9,000 338,568 2.20%
Charlatte 7,800 157,047 1.02%
Chargeurs SA 1,500 398,913 2.59%
Chaine et Trame 7,000 224,745 1.46%
Devernois 2,250 244,570 1.59%
Emin Leydier 5,400 458,503 2.98%
Europeene du Propulsion 3,000 360,327 2.34% UGC
Droits Audio Visual 10,000 556,447 3.61% GFI
Industries 1,500 221,651 1.44%
Faiveley warrants 7/99(a) 700 6,756 0.04%
Faiveley 7,700 458,697 2.98%
Infopoint 4,000 102,122 0.66%
Fraikin 8,000 382,183 2.48% CET
2,000 127,652 0.83% Int.
Metal Service 1,330 181,353 1.18%
Lagardere Groupe 23,000 617,005 4.00%
Mediascience 1,900 251,726 1.63%
Musee Grevin 20,000 301,529 1.96%
Rubis et Cie 13,000 487,786 3.17%
Robertet SA 1,130 310,131 2.01%
Rougier SA 2,000 187,610 1.22%
Rouleau Guichard 480 41,220 0.27%
Sidergie 500 113,920 0.74%
Thermador Holding 4,000 301,723 1.96%
Usinor Sacilor 21,000 324,730 2.11%
Vilmorin et Cie 1,000 91,097 0.59% ---
---------------------------------------------------
8,444,847
------------------------------------------------------
ITALY--1.0%
Marzotto & Figli 13,000 92,401 0.60%
Tecnost SPA 38,000 65,942 0.43%
------------------------------------------------------
158,343
------------------------------------------------------
NETHERLAND--16.0%
Akzo Nobel NV 1,625 188,722 1.22%
Elsevier NV 20,000 301,138 1.95%
Getronics NV 6,000 416,691 2.70% IHC
Caland NV 2,500 98,191 0.64%
KLM 2,500 83,893 0.54%
KNP BT (Kon) NV 7,300 174,246 1.13%
Kon PTT Nederland 5,000 187,628 1.22%
Royal Dutch Petroleum 3,700 527,091 3.42%
Stork NV 8,600 241,914 1.57%
Volker Stevin 3,650 248,162 1.61% ---
---------------------------------------------------
2,467,676
------------------------------------------------------
SPAIN--13.5%
Centros Com Pryca 8,220 189,647 1.23%
Const. Y Aux Ferr 5,500 193,906 1.26%
Conserv Campofrio 6,400 236,452 1.53%
Elec. Reun Zaragoza 8,477 216,567 1.41% ---
---------------------------------------------------
</TABLE>
(a) Non-income producing security
See Notes to Financial Statements
<TABLE>
<CAPTION>
US $
Market % of
COMMON STOCKS AND WARRANTS (CONTINUED) Shares
Value Net Assets
-------------------------------------------------------
---------- -----------
<S> <C>
<C> <C>
SPAIN (CONTINUED)
Fab Autom Renault 8,700
184,650 1.20%
Grupo Anaya SA 9,557
196,453 1.28%
Hidroel Cantabrico 3,000
100,225 0.65%
OMSA Alimentacion 32,500
111,643 0.72%
Radiotronica SA 30,000
334,869 2.17%
Repsol SA 3,000
110,012 0.71%
Energia E Ind. Arag 45,000
210,119 1.36%
-------------------------------------------------------
---------- -----------
2,084,543 ---------------------------------------------
-------------------- -----------
UNITED STATES--1.5%
Luxxotica Group SPA 2,900
233,450 %
-------------------------------------------------------
---------- -----------
233,450 -----------------------------------------------
------------------ -----------
UNITED KINGDOM--9.2%
British Gas 20,000
71,031 0.46%
British Telecom 3,100
170,045 1.10%
Cable & Wireless 30,500
239,364 1.55%
SEMA Group 50,000
504,138 3.27%
Hardy Oil & Gas 80,000
310,008 2.01%
Hays 10,000
64,560 0.42%
RTZ Corp. 4,000
62,965 0.41%
-------------------------------------------------------
---------- -----------
1,422,111 ---------------------------------------------
-------------------- -----------
Total Common Stocks and Warrants (Cost
$13,156,465)
14,810,970 --------------------------------------------
--------------------- -----------
<CAPTION>
FOREIGN CURRENCY Number of
OPTIONS--0.6% Contracts
---------------------------------------------------------------
-- -----------
<S> <C>
<C> <C>
Put 250 French Franc
June 96 19.00 2,750
2,255 0.01%
Put 625 German Mark
June 96 64.00 9,375
3,000 0.02%
Put 625 German Mark
Sept. 96 64.00 8,750
7,438 0.05%
Put 250 French Franc
June 96 19.50 8,000
16,800 0.11%
Put 625 German Mark
June 96 65.00 8,750
5,863 0.04%
Put 625 German Mark
Dec. 96 67 13,750
29,150 0.19%
Put 250 French Franc
Dec. 96 18.50 2,500
3,400 0.02%
Put 250 French Franc
Sept. 96 19.00 8,000
15,200 0.10%
-------------------------------------------------------
---------- -----------
Total Foreign Currency Options
(Cost $123,678)
83,106 -----------------------------------------------
------------------ -----------
SHORT-TERM INVESTMENTS--3.4%
Repurchase Agreement, State Street Bank &
Trust Company, dated 4/30/96, 2.0%
(Collateralized by U.S. Treasury Notes
valued at $529,093. Repurchase proceeds
of $516,029
(Cost $516,000.) 516,000
516,000 -----------------------------------------------
------------------ -----------
TOTAL INVESTMENTS
(COST $13,796,143)--100.0%
$15,410,076 OTHER ASSETS & LIABILITIES
108 -----------------------------------
------------------------------ -----------
TOTAL NET ASSETS--100.0%
$15,410,184
----------- </TABLE>
44
<PAGE>
THE TOCQUEVILLE EUROPE FUND
STATEMENT OF ASSETS AND
LIABILITIES
April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
ASSETS
Investments, at values (identified cost $13,796,143)
$15,410,076
Cash
400
Cash, foreign currency
25,469
Receivable for investments sold
267,745
Dividends and interest receivable
54,967
Other assets
24,914
-----------
$15,783,571
-----------
LIABILITIES
Payable for investments repurchased
329,305
Accrued expenses
44,082
-----------
373,387
-----------
NET ASSETS
$15,410,184
-----------
At April 30, 1996 net assets consisted of:
Capital paid in
$13,551,923
Undistributed net investment income (loss)
(115,040)
Net accumulated undistributed realized gain
359,368
Net unrealized appreciation
1,613,933
-----------
$15,410,184
-----------
CLASS A
NET ASSET VALUE PER SHARE ($15,409,965/1,284,326 shares
outstanding)
$12.00
-----------
Maximum offering price ($12.00/96%)
$12.50
-----------
CLASS B
NET ASSET VALUE PER SHARE AND MAXIMUM OFFERING PRICE
($219/18
shares outstanding)
$11.97
-----------
</TABLE>
See Notes to Financial Statements.
45
<PAGE>
THE TOCQUEVILLE EUROPE FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C> INVESTMENT INCOME
Dividends (net of $8,924 foreign taxes withheld) $
51,850 Interest
25,567
-----------
77,417
----------- EXPENSES
Investment adviser's fee (Note 2)
56,256 Custodian and fund accounting
39,130 Transfer agent and shareholder
services 15,470 Professional fees
17,290
Distribution (Note 4)
Class A
19,307 Class B
1 Administration fee (Note 4)
8,438 Printing
1,820 Registration
6,370 Trustees
fee 910
Fidelity bond 910
Other
3,640
----------- Total expenses
169,542 Less: Fees waived (Note 4)
(84,002)
-
---------- Net expenses
85,540
----------- NET INVESTMENT (LOSS)
(8,123)
-
---------- NET REALIZED AND UNREALIZED GAIN
Net realized gain (loss) on:
Investments
398,957 Foreign currency transactions
(134,379)
-
----------
264,578
----------- Net unrealized appreciation
(depreciation) on:
Investments
1,331,966 Foreign currency translation
(1,504)
-
----------
1,330,462
----------- Net gain on investments
1,595,040
----------- Net
increase in net assets resulting from operations $ 1,586,917
------
----- </TABLE>
See Notes to Financial Statements.
46
<PAGE>
THE TOCQUEVILLE EUROPE FUND
STATEMENTS OF CHANGES IN NET
ASSETS
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED FOR
THE YEAR APRIL 30, 1996
ENDED (UNAUDITED)
OCTOBER 31, 1995 -------
----------- ---------------- <S>
<C> <C> INCREASE (DECREASE) IN
NET ASSETS
Operations
Net investment income
(loss) $(8,123) $
(18,930) Net realized gain 264,578
20,664 Net unrealized
appreciation 1,330,462
258,755 -----------
---------- Net increase resulting
from operations 1,586,917
260,489 Distributions to
shareholders from:
Net investment income
Class A 0
0 Class B 0
0 Net realized gain on
investments
Class A 0
0 Class B 0
0 Fund share transactions
(Note 3)
Class A 7,553,610
3,492,707 Class B 0
200 --------
--- ---------- Net increase in net
assets 9,140,527
3,753,396 NET ASSETS
Beginning of period 6,269,657
2,516,261 -----------
---------- End of period
$15,410,184 $6,269,657
----------- ---------- </TABLE>
See Notes to Financial Statements.
47
<PAGE>
THE TOCQUEVILLE EUROPE FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
-------------------------------------------------------
---------- ---------------
NOTE 1
The Tocqueville Trust (the "Trust") was organized as
a Massachusetts business
trust registered under the Investment Company Act of
1940 as amended, as a di-
versified, open-end management investment company. The
Trust consists of five
separate Funds: The Tocqueville Fund, The Tocqueville
Asia-Pacific Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville
Europe Fund and The
Tocqueville Government Fund (the "Funds"). The
following is a summary of sig-
nificant accounting principles followed by the Trust in
the preparation of its
financial statements.
-------------------------------------------------------
---------- ---------------
SECURITY VALUATION
Investments in securities, including foreign
securities, traded on an ex-
change or quoted on the over-the-counter market are
valued at the last sale
price or, if no sale occurred during the day, at the
mean between closing bid
and asked prices, as last reported by a pricing service
approved by the Trust-
ees. When market quotations are not readily available,
or when restricted secu-
rities or other assets are being valued, such assets
are valued at fair value
as determined in good faith by or under procedures
established by the Trustees.
Short-term investments are stated at cost which,
together with accrued inter-
est, approximates market value.
-------------------------------------------------------
---------- ---------------
FEDERAL INCOME TAX
It is the Trust's policy to comply with the
provisions of the Internal Reve-
nue Code ("Code") applicable to regulated investment
companies and to distrib-
ute all of its taxable income to its shareholders. It
is also the Trust's in-
tention to distribute amounts sufficient to avoid
imposition of any excise tax
under Section 4982 of the Code. Therefore, no federal
income or excise tax pro-
vision is required.
-------------------------------------------------------
---------- ---------------
DEFERRED ORGANIZATION EXPENSES
Expenses incurred in connection with the organization
of The Tocqueville Eu-
rope Fund (the "Fund") are being amortized on a
straight-line basis over a
five-year period from the Fund's commencement of
operations. In the event any
initial shares of The Tocqueville Europe Fund are
redeemed during the amortiza-
tion period, the proceeds of redemption will be reduced
by the pro-rata portion
of any unamortized organization expenses in the same
proportion as the number
of shares redeemed bears to the number of initial
shares held at the time of
redemption.
-------------------------------------------------------
---------- ---------------
FOREIGN CURRENCY TRANSLATION
Investments and other assets and liabilities
denominated in foreign curren-
cies are translated to U.S. dollars at the prevailing
rates of exchange. The
Tocqueville Europe Fund is engaged in transactions in
securities denominated in
foreign currencies and, as a result, enters into
foreign exchange contracts.
The Fund is exposed to additional market risk as a
result of changes in the
value of the underlying currency in relation to the
U.S. dollar. The value of
foreign currency contracts are "marked to market" on a
daily basis, which re-
flects the changes in the market value of the contract
at the close of each
day's trading, resulting in daily unrealized gains
and/or losses. When the con-
tracts are closed, the Fund recognizes a realized gain
or loss.
48
<PAGE>
The Fund does not isolate that portion of the results
of operations resulting
from changes in foreign exchange rates on investments
from the fluctuations
arising from changes in market prices of securities
held. Such fluctuations are
included with the net realized and unrealized gain or
loss from investments.
Reported net realized foreign exchange gains or
losses arise from sales of
foreign currencies, currency gains or losses realized
between the trade and
settlement dates on securities transactions, the
differences between the
amounts of dividends, interest, and foreign withholding
taxes recorded on the
Fund's books, and the U.S. dollar equivalent of the
amounts actually received
or paid. Net unrealized foreign exchange gains and
losses arise from changes in
the value of assets and liabilities other than
investments in securities at the
end of the fiscal period, resulting from changes in the
exchange rates.
-------------------------------------------------------
---------- ---------------
OTHER
Security transactions are accounted for on the trade
date, the date the order
to buy or sell is executed. Dividend income is
recognized on the ex-dividend
date or at the time the Fund becomes aware, whichever
is earlier. Interest in-
come is recognized on the accrual basis and market
discount is accounted for on
a straight-line basis from settlement date. The Trust
used the first-in, first-
out method for determining realized gain or loss on
investments sold for both
financial reporting and federal tax purposes.
Distributions to shareholders are
recorded on the ex-dividend date. Expenses incurred by
the Trust not specifi-
cally identified to a fund are allocated on a basis
relative to the size of
each fund's daily net asset value. It is the Fund's
policy to take possession
of securities as collateral under repurchase agreements
and to determine on a
daily basis that the value of such securities are
sufficient to cover the value
of the repurchase agreements.
-------------------------------------------------------
---------- ---------------
NOTE 2
Tocqueville Asset Management L.P. ("Tocqueville"), is
the investment adviser
to the Trust under an Investment Advisory Agreement
approved by shareholders on
February 26, 1990. For its services, Tocqueville
receives a fee from the Fund,
payable monthly, at an annual rate of 1.00% on the
first $50 million of its av-
erage daily net assets, .75% of the next $50 million of
average daily net as-
sets, and .65% of average daily net assets in excess of
$100 million.
Certain states in which shares of the Trust are
qualified for sale impose
limitations on the expenses of the Trust. The Advisory
Agreement provides that
if, in any fiscal year, the total expenses of the Trust
(excluding taxes, in-
terest, extraordinary expenses and the distribution fee
but including the Ad-
viser's fee) exceed the expense limitation applicable
to the Trust imposed by
the securities regulations of any state in which it is
registered to sell
shares, Tocqueville will pay or reimburse the Trust for
that excess up to the
amount of its fee. The most restrictive limitation
currently applicable (ex-
cluding the items described above) limits a fund to
2.5% of the Trust's first
$30,000,000 of average daily net assets, 2% of the next
$70,000,000, and 1.5%
of the Trust's average daily net assets over
$100,000,000. For the six months
ended April 30, 1996, the Adviser has waived its
advisory fee of $56,256, due
to the expense limitation referred to above.
49
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 3
Effective August 14, 1995 the Fund offered two
classes of shares: Class A and
Class B shares. Shares of each class are identical
except for the initial sales
load on Class A shares, a contingent deferred sales
charge on Class B shares,
distribution fees, and voting rights on matters
effecting a single class. All
Fund shares outstanding before August 14, 1995 were
designated as Class A
shares. At April 30, 1996, there were an unlimited
number of shares of benefi-
cial interest authorized ($0.01 par value).
Transactions in the Fund's shares
were as follows:
<TABLE>
<CAPTION>
CLASS A
-------
SIX MONTHS ENDED YEAR
ENDED APRIL 30, 1996
OCTOBER 31, 1995
------------------- -------
--------- SHARES AMOUNT
SHARES AMOUNT ------ -
----- ------ ------ <S> <C>
<C> <C> <C> Shares sold
705,470 $7,555,515 346,755 $3,693,929
Shares redeemed (183) (1,905) (18,942)
(201,222)
------- ---------- --------
-----------
Net increase 705,287 $7,553,610 327,813
$3,492,707
------- ---------- --------
-----------
<CAPTION>
CLASS B
-------
FOR THE
PERIOD FROM
AUGUST 14, 1995 SIX MONTHS
ENDED TO APRIL
30, 1996 OCTOBER 31, 1995
---------------- -------------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold -- -- 18 $
200
Shares redeemed -- -- --
--
------- ---------- --------
-----------
Net increase -- -- 18
$ 200
------- ---------- --------
-----------
</TABLE>
50
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 4
Tocqueville Securities L.P. (the "Distributor") acts
as distributor for
shares of the Fund and purchases shares of the Fund at
net asset value to fill
orders as received from investment dealers. For the six
months ended April 30,
1996, the Distributor received no commissions from the
sale of the Fund's
shares. The Fund has adopted distribution plans related
to the sale of Class A
and Class B shares pursuant to which the Fund may incur
distribution expenses
in amounts not to exceed 0.25% and 0.75% per annum of
the average daily net as-
sets of Class A and Class B shares, respectively. Such
expenses may include,
but are not limited to, advertising, printing, and
distribution of sales liter-
ature, prospectuses and other materials, and payments
to dealers and sharehold-
ers servicing agents including the Distributor. Under
the distribution plans,
the Distributor is permitted to carry forward expenses
not reimbursed by the
distribution fees to subsequent fiscal years for
submission to the Fund for
payment, subject to the continuation of the Plan. For
the six months ended
April 30, 1996, the Distributor has waived distribution
fees of $19,307 and $1,
respectively for Class A and Class B shares. The
Distributor has informed the
Trust that, as of March 31, 1996, there were $66,599 in
unreimbursed expenses
for the Fund.
Class B shares which are redeemed within six years of
purchase are subject to
a contingent deferred sales charge at rates ranging
from 5% to 0%, charged as a
percentage of the dollar amount subject thereto. There
were no contingent de-
ferred sales charges paid to the Distributor for the
six months ended April 30,
1996.
Pursuant to an Administrative Services Agreement,
effective September 15,
1995, the Fund pays to the Distributor a fee computed
and paid monthly at an
annual rate of 0.15% of the average daily net assets of
the Fund. During the
six months ended April 30, 1996, the Distributor waived
administration fees of
$8,438.
51
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 5
Purchases and sales of investment securities
(excluding short-term instru-
ments) for the six months ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
EUROPE FUND
-----------
<S> <C>
PURCHASES
U.S. Government $ --
Other 15,673,490
-----------
$15,673,490
-----------
SALES
U.S. Government $ --
Other 6,302,384
-----------
$ 6,302,384
-----------
</TABLE>
-------------------------------------------------------
---------- ---------------
NOTE 6
Unrealized appreciation at April 30, 1996 based on
cost of securities for
Federal tax purposes is as follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
EUROPE FUND
-----------
<S> <C>
Gross unrealized appreciation $ 1,815,699
Gross unrealized depreciation (201,766)
-----------
Net unrealized appreciation $ 1,613,933
----------- Cost of
investments $13,796,143
----------- </TABLE>
-------------------------------------------------------
---------- ---------------
52
<PAGE>
The Tocqueville Government Fund
-------------------------------------------------------
---------- ---------------
DEAR FELLOW SHAREHOLDERS:
We are pleased to report returns for the first
six months of
our fiscal year. As of April 30, 1996, The
Tocqueville Government
Fund, Class A, generated a return of 1.25%. Over
the same period,
the average Intermediate Government Fund as
compiled by Lipper Ana-
lytical Fund generated a 0.36% return.
We attribute the Fund's superior performance
relative to its
peer group to our cautious approach. Unlike most
government bond
funds, The Tocqueville Government Fund is a capital
preservation
vehicle. Our primary goal is to preserve the
capital of our share-
holders against the vagaries of the financial
markets, the insidi-
ous ravages of inflation, and the burden of taxes.
In this respect, The Tocqueville Government
Fund shares the
philosophy of the equity funds in The Tocqueville
Trust family.
Over the long term, we recognize that equities are
the best vehicle
for preserving capital. Still, liquidity needs and
valuation con-
siderations require a fixed income option. The
Tocqueville Govern-
ment Fund provides that option. Since its mission
is to preserve
capital and reduce equity exposure, the Fund will
not speculate on
interest rate swings in an effort to generate
superior capital ap-
preciation. Rather, we will prudently "lean against
the wind" of
prevailing expectations in order to avoid the
damage to capital
that can occur when the consensus view is wrong.
The first six months of the current fiscal
year provide an ex-
cellent case in point. Six months ago, the
prevailing view was that
interest rates were bound to go lower. Further Fed
easing was a
forgone conclusion. Our thinking was different.
While we did not
forecast the higher interest rates that were
eventually obtained,
we did not see the rationale for investing
alongside the consensus.
The potential gain to be made from still lower
rates did not seem
large to us, even if the consensus were correct. In
addition, at
that time, with long rates at 6.0%, we felt just as
comfortable
with a 7.0% long rate as a 5.0% rate. As a result,
we kept our du-
ration to approximately two years, leaving us with
very limited ex-
posure to rising rates.
53
<PAGE>
-------------------------------------------------------
---------- ---------------
OUTLOOK
With long rates currently above 7.0%, we are
more comfortable
with a neutral weighting in our portfolio, which to
us means ap-
proximately a five-year duration. Our position does
not forecast a
decline in rates and recession, nor does it
anticipate a robust
economy that would drive inflationary expectations
and interest
rates higher. Rather, we feel that the bond markets
appear fairly
priced at present, given the state of economic
affairs.
What could change? A global expansion could
increase the worldwide demand for capital, causing
upward pressure on rates.
Most foreign developed economies have lagged the
economic cycle in
the U.S., allowing the domestic economy to grow
without a signifi-
cant rise in rates. The developing economies have
expanded at less
than their trend line rates during this period, and
some, notably
Mexico, have actually declined. A return to robust
growth would ex-
acerbate the capital shortage that might occur in a
global expan-
sion. Balanced against these potentials is the
likelihood of an
eventual slowdown in the U.S. economy, which could
well begin in
the latter half of 1996 and extend into 1997. We
view this as a
greater possibility than a resurgence of inflation
in the U.S. Our
neutral posture reflects the balancing of these
cross currents, but
we will remain vigilant for developments which
would cause us to
change our thinking.
Robert Kleinschmidt
Christopher Culp
Portfolio Managers
54
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
SELECTED FINANCIAL INFORMATION
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
(UNAUDITED)
CLASS A CLASS B
CLASS A CLASS B
------- ------- -
------- --------
FOR THE
PERIOD FROM
PER SHARE OPERATING SIX MONTHS
AUGUST 4, 1995
PERFORMANCE ENDED
TO (FOR A SHARE OUTSTANDING APRIL 30, 1996
OCTOBER 31, 1995
THROUGHOUT THE PERIOD) --------------------
-----------------------
<S> <C> <C>
<C> <C>
Net asset value, beginning
of period $10.05 $10.05 $
10.00 $ 9.97
------ ------ -
------- --------
Income form investment op-
erations:
Net investment income
(loss)(a)(b) 0.25(a) 0.23(b)
0.05(e) 0.04
Net realized and
unrealized gain (0.12) (0.12)
0.05 0.08
------ ------ -
------- --------
Total from investment op-
erations 0.13 0.11
0.10 0.12
------ ------ -
------- --------
Less distributions
Dividends from net invest-
ment income (0.22) (0.19)
(0.05) (0.04)
Distributions from net re-
alized gains -- --
-- --
------ ------ -
------- --------
Total distributions (0.22) (0.19)
(0.05) (0.04)
------ ------ -
------- --------
Change in net asset value
for the period (0.09) (0.08)
0.05 0.08
------ ------ -
------- --------
Net asset value, end of
period $ 9.96 $ 9.97 $
10.05 $ 10.05
------ ------ -
------- --------
Total Return (c)(d) 1.25%(a) 1.08%(b)
6.26%* 8.42%*
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000 for Class A) $9,194 $205 $
6,506 $ 201
Ratio of average net as-
sets of:
Expenses 1.53%*(a) 1.53%*(b)
2.74%*(e) --
Net investment income 4.27%*(a) 4.27%*(b)
3.08%*(e) --
Portfolio turnover rate 141%* -- %
0.00% --
</TABLE>
--------
(a) Net of fees waived amounting to 0.90% of average
net assets for the period
ended April 30, 1996.
(b) Net of fees waived amounting to 1.40% of average
net assets for the period
ended April 30, 1996.
(c) Does not include maximum sales charge of 4% for
Class A shares.
(d) Does not include contingent deferred sales charge
for Class B shares. Not
annualized.
(e) Net of fees waived amounting to 0.77% of average
net assets for the period
ended October 31, 1995.
* Annualized.
55
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
INVESTMENTS AS OF APRIL 30,
1996
(unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
Par Market
% of Value Value
Net Assets --------------------------------------------
------------------ <S> <C>
<C> <C> MORTGAGE RELATED--32.3%
Federal Home Loan
Mortgage Corp.
7.085%, 3/21/2001 $1,500,000 $1,482,991
16.13% 7.13%, 10/02/2001 750,000
746,370 8.12% 6.38%, 10/24/2009
750,000 739,102 8.04% ---------------------------
----------------------------------
2,968,463
------------------------------------------------------------
-- U.S. TREASURY NOTES--41.4%
5.50%, 4/15/2001 1,000,000 971,250
10.56% 5.875%, 6/30/2000 1,000,000
981,875 10.68% 5.625%, 2/15/2006
2,000,000 1,854,372 20.17% -------------------------
-------------------------------------
3,807,497 -----------------------
--------------------------------------- U.S. TREASURY
STRIPS--16.5%
.010, 5/15/2006 3,000,000 1,518,360
16.51% ------------------------------------------------
--------------
1,518,360 ---------------------------------------------
----------------- </TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Par Market % of
Value Value Net Assets
-------------------------------------------------------
---------- ---------------
<S> <C>
<C> <C>
SHORT-TERM INVESTMENTS--6.9%
U.S. T-Bill, 5.220%, 10/24/96
$633,889 6.89%
-------------------------------------------------------
---------- ---------------
SHORT-TERM INVESTMENTS--1.8%%
Repurchase Agreement, State Street Bank & Trust
Company, dated 4/30/96, 2.0% (Collateralized
by U.S. Treasury Notes valued at $172,973.
Repurchase proceeds of $168,009 (Cost
$168,000.)
168,000 $ 168,000 1.83%
-------------------------------------------------------
---------- ---------------
TOTAL INVESTMENTS
(COST $9,185,144)--98.9%
$9,096,209
OTHER ASSETS & LIABILITIES,
NET--1.1%
98,074
-------------------------------------------------------
---------- ---------------
TOTAL NET ASSETS--100%
$9,194,283
----------
</TABLE>
56
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
STATEMENT OF ASSETS AND
LIABILITIES
April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
ASSETS
Investments, at values (identified cost $9,185,144)
$ 9,096,209
Cash
390
Receivable for Fund shares sold
82,324
Interest receivable
60,762
Other assets
23,883
-----------
$ 9,263,568
-----------
LIABILITIES
Payable for Fund shares repurchased
25,000
Accrued expenses
44,285
-----------
69,285
-----------
NET ASSETS
$ 9,194,283
-----------
At April 30, 1996 net assets consisted of:
Capital paid in
$ 9,269,592
Undistributed net investment income
0
Net accumulated undistributed realized gain
13,626
Net unrealized depreciation
(88,935)
-----------
$ 9,194,283
-----------
CLASS A
NET ASSET VALUE PER SHARE ($9,194,078/922,924 shares
outstanding) $ 9.96
-----------
Maximum offering price ($9.96/96%)
$10.38
-----------
CLASS B
NET ASSET VALUE PER SHARE AND MAXIMUM OFFERING PRICE
($205/21 shares outstanding)
$ 9.97
-----------
</TABLE>
See Notes to Financial Statements.
57
<PAGE>
THE TOCQUEVILLE GOVERMENT FUND
STATEMENT OF OPERATIONS
Six Months Ended April 30, 1996
(Unaudited)
-------------------------------------------------------
---------- ---------------
<TABLE>
<S>
<C>
INVESTMENT INCOME
Interest
$237,090
--------
EXPENSES
Investment adviser's fee (Note 2)
20,443
Custodian and fund accounting
27,300
Transfer agent and shareholder services
15,470
Professional fees
11,830
Distribution (Note 4)
Class A
10,221
Class B
1
Administration fee (Note 4)
6,133
Printing
910
Registration
2,184
Trustees fee
910
Fidelity bond
910
Other
3,088
--------
Total expenses
99,400
Less: Fees waived (Note 4)
(36,798)
--------
Net expenses
62,602
--------
NET INVESTMENT INCOME
174,488
--------
NET REALIZED AND UNREALIZED (LOSS) ON INVESTMENTS
Net realized gain on investments
14,456
Net unrealized depreciation of investments during the
period (116,714)
--------
Net (loss) on investments
(102,258)
--------
Net increase in net assets resulting from operations
$ 72,230
-------
</TABLE>
See Notes to Financial Statements.
58
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
STATEMENTS OF CHANGES IN NET
ASSETS
-------------------------------------------------------
---------- ---------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
ENDED FOR THE YEAR
APRIL 30,
1996 ENDED
(UNAUDITED) OCTOBER 31, 1995
-----------
------- ----------------
<S> <C>
<C>
INCREASE IN NET ASSETS
Operations
Net investment income $
174,488 $ 21,145
Net realized gain (loss)
14,456 (830)
Net unrealized appreciation (depreciation)
(116,714) 27,780
-------
--- ----------
Net increase resulting from operations
72,230 48,095
Distributions to shareholders from:
Net investment income
Class A
(174,483) (21,144)
Class B
(5) (1)
Net realized gain on investments
Class A
0 0
Class B
0 0
Fund share transactions (Note 3)
Class A
2,790,825 6,478,561
Class B
4 201
-------
--- ----------
Net Increase in net assets
2,688,571 6,505,712
NET ASSETS
Beginning of period
6,505,712 0
-------
--- ----------
End of period
$9,194,283 $6,505,712
-------
--- ----------
</TABLE>
See Notes to Financial Statements.
59
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
NOTES TO FINANCIAL STATEMENTS
(unaudited)
-------------------------------------------------------
---------- ---------------
NOTE 1
The Tocqueville Trust (the "Trust") was organized as
a Massachusetts business
trust registered under the Investment Company Act of
1940 as amended, as a di-
versified, open-end management investment company. The
Trust consists of five
separate Funds: The Tocqueville Fund, The Tocqueville
Asia-Pacific Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville
Europe Fund and the
Tocqueville Government Fund (the "Funds"). The
following is a summary of sig-
nificant accounting principles followed by the Trust in
the preparation of its
financial statements.
-------------------------------------------------------
---------- ---------------
SECURITY VALUATION
Investments in securities, including foreign
securities, traded on an ex
change or quoted on the over-the-counter market are
valued at the last sale
price or, if no sale occurred during the day, at the
mean between closing bid
and asked prices, as last reported by a pricing service
approved by the Trust-
ees. When market quotations are not readily available,
or when restricted secu-
rities or other assets are being valued, such assets
are valued at fair value
as determined in good faith by or under procedures
established by the Trustees.
Short-term investments are stated at cost which,
together with accrued inter-
est, approximates market value.
-------------------------------------------------------
---------- ---------------
FEDERAL INCOME TAX
It is the Trust's policy to comply with the
provisions of the Internal Reve-
nue Code ("Code") applicable to regulated investment
companies and to distrib-
ute all of its taxable income to its shareholders. It
is also the Trust's in-
tention to distribute amounts sufficient to avoid
imposition of any excise tax
under Section 4982 of the Code. Therefore, no federal
income or excise tax pro-
vision is required.
-------------------------------------------------------
---------- ---------------
DEFERRED ORGANIZATION EXPENSES
Expenses incurred in connection with the organization
of The Tocqueville Gov-
ernment Fund (the "Fund") are being amortized on a
straight-line basis over a
five-year period from the Fund's commencement of
operations. In the event any
initial shares of The Tocqueville Government Fund are
redeemed during the amor-
tization period, the proceeds of redemption will be
reduced by the pro-rata
portion of any unamortized organization expenses in the
same proportion as the
number of shares redeemed bears to the number of
initial shares held at the
time of redemption.
-------------------------------------------------------
---------- --------------
OTHER
Security transactions are accounted for on the trade
date, the date the order
to buy or sell is executed. Interest income is
recognized on the accrual basis
and market discount is accounted for using the
effective interest method. The
Trust uses the first-in, first-out method for
determining realized gain or loss
on investments sold for both financial reporting and
federal tax purposes. Dis-
tributions to shareholders are recorded on the ex-
dividend date. Expenses in-
curred by the Trust not specifically identified to a
Fund are allocated on a
basis relative to the size of each Fund's daily net
asset value.
-------------------------------------------------------
---------- ---------------
60
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 2
Tocqueville Asset Management L.P. ("Tocqueville"), is
the investment adviser
to the Trust under an Investment Advisory Agreement
approved by shareholders on
February 26, 1990. For its services, Tocqueville
receives a fee from The
Tocqueville Government Fund, payable monthly, at an
annual rate of .50% of the
first $500 million of the Fund's average daily net
assets, .40% of the next
$500 million of average daily net assets, and .30% of
average daily net assets
in excess of $1 billion.
Certain states in which shares of the Trust are
qualified for sale impose
limitations on the expenses of the Trust. The Advisory
Agreement provides that
if, in any fiscal year, the total expenses of the Trust
(excluding taxes, in-
terest, extraordinary expenses and the distribution fee
but including the Ad-
viser's fee) exceed the expense limitation applicable
to the Trust imposed by
the securities regulations of any state in which it is
registered to sell
shares, Tocqueville will pay or reimburse the Trust for
that excess up to the
amount of its fee. The most restrictive limitation
currently applicable (ex-
cluding the items described above) limits a fund to
2.5% of the Trust's first
$30,000,000 of average daily net assets, 2% of the next
$70,000,000, and 1.5%
of the Trust's average daily net assets over
$100,000,000. For the six months
ended April 30, 1996, the Adviser has waived its
advisory fee of $20,443 due to
the expense limitation referred to above. In addition,
the Adviser has agreed
to waive its fee until the Fund's average daily net
assets exceed $10 million.
-------------------------------------------------------
---------- ---------------
61
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 3
The Fund offers two classes of shares: Class A and
Class B shares. Shares of
each class are identical except for the initial sales
load on Class A shares, a
contingent deferred sales charge on Class B shares,
distribution fees and vot-
ing rights on matters effecting a single class. At
April 30, 1996, there were
an unlimited number of shares of beneficial interest
authorized ($0.01 par val-
ue). Transactions in the Fund's shares were as follows:
<TABLE>
<CAPTION>
CLASS A
-------
FOR THE PERIOD FROM
SIX MONTHS
AUGUST 14, 1995
ENDED
TO
APRIL 30, 1996
OCTOBER 31, 1995
--------------
------------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ ------
<S> <C> <C>
<C> <C>
Shares sold 556,672 $ 5,619,956
645,088 $6,457,875
Shares issued on
reinvestment of dividends 15,983 161,927
2,062 20,687
Shares redeemed (296,882)
(2,991,058) -- --
-------- -----------
-------- -----------
Net increase 275,773 $ 2,790,825
647,150 $6,478,561
-------- -----------
-------- -----------
<CAPTION>
CLASS B
-------
FOR THE PERIOD FROM
SIX MONTHS
AUGUST 14, 1995
ENDED
TO
APRIL 30, 1996
OCTOBER 31, 1995
--------------
-------------------
SHARES AMOUNT
SHARES AMOUNT
------ ------
------ ------
<S> <C> <C>
<C> <C>
Shares sold -- --
20 $ 200
Shares issued on
reinvestment of dividends 1 4
-- 1
Shares redeemed -- --
-- --
-------- -----------
-------- -----------
Net increase 1 4
20 $ 201
-------- -----------
-------- -----------
</TABLE>
62
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 4
Tocqueville Securities L.P. (the "Distributor") acts
as distributor for
shares of the Fund and purchases shares of the Fund at
net asset value to fill
orders as received from investment dealers. For the six
months ended April 30,
1996, the Distributor received no net commissions from
the sale of the Fund's
shares.
The Fund has adopted distribution plans related to
the sale of Class A and
Class B shares pursuant to which the Fund may incur
distribution expenses in
amounts not to exceed 0.25% and 0.75% per annum of the
average daily net assets
of Class A and Class B shares, respectively. Such
expenses may include, but are
not limited to, advertising, printing, and distribution
of sales literature,
prospectuses and other materials, and payments to
dealers and shareholders ser-
vicing agents including the Distributor. Under the
distribution plans, the Dis-
tributor is permitted to carry forward expenses not
reimbursed by the distribu-
tion fees to subsequent fiscal years for submission to
the Fund for payment,
subject to the continuation of the Plan. For the six
months ended April 30,
1996, the Distributor has waived distribution fees of
$10,221 and $1, respec-
tively for Class A and Class B shares. The Distributor
has informed the Trust
that, as of March 31, 1996, there were $18,879 in
unreimbursed expenses for the
Fund.
Class B shares which are redeemed within six years of
purchase are subject to
a contingent deferred sales charge at rates ranging
from 5% to 0%, charged as a
percentage of the dollar amount subject thereto. There
were no contingent de-
ferred sales charges paid to the Distributor for the
six months ended April 30,
1996.
Commissions earned by the Distributor for services
rendered as registered
broker-dealer in securities transactions for the Fund
for the six months ended
April 30, 1996 were $6,913.
Pursuant to an Administrative Services Agreement,
effective September 15,
1995, the Fund pays to the Distributor a fee computed
and paid monthly at an
annual rate of 0.15% of the average daily net assets of
the Fund. During the
six months ended April 30, 1996, the Distributor waived
administration fees of
$6,133.
63
<PAGE>
-------------------------------------------------------
---------- ---------------
NOTE 5
Purchases and sales of investment securities
(excluding short-term instru-
ments) for the six months ended April 30, 1996 were as
follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
GOVERNMENT
FUND
-----------
<S> <C>
PURCHASES $7,913,498
----------
SALES $5,778,914
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
NOTE 6
Unrealized depreciation at April 30, 1996 based on
cost of securities for
Federal tax purposes is as follows:
<TABLE>
<CAPTION>
THE
TOCQUEVILLE
GOVERNMENT
FUND
-----------
<S> <C>
Gross unrealized appreciation $ 0
Gross unrealized depreciation (88,935)
----------
Net unrealized depreciation $ (88,935)
----------
Cost of investments $9,185,144
----------
</TABLE>
-------------------------------------------------------
---------- ---------------
64
<PAGE>
Investment Advisor
Tocqueville Asset Management
L.P. 1675 Broadway
New York, NY 10019
Phone: (212) 698-0800
Fax: (212) 262-0154
Distributor
Tocqueville Securities L.P.
1675 Broadway
New York, NY 10019
Phone: (800) 697-3863
Fax: (212) 262-0154
Shareholders' Servicing,
Custodian and Transfer Agent
State Street Bank & Trust Company
P.O. Box 8507
Boston, MA 02266-8507
Toll Free Phone: (800) 626-9402
Board of Trustees
Francois Sicart - Chairman
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Robert W. Kleinschmidt
Francois Letaconnoux
IVY SHORT-TERM BOND FUND
a series of
IVY FUND
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1996
_________________________________________________________________
Ivy Fund (the "Trust") is a diversified, open-end
management investment company that currently consists
of thirteen fully managed portfolios. This Statement
of Additional Information ("SAI") describes one of the
portfolios, Ivy Short-Term Bond Fund (the "Fund"). The
other twelve portfolios of the Trust are described in
separate Statements of Additional Information.
This SAI is not a prospectus and should be read in
conjunction with the prospectus for the Fund dated April
30, 1996 (the "Prospectus"), which may be obtained
upon request and without charge from the Trust at the
Distributor's address and telephone number listed
below.
INVESTMENT MANAGER
Ivy Management, Inc. ("IMI")
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 777-6472
DISTRIBUTOR
Ivy Mackenzie Distributors, Inc.
Via Mizner Financial Plaza, Suite 300
700 South Federal Highway
Boca Raton, Florida 33432
Telephone: (800) 456-5111
TABLE OF CONTENTS
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . .
. . . 4 COMMERCIAL PAPER . . . . . . . . . . . .
. . . . . . . . 4 BANKING INDUSTRY AND SAVINGS
AND LOAN OBLIGATIONS . . . 4 REPURCHASE
AGREEMENTS . . . . . . . . . . . . . . . . . 4
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES . 5
U.S. GOVERNMENT SECURITIES . . . . . . . . . . . . . . .
5 MORTGAGE-RELATED SECURITIES . . . . . . . . .
. . . . . 7 ADJUSTABLE RATE MORTGAGE
SECURITIES: . . . . . . . 8 COLLATERALIZED
MORTGAGE OBLIGATIONS ("CMOS") . . . 9 CAPS
AND FLOORS . . . . . . . . . . . . . . . . . . 10
LOANS OF PORTFOLIO SECURITIES . . . . . . . . . . . . . 10
BORROWING . . . . . . . . . . . . . . . . . . . . . . .
10 RESTRICTED AND ILLIQUID SECURITIES . . . . . .
. . . . . 11 AMERICAN DEPOSITORY RECEIPTS (ADRS)
. . . . . . . . . . 11 FOREIGN SECURITIES . . . .
. . . . . . . . . . . . . . . 11 INVESTING IN
EMERGING MARKETS . . . . . . . . . . . . . 12
FORWARD FOREIGN CURRENCY CONTRACTS . . . . . . . . . . . 14
ADJUSTABLE RATE PREFERRED STOCKS . . . . . . . . . . . .
15 HIGH YIELD BONDS . . . . . . . . . . . . . . .
. . . . . 15 ZERO COUPON BONDS . . . . . . . . .
. . . . . . . . . . 16 OPTIONS TRANSACTIONS,
FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS . . . . . . . . . . . . . . . . . 17
OPTIONS TRANSACTIONS . . . . . . . . . . . . . . . 17
GENERAL . . . . . . . . . . . . . . . . . . . 17
WRITING CALL OPTIONS ON INDIVIDUAL
SECURITIES . . . . . . . . . . . . . . .
18 RISKS OF OPTIONS TRANSACTIONS . . .
. . . . . 18 FUTURES CONTRACTS AND OPTIONS
ON FUTURES CONTRACTS . . . . . . . . .
. . . . . . . . . 20 GENERAL . . . . .
. . . . . . . . . . . . . . 20 INTEREST
RATE FUTURES CONTRACTS . . . . . . . 22
OPTIONS ON INTEREST RATE FUTURES CONTRACTS . . 22
FOREIGN CURRENCY FUTURES CONTRACTS AND
RELATED OPTIONS . . . . . . . . . . . . . 23
RISKS ASSOCIATED WITH FUTURES AND RELATED
OPTIONS . . . . . . . . . . . . . . . . . 24
COMBINED TRANSACTIONS . . . . . . . . .
. . . 25
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 25
ADDITIONAL RESTRICTIONS . . . . . . . . . . . . . . . .
. . . 27
ADDITIONAL RIGHTS AND PRIVILEGES . . . . . . . . . . .
. . . 28 AUTOMATIC INVESTMENT METHOD . . . . . .
. . . . . . . . 28 EXCHANGE OF SHARES . . . . . .
. . . . . . . . . . . . . 29 CLASS A . . . .
. . . . . . . . . . . . . . . . . . 29 CLASS
B . . . . . . . . . . . . . . . . . . . . . . 29
CLASS I . . . . . . . . . . . . . . . . . . . . . . 31
LETTER OF INTENT . . . . . . . . . . . . . . . . . . . .
32 RETIREMENT PLANS . . . . . . . . . . . . . . .
. . . . . 33 INDIVIDUAL RETIREMENT ACCOUNTS
. . . . . . . . . . 33 QUALIFIED PLANS . . .
. . . . . . . . . . . . . . . 35
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7)
ACCOUNT") . . . . . . . . . . . . . . . . . .
36 SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS
. . . . . 36 REINVESTMENT PRIVILEGE . . . . . . .
. . . . . . . . . . 37 RIGHTS OF ACCUMULATION . .
. . . . . . . . . . . . . . . 37 SYSTEMATIC
WITHDRAWAL PLAN . . . . . . . . . . . . . . . 38
BROKERAGE ALLOCATION . . . . . . . . . . . . . . . . .
. . . 38
TRUSTEES AND OFFICERS . . . . . . . . . . . . . . . . .
. . . 41 PERSONAL INVESTMENTS BY EMPLOYEES OF THE
ADVISER . . . . 45
INVESTMENT ADVISORY AND OTHER SERVICES . . . . . . . .
. . . 48 BUSINESS MANAGEMENT AND INVESTMENT
ADVISORY SERVICES . . 48 DISTRIBUTION SERVICES .
. . . . . . . . . . . . . . . . 50 CUSTODIAN . .
. . . . . . . . . . . . . . . . . . . . . 54 FUND
ACCOUNTING SERVICES . . . . . . . . . . . . . . . . 54
TRANSFER AGENT AND DIVIDEND PAYING AGENT . . . . . . . . 54
ADMINISTRATOR . . . . . . . . . . . . . . . . . . .
. . 55 AUDITORS . . . . . . . . . . . . . . . . .
. . . . . . . 55
CAPITALIZATION AND VOTING RIGHTS . . . . . . . . . . .
. . . 55
NET ASSET VALUE . . . . . . . . . . . . . . . . . . . .
. . . 58
PORTFOLIO TURNOVER . . . . . . . . . . . . . . . . . .
. . . 60
REDEMPTIONS . . . . . . . . . . . . . . . . . . . . . .
. . . 60
TAXATION . . . . . . . . . . . . . . . . . . . . . . .
. . . 62 DISTRIBUTIONS . . . . . . . . . . . . .
. . . . . . . . 63 DISPOSITION OF SHARES . . . .
. . . . . . . . . . . . . 64 DEBT SECURITIES
ACQUIRED AT A DISCOUNT . . . . . . . . . 64
OPTIONS AND HEDGING TRANSACTIONS . . . . . . . . . . . . 65
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES .
67 FOREIGN WITHHOLDING TAXES . . . . . . . . . .
. . . . . 67 INVESTMENT IN PASSIVE FOREIGN
INVESTMENT COMPANIES . . . 67 BACKUP WITHHOLDING
. . . . . . . . . . . . . . . . . . . 68
PERFORMANCE INFORMATION . . . . . . . . . . . . . . . .
. . . 69 YIELD . . . . . . . . . . . . . . . . .
. . . . . . . . 69 AVERAGE ANNUAL TOTAL RETURN
QUOTATIONS . . . . . . . . . 70 CUMULATIVE TOTAL
RETURN . . . . . . . . . . . . . . . . 73 OTHER
QUOTATIONS, COMPARISONS AND GENERAL INFORMATION . 74
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . .
. . . 75
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S INVESTORS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND COMMERCIAL
PAPER RATINGS . . . . . . . . . 76
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives and general
investment policies are described in the Fund's
Prospectus. Additional information concerning the
characteristics of the Fund's investments is set forth
below.
COMMERCIAL PAPER
Commercial paper represents short-term unsecured
promissory notes issued in bearer form by bank holding
companies, corporations and finance companies. The
Fund may invest in commercial paper that, at the date
of investment, is rated A-1 by Standard & Poor's
Corporation ("S&P") or Prime-1 by Moody's Investors
Service, Inc. ("Moody's") or, if not rated by Moody's
or S&P, issued by companies having an outstanding debt issue
rated AAA or AA by S&P or Aaa or Aa by Moody's.
BANKING INDUSTRY AND SAVINGS AND LOAN OBLIGATIONS
Certificates of deposit are negotiable
certificates issued against funds deposited in a
commercial bank (or a savings and loan institution) for
a definite period of time and earning a specified
return. Time deposits are generally similar to
certificates of deposits, but are uncertificated. Bankers'
acceptances are negotiable drafts or bills of exchange,
normally drawn by an importer or exporter to pay for
specific merchandise, which are "accepted" by a bank,
meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on
maturity. The Fund may invest in certificates of deposit, time
deposits and bankers' acceptances subject to the
requirements set forth in the Fund's Prospectus.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements.
Repurchase agreements are contracts under which the
Fund buys a money market instrument and obtains a
simultaneous commitment from the seller to repurchase
the instrument at a specified time and at an agreed-
upon yield. The Fund may not enter into a repurchase
agreement with more than seven days to maturity if, as a result,
more than 10% of the Fund's net assets would be invested
in illiquid securities, including such repurchase
agreements. Under guidelines approved by the Trust's
Board of Trustees, the Fund is permitted to enter into
repurchase agreements only if the repurchase agreements
are at least fully collateralized with U.S. Government
securities or other securities that Ivy Management,
Inc., the Fund's investment adviser ("IMI") has approved for use
as collateral for repurchase agreements and the
collateral must be marked to market daily. The Fund
will enter into repurchase agreements only with banks
and broker-dealers deemed to be creditworthy by IMI
under guidelines approved by the Board of Trustees. In
the unlikely event of failure of the executing bank or
broker-dealer, the Fund could experience some delay in
obtaining direct ownership of the underlying collateral
and might incur a loss if the value of the security
should decline, as well as costs in disposing of the
security.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES
The Fund may purchase securities on a firm
commitment or when-issued basis. New issues of certain
debt securities are often offered on a when-issued
basis; that is, the payment obligation and the interest
rate are fixed at the time the buyer enters into the
commitment, but delivery and payment for the securities
normally take place after the date of the commitment to
purchase. Firm commitment agreements call for the purchase of
securities at an agreed-upon price on a specified future
date. The transactions are entered into in order to
secure what is considered to be an advantageous price
and yield to the Fund and not for purposes of
leveraging the Fund's assets. The Fund will maintain
in a segregated account with its custodian liquid
assets, such as cash, U.S. Government securities, or other
appropriate high grade debt obligations equal (on a daily marked-
to-market basis) to the amount of its commitment to
purchase the securities on a when-issued or firm
commitment basis.
Securities purchased on a when-issued basis and
the securities held in the Fund's portfolio are subject
to changes in market value based upon various factors
including changes in the level of market interest
rates. Generally, the value of such securities will
fluctuate inversely to changes in interest rates, I.E.,
they will appreciate in value when market interest rates
decline and decrease in value when market interest rates rise.
For this reason, placing securities rather than cash in
the segregated account may have a leveraging effect on
the Fund's net assets. That is, to the extent that the
Fund remains substantially fully invested in securities
at the same time that it has committed to purchase
securities on a when-issued basis, there will be
greater fluctuations in its net assets than if it had
set aside cash to satisfy its purchase commitment.
Upon the settlement date of the when-issued
securities, the Fund ordinarily will meet its
obligation to purchase the securities from available
cash flow, use of the cash (or liquidation of
securities) held in the segregated account or sale of
other securities. Although it would not normally expect to do
so, the Fund also may meet its obligation from the sale of
the when-issued securities themselves (which may have a
current market value greater or less than the Fund's
payment obligation). The sale of securities to meet
such obligations carries with it a greater potential
for the realization of capital gains.
U.S. GOVERNMENT SECURITIES
The Fund may invest in U.S. government securities.
U.S. government securities are obligations of, or
guaranteed by, the U.S. government, its agencies or
instrumentalities. Securities
guaranteed by the U.S. government include: (1) direct
obligations of the U.S. Treasury (such as Treasury bills,
notes, and bonds), and (2) federal agency obligations
guaranteed as to principal and interest by the U.S.
Treasury (such as GNMA certificates, as described
below). In these securities, the payment of principal
and interest is unconditionally guaranteed by the U.S.
government, and thus they are of the highest possible
credit quality. Such securities are subject to variations in
market value due to fluctuations in interest rates, but, if
held to maturity, will be paid in full.
Mortgage-backed securities are securities
representing part ownership of a pool of mortgage
loans. For example, GNMA certificates are such
securities in which the timely payment of principal and
interest is guaranteed by the full faith and credit of
the U.S. government. Although the mortgage loans in the pool
will have maturities of up to 30 years, the actual average
life of the GNMA certificates typically will be
substantially less because the mortgages will be
subject to normal principal amortization and may be
prepaid prior to maturity. Prepayment rates vary
widely and may be affected by changes in market
interest rates. In periods of falling interest rates, the rate
of prepayment tends to increase, thereby shortening the
actual average life of the GNMA certificates.
Conversely, when interest rates are rising, the rate of
prepayments tends to decrease, thereby lengthening the
actual average life of the GNMA certificates.
Accordingly, it is not possible to predict accurately
the average life of a particular pool. Reinvestment of
prepayments may occur at higher or lower rates than the
original yield on the certificates. Due to the prepayment
feature and the need to reinvest prepayments of principal at
current rates, GNMA certificates can be less effective than
typical bonds of similar maturities at "locking in"
yields during periods of declining interest rates.
GNMA certificates may appreciate or decline in market
value during periods of declining or rising interest
rates, respectively.
The Fund may invest in securities issued by U.S.
government instrumentalities and certain federal
agencies that are neither direct obligations of nor
guaranteed by the U.S. Treasury. However, they involve
federal sponsorship in one way or another, some are
backed by specific types of collateral; some are
supported by the issuer's right to borrow from the Treasury; some
are supported by the discretionary authority of the
Treasury to purchase certain obligations of the issuer;
others are supported only by the credit of the issuing
government agency or instrumentality. These agencies
and instrumentalities include, but are not limited to,
Federal Land Banks, Farmers Home Administration, Bank
for Cooperatives (including Central Bank for
Cooperatives), Federal Intermediate Credit Banks, Federal Home
Loan Banks, Federal National Mortgage Association, Student
Loan Marketing Association, Tennessee Valley Authority,
Export-Import Bank of the United States, Commodity
Credit Corporation, Federal
Financing Bank, Federal Home Loan Mortgage Corporation,
Small Business Administration and National Credit Union
Administration.
MORTGAGE-RELATED SECURITIES
The Fund may invest in mortgage-related
securities. A mortgage-related security is an interest
in a pool of mortgage loans. Most mortgage-related
securities are pass-through securities, which means
that they provide investors with payments consisting of
both principal and interest as mortgages in the
underlying mortgage pool are paid off by the borrowers. The
dominant issuers or guarantors of mortgage-related securities
today are the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association
("FNMA"), and the Federal Home Loan Mortgage
Corporation ("FHLMC"). GNMA creates mortgage
securities from pools of Government-guaranteed or
insured (Federal Housing Authority or Veterans Administration)
mortgages originated by mortgage bankers, commercial banks,
and savings and loan associations. FNMA and FHLMC
issue mortgage securities from pools of conventional
and federal insured and/or guaranteed residential
mortgages obtained from various entities, including
savings and loan associations, savings banks,
commercial banks, credit unions and mortgage bankers.
The mortgage-related securities either issued or
guaranteed by GNMA, FHLMC, or FNMA ("Certificates") are
called pass-through Certificates because a pro rata
share of both regular interest and principal payments
(less GNMA's, FHLMC's or FNMA's fees and any applicable
loan servicing fees), as well as unscheduled early
prepayments on the underlying mortgage pool, are passed through
monthly to the holder of the Certificate (i.e., the Fund).
The principal and interest on GNMA securities are
guaranteed by GNMA and backed by the full faith and
credit of the U.S. government. FNMA guarantees full
and timely payment of all interest and principal, while
FHLMC guarantees timely payment of interest and
ultimate collection of principal. Mortgage securities from FNMA
and FHLMC are not backed by the full faith and credit of
the U.S. government, but are supported by the
discretionary authority of the U.S. government to
purchase certain obligations of the particular agency.
The yields provided by these mortgage securities have
historically exceeded the yields on other types of U.S.
government securities with comparable maturities.
However, these securities generally have the potential for
greater fluctuations in yield as their prices will not
generally fluctuate as much as more traditional fixed-
rate debt securities.
Recently, the originators of mortgages have been
making mortgage loans that carry an adjustable rate of
interest as well as the older, more traditional fixed-
rate loans. These adjustable rate mortgages have
become an increasingly important form of residential
financing. Generally, adjustable rate mortgages are
mortgages originated by thrift institutions that have a
specified maturity date and which amortize principal in
much the same way as a fixed-rate mortgage. As a result, in
periods of declining interest rates there is a
reasonable likelihood that ARMS will behave like fixed-
rate mortgage securities in that current levels of
prepayments of principal on the underlying mortgages
could accelerate. However, one difference between ARMS
and fixed rate mortgage securities is that for certain
types of ARMS, the rate of amortization of principal,
as well as interest payments, can and does change in
accordance with movements in a particular, pre-specified,
published interest rate index. The amount of interest due to an
ARM security holder is calculated by adding a specified
additional amount, the "margin," to the index, subject to
limitations or "caps" on the maximum and minimum
interest that is charged to the mortgage during the
life of the mortgage or to maximum and minimum changes
to that interest rate during a given period. It is
these special characteristics which are unique to
adjustable rate mortgages that IMI believes make them attractive
investments in seeking to accomplish the Fund's
objective.
ADJUSTABLE RATE MORTGAGE SECURITIES: ARMS are
pass-through mortgage securities which are
collateralized by mortgages with adjustable rather than
fixed interest rates. The ARMS in which the Fund
invests are issued primarily by GNMA, FNMA and FHLMC and
are actively traded in the secondary market. The underlying
mortgages which collateralize ARMS issued by GNMA are fully
guaranteed by the Federal Housing Administration ("FHA")
or the Veterans Administration ("VA"), while those
collateralizing ARMS issued by FHLMC or FNMA are
typically conventional residential mortgages conforming
to standard underwriting size and maturity constraints.
Unlike fixed-rate mortgages which generally
decline in value during periods of rising interest
rates, ARMS allow the Fund to participate in increases
in interest rates through periodic adjustments in the
coupons of the underlying mortgages, resulting in both
higher current yields and lower price fluctuations.
Furthermore, if prepayments of principal are made on the
underlying mortgages during periods of rising interest rates, the
Fund generally will be able to reinvest such amounts in
mortgage securities with a higher current rate of
return. However, the Fund will not benefit from
increases in interest rates to the extent that interest
rates rise to the point where they cause the current
coupon of adjustable rate mortgages held as investments
to exceed the maximum allowable annual or lifetime reset limits
(or "cap rates") for a particular mortgage. Also, the
Fund's net asset value could vary to the extent that
current yields on mortgage securities are different
than market yields during interim periods between
coupon reset dates.
The adjustable interest rate feature of the
underlying mortgages generally will act as a buffer to
reduce sharp changes in the Fund's net asset value in
response to normal interest rate fluctuations. As the
interest rates on the mortgages underlying the Fund's
investments are reset periodically, yields of portfolio
securities will gradually align themselves to reflect
changes in market rates and should cause the net asset
value of the Fund to fluctuate less dramatically than
it would if the Fund invested in more traditional long-
term, fixed-rate debt securities. However, during
periods of rising interest rates, changes in the coupon
rate lag behind changes in the market rate resulting in
possibly a slightly lower net asset value until the
coupon resets to market rates. Thus, investors could suffer some
principal loss if they sold their shares of the Fund
before the interest rates on the underlying mortgages
are adjusted to reflect current market rates. During
periods of extreme fluctuations in interest rates, the
Fund's net asset value will fluctuate as well. Since
most mortgage securities in the Fund's portfolio will
generally have annual reset caps of 100 to 200 basis
points, fluctuation in interest rates above these levels
could cause such mortgage securities to "cap out" and to behave
more like long-term fixed-rate debt securities.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"): The
Fund may also invest in CMOs, which generally are bonds
issued by single- purpose, stand-alone finance
subsidiaries or trusts of financial institutions,
government agencies, investment bankers, or other
similar institutions. CMOs purchased by the Fund may be:
(1) collateralized by pools of mortgages in which
each mortgage is guaranteed as to payment of principal
and interest by an agency or instrumentality of the
U.S. government;
(2) collateralized by pools of mortgages in which
payment of principal and interest are guaranteed by the
issuer and the guarantee is collateralized by U.S.
government securities; or
(3) securities in which the proceeds of the
issuance are invested in mortgage securities and
payment of the principal and interest are supported by
the credit of an agency or instrumentality of the U.S.
government.
All CMOs purchased by the Fund will be either
issued by a U.S. government agency or rated AAA by S&P
or Aaa by Moody's.
A decline in interest rates may lead to a faster
rate of repayment of the mortgages underlying CMO's
held by the Fund, and expose the Fund to a lower rate
of return upon reinvestment. To the extent that CMO's
are held by the Fund, the prepayment right of
mortgagors may limit the increase in net asset value of the
Fund because the value of the CMO's held by the Fund may not
appreciate as rapidly as the price of non-callable debt
securities.
The interest rates paid on the ARMS and CMOs in
which the Fund invests generally are readjusted at
intervals of one year or less to an increment over some
predetermined interest rate index. There are two main
categories of indices; those based on U.S. Treasury
securities and those derived from a calculated measure
such as a cost of funds index or a moving average of mortgages
rates. Commonly utilized indices include the one-year,
three- year and five-year constant maturity Treasury
rates, the three- month Treasury Bill rate, the 180-day
Treasury Bill rate, rates on longer-term Treasury
securities, the 11th District Federal Home Loan Bank
Cost of Funds, the National Median Cost of Funds, the
one-month, three-month, six-month or one-year London
Interbank Offered Rate (LIBOR), the prime rate on a specific
bank, or commercial paper rates. Some indices, such as the one-
year constant maturity Treasury rate, closely mirror
changes in market interest rate levels. Other, such as
the 11th District Home Loan Bank Cost of Funds index,
tend to lag behind changes in market rate levels and
tend to be somewhat less volatile.
CAPS AND FLOORS: The underlying mortgages that
collateralize the ARMS and CMOs in which the Fund invests
will frequently have caps and floors that limit the
maximum amount by which the loan rate to the
residential borrower may change up or down (1) per
reset or adjustment interval and (2) over the life of
the loan. Some residential mortgage loans restrict periodic
adjustments by limiting changes in the borrower's monthly
principal and interest payments rather than limiting
interest rate changes. These payment caps may result
in negative amortization.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend its investment securities to
brokers, dealers and financial institutions for the
purpose of realizing additional income. Loans of
securities by the Fund will be collateralized by cash,
letters of credit, or securities issued or guaranteed
by the U.S Government or its agencies or
instrumentalities. The collateral will equal (on a daily marked-
to-market basis) at least 100% of the current market
value of the loaned securities. The aggregate market
value of the securities loaned will not at any time
exceed 30% of the total assets of the Fund. The risks
in lending portfolio securities, as with other
extensions of credit, consist of possible loss of rights in the
collateral should the borrower fail financially. In
determining whether to lend securities, IMI will
consider all relevant facts and circumstances,
including the creditworthiness of the borrower.
BORROWING
As a fundamental policy, the Fund may borrow from
banks as a temporary measure for extraordinary or
emergency purposes. The Fund may borrow in amounts up
to 10% of its total assets taken at cost or market
value, whichever is lower. All borrowings will be
repaid before any additional investments are made. The Fund may
not mortgage, pledge or in any other manner transfer any
of its assets as security for any indebtedness.
Borrowing may exaggerate the effect on the Fund's net
asset value of any increase or decrease in the value of
the Fund's portfolio securities. Money borrowed will
be subject to interest costs
(which may include commitment fees and/or the cost of
maintaining minimum average balances).
RESTRICTED AND ILLIQUID SECURITIES
It is the Fund's policy that restricted
securities, including restricted securities offered and
sold to "qualified institutional buyers" under Rule
144A under the Securities Act of 1933, as amended (the
"1933 Act"), and any other illiquid securities
(including repurchase agreements of more than seven
days duration and other securities which are not readily
marketable) may not constitute, at the time of purchase, more
than 10% of the value of the Fund's net assets. Issuers of
restricted securities may not be subject to the
disclosure and other investor protection requirements
that would be applicable if their securities were
publicly traded. Restricted securities may be sold
only in privately negotiated transactions or in a
public offering with respect to which a registration statement is
in effect under the 1933 Act. Where a registration
statement is required, the Fund may be required to bear
all or part of the registration expenses. There may be
a lapse of time between the Fund's decision to sell a
restricted or illiquid security and the point at which
the Fund is permitted or able to sell such security.
If, during such a period, adverse market conditions
were to develop, the Fund might obtain a price less favorable
than the price that prevailed when it decided to sell.
Since it is not possible to predict with assurance that
the market for securities eligible for resale under
Rule 144A will continue to be liquid, the Fund will
carefully monitor each of its investments in these
securities, focusing on such important factors, among
others, as valuation, liquidity and availability of
information. This investment practice could have the effect
of increasing the level of illiquidity in the Fund to the
extent that qualified institutional buyers become for a
time uninterested in purchasing these restricted
securities.
AMERICAN DEPOSITORY RECEIPTS (ADRS)
The Fund may purchase sponsored or unsponsored
American Depository Receipts ("ADRs"). ADRs are
dollar-denominated receipts issued generally by U.S.
banks that represent the deposit with the bank of a
foreign company's security. ADRs are publicly traded
on exchanges or over-the-counter ("OTC") in the United
States. Ownership of unsponsored ADRs may not entitle the
Fund to financial or other reports from the issuer to which it
might otherwise be entitled as the owner of sponsored
ADRs.
FOREIGN SECURITIES
The Fund may invest in debt securities of foreign
issuers, including non-U.S. dollar-denominated debt
securities, Eurodollar securities and debt securities
issued, assumed or guaranteed by foreign governments or
political subdivisions or the instrumentalities
thereof. Investors should consider carefully
the substantial risks involved in investing in
securities issued by companies and governments of
foreign nations, which are in addition to the usual
risks inherent in the domestic investments. Although
the Fund intends to invest only in nations that IMI
considers to have relatively stable and friendly governments,
there is the possibility of expropriation, nationalization
or confiscatory taxation, taxation of income earned in
a foreign country and other foreign taxes, foreign
exchange controls (which may include suspension of the
ability to transfer currency from a given country),
default in foreign government securities, political or
social instability or diplomatic developments which
could affect investments in securities of issuers in those
nations. In addition, in many countries there is less publicly
available information about issuers than is available in
reports about companies in the United States. For
example, ownership of unsponsored ADRs may not entitle
the owner to financial or other reports from the issuer
to which it might otherwise be entitled as the owner of
a sponsored ADR. Moreover, foreign companies are not
generally subject to uniform accounting, auditing and
financial reporting standards, and auditing practices and
requirements may not be comparable to those applicable to U.S.
companies. In many foreign countries, there is less
government supervision and regulation of business and
industry practices, stock exchanges, brokers and listed
companies than in the United Sates. Foreign securities
transactions may be subject to higher brokerage costs
than domestic securities transactions. The foreign
securities markets of many of the countries in which the
Fund may invest may also be smaller, less liquid and subject to
greater price volatility than those in the United States.
Further, the Fund may encounter difficulties or be
unable to pursue legal remedies and obtain judgment in
foreign courts.
INVESTING IN EMERGING MARKETS
Investors should recognize that investing in
certain foreign securities involves certain special
considerations, including those set forth below , that
are not typically associated with investing in United
States securities and that may affect the Fund's
performance favorably or unfavorably. (See also "Foreign
Securities" under the caption "Risk Factors and Investment
Techniques" in the Prospectus.)
Foreign stock markets have different clearance and
settlement procedures and in certain markets there have
been times when settlements have been unable to keep
pace with the volume of securities transactions, making
it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when
assets of the Fund are uninvested and no return is
earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could
cause the Fund to miss attractive investment opportunities.
Further, the inability to dispose of portfolio securities
due to settlement problems could result either in
losses to the Fund because of subsequent declines in
the value of the portfolio
security or, if the Fund has entered into a contract to
sell the security, in possible liability to the
purchaser. Fixed commissions on some foreign
securities exchanges are generally higher than
negotiated commissions on U.S. exchanges, although IMI
will endeavor to achieve the most favorable net results on
the Fund's portfolio transactions. In addition, the Fund may
encounter difficulties or be unable to pursue legal
remedies and obtain judgment in foreign courts. It may
be more difficult for the Fund's agents to keep
currently informed about corporate actions such as
stock dividends or other matters which may affect the
prices of portfolio securities. Communications between the
United States and foreign countries may be less reliable than
within the United States, thus increasing the risk of
delayed settlements of portfolio transactions or loss
of certificates for portfolio securities. Moreover,
individual foreign economies may differ favorably or
unfavorably from the United States economy in such
respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. IMI seeks to mitigate the
risks to the Fund associated with the foregoing
considerations through investment variation and
continuous professional management.
Investments in companies domiciled in developing
countries may be subject to potentially higher risks
than investments in developed countries. These risks
include (i) less social, political and economic
stability; (ii) the small current size of the markets
for such securities and the currently low or
nonexistent volume of trading, which result in a lack of
liquidity and in greater price volatility; (iii) certain national
policies which may restrict the Fund's investment
opportunities, including restrictions on investment in
issuers or industries deemed sensitive to national
interests; (iv) foreign taxation; (v) the absence of
developed structures governing private or foreign
investment or allowing for judicial redress for injury to
private property; (vi) the absence, until relatively recently in
certain Eastern European countries, of a capital market
structure or market-oriented economy; (vii) the
possibility that recent favorable economic developments
in Eastern Europe may be slowed or reversed by
unanticipated political or social events in such
countries; and (viii) the possibility that currency devaluations
could adversely affect the value of the Fund's
investments.
Despite the dissolution of the Soviet Union, the
Communist Party may continue to exercise a significant
role in certain Eastern European countries. To the
extent of the Communist Party's influence, investments
in such countries will involve risks of
nationalization, expropriation and confiscatory
taxation. The communist governments of a number of Eastern
European countries expropriated large amounts of private
property in the past, in many cases without adequate
compensation, and there can be no assurance that such
expropriation will not occur in the future. In the
event of such expropriation, the Fund could lose a
substantial portion of any investments it has made in
the affected countries. Further, few (if any) accounting
standards exist in Eastern European countries.
Finally, even though certain Eastern European
currencies may be convertible into U.S. dollars, the
conversion rates may be artificial in relation to the
actual market values and may be adverse to Fund
Shareholders.
Certain Eastern European countries that do not
have market economies are characterized by an absence
of developed legal structures governing private and
foreign investments and private property. In addition,
certain countries require governmental approval prior
to investments by foreign persons, or limit the amount
of investment by foreign persons in a particular company,
or limit the investment of foreign persons to only a specific
class of securities of a company that may have less
advantageous terms than securities of the company
available for purchase by nationals.
Authoritarian governments in certain Eastern
European countries may require that a governmental or
quasi-governmental authority act as custodian of the
Fund's assets invested in such country. To the extent
such governmental or quasi-governmental authorities do
not satisfy the requirements of the Investment Company
Act of 1940, as amended (the "1940 Act"), to act as
foreign custodians of the Fund's cash and securities, the Fund's
investment in such countries may be limited or may be
required to be effected through intermediaries. The
risk of loss through governmental confiscation may be
increased in such countries.
FORWARD FOREIGN CURRENCY CONTRACTS
The Fund may enter into forward foreign currency
exchange contracts in order to protect against
uncertainty in the level of future foreign exchange
rates in the purchase and sale of securities, but not
for speculative purposes. A forward foreign currency
exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed
number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the
contract. These contracts may be bought or sold to
protect the Fund against a possible loss resulting from
an adverse change in the relation- ship between foreign
currencies and the U.S. dollar. Although such
contracts are intended to minimize the risk of loss due to a
decline in the value of the hedged currencies, at the same
time, they tend to limit any potential gain that might
result should the value of such currencies increase.
The Fund will not enter into forward contracts or
maintain a net exposure to such contracts where the
consummation of the contract would obligate the Fund to
deliver an amount of currency in excess of the value of
the Fund's portfolio securities or other assets
denominated in that currency. Further, the Fund
generally will not enter into a forward contract with a term of
greater than one year.
To the extent required by applicable law, the Fund
will hold liquid assets, such as cash, U.S. Government
securities, or other appropriate high grade debt
obligations, in a segregated account with its Custodian
in an amount equal (on a daily marked-to- market basis)
to the amount of the commitments under these contracts.
At the maturity of a forward contract, the Fund may
either accept or make delivery of the currency specified in the
contract, or, prior to maturity, enter into a closing
purchase transaction involving the purchase or sale of
an offsetting contract. Closing purchase transactions
with respect to forward contracts are usually effected
with the currency trader who is a party to the original
forward contract.
ADJUSTABLE RATE PREFERRED STOCKS
The Fund may invest in adjustable rate preferred
stocks. Adjustable rate preferred stocks have a
variable dividend, generally determined on a quarterly
basis according to a formula based upon a specified
premium or discount to the yield on a particular U.S.
Treasury security rather than a dividend which is set
for the life of the issue. Although the dividend rates on
these stocks are adjusted quarterly and their market value
should therefore be less sensitive to interest rate
fluctuations than are other fixed income securities and
preferred stocks, the market values of adjustable rate
preferred stocks have fluctuated and can be expected to
continue to do so in the future.
HIGH YIELD BONDS
The Fund may invest in corporate debt securities
rated Ba or lower by Moody's or BB or lower by S&P.
The Fund will not, however, invest in securities that,
at the time of investment, are rated lower than C by
either Moody's or S&P. Securities rated Ba or BB (and
comparable unrated securities), commonly referred to as
"high yield" or "junk" bonds, are considered by major
credit-rating organizations to have predominantly
speculative elements with respect to the issuer's continuing
ability to meet principal and interest payments. The lower
the ratings of corporate debt securities, the more
their risks render them like equity securities. See
Appendix A for a more complete description of the
ratings assigned by Moody's and S&P and their
respective characteristics.
While IMI may refer to ratings issued by
established credit rating agencies, it is not IMI's
policy to rely exclusively on such ratings, but rather
to supplement such ratings with its own independent and
ongoing review of credit quality. The Fund's
achievement of its investment objective may, to the extent of its
investment in high yield bonds, be more dependent upon
IMI's credit analysis than would be the case if the
Fund were investing in higher quality bonds. Should
the rating of a portfolio security be downgraded, IMI
will determine whether it is in the Fund's best
interest to retain or dispose of the security.
However, should any individual bond held by the Fund be
downgraded below a rating of C, IMI currently intends
to dispose of such bond based on then existing market
conditions.
The secondary market on which high yield bonds are
traded may be less liquid than the market for higher
grade bonds. Less liquidity in the secondary trading
market could adversely affect the price at which the
Fund could sell a high yield bond, and could adversely
affect and cause large fluctuations in the daily net
asset value of the Fund's shares. Adverse publicity and
investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield
bonds, especially in a thinly traded market. When
secondary markets for high yield securities are less
liquid than the markets for higher grade securities, it
may be more difficult to value the securities because
such valuation may require more research, and elements
of judgment may play a greater role in the valuation
because there is less reliable, objective data
available.
Furthermore, prices for high yield bonds may be
affected by legislative and regulatory developments.
For example, federal rules require savings and loan
institutions to reduce gradually their holdings of this
type of security.
ZERO COUPON BONDS
The Fund may purchase zero coupon bonds in
accordance with the Fund's credit quality standards.
Zero coupon bonds are debt obligations issued without
any requirement for the periodic payment of interest.
Zero coupon bonds are issued at a significant discount
from face value. The discount approximates the total
amount of interest the bonds would accrue and compound
over the period until maturity at a rate of interest reflecting
the market rate at the time of issuance. If the Fund
holds zero coupon bonds in its portfolio, however, it
would recognize income currently for federal income tax
purposes in the amount of the unpaid, accrued interest
and generally would be required to distribute dividends
representing such income to shareholders currently,
even though funds representing such income would not
have been received by the Fund. Cash to pay dividends
representing unpaid, accrued interest may be obtained from sales
proceeds of portfolio securities and Fund shares and from
loan proceeds. The potential sale of portfolio
securities to pay cash distributions from income earned
on zero coupon bonds may result in the Fund being
forced to sell portfolio securities at a time when the
Fund might otherwise choose not to sell these securities
and when the Fund might incur a capital loss on such sales.
Because interest on zero coupon obligations is not
distributed to the Fund on a current basis but is in
effect compounded, the value of the securities of this
type is subject to greater fluctuations in response to
changing interest rates than the value of debt
obligations which distribute income regularly.
OPTIONS TRANSACTIONS, FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS
The Fund can use various techniques to increase or
decrease its exposure to changing security prices,
interest rates, currency exchange rates, commodity
prices, or other factors that affect security values.
These techniques may involve derivative transactions
such as selling call options and purchasing put and
call options on U.S. government securities, interest rate
futures, foreign currency futures and foreign currencies that
are traded on an exchange or board of trade. IMI can
use these practices to adjust the risk and return
characteristics of the Fund's portfolio of investments.
If IMI judges market conditions incorrectly or employs
a strategy that does not correlate well with the Fund's
investments, these techniques could result in a loss.
These techniques may increase the volatility of the Fund
and may involve a small investment of cash relative to the
magnitude of the risk assumed. In addition, these techniques
could result in a loss if the counterparty to the
transaction does not perform as promised.
OPTIONS TRANSACTIONS
GENERAL. The Fund may sell (write) exchange-
listed call options and purchase put and call options
in accordance with its investment objectives and
policies. A call option is a short- term contract
(having a duration of less than one year) pursuant to
which the purchaser, in return for the premium paid, has the
right to buy the security underlying the option at the
specified exercise price at any time during the term of
the option. The writer of the call option, who
receives the premium, has the obligation, upon exercise
of the option, to deliver the underlying security
against payment of the exercise price. A put option is
a similar contract pursuant to which the purchaser, in
return for the premium paid, has the right to sell the security
underlying the option at the specified exercise price at
any time during the term of the option. The writer of
the put option, who receives the premium, has the
obligation, upon exercise of the option, to buy the
underlying security at the exercise price. The premium
paid by the purchaser of an option will reflect, among
other things, the relationship of the exercise price to the
market price and volatility of the underlying security, the
time remaining to expiration of the option, supply and
demand, and interest rates.
If the writer of an option wishes to terminate the
obligation, he or she may effect a "closing purchase
transaction." This is accomplished by buying an option of
the same series as the option previously written. The
effect of the purchase is that the writer's position
will be cancelled by the Options Clearing Corporation.
However, a writer may not effect a closing purchase
transaction after it has been notified of the exercise
of an option. Likewise, an investor who is the holder
of an option may liquidate his or her position by effecting a
"closing sale transaction." This is accomplished by
selling an option of the same series as the option
previously purchased. There is no guarantee that
either a closing purchase or a closing sale transaction
can be effected. If any call or put is not exercised
or sold, it will become worthless on its expiration
date.
The Fund will realize a gain (or a loss) on a
closing purchase transaction with respect to a call or
a put previously written by the Fund if the premium,
plus commission costs, paid by the Fund to purchase the
call or put is less (or greater) than the premium, less
commission costs, received by the Fund on the sale of
the call or the put. A gain also will be realized if a
call or put which the Fund has written lapses unexercised,
because the Fund would retain the premium. Any such gains (or
losses) are considered short-term capital gains (or
losses) for federal income tax purposes. Net short-
term capital gains, when distributed by the Fund, are
taxable as ordinary income. See "Taxation."
A gain (or a loss) will be realized by the Fund on
a closing sale transaction with respect to a call or a
put previously purchased by the Fund if the premium,
less commission costs, received by the Fund on the sale
of the call or the put is greater (or less) than the
premium, plus commission costs, paid by the Fund to
purchase the call or the put. If a put or a call
expires unexercised, it will become worthless on the expiration
date, and the Fund will realize a loss in the amount of
the premium paid, plus commission costs. Any such gain
or loss will be long-term or short-term capital gain or
loss, depending upon the Fund's holding period for the
option.
The Fund will not purchase put or call options if
the aggregate premium paid for such options would
exceed 10% of its net assets at the time of purchase.
WRITING CALL OPTIONS ON INDIVIDUAL SECURITIES.
The Fund may write (sell) covered call options as
described in the Prospectus. Covered call options
provide the Fund with additional income on its
portfolio securities or partially protect against declines in
the value of those securities. A "covered" call option
means generally that so long as the Fund is obligated
as the writer of a call option, the Fund will either
own the underlying securities subject to the option, or
hold a call at the same exercise price, for the same
exercise period, and on the same securities as the call
written. Although the Fund receives premium income from
these activities, any appreciation realized on an underlying
security will be limited by the terms of the call option.
RISKS OF OPTIONS TRANSACTIONS. The purchase and
writing of options involves certain risks. During the
option period, the covered call writer has, in return
for the premium on the option, given up the opportunity
to profit from a price increase in the underlying
securities above the exercise price, but, as long as
its obligation as a writer continues, has retained the
risk of loss should the price of the underlying
security decline. The writer of an option has no
control over the time when it may be required to
fulfill its obligation as a writer of the option. Once
an option writer has received an exercise notice, it cannot
effect a closing purchase transaction in order to terminate
its obligation under the option and must deliver the
underlying securities at the exercise price. If a put
or call option purchased by the Fund is not sold when
it has remaining value, and if the market price of the
underlying security, in the case of a put, remains
equal to or greater than the exercise price or, in the
case of a call, remains less than or equal to the exercise
price, the Fund will lose its entire investment in the option.
Also, where a put or call option on a particular
security is purchased to hedge against price movements
in a related security, the price of the put or call
option may move more or less than the price of the
related security. In this regard, trading in options
on certain securities (such as U.S. Government
securities) is relatively new, so that it is impossible to
predict to what extent liquid markets will develop or continue.
Furthermore, if trading restrictions or suspensions are
imposed on the options markets, the Fund may be unable
to close out a position. Finally, trading could be
interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or
sellers, or the options exchange could suspend trading
after the price has risen or fallen more than the maximum
amount specified by the exchange. Although the Fund may be able
to offset to some extent any adverse effects of being
unable to liquidate an option position, the Fund may
experience losses in some cases as a result of such
inability.
The Fund may employ hedging strategies with
options on currencies before the Fund purchases a
foreign security denominated in the hedged currency
that the Fund anticipates acquiring, during the period
the Fund holds the foreign security, or between the
date the foreign security is purchased or sold and the
date on which payment therefor is made or received. Hedging
against a change in the value of a foreign currency in the
foregoing manner does not eliminate fluctuations in the
prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such
hedging transactions reduce or preclude the opportunity
for gain if the value of the hedged currency should
change relative to the U.S. dollar. With respect to
transactions in surrogate currencies, there is a risk
of loss if there is not a correlation between the currency in
which the hedge is desired and the surrogate currency.
A position on an option on foreign currencies may
be closed out only on an exchange which provides a
secondary market for an option of the same series.
Although the Fund will purchase only exchange-traded
options, there is no assurance that a liquid secondary
market on an exchange will exist for any particular
option, or at any particular time. In the event no liquid
secondary market exists, it might not be possible to effect
closing transactions in particular options. If the
Fund cannot close out an exchange-traded option which
it holds, it would have to exercise its option in order
to realize any profit and would incur transactional
costs on the sale of the underlying assets.
The Fund's options activities also may have an
impact upon the level of its portfolio turnover and
brokerage commissions. See "Portfolio Turnover."
The Fund's success in using options techniques
depends, among other things, on IMI's ability to
predict accurately the direction and volatility of
price movements in the options markets as well as the
securities markets and on IMI's ability to select the
proper type, time and duration of options.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
GENERAL. The Fund may enter into futures
contracts and options on futures contracts. When a
purchase or sale of a futures contract is made by the
Fund, the Fund is required to deposit with its
custodian (or broker, if legally permitted) a specified
amount of cash or U.S. Government securities ("initial
margin"). The margin required for a futures contract is set by
the exchange on which the contract is traded and may be
modified during the term of the contract. The initial
margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned
to the Fund upon termination of the contract, assuming
all contractual obligations have been satisfied. A
futures contract held by the Fund is valued daily at
the official settlement price of the exchange on which it is
traded. Each day the Fund pays or receives cash, called
"variation margin," equal to the daily change in value of the
futures contract. This process is known as "marking to
market." Variation margin does not represent a
borrowing or loan by the Fund but is instead a
settlement between the Fund and the broker of the
amount one would owe the other if the futures contract
expired. In computing daily net asset value, the Fund will mark-
to-market its open futures position.
The Fund is also required to deposit and maintain
margin with respect to put and call options on futures
contracts written by it. Such margin deposits will
vary depending on the nature of the underlying futures
contract (and the related initial margin requirements),
the current market value of the option, and other
futures positions held by the Fund.
Although some futures contracts call for making or
taking delivery of the underlying securities, generally
these obligations are closed out prior to delivery by
offsetting purchases or sales of matching futures
contracts (same exchange, underlying security or index,
and delivery month). If an offsetting purchase price
is less than the original sale price, the Fund
generally realizes a capital gain, or if it is more, the
Fund generally realizes a capital loss. Conversely, if an
offsetting sale price is more than the original
purchase price, the Fund generally realizes a capital
gain, or if it is less, the Fund generally realizes a
capital loss. The transaction costs must also be
included in these calculations.
When purchasing a futures contract, the Fund will
maintain with its Custodian (and mark-to-market on a
daily basis) cash, U.S. Government securities, or other
high grade debt securities that, when added to the
amounts deposited with a futures commission merchant
("FCM") as margin, are equal to the market value of the
futures contract. Alternatively, the Fund may "cover"
its position by purchasing a put option on the same
futures contract with a strike price as high as or higher than
the price of the contract held by the Fund.
When selling a futures contact, the Fund will
maintain with its custodian (and mark-to-market on a
daily basis) liquid assets that, when added to the
amounts deposited with an FCM as margin, are equal to
the market value of the instruments underlying the
contract. Alternatively, the Fund may "cover" its position by
owning the instruments underlying the contract (or, in the
case of an index futures contract, a portfolio with a
volatility substantially similar to that of the index
on which the futures contract is based), or by holding
a call option permitting the Fund to purchase the same
futures contract at a price no higher than the price of
the contract written by the Fund (or at a higher price
if the difference is maintained in liquid assets with
the Fund's custodian).
When selling a call option on a futures contract,
the Fund will maintain with its custodian (and mark-to-
market on a daily basis) cash, U.S. Government
securities, or other high grade debt securities that,
when added to the amounts deposited with an FCM as
margin, equal the total market value of the futures contract
underlying the call option. Alternatively, the Fund may
cover its position by entering into a long position in
the same futures contract at a price no higher than the
strike price of the call option, by owning the
instruments underlying the futures contract, or by
holding a separate call option permitting the Fund to
purchase the same futures contract at a price not higher
than the strike price of the call option sold by the Fund.
When selling a put option on a futures contract,
the Fund will maintain with its custodian (and mark-to-
market on a daily basis) cash, U.S. Government
securities, or other high grade debt securities that
equal the purchase price of the futures contract less
any margin on deposit. Alternatively, the Fund may cover
the position either by entering into a short position in the
same futures contract, or by owning a separate put
option permitting it to sell the same futures contract
so long as the strike price of the purchased put option
is the same or higher than the strike price of the put
option sold by the Fund.
The requirements for qualification as a regulated
investment company also may limit the extent to which
the Fund may enter into futures and futures options.
INTEREST RATE FUTURES CONTRACTS. The Fund may
engage in interest rate futures contracts transactions
for hedging purposes only. An interest rate futures
contract is an agreement between parties to buy or sell
a specified debt security at a set price on a future
date. The financial instruments that underlie interest
rate futures contracts include long-term U.S. Treasury
bonds, U.S. Treasury notes, GNMA certificates, and three-month
U.S. Treasury bills. In the case of futures contracts
traded on U.S. exchanges, the exchange itself or an
affiliated clearing corporation assumes the opposite
side of each transaction (I.E., as buyer or seller). A
futures contract may be satisfied or closed out by
delivery or purchase, as the case may be, in the cash
financial instrument or by payment of the change in the cash
value of the index. Frequently, using futures to effect a
particular strategy instead of using the underlying or
related security will result in lower transaction costs
being incurred.
The Fund may sell interest rate futures contracts
in order to hedge its portfolio securities whose value
may be sensitive to changes in interest rates. In
addition, the Fund could purchase and sell these
futures contracts in order to hedge its holdings in
certain common stocks (such as utilities, banks and savings
and loans) whose value may be sensitive to changes in interest
rates. The Fund could sell interest rate futures
contracts in anticipation of or during a market decline
to attempt to offset the decrease in market value of
its securities that might otherwise result. When the
Fund is not fully invested in securities, it could
purchase interest rate futures in order to gain rapid
market exposure that may in part or entirely offset
increases in the cost of securities that it intends to purchase.
As such purchases are made, an equivalent amount of
interest rate futures contracts will be terminated by
offsetting sales. In a substantial majority of these
transactions, the Fund would purchase such securities
upon termination of the futures position whether the
futures position results from the purchase of an
interest rate futures contract or the purchase of a call option
on an interest rate futures contract, but under unusual
market conditions, a futures position may be terminated
without the corresponding purchase of securities.
OPTIONS ON INTEREST RATE FUTURES CONTRACTS. For
hedging purposes, the Fund may also purchase and write
put and call options on interest rate futures contracts
which are traded on a U.S. exchange or board of trade
and sell or purchase such options to terminate an
existing position. Options on interest rate futures
give the purchaser the right (but not the obligation), in
return for the premium paid, to assume a position in an interest
rate futures contract at a specified exercise price at a
time during the period of the option.
Transactions in options on interest rate futures
would enable the Fund to hedge against the possibility
that fluctuations in interest rates and other factors
may result in a general decline in prices of debt
securities owned by the Fund. Assuming that any
decline in the securities being hedged is accomplished
by a rise in interest rates, the purchase of put
options and sale of call options on the futures contracts may
generate gains which can partially offset any decline in the
value of the Fund's portfolio securities which have been
hedged. However, if after the Fund purchases or sells
an option on a futures contract, the value of the
securities being hedged moves in the opposite direction
from that contemplated, the Fund may experience losses
in the form of premiums on such options which would
partially offset gains the Fund would have.
FOREIGN CURRENCY FUTURES CONTRACTS AND RELATED
OPTIONS. The Fund may engage in foreign currency
futures contracts and related options transactions for
hedging purposes. A foreign currency futures contract
provides for the future sale by one party and purchase
by another party of a specified quantity of a foreign
currency at a specified price and time.
An option on a foreign currency futures contract
gives the holder the right, in return for the premium
paid, to assume a long position (call) or short
position (put) in a futures contract at a specified
exercise price at any time during the period of the
option. Upon the exercise of a call option, the holder
acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a
put option, the opposite is true.
The Fund may purchase call and put options on
foreign currencies as a hedge against changes in the
value of the U.S. dollar (or another currency) in
relation to a foreign currency in which portfolio
securities of the Fund may be denominated. A call
option on a foreign currency gives the buyer the right to
buy, and a put option the right to sell, a certain amount of
foreign currency at a specified price during a fixed period
of time. The Fund may invest in options on foreign
currency which are either listed on a domestic
securities exchange or traded on a recognized foreign
exchange.
In those situations where foreign currency options
may not be readily purchased (or where such options may
be deemed illiquid) in the currency in which the hedge
is desired, the hedge may be obtained by purchasing an
option on a "surrogate" currency, i.e., a currency
where there is tangible evidence of a direct
correlation in the trading value of the two currencies. A
surrogate currency's exchange rate movements parallel that of
the primary currency. Surrogate currencies are used to
hedge an illiquid currency risk, when no liquid hedge
instruments exist in world currency markets for the
primary currency.
The Fund will only enter into futures contracts
and futures options which are standardized and traded
on a U.S. or foreign exchange, board of trade, or
similar entity or quoted on an automated quotation
system. The Fund will not enter into a futures
contract or purchase an option thereon if, immediately
thereafter, the aggregate initial margin deposits for futures
contracts held by the Fund plus premiums paid by it for open
futures option positions, less the amount by which any
such positions are "in-the-money," would exceed 5% of
the liquidation value of the Fund's portfolio (or the
Fund's net asset value), after taking into account
unrealized profits and unrealized losses on any such
contracts the Fund has entered into. A call option is
"in-the-money" if the value of the futures contract
that is the subject of the option exceeds the exercise price. A
put option is "in the money" if the exercise price
exceeds the value of the futures contract that is the
subject of the option. For additional information
about margin deposits required with respect to futures
contracts and options thereon, see "Futures Contracts
and Options on Futures Contracts".
RISKS ASSOCIATED WITH FUTURES AND RELATED OPTIONS.
There are several risks associated with the use of
futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract
may result in losses in excess of the amount invested
in the futures contract. There can be no guarantee that
there will be a correlation between price movements in the
hedging vehicle and in the Fund's portfolio securities being
hedged. In addition, there are significant differences
between the securities and futures markets that could
result in an imperfect correlation between the markets,
causing a given hedge not to achieve its objectives.
The degree of imperfection of correlation depends on
circumstances such as variations in speculative market
demand for futures and futures options on securities,
including technical influences in futures trading and
futures options, and differences between the financial
instruments being hedged and the instruments underlying the
standard contracts available for trading in such respects as
interest rate levels, maturities, and creditworthiness of
issuers. A decision as to whether, when and how to hedge
involves the exercise of skill and judgment, and even a well-
conceived hedge may be unsuccessful to some degree
because of market behavior or unexpected interest rate
trends.
Futures exchanges may limit the amount of
fluctuation permitted in certain futures contract
prices during a single trading day. The daily limit
establishes the maximum amount that the price of a
futures contract may vary either up or down from the
previous day's settlement price at the end of the current
trading session. Once the daily limit has been reached in a
futures contract subject to the limit, no more trades may be
made on that day at a price beyond that limit. The
daily limit governs only price movements during a
particular trading day and therefore does not limit
potential losses because the limit may work to prevent
the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the
daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of
futures contracts to substantial losses.
There can be no assurance that a liquid market
will exist at a time when the Fund seeks to close out a
futures or a futures option position, and the Fund
would remain obligated to meet margin requirements
until the position is closed. In addition, there can
be no assurance that an active secondary market will
continue to exist.
Currency futures contracts and options thereon may
be traded on foreign exchanges. Such transactions may
not be regulated as effectively as similar transactions
in the United States; may not involve a clearing
mechanism and related guarantees; and are subject to
the risk of governmental actions affecting trading in,
or the prices of, foreign securities. The value of such position
also could be adversely affected by (i) other complex
foreign political, legal and economic factors, (ii)
lesser availability than in the United States of data
on which to make trading decisions, (iii) delays in a
Fund's ability to act upon economic events occurring in
foreign markets during non business hours in the United
States, (iv) the imposition of different exercise and
settlement terms and procedures and margin requirements than in
the United States, and (v) lesser trading volume.
COMBINED TRANSACTIONS. The Fund may enter into
multiple transactions, including multiple options
transactions, multiple futures transactions, multiple
currency transactions (including forward currency
contracts) and multiple interest rate transactions and
any combination of futures, options, currency and
interest rate transactions ("component" transactions),
instead of a single transaction, as part of a single or combined
strategy when, in the opinion of IMI, it is in the best
interests of a Fund to do so. A combined transaction
will usually contain elements of risk that are present
in each of its component transactions. Although
combined transactions are normally entered into based
on IMI's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the
desired portfolio management goal, it is possible that the
combination will instead increase such risks or hinder
achievement of the management objective.
INVESTMENT RESTRICTIONS
The Fund's investment objectives as set forth in
the Prospectus under "Investment Objectives and
Policies," together with the investment restrictions
set forth below, are fundamental policies of the Fund
and may not be changed without the approval of a
majority of the outstanding voting shares. Under these
restrictions, the Fund may not:
(i) With respect to 75% of its total assets,
purchase the securities of any one issuer,
other than securities issued by the U.S.
Government or its agencies or
instrumentalities, if immediately after
such purchase more than 5% of the value of the total
assets of the Fund would be invested in securities
of such issuer;
(ii) Invest in real estate, real estate
mortgage loans, commodities, commodity
futures contracts or interests in oil, gas
and/or mineral exploration or development
programs, although the Fund may purchase
and sell (a) securities which are secured by real
estate, (b) securities of issuers which invest or
deal in real estate, and (c) futures contracts as
described in the Fund's Prospectus;
(iii) Make investments in securities for the
purpose of exercising control over or
management of the issuer;
(iv) Participate on a joint or a joint and
several basis in any trading account in
securities. The "bunching" of orders of
the Fund and of other accounts under the
investment management of the Fund's
Manager for the sale or purchase of portfolio
securities shall not be considered participation in
a joint securities trading account;
(v) Purchase the securities of any one issuer
if, immediately after such purchase, the
Fund would own more than 10% of the
outstanding voting securities of such
issuer;
(vi) Purchase securities on margin, except such
short- term credits as are necessary for
the clearance of transactions;
(vii) Make loans, except this restriction shall
not prohibit (a) the purchase and holding
of a portion of an issue of publicly
distributed debt securities, (b) entry
into repurchase agreements with banks or
broker-dealers, or (c) the lending of its portfolio
securities in accordance with applicable guidelines
established by the Securities and Exchange
Commission (the "SEC") and any guidelines
established by the Trust's Trustees;
(viii) Borrow amounts in excess of 10% of its
total assets, taken at the lower of cost
or market value, and then only from banks
as a temporary measure for extraordinary
or emergency purposes. All borrowings
will be repaid before any additional investments are
made;
(ix) Purchase the securities of issuers
conducting their principal business
activities in the same industry if
immediately after such purchase the value of the
Fund's investments in such industry would exceed 25%
of the value of the total assets of the Fund;
(x) Act as an underwriter of securities,
except to the extent that, in connection
with the sale of securities, it may be
deemed to be an underwriter under
applicable securities laws; or
(xi) Issue senior securities, except insofar as
the Fund may be deemed to have issued a
senior security in connection with any
repurchase agreement or any permitted
borrowing.
ADDITIONAL RESTRICTIONS
The Fund has adopted the following additional
restrictions, which are not fundamental and which may
be changed without shareholder approval, to the extent
permitted by applicable law, regulation or regulatory
policy. Under these restrictions, the Fund may not:
(i) purchase or sell real estate limited
partnership interests;
(ii) purchase or sell interests in oil, gas or
mineral leases (other than securities of
companies that invest in or sponsor such
programs);
(iii) purchase any security if, as a result, the
Fund would then have more than 5% of its
total assets (taken at current value)
invested in securities of companies
(including predecessors) less than three
years old;
(iv) purchase or retain securities of any
company if officers and Trustees of the
Trust and officers and directors of the
Manager and the Manager who individually
own more than 1/2 of 1% of the securities
of that company, together own beneficially
more than 5% of such securities; or
(v) purchase securities of any open-end
investment company, or securities of
closed-end companies, except by purchase
in the open market where no commission or
profit to a sponsor or dealer results from
such purchases, or except when such purchase is
part of a merger, consolidation, reorganization or
sale of assets, and except that the Fund may
purchase shares of other investment companies
subject to such restrictions as may be imposed by
the Investment Company Act of 1940 and rules
thereunder or by any state in which shares
of the Fund are registered.
In addition, the Fund may not make short sales of
securities or maintain a short position. Moreover, so
long as it remains a restriction of the Ohio Division
of Securities, the Fund will treat securities eligible
for resale under Rule 144A of the Securities Act of
1933 as subject to the Fund's restriction on investing
in restricted securities, unless the Board determines
that such securities are liquid. (see "Restricted and Illiquid
Securities" under "Investment Objectives and Policies,"
above).
Whenever an investment policy or investment
restriction set forth in the Prospectus or this SAI
states a maximum percentage of assets that may be
invested in any security or other asset or describes a
policy regarding quality standards, such percentage
limitation or standard shall, unless otherwise indicated, apply
to the Fund only at the time a transaction is entered
into. Accordingly, if a percentage limitation is
adhered to at the time of investment, a later increase
or decrease in the percentage which results from a
relative change in values or from a change in the
Fund's net assets or other circumstances will not be
considered a violation.
ADDITIONAL RIGHTS AND PRIVILEGES
The Trust offers to investors, and (except as
noted below) bears the cost of providing, the following
rights and privileges. The Trust reserves the right to
amend or terminate any one or more of such rights and
privileges. Notice of amendments to or terminations of
rights and privileges will be provided to shareholders
in accordance with applicable law.
Certain of the rights and privileges described
below reference other funds distributed by Ivy
Mackenzie Distributors, Inc. ("IMDI")(formerly known as
Mackenzie Ivy Funds Distribution, Inc.), which funds
are not described in this SAI. These funds are: Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy Emerging
Growth Fund, Ivy International Fund, Ivy China Region Fund, Ivy
Latin America Strategy Fund, Ivy New Century Fund, Ivy
International Bond Fund, Ivy Canada Fund, Ivy Global Fund,
Ivy Bond Fund and Ivy Money Market Fund, the twelve
other series of Ivy Fund; and Mackenzie California
Municipal Fund, Mackenzie Florida Limited Term
Municipal Fund, Mackenzie Limited Term Municipal Fund,
Mackenzie National Municipal Fund and Mackenzie New
York Municipal Fund, the five series of Mackenzie Series
Trust (collectively, with the Fund, the "Ivy Mackenzie Funds").
Investors should obtain a current prospectus before
exercising any right or privilege that may relate to
these funds.
AUTOMATIC INVESTMENT METHOD
The Automatic Investment Method is available for
Class A and Class B shareholders of the Fund. The
minimum initial and
subsequent investment pursuant to this plan is $50 per
month, except in the case of a tax qualified retirement
plan for which the minimum initial and subsequent
investment is $25 per month. The Automatic Investment
Method may be discontinued at any time upon receipt by
The Ivy Mackenzie Services Corp. ("IMSC") (formerly
known as The Mackenzie Ivy Investor Services Corp.) of
telephone instructions or written notice to IMSC from the
investor. See "Automatic Investment Method" in the Account
Application.
EXCHANGE OF SHARES
As described in the Fund's Prospectus,
shareholders of the Fund have an exchange privilege
with certain other Ivy and Mackenzie Funds. Before
effecting an exchange, shareholders of the Fund should
obtain and read the currently effective prospectus for
the Ivy or Mackenzie Fund into which the exchange is to
be made.
CLASS A: Class A shareholders may exchange their
Class A shares ("outstanding Class A shares") for Class
A shares of another Ivy or Mackenzie Fund (or for
shares of another Ivy or Mackenzie Fund that currently
offers only a single class of shares) ("new Class A
shares") on the basis of the relative net asset value
per Class A share, plus an amount equal to the
difference, if any, between the sales charge previously paid on
the outstanding Class A shares and the sales charge
payable at the time of the exchange on the new Class A
shares. (The additional sales charge will be waived
for outstanding Class A shares that have been invested
for a period of 12 months or longer.) Class A
shareholders may also exchange their Class A shares for
Class A shares of Ivy Money Market Fund (no initial
sales charge will be assessed at the time of such an exchange).
Class A shares of the Fund acquired through an
exchange of Class A shares of another Ivy or Mackenzie
Fund that are subject to a contingent deferred sales
charge, as described in that Fund's prospectus, will
continue to be subject to the contingent deferred sales
charge schedule (and period) applicable to the Ivy or
Mackenzie Fund from which the exchange was made.
For purposes of computing the contingent deferred
sales charge that may be payable upon the redemption of
the new Class A shares, the holding period of the
outstanding Class A shares is "tacked" onto the holding
period of the new Class A shares.
CLASS B: Class B shareholders may exchange their
Class B shares ("outstanding Class B shares") for Class
B shares of another Ivy or Mackenzie Fund ("new Class B
shares") on the basis of the relative net asset value
per Class B share, without the payment of any
contingent deferred sales charge that would otherwise
be due upon the redemption of the outstanding Class B
shares. Class B shareholders of the Fund exercising the exchange
privilege will continue to be subject to the Fund's
contingent
deferred sales charge schedule (or period) following an
exchange if such schedule is higher (or such period is
longer) than the contingent deferred sales charge
schedule (or period) applicable to the new Class B
shares.
Class B shares of the Fund acquired through an
exchange of Class B shares of another Ivy or Mackenzie
Fund will be subject to the Fund's contingent deferred
sales charge schedule (or period) if such schedule is
higher (or such period is longer) than the contingent
deferred sales charge schedule (or period) applicable
to the Ivy or Mackenzie Fund from which the exchange
was made.
For purposes of both the conversion feature and
computing the contingent deferred sales charge that may
be payable upon the redemption of the new Class B
shares (prior to conversion), the holding period of the
outstanding Class B shares is "tacked" onto the holding
period of the new Class B shares.
The following contingent deferred sales charge
table ("Table 1") applies to Class B shares of the
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy International Fund, Ivy China
Region Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund, Ivy International Bond Fund, Ivy Canada
Fund, Ivy Global Fund, Ivy Bond Fund, Mackenzie
California Municipal Fund, Mackenzie National Municipal Fund and
Mackenzie New York Municipal Fund ("Table 1 Funds"):
CONTINGENT
DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT YEAR SINCE
PURCHASE TO CHARGE
First 5%
Second 4%
Third 3%
Fourth 3%
Fifth 2%
Sixth 1%
Seventh and thereafter 0%
The following contingent deferred sales charge
table ("Table 2") applies to Class B shares of the
Fund, Mackenzie Florida Limited Term Municipal Fund and
Mackenzie Limited Term Municipal Fund ("Table 2
Funds"):
CONTINGENT
DEFERRED SALES
CHARGE AS A PERCENTAGE OF
DOLLAR AMOUNT SUBJECT YEAR SINCE PURCHASE
TO CHARGE
First 3%
Second 2 1/2%
Third 2%
Fourth 1 1/2%
Fifth 1%
Sixth and thereafter 0%
The contingent deferred sales charge schedule for
Table 1 Funds is higher (and the period is longer) than
the contingent deferred sales charge schedule (and
period) for Table 2 Funds.
If a shareholder exchanges Class B shares of a
Table 1 Fund for Class B shares of a Table 2 Fund,
Table 1 will continue to apply to the Class B shares
following the exchange. For example, an investor may
decide to exchange Class B shares of a Table 1 Fund
("outstanding Class B shares") for Class B shares of a Table
2 Fund ("new Class B shares") after having held the
outstanding Class B shares for two years. The 4%
contingent deferred sales charge that generally would
apply to a redemption of outstanding Class B shares
held for two years would not be deducted at the time of
the exchange. If, three years later, the investor
redeems the new Class B shares, a 1% contingent deferred sales
charge will be assessed upon the redemption because by
"tacking" the two year holding period of the
outstanding Class B shares onto the three year holding
period of the new Class B shares, the investor will be
deemed to have held the new Class B shares for five
years.
If a shareholder exchanges Class B shares of a
Table 2 Fund for Class B shares of a Table 1 Fund,
Table 1 will apply to the Class B shares following the
exchange. For example, an investor may decide to
exchange Class B shares of a Table 2 Fund ("outstanding
Class B shares") for Class B shares of a Table 1 Fund
("new Class B shares") after having held the outstanding
Class B shares for two years. The 2 1/2% contingent deferred
sales charge that generally would apply to a redemption of
outstanding Class B shares held for two years would not be
deducted at the time of the exchange. If, three years
later, the investor redeems the new Class B shares, a
2% contingent deferred sales charge will be assessed
upon the redemption because by "tacking" the two year
holding period of the outstanding Class B shares onto
the three year holding period of the new Class B
shares, the investor will be deemed to have held the new Class B
shares for five years.
CLASS I: Class I shareholders may exchange their
Class I shares for Class I shares of another Ivy or
Mackenzie Fund on the basis of the relative net asset
value per Class I share.
The minimum amount which may be exchanged into a
fund of the Ivy Mackenzie Funds in which shares are not
already held is $1,000 ($5,000,000 in the case of Class
I of the Fund). No exchange out of the Fund (other
than by a complete exchange of all shares of the Fund)
may be made if it would reduce the shareholder's
interest in the Fund to less than $1,000. Exchanges
are available only in states where the exchange can be
legally made.
Each exchange will be made on the basis of the
relative net asset values per share of each fund of the
Ivy Mackenzie Funds next computed following receipt of
telephone instructions by IMSC or a properly executed
request by IMSC. An exchange from the Fund into any
other fund into which exchanges are permitted may be
subject to a sales charge as described in its Prospectus.
Exchanges, whether written or telephonic, must be received by
IMSC by the close of regular trading on the New York Stock
Exchange (the "Exchange") (normally 4:00 p.m., eastern
time) to receive the price computed on the day of
receipt; exchange requests received after that time
will receive the price next determined following
receipt of the request. This exchange privilege may be
modified or terminated at any time, upon at least 60
days' notice when such notice is required by SEC rules.
See "Redemptions."
An exchange of shares in any fund of the Ivy
Mackenzie Funds for shares in another fund will result
in a taxable gain or loss. Generally, any such taxable
gain or loss will be a capital gain or loss (long-term
or short-term, depending on the holding period of the
shares) in the amount of the difference between the net
asset value of the shares surrendered and the shareholder's tax
basis for those shares. However, in certain
circumstances, shareholders will be ineligible to take
sales charges into account in computing taxable gain or
loss on an exchange. See "Taxation."
With limited exceptions, any gain realized by a
tax-deferred retirement plan will not be taxable to the
plan and will not be taxed to the participant until
distribution. Each investor should consult his or her
tax adviser regarding the tax consequences of an
exchange transaction.
LETTER OF INTENT
Reduced sales charges apply to initial investments
in Class A shares of the Fund made pursuant to a non-
binding Letter of Intent. A Letter of Intent may be
submitted by an individual, his or her spouse and
children under the age of 21, or a trustee or other
fiduciary of a single trust estate or single fiduciary
account. See the Account Application in the Fund's Prospectus.
Any investor may submit a Letter of Intent stating that
he or she will invest, over a period of 13 months, at
least $1,000,000 in Class A shares of the Fund. A
Letter of Intent may be submitted at the time of an
initial purchase of Class A shares of the Fund or
within 90 days of the initial purchase, in which case the
Letter of Intent will be back dated. A shareholder may include
the value (at the applicable offering price) of all Class
A shares of the Fund, Ivy Canada Fund, Ivy Global Fund,
Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
Emerging Growth Fund, Ivy International Fund, Ivy China
Region Fund, Ivy Latin America Strategy Fund, Ivy New
Century Fund, Ivy International Bond Fund, Ivy Bond
Fund, Mackenzie National Municipal Fund, Mackenzie
Florida Limited Term Municipal Fund, Mackenzie Limited Term
Municipal Fund, Mackenzie California Municipal Fund and
Mackenzie New York Municipal Fund (and shares that have
been exchanged into Ivy Money Market Fund from any of
the other funds in the Ivy Mackenzie Funds) held of
record by him or her as of the date of his or her
Letter of Intent as an accumulation credit toward the
completion of such Letter. During the term of the Letter of
Intent, the Transfer Agent will hold Class A shares
representing 5% of the indicated amount (less any
accumulation credit value) in escrow. The escrowed
Class A shares will be released when the full indicated
amount has been purchased. If the full indicated
amount is not purchased during the term of the Letter of Intent,
the investor is required to pay IMDI an amount equal to
the difference between the dollar amount of sales
charge which he or she has paid and that which he or
she would have paid on his or her aggregate purchases
if the total of such purchases had been made at a
single time. Such payment will be made by an automatic
liquidation of Class A shares in the escrow account. A Letter of
Intent does not obligate the investor to buy or the
Trust to sell the indicated amount of Class A shares,
and the investor should read carefully all the
provisions thereof before signing.
RETIREMENT PLANS
Shares may be purchased in connection with several
types of tax-deferred retirement plans. Shares of more
than one fund distributed by IMDI may be purchased in a
single application establishing a single plan account,
and shares held in such an account may be exchanged
among the funds in the Ivy Mackenzie Funds in
accordance with the terms of the applicable plan and the
exchange privilege available to all shareholders. Initial and
subsequent purchase payments in connection with tax-
deferred retirement plans must be at least $25 per
participant.
The following fees will be charged to individual
shareholder accounts as described in the retirement
prototype plan document:
Retirement Plan New Account Fee no fee
Retirement Plan Annual Maintenance Fee $10.00 per
account
For shareholders whose retirement accounts are
diversified across several funds of the Ivy Mackenzie
Funds, the annual maintenance fee will be limited to
not more than $20.
The following discussion describes the tax
treatment of certain tax-deferred retirement plans
under current Federal income tax law. State income tax
consequences may vary. An individual considering the
establishment of a retirement plan should consult with
an attorney and/or an accountant with respect to the
terms and tax aspects of the plan.
INDIVIDUAL RETIREMENT ACCOUNTS: Shares of the
Fund may be used as a funding medium for an Individual
Retirement Account ("IRA"). Eligible individuals may
establish an IRA by adopting a model custodial account
available from IMSC, who may impose a
charge for establishing the account. Individuals may
wish to consult their tax advisers before investing IRA
assets in a Fund which primarily distributes exempt-
interest dividends.
An individual who has not reached age 70-1/2 and
who receives compensation or earned income is eligible
to contribute to an IRA, whether or not he or she is an
active participant in a retirement plan. An individual
who receives a distribution from another IRA, a
qualified retirement plan, a qualified annuity plan or
a tax-sheltered annuity or custodial account ("403(b)
plan") that qualifies for "rollover" treatment is also eligible
to establish an IRA by rolling over the distribution
either directly or within 60 days after its receipt.
Tax advice should be obtained in connection with
planning a rollover contribution to an IRA.
In general, an eligible individual may contribute
up to the lesser of $2,000 or 100% of his or her
compensation or earned income to an IRA each year. If
a husband and wife are both employed, and both are
under age 70-1/2, each may set up his or her own IRA
within these limits. If both earn at least $2,000 per
year, the maximum potential contribution is $4,000 per year
for both. However, if one spouse has (or elects to be treated
as having) no earned income for IRA purposes for a
year, the other spouse may contribute to an IRA on his
or her behalf. In such a case, the working spouse may
contribute up to the lesser of $2,250 or 100% of his or
her compensation or earned income for the year to IRAs
for both spouses, provided that no more than $2,000 is
contributed to the IRA of one spouse. Rollover
contributions are not subject to these limits.
An individual may deduct his or her annual
contributions to an IRA in computing his or her Federal
income tax within the limits described above, provided
he or she (or his or her spouse, if they file a joint
Federal income tax return) is not an active participant
in a qualified retirement plan (such as a qualified
corporate, sole proprietorship, or partnership pension, profit
sharing, 401(k) or stock bonus plan), qualified annuity
plan, 403(b) plan, simplified employee pension, or
government plan. If he or she (or his or her spouse)
is an active participant, a full deduction is only
available if he or she has adjusted gross income that
is no greater than a specified level ($40,000 for
married couples filing a joint return, $25,000 for single
individuals, and $0 for a married individual filing a separate
return). The deduction is phased out ratably for active
participants with adjusted gross income between certain
levels ($40,000 and $50,000 for married individuals
filing a joint return, $25,000 and $35,000 for single
individuals, and $0 and $10,000 for married individuals
filing separate returns). Individuals with income
above the specified phase-out level may not deduct
their IRA contributions. Rollover contributions are
not includible in income for Federal income tax purposes and
therefore are not deductible from it.
Generally, earnings on an IRA are not subject to
current Federal income tax until distributed.
Distributions attributable to tax-deductible
contributions and to IRA earnings are taxed as ordinary
income. Distributions of non-deductible contributions
are not subject to Federal income tax. In general, distributions
from an IRA to an individual before he or she reaches
age 59-1/2 are subject to a nondeductible penalty tax
equal to 10% of the taxable amount of the distribution.
The 10% penalty tax does not apply to amounts withdrawn
from an IRA after the individual reaches age 59-1/2,
becomes disabled or dies, or if withdrawn in the form
of substantially equal payments over the life or life
expectancy of the individual and his or her designated
beneficiary, if any, or rolled over into another IRA.
Distributions must begin to be withdrawn not later than April 1
of the calendar year following the calendar year in which
the individual reaches age 70-1/2. Failure to take
certain minimum required distributions will result in
the imposition of a 50% non-deductible penalty tax.
Extremely large distributions in any one year from an
IRA (or from an IRA and other retirement plans) may
also result in a penalty tax.
QUALIFIED PLANS: For those self-employed
individuals who wish to purchase shares of one or more
of the funds in the Ivy Mackenzie Funds through a
qualified retirement plan, a Custodial Agreement and a
Retirement Plan are available from IMSC. The
Retirement Plan may be adopted as a profit sharing plan or a
money purchase pension plan. A profit sharing plan permits
an annual contribution to be made in an amount
determined each year by the self-employed individual
within certain limits prescribed by law. A money
purchase pension plan requires annual contributions at
the level specified in the Custodial Agreement. There
is no set-up fee for qualified plans and the annual account
maintenance fee is $20.00 per account.
In general, if a self-employed individual has any
common law employees, employees who have met certain
minimum age and service requirements must be covered by
the Retirement Plan. A self- employed individual
generally must contribute the same percentage of income
for common law employees as for himself or herself.
A self-employed individual may contribute up to
the lesser of $30,000 or 25% of compensation or earned
income to a money purchase pension plan or to a
combination profit sharing and money purchase pension
plan arrangement each year on behalf of each
participant. To be deductible, total contributions to a
profit sharing plan generally may not exceed 15% of the total
compensation or earned income of all participants in the
plan, and total contributions to a combination money
purchase-profit sharing arrangement generally may not
exceed 25% of the total compensation or earned income
of all participants. The amount of compensation or
earned income of any one participant that may be taken
into account under the plan is limited (generally to
$150,000 for benefits accruing in plan years beginning after
1993, with annual inflation adjustments). A self-employed
individual's contributions to a retirement plan on his
or her own behalf must be deducted in computing his or
her earned income.
Corporate employers may also adopt the Custodial
Agreement and Retirement Plan for the benefit of their
eligible employees. Similar contribution and deduction
rules apply to corporate employers.
Distributions from the Retirement Plan generally
are made after a participant's separation from service.
A 10% penalty tax generally applies to distributions to
an individual before he or she reaches age 59 1/2,
unless the individual (1) has reached age 55 and
separated from service; (2) dies; (3) becomes disabled;
(4) uses the withdrawal to pay tax-deductible medical expenses;
(5) takes the withdrawal as part of a series of
substantially equal payments over his or her life
expectancy or the joint life expectancy of himself or
herself and a designated beneficiary; or (6) rolls over
the distribution.
The Transfer Agent will furnish custodial services
to the employer and any participating employees.
DEFERRED COMPENSATION FOR PUBLIC SCHOOLS AND
CHARITABLE ORGANIZATIONS ("403(B)(7) ACCOUNT"):
Section 403(b)(7) of the Internal Revenue Code of 1986,
as amended (the "Code"), permits public school systems
and certain charitable organizations to use mutual fund
shares held in a custodial account to fund deferred
compensation arrangements with their employees. A custodial
account agreement is available for those employers whose
employees wish to purchase shares of the Trust in conjunction
with such an arrangement. Sales charges for such
purchases are the same as those set forth under
"Purchase of Shares" in the Prospectus. The special
application for a 403(b)(7) Account is available from
IMSC.
Distributions from the 403(b)(7) Account may be
made only following death, disability, separation from
service, attainment of age 59-1/2, or incurring a
financial hardship. A 10% penalty tax generally
applies to distributions to an individual before he or
she reaches age 59-1/2, unless the individual (1) has reached
age 55 and separated from service; (2) dies; (3) becomes
disabled; (4) uses the withdrawal to pay tax-deductible
medical expenses; (5) takes the withdrawal as part of a
series of substantially equal payments over his or her
life expectancy or the joint life expectancy of himself
or herself and a designated beneficiary; or (6) rolls
over the distribution. There is no set-up fee for
403(b)(7) Accounts and the annual maintenance fee is
$20.00 per account.
SIMPLIFIED EMPLOYEE PENSION ("SEP") IRAS: An
employer may deduct contributions to a SEP up to the
lesser of $30,000 or 15% of compensation. SEP accounts
generally are subject to all rules applicable to IRA
accounts, except the deduction limits, and are subject
to certain employee participation requirements.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of the
Fund may reinvest all or a part of the proceeds of the
redemption back into Class A shares of the Fund at net
asset value (without a sales charge) within 24 months
from the date of redemption. There is no limit on the
number of times this privilege may be exercised. The
reinvestment will be made at the net asset value next
determined after receipt by the Transfer Agent of the
reinvestment order accompanied by the funds to be reinvested. No
compensation will be paid to any sales personnel or
dealer in connection with the transaction.
Any redemption is a taxable event. A loss
realized on a redemption generally may be disallowed
for tax purposes if the reinvestment privilege is
exercised within 30 days after the redemption. In
certain circumstances, shareholders will be ineligible
to take sales charges into account in computing taxable
gain or loss on a redemption if the reinvestment
privilege is exercised. See "Taxation."
RIGHTS OF ACCUMULATION
A scale of reduced sales charges applies to any
investment of $1,000,000 or more in Class A shares of
the Fund. See the "Initial Sales Charge Alternative--
Class A Shares" in the Prospectus for the Fund. The
reduced sales charge is applicable to investments made
at one time by an individual, his or her spouse and
children under the age of 21, or a trustee or other
fiduciary of a single trust estate or single fiduciary account
(including a pension, profit sharing or other employee
benefit trust created pursuant to a plan qualified
under Section 401 of the Code). It is also applicable
to current purchases of all of the funds in the Ivy
Mackenzie Funds (except Ivy Money Market Fund) by any
of the persons enumerated above, where the aggregate
quantity of Class A shares of the Fund, Ivy Growth Fund, Ivy
Growth with Income Fund, Ivy Emerging Growth Fund, Ivy
International Fund, Ivy China Region Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund, Ivy International Bond
Fund, Ivy Canada Fund, Ivy Global Fund, Ivy Bond Fund,
Mackenzie National Municipal Fund, Mackenzie California
Municipal Fund, Mackenzie Florida Limited Term
Municipal Fund, Mackenzie Limited Term Municipal Fund
and Mackenzie New York Municipal Fund (and shares that
have been exchanged into Ivy Money Market Fund from any
of the other funds in the Ivy Mackenzie Funds) and of any
other investment company distributed by IMDI, previously
purchased or acquired and currently owned, determined at the
higher of current offering price or amount invested, plus
the Class A shares being purchased, amounts to $50,000
or more for Ivy Global Fund, Ivy Canada Fund, Ivy
Growth Fund, Ivy Growth with Income Fund, Ivy Emerging
Growth Fund, Ivy International Fund, Ivy Latin America
Strategy Fund, Ivy New Century Fund, and Ivy China
Region Fund; $100,000 or more for Ivy International
Bond Fund, Ivy Bond Fund, Mackenzie National Municipal Fund,
Mackenzie California Municipal Fund and Mackenzie New
York Municipal Fund; $25,000 or more for Mackenzie
Florida Limited Term Municipal Fund and Mackenzie
Limited Term Municipal Fund; or $1,000,000 or more for
the Fund.
At the time an investment takes places, IMSC must
be notified by the investor or his or her dealer that
the investment qualifies for the reduced sales charge
on the basis of previous investments. The reduced
sales charge is subject to confirmation of the
investor's holdings through a check of the Fund's records.
SYSTEMATIC WITHDRAWAL PLAN
A Class A shareholder may establish a Systematic
Withdrawal Plan (a "Withdrawal Plan") by telephone
instructions to IMSC or by delivery to IMSC of a
written election to so redeem, accompanied by a
surrender to IMSC of all share certificates then
outstanding in the name of such shareholder, properly endorsed by
him or her. To be eligible, a shareholder must have at
least $5,000 in the shareholder's account. A
Withdrawal Plan may not be established if the investor
is currently participating in the Automatic Investment
Method. A Withdrawal Plan may involve the use of
principal and, to the extent that it does, depending on
the amount withdrawn, the investor's principal may be depleted.
A redemption under the Withdrawal Plan is a
taxable event. Investors contemplating participation
in the Withdrawal Plan should consult their tax
advisers.
Additional investments in Class A or Class B
shares of the Fund made by investors participating in a
Withdrawal Plan must equal at least $1,000 each while
the Withdrawal Plan is in effect. Making additional
purchases while the Withdrawal Plan is in effect may be
disadvantageous to the investor because of applicable
initial or contingent deferred sales charges.
An investor may terminate his or her participation
in the Withdrawal Plan at any time by delivering
written notice to the Transfer Agent. If all shares
held by the investor are liquidated at any time,
participation in the Withdrawal Plan will terminate
automatically. The Trust or IMSC may terminate the
Withdrawal Plan at any time after reasonable notice to
shareholders.
BROKERAGE ALLOCATION
Subject to the overall supervision of the
President and the Board of Trustees of the Trust, IMI
places orders for the purchase and sale of the Fund's
portfolio securities. All portfolio transactions are
effected at the best price and execution obtainable.
Purchases and sales of debt securities are usually
principal transactions and, therefore, brokerage
commissions are usually not required to be paid by the Fund for
such purchases and sales, although the price paid
generally
includes undisclosed compensation to the dealer. The
prices paid to underwriters of newly-issued securities
usually include a concession paid by the issuer to the
underwriter, and purchases of after-market securities
from dealers normally reflect the spread between the
bid and asked prices. In connection with OTC
transactions, IMI attempts to deal directly with the principal
market makers, except in those circumstances where it
believes that better prices and execution are available
elsewhere.
IMI selects broker-dealers to execute transactions
and evaluates the reasonableness of commissions on the
basis of quality, quantity, and the nature of the
firms' professional services. Commissions to be
charged and the rendering of investment services,
including statistical, research, and counseling
services by brokerage firms, are factors to be
considered in the placing of brokerage business. The types of
research services provided by brokers may include general
economic and industry data, and information on securities
of specific companies. Research services furnished by
brokers through whom the Trust effect securities
transactions may be used by IMI in servicing all of its
accounts. In addition, not all of these services may
be used by the Investment Adviser in connection with
the services it provides to the Fund or the Trust. IMI
may consider sales of shares of the Fund as a factor in
the selection of broker-dealers and may select broker-dealers
who provide it with research services. IMI will not,
however, execute brokerage transactions other than at
the best price and execution.
The Fund may, under some circumstances, accept
securities in lieu of cash as payment for Fund shares.
The Fund will consider accepting securities only to
increase its holdings in a portfolio security or to
take a new portfolio position in a security that IMI
deems to be a desirable investment for the Fund. While no
minimum has been established, it is expected that the Fund will
not accept securities having an aggregate value of less
than $1 million. The Trust may reject in whole or in
part any or all offers to pay for Fund shares with
securities and may discontinue accepting securities as
payment for Fund shares at any time without notice.
The Trust will value accepted securities in the manner
and at the same time provided for valuing portfolio
securities of the Fund, and Fund shares will be sold for net
asset value determined at the same time the accepted
securities are valued. The Trust will accept only
securities which are delivered in proper form and will
not accept securities subject to legal restrictions on
transfer. The acceptance of securities by the Trust
must comply with applicable laws of certain states.
During the fiscal years ended June 30, 1993 and
June 30, 1994, the Fund paid no brokerage commissions.
During the six- month period ended December 31, 1994 the
Fund paid brokerage commissions of $2,063. During the
fiscal year ended December 31, 1995, the fund paid
brokerage commissions of $______.
Fluctuations in the Fund's portfolio turnover rate are
due to the Fund's responding to changes in economic and
market developments.
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Trust,
their business addresses and principal occupations
during the past five years are:
POSITION
WITH THE BUSINESS
AFFILIATIONS NAME, ADDRESS, AGE TRUST AND
PRINCIPAL OCCUPATIONS
John S. Anderegg, Jr. Trustee Chairman,
Dynamics 60 Concord Street Research
Corp. instruments Wilmington, MA 01887
and controls); Director, Age: 72
Burr-Brown Corp.
(operational amplifiers);
Director, Metritage
Incorporated (level
measuring instruments);
Trustee of Mackenzie Series
Trust (1992-present).
Paul H. Broyhill Trustee Chairman, BMC
Fund, Inc. 800 Hickory Blvd. (1983-
present); Chairman, Golfview Park
Broyhill Family Foundation, Lenoir, NC 28645
Inc. (1983-Present); Age: 72
Chairman and President,
Broyhill Investments, Inc.
(1983-present); Chairman,
Broyhill Timber Resources
(1983-present); Management
of a personal
portfolio of
fixed-income and equity
investments (1983-present);
Trustee of Mackenzie Series
Trust (1988-present);
Director of The Mackenzie
Funds Inc. (1988-1995).
Stanley Channick Trustee President, The Whitestone
11 Bala Avenue Corporation
(insurance Bala Cynwyd, PA 19004
agency); President, Scott Age: 71
Management Company
(administrative services
for insurance companies);
President, The Channick
Group (consultants to
insurance companies and
national trade
associations); Trustee of
Ivy Fund (1984-1993);
Director of The Mackenzie
Funds Inc.
(1994-1995).
Frank W. DeFriece, Jr. Trustee Director, Manager
and Vice
The Landmark Centre President, Massengill-
113 Landmark Lane, DeFriece
Foundation Suite B
(charitable organization) Bristol, TN 37625
(1950-present); Trustee and Age: 75
Second Vice Chairman, East
Tennessee Public
Communications Corp. (WSJK-
TV) (1984-present); Trustee
of Mackenzie Series Trust
(1985-present);
Director of The
Mackenzie Funds Inc.
(1987-1995).
Roy J. Glauber Trustee Mallinckrodt Professor of
Lyman Laboratory Physics, Harvard
of Physics University (since
1974); Harvard University Trustee of
Ivy Fund (1961 Cambridge, MA 02138
-1991); Trustee of
Mackenzie Series Trust Age: 70
(1994-present).
Michael G. Landry Trustee President,
Chairman and 700 South Federal Hwy. and
Director of Mackenzie Suite 300
President Investment Management Boca Raton, FL
33432 Inc. (1987-present); Age: 49
President and Director [*Deemed
to be an of Ivy Management, Inc.
"interested person" (1992-present); Chairman
of the Trust, as and Director of
defined under the Mackenzie Ivy Investor
1940 Act.] Services Corp. (1993-
present);
Director and
President of Mackenzie Ivy
Funds Distribution, Inc.
(1993-1994); Chairman and
Director of Mackenzie Ivy
Funds Distribution, Inc.
(1994-present); Director
and President of The
Mackenzie Funds Inc. (1987-
1995); Trustee
and President of
Mackenzie Series
Trust (1987-
present).
Michael R. Peers Trustee Chairman of the
Board, 737 Periwinkle Way and Ivy
Management, Inc. Sanibel, FL 33957 Chairman
(1984-1991); Chairman Age: 66 of the
of the Board, Ivy Fund [*Deemed to be an
Board (1974-present); Private "interested
person" Investor.
of the Trust, as
defined under the
1940 Act.]
Joseph G. Rosenthal Trustee Chartered
Accountant 110 Jardin Drive (1958-
present); Trustee Unit #12
of Mackenzie Series Concord, Ontario Canada
Trust (1985-present); L4K 2T7
Director of The Mackenzie Age: 61
Funds Inc. (1987-1995).
Richard N. Silverman Trustee Formerly
President, 18 Bonnybrook Road Hy-Sil
Manufacturing Waban, MA 02168
Company, a division of Age: 71
Van Leer, U.S.A., Inc.
(gift packaging materials
and metalized film
products); Formerly
Director, Waters
Manufacturing Co.
(manufacturer of electronic
parts); Director, Panorama
Television Network.
J. Brendan Swan Trustee President,
Airspray 4701 North Federal Hwy.
International, Inc.; Suite 465
Joint Managing Director, Pompano Beach, FL 33064
Airspray International Age: 65
B.V. (an environmentally
sensitive packaging
company); Director, The
Mackenzie Funds Inc. (1992-
1995); Trustee of Mackenzie
Series Trust (1992-
present).
Keith J. Carlson Vice Senior Vice
President 700 South Federal Hwy. President and
Director of Mackenzie Suite 300
Investment Management, Boca Raton, FL 33432
Inc. (1994-present); Age: 39
Senior Vice President,
Secretary and Treasurer of
Mackenzie Investment
Management Inc. (1985-
1994); Senior Vice
President and Director of
Ivy Management, Inc. (1994-
present); Senior Vice
President, Treasurer
and Director of
Ivy Management,
Inc. (1992-1994); Vice
President of The Mackenzie
Funds Inc. (1987-1995);
President and Director of
Mackenzie Ivy Investor
Services Corp. (1993-1996);
Vice President of Mackenzie
Series Trust (1994
present);
Treasurer of
Mackenzie Series Trust
(1985-1994); President and
Director of Mackenzie Ivy
Funds Distribution, Inc.
(1994-present); Executive
Vice President and Director
of Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994).
C. William Ferris Secretary/ Senior Vice
President, 700 South Federal Hwy. Treasurer
Secretary/Treasurer Suite 300
and Director of Boca Raton, FL 33432
Mackenzie Investment Age: 51
Management Inc. (1994-
present); Senior Vice
President, Finance and
Administration/Compliance
Officer of Mackenzie
Investment Management Inc.
(1989-1994); Senior Vice
President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1994-
present); Senior
Vice President,
Finance and
Administration/Compliance
Officer of Ivy Management,
Inc. (1992-1994); Senior
Vice President, Secretary/
Treasurer and Clerk of Ivy
Management, Inc. (1989-
1994); Senior Vice
President, Secretary/
Treasurer of
Mackenzie Ivy
Funds Distribution, Inc.
(1994-present); Secretary/
Treasurer and Director of
Mackenzie Ivy Funds
Distribution, Inc. (1993-
1994); Secretary/Treasurer
and Director of Mackenzie
Ivy Investor Services
Corp.
(1993-1996); President and
Director of Mackenzie Ivy
Investor Services Corp.
(1996-present); Secretary/
Treasurer of The Mackenzie
Funds Inc. (1993-1995);
Secretary/Treasurer of
Mackenzie Series
Trust (1994-
present).
As of March 23, 1996, none the Officers and
Trustees of the Trust as a group owned none of the
outstanding Class A, Class B or Class I shares of the
Fund.
PERSONAL INVESTMENTS BY EMPLOYEES OF THE ADVISER
Employees of IMI are permitted to make personal
securities transactions, subject to requirements and
restrictions set forth in IMI's Code of Ethics. The
Code of Ethics contains provisions and requirements
designed to identify and address certain conflicts of
interest between personal investment activities and the
interests of investment advisory clients such as the Fund.
Among other things, the Code of Ethics, which generally
complies with standards recommended by the Investment
Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions
absent prior approval, imposes time periods during
which personal transactions may not be made in certain
securities, and requires the submission of duplicate broker
confirmations and monthly reporting of securities
transactions. Additional restrictions apply to
portfolio managers, traders, research analysts and
others involved in the investment advisory process.
Exceptions to these and other provisions of the Code of
Ethics may be granted in particular circumstances after review by
appropriate personnel.
COMPENSATION TABLE
IVY FUND
(FISCAL YEAR ENDED DECEMBER 31, 1995)
TOTAL PENSION OR
COMPENSA- RETIREMENT
TION FROM
BENEFITS ESTIMATED TRUST AND
AGGREGATE ACCRUED AS ANNUAL FUND COM-
COMPENSA- PART OF BENEFITS PLEX PAID
NAME, TION FUND UPON TO
POSITION FROM TRUST EXPENSES RETIREMENT
TRUSTEES
John S. 7,112 N/A N/A
8,000 Anderegg, Jr.
(Trustee)
Paul H. 7,112 N/A N/A
8,000 Broyhill
(Trustee)
Stanley -0- N/A N/A
8,000 Channick[*]
(Trustee)
Frank W. 7,112 N/A N/A
8,000 DeFriece, Jr.
(Trustee)
Roy J. -0- N/A N/A
8,000 Glauber[*]
(Trustee)
Michael G. -0- N/A N/A
-0- Landry
(Trustee and
President)
Michael R. -0- N/A N/A
-0- Peers
(Trustee and
Chairman of
the Board)
Joseph G. 7,112 N/A N/A
8,000 Rosenthal
(Trustee)
Richard N. 8,000 N/A N/A
8,000 Silverman
(Trustee)
J. Brendan 7,112 N/A N/A
8,000 Swan
(Trustee)
Keith J. -0- N/A N/A
-0- Carlson
(Vice President)
C. William -0- N/A N/A
-0- Ferris
(Secretary/Treasurer)
[*] Appointed as a Trustee of the Trust at a meeting
of the Board of Trustees held on February 10,
1996.
As of February 26, 1996, the Officers and Trustees
of the Trust as a group owned beneficially or of record
none of the outstanding Class A, Class B, Class C or
Class I shares of any of the Funds.
INVESTMENT ADVISORY AND OTHER SERVICES
BUSINESS MANAGEMENT AND INVESTMENT ADVISORY SERVICES
Ivy Management, Inc. ("IMI") currently provides
business management and investment advisory services to
the Fund pursuant to a Business Management and
Investment Advisory Agreement (the "Agreement"). The
Agreement was initially approved on September 29, 1994
by the Trust's Board of Trustees including a majority of
the Trustees who neither are "interested persons" (as defined in
the 1940 Act) of the Trust nor have a direct or indirect
financial interest in the operation of the distribution
plan (see "Distribution Services") or in any related
agreement (the "Independent Trustees"). The Agreement
was approved by the sole shareholder of the Fund on
December 31, 1994. Until December 31, 1994 Mackenzie
Investment Management Inc. ("MIMI") served as
investment adviser to the Fund, which until December 31, 1994 was
a series of The Mackenzie Funds Inc. (the "Company").
IMI is a wholly owned subsidiary of MIMI. MIMI is a
subsidiary of MFC, 150 Bloor Street West, Toronto,
Ontario, Canada, a public corporation organized under
the laws of Ontario whose shares are listed for trading
on The Toronto Stock Exchange. MFC is registered in
Ontario as a mutual fund dealer and advises Ivy Canada
Fund. On December 31, 1994, the Fund was reorganized as a
series of the Trust. In connection with that reorganization,
IMI succeeded to MIMI as investment adviser to the
Fund. IMI also currently acts as manager and
investment adviser to the following investment
companies registered under the 1940 Act: Ivy Emerging
Growth Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy Money Market Fund, Ivy China Region
Fund, Ivy Latin America Strategy Fund, Ivy New Century
Fund, Ivy International Bond Fund, Ivy Global Fund, Ivy
Canada Fund and Ivy Bond Fund.
The Fund pays IMI a monthly fee for providing
business management and investment advisory services at
the annual rate of 0.60% of the Fund's average daily
net assets. During the fiscal years ended June 30,
1993 and June 30, 1994 and during the six- month period
ended December 31, 1994, MIMI, as the investment
adviser to the Fund when it was a series of the Company, received
fees of $191,454, $171,829 and $32,313, respectively,
from the Fund. During the fiscal year ended December
31, 1995, IMI, as investment adviser to the Fund,
received fees of $42,049 from the Fund.
Under the Agreement, the Trust pays the following
expenses: (1) the fees and expenses of the Trust's
Independent Trustees; (2) the salaries and expenses of
any of the Trust's officers or employees who are not
affiliated with IMI; (3) interest expenses; (4) taxes
and governmental fees, including any original issue
taxes or transfer taxes applicable to the sale or delivery of
shares or certificates therefor; (5) brokerage commissions
and other expenses incurred in acquiring or disposing
of portfolio securities; (6) the expenses of
registering and qualifying shares
for sale with the SEC and with various state securities
commissions; (7) accounting and legal costs; (8)
insurance premiums; (9) fees and expenses of the
Trust's Custodian and Transfer Agent and any related
services; (10) expenses of obtaining quotations of
portfolio securities and of pricing shares; (11)
expenses of maintaining the Trust's legal existence and
of shareholders' meetings; (12) expenses of preparation and
distribution to existing shareholders of periodic reports,
proxy materials and prospectuses; and (13) fees and
expenses of membership in industry organizations.
The Agreement obligates IMI to make investments
for the accounts of the Fund in accordance with its
best judgement and within the investment objectives and
restrictions set forth in the Fund's prospectus, the
1940 Act and the provisions of the Code relating to
regulated investment companies, subject to policy
decisions adopted by the Trust's Board of Trustees. IMI
also determines the securities to be purchased or sold by the
Fund and places orders with brokers or dealers who deal in
such securities.
Under the Agreement, IMI also provides certain
business management services. IMI is obligated to (1)
coordinate with the Fund's Custodian and Transfer Agent
and monitor the services they provide to the Fund; (2)
coordinate with and monitor any other third parties
furnishing services to the Fund; (3) provide the Fund
with necessary office space, telephones and other
communications facilities as are adequate for the Fund's needs;
(4) provide the services of individuals competent to
perform administrative and clerical functions which are
not performed by employees or other agents engaged by
the Fund or by IMI acting in some other capacity
pursuant to a separate agreement or arrangements with
the Fund; (5) maintain or supervise the maintenance by
third parties of such books and records of the Trust as
may be required by applicable Federal or state law; (6)
authorize and permit IMI's directors, officers and employees who
may be elected or appointed as directors or officers of
the Trust to serve in such capacities; and (7) take
such other action with respect to the Trust, after
approval by the Trust, as may be required by applicable
law, including without limitation the rules and
regulations of the SEC and of state securities
commissions and other regulatory agencies.
The Agreement provides that if the Fund's total
expenses in any fiscal year (other than interest,
taxes, distribution expenses, brokerage commissions and
other portfolio transaction expenses, other
expenditures which are capitalized in accordance with
generally accepted accounting principles and any extraor-
dinary expenses including, without limitation, litigation and
indemnification expenses) exceed the permissible limits appli-
cable to the Fund in any state in which its shares are
then qualified for sale, IMI will bear the excess
expenses. At the present time, the most restrictive
state expense limitation provision limits the Fund's
annual expenses to 2.5% of the first
$30 million of its average daily net assets, 2.0% of
the next $70 million and 1.5% of its average daily net
assets over $100 million. In addition, IMI may
voluntarily reimburse the Fund's expenses. MIMI's
voluntary expense reimbursements for the Fund for the
fiscal year ended June 30, 1994 and for the six months
ended December 31, 1994 were $171,733 and $76,575, respectively.
IMI's voluntary expense reimbursements for the Fund for
the fiscal year ended December 31, 1995 were $163,233.
On December 31, 1994, the Trustees of the Trust,
including a majority of the Independent Trustees, last
voted to approve the Agreement for the Fund. The
Agreement will continue in effect with respect to the
Fund from year to year only so long as the continuance
is specifically approved at least annually (i) by the
vote of a majority of the Independent Trustees and (ii) either
(a) by the vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund or (b)
by the vote of a majority of the entire Board of
Trustees. If the question of continuance of the
Agreement (or adoption of any new agreement) is
presented to shareholders, continuance (or adoption)
shall be effected only if approved by the affirmative
vote of a majority of the outstanding voting securities (as
defined in the 1940 Act) of the Fund. See "Capitalization and
Voting Rights."
The Agreement may be terminated with respect to
the Fund at any time, without payment of any penalty,
by the vote of a majority of the Board of Trustees, or
by a vote of a majority of the outstanding voting
securities of the Fund, on 60 days' written notice to
IMI or by IMI on 60 days' written notice to the Trust.
The Agreement shall terminate automatically in the event
of its assignment.
DISTRIBUTION SERVICES
IMDI, a wholly owned subsidiary of MIMI, serves as
the exclusive distributor of the Fund's shares pursuant
to a Distribution Agreement, which was last approved by
the Board of Trustees on August 25, 1995, with the
Trust. IMDI is not obligated to sell any specific
amount of shares.
IMDI distributes shares of the Fund through
broker-dealers who are members of the National
Association of Securities Dealers, Inc. and who have
executed dealer agreements with IMDI. IMDI distributes
shares of the Fund on a continuous basis, but reserves
the right to suspend or discontinue distribution on such
basis. IMDI is not obligated to sell any specific amount of Fund
shares. Pursuant to the Distribution Agreement, the
Fund bears, among other expenses, the expenses of
registering and qualifying its shares for sale under
federal and state securities laws and preparing and
distributing to existing shareholders periodic reports,
proxy materials and prospectuses.
IMDI may, from time to time, in certain
circumstances, re- allow to individual selling dealers
all or a portion of the sales charge with respect to
Class A shares which it normally retains. For example,
additional re-allowance may be made when the selling
dealer commits to substantial marketing support such as internal
wholesaling through dedicated personnel, internal
communications and mass mailings. IMDI may, from time
to time, pay a fee out of its own resources to
individual selling dealers for sales of Class I shares.
During the fiscal year ended June 30, 1993 and the
three months ended September 30, 1993, MIMI, which at
that time was the Fund's distributor, received from
sales of Class A shares [FN][Shares of the Fund
outstanding as of June 27, 1993, were redesignated
Class A shares of the Fund.] of the Fund $50,027 and
$3,139, respectively, in sales commissions, of which $15,582 and
$930, respectively, was retained after dealers' re-
allowances. For the nine months ended June 30, 1994,
for the six-month period ended December 31, 1994, and
for the fiscal year ended December 31, 1995, IMDI
received from sales of Class A Shares[FN][Shares of the
Fund outstanding as of June 27, 1993, were redesignated
Class A shares of the Fund.] of the Fund $7,330, $3,398 and
$2,777, respectively, in sales commissions, of which $1,381,
$892 and $505, respectively, was retained after dealer
re-allowances. During the fiscal year ended December
31, 1995, IMDI received no CDSCs paid upon certain
redemptions of Class B shares of the Fund.
RULE 18F-3 PLAN. On February 23, 1995, the SEC
adopted Rule 18f-3 under the 1940 Act, which permits a
registered open-end investment company whose shares are
registered on Form N-1A to issue multiple classes of
shares in accordance with a written plan approved by
the investment company's board of directors/trustees
and filed with the SEC. At a meeting held on December
1-2, 1995, the Board of Trustees of the Trust adopted a
multi-class plan (the "Rule 18f-3 plan") on behalf of the Fund.
The key features of the Rule 18f-3 plan are as follows:
(i) shares of each class of the Fund represent an equal
pro rata interest in the Fund and generally have
identical voting, dividend, liquidation, and other
rights, preferences, powers, restrictions, limitations,
qualifications, terms and conditions, except that each
class bears certain class-specific expenses and has
separate voting rights on certain matters that relate solely
to that class or in which the interests of shareholders of
one class differ from the interests of shareholders of
another class; (ii) subject to certain limitations
described in the Prospectus, shares of a particular
class of the Fund may be exchanged for shares of the
same class of another Ivy or Mackenzie fund; and (iii)
the Fund's Class B shares will convert automatically into
Class A shares of the Fund after a period of eight years, based
on the relative net asset value of such shares at the
time of conversion.
RULE 12B-1 DISTRIBUTION PLANS. The Fund has
adopted pursuant to Rule 12b-1 under the 1940 Act
separate distribution plans pertaining to its Class A
and Class B shares (the "Class A Plan" and the "Class B
Plan;" collectively, the "Plans"). The Trustees of the
Trust believe that the Plans will benefit the Funds and
its shareholders and that the Plans should result in
greater sales and/or fewer redemptions of Trust shares although
it is impossible to know for certain the level of sales
and redemptions of Trust shares in the absence of a
Plan or under an alternative distribution arrangement.
Under the Fund's Class A Plan and Class B Plan,
the Fund pays IMDI a service fee, accrued daily and
paid monthly, at the annual rate of up to 0.25% of the
average daily net assets attributable to its Class A
shares or Class B shares, as the case may be. The
services for which service fees may be paid include,
among other services, advising clients or customers regarding the
purchase, sale or retention of shares of the Fund,
answering routine inquiries concerning the Fund and
assisting shareholders in changing options or enrolling
in specific plans. Pursuant to the Fund's Plans,
service fee payments made out of or charged against the
assets attributable to the Fund's Class A shares or
Class B shares must be in reimbursement for services rendered for
or on behalf of that class of the Fund. The expenses
not reimbursed in any one given month may be reimbursed
in a subsequent month. The Class A Plan does not
provide for the payment of interest or carrying charges
as distribution expenses.
IMDI may make payments for distribution assistance
and for administrative and accounting services from
resources that may include the management fees paid to
IMI by the Fund. IMDI also may make payments (such as
the service fee payments described above) to
unaffiliated broker-dealers for services rendered in
the distribution of the Fund's Class A shares. To qualify for
such payments, shares may be subject to a minimum holding
period. However, no such payments will be made to any
dealer or broker if at the end of each year the amount
of shares held does not exceed a minimum amount. The
minimum holding period and minimum level of holdings
will be determined from time to time by IMDI.
Under the Fund's Class B Plan, the Fund pays IMDI
a distribution fee, accrued daily and paid quarterly,
at the annual rate of 0.50% of the average daily net
assets attributable to its Class B shares in addition
to the 0.25% service fee. IMDI may re-allow all or a
portion of the service and distribution fees to dealers
as IMDI may determine from time to time. The
distribution fee compensates IMDI for expenses incurred in
connection with activities primarily intended to result in the
sale of Class B shares of the Fund, including the
printing of prospectuses for persons other than
shareholders and the preparation, printing and
distribution of sales literature and advertising
materials. Pursuant to the Class B Plan, IMDI may
include interest, carrying or other finance charges in its
calculation of Class B distribution expenses, if not prohibited
from doing so pursuant to an order of or a regulation
adopted by the SEC. The SEC order permitting the
imposition of a contingent deferred sales charge on
Class B shares does not currently permit IMDI to
recover such charges.
Among other things, each Plan provides that (1)
IMDI will submit to the Board of Trustees of the Trust
at least quarterly, and the Trustees will review,
reports regarding all amounts expended under the Plan
and the purposes for which such expenditures were made;
(2) the Plan will continue in effect only so long as
such continuance is approved at least annually, and any
material amendment thereto is approved, by the votes of a
majority of the Trust's Board of Trustees, including the
Independent Trustees, cast in person at a meeting called for
that purpose; (3) payments by the Fund under the Plan
shall not be materially increased without the
affirmative vote of the holders of a majority of the
outstanding shares of the relevant class; and (4) while
the Plan is in effect, the selection and nomination of
Trustees who are not "interested persons" (as defined in the
1940 Act) of the Trust shall be committed to the discretion
of the Trustees who are not "interested persons" of the
Trust.
IMDI may make payments for distribution assistance
and for administrative and accounting services from its
own resources, which may include the management fees
paid by the Fund. IMDI also may make payments (such as
the service fee payments described above) to
unaffiliated broker-dealers for services rendered in
the distribution of the Fund's shares. To qualify for
such payments, shares may be subject to a minimum holding
period. However, no such payments will be made to any dealer or
broker, if the amount of shares held does not exceed a
minimum amount. The minimum holding period and minimum
level of holdings will be determined from time to time
by IMDI.
Each Plan may be amended at any time with respect
to the Class of shares of the Fund to which the Plan
relates by vote of the Trustees, including a majority
of the Independent Trustees, cast in person at a
meeting called for the purpose of considering such
amendment. Each Plan may be terminated with respect to the
Class of shares of the Fund to which the Plan relates at any
time, without payment of any penalty, by vote of a
majority of the Independent Trustees, or by vote of a
majority of the outstanding voting securities of that
Class.
If the Distribution Agreement or the Distribution
Plans are terminated (or not renewed) with respect to
one or more funds (or Class of shares thereof) of the
Trust, they may continue in effect with respect to any
fund (or Class of shares thereof) as to which they have
not been terminated (or have been renewed).
During the fiscal year ended December 31, 1995,
IMDI expended the following amounts in marketing Class
A shares of the Fund: advertising, $2,417; printing
and mailing of prospectuses to persons other than
current shareholders, $13,127; compensation
to dealers, $11,854; compensation to sales
personnel,$30,072; seminars and meetings, $2,963;
travel and entertainment, $8,054; general and
administrative, $14,142; telephone, $1,040; and
occupancy and equipment rental, $2,547.
During the fiscal year ended December 31, 1995,
IMDI expended the following amounts in marketing Class
B shares of the Fund: advertising, $14; printing and
mailing of prospectuses to persons other than current
shareholders, $75; compensation to dealers, $68;
compensation to sales personnel,$172; seminars and
meetings, $17; travel and entertainment, $46; general and
administrative, $81; telephone, $6; and occupancy and equipment
rental, $15.
CUSTODIAN
Brown Brothers Harriman & Co., a private bank and
member of the principal securities exchanges, located
at 40 Water Street, Boston, Massachusetts 02109, (the
"Custodian") has been retained to act as the Trust's
Custodian for assets of the Fund held in the United
States. Its primary responsibility is to maintain
custody of the cash and securities in the Fund's portfolio.
Rules adopted under the 1940 Act permit the Trust to maintain
its foreign securities and cash in the custody of
certain eligible foreign banks and securities
depositories. Pursuant to those rules, Brown Brothers
Harriman & Co. has entered into subcustodial agreements
for the holding of the Fund's foreign securities. As
partial payment for its services, the Custodian may
receive a portion of the Trust's brokerage business, subject
to its ability to provide best price and execution.
FUND ACCOUNTING SERVICES
Pursuant to a Fund Accounting Services Agreement,
effective November 1, 1994, MIMI provides certain
accounting and pricing services for the Fund. As
compensation for those services, the Fund pays MIMI a
monthly fee plus out-of-pocket expenses as incurred.
The monthly fee is based upon the net assets of the
Fund at the preceding month end at the following rates: $1,000
when net assets are $20 million and under; $1,500 when net
assets are over $20 million to $75 million; $4,000 when
net assets are over $75 million to $100 million; and
$6,000 when net assets are over $100 million. For the
two months ended December 31, 1994 and for the fiscal
year ended December 31, 1995, the Fund paid MIMI $2,130
and $22,290, respectively. Prior to November 1, 1994,
the Fund utilized an unrelated entity for Fund accounting
and pricing services.
TRANSFER AGENT AND DIVIDEND PAYING AGENT
Ivy Mackenzie Services Corp. ("IMSC," or the
"Transfer Agent") acts as the Trust's transfer agent
and dividend paying agent pursuant to a Transfer Agency
and Shareholder Services Agreement. For transfer
agency and shareholder services, the
Fund pays IMSC an annual fee of $20.75 per open account
of Class A and Class B shares, and $10.25 per open
account of Class I shares, payable in equal monthly
installments. In addition, the Fund pays IMSC a fee of
$4.36 for each account that is closed, and reimburses
IMSC monthly for out-of-pocket expenses. Such fees and
expenses for the fiscal year ended December 31, 1995 for
the Fund totalled $13,645. Certain broker-dealers that maintain
shareholder accounts with the Fund through an omnibus
account provide transfer agent and other shareholder-
related services that would otherwise be provided by
IMSC if the individual accounts that comprise the
omnibus account were opened by their beneficial owners
directly. IMSC pays such broker-dealers a per account
fee for each open account within the omnibus account, or
a fixed rate (eg. 10%) fee, based on the average daily net asset
value of the omnibus account (or a combination thereof).
ADMINISTRATOR
MIMI provides various administrative services to
the Trust pursuant to an Administrative Services
Agreement. Such fees for the fiscal year ended
December 31, 1995 for the Fund totalled $7,008.
Outside of providing administrative services to
the Trust , as described above, MIMI may also act on
behalf of IMDI in paying commissions to broker-dealers
with respect to sales of Class B shares of the Fund.
AUDITORS
Coopers & Lybrand L.L.P., independent certified
public accountants, 200 East Las Olas Boulevard, Suite
1700, Ft. Lauderdale, Florida 33301, has been selected
as auditors for the Trust. The audit services
performed by Coopers & Lybrand L.L.P. include audits of
the annual financial statements of each of the funds of
the Trust. Other services provided principally relate
to filings with the SEC and the preparation and/or review of the
Trust's tax returns.
CAPITALIZATION AND VOTING RIGHTS
The Fund results from a reorganization of
Mackenzie Short- Term U.S. Government Securities Fund,
which reorganization was approved by shareholders on
December 30, 1994. The capitalization of the Trust
consists of an unlimited number of shares of beneficial
interest (no par value per share). When issued, shares
of each class of the Fund are fully paid, non-
assessable, redeemable and fully transferable. No class of
shares of the Fund has preemptive rights or subscription
rights.
The Amended and Restated Declaration of Trust
permits the Trustees to create separate series or
portfolios and to divide any series or portfolio into
one or more classes. The Trustees have authorized
thirteen series, each of which represents a
separate investment portfolio. The Trustees have
further authorized the issuance of Class A, B and C
shares for the Ivy Bond Fund, Ivy Canada Fund, Ivy
China Region Fund, Ivy Emerging Growth Fund, Ivy Global
Fund, Ivy Growth Fund, Ivy Growth with Income Fund, Ivy
International Fund, Ivy International Bond Fund and Ivy
Latin America Strategy Fund and Ivy New Century Fund, as
well as Class A, B and I for the Fund, Class I for Ivy
International Fund and Ivy Bond Fund, and Class D shares for Ivy
Growth with Income Fund [FN][The Class D shares of Ivy
Growth with Income Fund were initially issued as "Ivy
Growth with Income Fund -- Class C" to shareholders of
Mackenzie Growth & Income Fund, a former series of the
Company, in connection with the reorganization between
that fund and Ivy Growth with Income Fund, and are not
offered for sale to the public. On February 29, 1996,
the Trustees of the Trust resolved by written consent to
establish a new class of shares designated as "Class C" for all
Ivy Fund portfolios (other than the Fund), and to
redesignate the shares of beneficial interest of "Ivy
Growth with Income Fund-- Class C" as shares of
beneficial interest of "Ivy Growth with Income Fund--
Class D," which establishment and redesignation,
respectively, are to become effective on April 30, 1996. The
voting, dividend, liquidation and other rights, preferences,
powers, restrictions, limitations, qualifications, terms
and conditions of the Class D shares of Ivy Growth with
Income Fund, as set forth in Ivy Fund's Declaration of
Trust, as amended from time to time, will not be
changed by this redesignation.].
Shareholders have the right to vote for the
election of Trustees of the Trust and on any and all
matters on which they may be entitled to vote by law or
by the provisions of the Trust's By-Laws. The Trust is
not required to hold a regular annual meeting of
shareholders, and it does not intend to do so. Shares
of each class of the Fund entitle their holders to one
vote per share (with proportionate voting for fractional shares).
On matters affecting the Fund, the shareholders of the
Fund are entitled to vote. All classes of shares of
the Fund will vote together, except with respect to the
distribution plan applicable to the Fund's Class A and
Class B shares or when a class vote is required by the
1940 Act. On matters relating to all funds of the
Trust, but affecting the funds differently, separate votes by
the shareholders of each fund are required. Approval of an
investment advisory agreement and a change in fundamental
policies would be regarded as matters requiring separate
voting by the shareholders of each fund of the Trust.
If the Trustees determine that a matter does not affect
the interests of the Fund, then the shareholders of the
Fund will not be entitled to vote on that matter.
Matters that affect the Trust in general, such as
ratification of the selection of independent public
accountants, will be voted upon collectively by the shareholders
of all funds of the Trust.
As used in this SAI and the Fund's Prospectus, the
phrase "majority vote of the outstanding shares" of the
Fund means the vote of the lesser of: (1) 67% of the
shares of the Fund (or of
the Trust) present at a meeting if the holders of more
than 50% of the outstanding shares are present in
person or by proxy; or (2) more than 50% of the
outstanding shares of the Fund (or of the Trust). With
respect to the submission to shareholder vote of a
matter requiring separate voting by the Fund, the matter
shall have been effectively acted upon with respect to the Fund
if a majority of the outstanding voting securities of the
Fund votes for the approval of the matter,
notwithstanding that: (1) the matter has not been
approved by a majority of the outstanding voting
securities of any other fund of the Trust; or (2) the
matter has not been approved by a majority of the
outstanding voting securities of the Trust.
Under Massachusetts law, the Trust's shareholders
could, under certain circumstances, be held personally
liable for the obligations of the Trust. However, the
Amended and Restated Declaration of Trust disclaims
liability of the shareholders, Trustees or officers of
the Trust for acts or obligations of the Trust, which
are binding only on the assets and property of the
Trust, and requires that notice of the disclaimer be given in
each contract or obligation entered into or executed by the
Trust or its Trustees. The Amended and Restated
Declaration of Trust provides for indemnification out
of fund property for all loss and expense of any
shareholder of a Fund held personally liable for the
obligations of that Fund. The risk of a shareholder of
the Trust incurring financial loss on account of shareholder
liability is limited to circumstances in which the Trust
itself would be unable to meet its obligations and,
thus, should be considered remote. No series of the
Trust is liable for the obligations of any other series
of the Trust.
The Trust's shares do not have cumulative voting
rights and accordingly the holders of more than 50% of
the outstanding shares could elect the entire Board of
Trustees, in which case the holders of the remaining
shares would not be able to elect any Trustees.
To the knowledge of the Trust, as of March 29,
1996, no shareholder owned beneficially or of record 5%
or more of the Fund's outstanding shares, except that
of the outstanding Class A shares of the Fund, Prestige
Bank FSB, 710 Old Clairton Road, Pittsburgh, PA 15236,
owned of record 130,887.563 shares (21.24%), and First
National Bank of Assumption, 141 N. Chestnut Street,
Assumption, IL 62510, owned of record 60,273.000 shares
(9.78%), and except that of the outstanding Class B shares of the
Fund, Marjorie Fraser, 184 Euclid Avenue, Hamburg, NY
14075, owned of record 2,572.280 shares (43.23%), First
Trust Corp (custodian) FBO Fredric Fetkowitz, PO Box
173301, Denver, CO 80217-3301, owned of record
1,005.070 shares (16.89%), Carole Jane Champagne, 236
Davis Avenue, Greenwich, CT 06830, owned of record
597.769 shares (10.04%), First Trust Corp (custodian) FBO
Marilyn H. Roeters, PO Box 173301, Denver, CO 80217-3301, owned
of record 568.059 shares (9.54%), First Trust Corp
(custodian) FBO Linda L. Stempel, PO Box 173301,
Denver, CO 80217-3301, owned of record 448.112 shares
(7.53%), and Lucile M. Rohrbaugh, 1517 Willeys Lake
Road, Ferndale, WA 98248, owned of record 338.961
shares (5.69%).
NET ASSET VALUE
The share price, or value, for the separate
Classes of shares of the Fund is called the net asset
value per share. The net asset value per share of the
Fund is computed by dividing the value of the assets of
the Fund, less its liabilities, by the number of shares
of the Fund outstanding. For the purposes of
determining the aggregate net assets of the Fund, cash and
receivables will be valued at their realizable amounts. A
security listed or traded on a recognized stock exchange or
NASDAQ is valued at its last sale price on the principal
exchange on which the security is traded. The value of
a foreign security is determined in its national
currency as of the normal close of trading on the
foreign exchange on which it is traded or as of the
close of regular trading on the Exchange, if that is earlier,
and that value is then converted into its U.S. dollar
equivalent at the foreign exchange rate in effect at
noon, Eastern time, on the day the value of the foreign
security is determined. If no sale is reported at that
time, the average between the current bid and asked
price is used. All other securities for which OTC
market quotations are readily available are valued at the average
between the current bid and asked price. Interest will
be recorded as accrued. Securities and other assets
for which market prices are not readily available are
valued at fair value as determined by IMI and approved
in good faith by the Board of Trustees. Money market
instruments of the Fund are valued at amortized cost,
which approximates money market value.
The Fund's liabilities are allocated between its
Classes. The total of such liabilities allocated to a
Class plus that Class's distribution fee and any other
expenses specially allocated to that Class are then
deducted from the Class's
proportionate interest in the Fund's assets, and the
resulting amount for each Class is divided by the
number of shares of that Class outstanding to produce
the net asset value per share.
Portfolio securities are valued and net asset
value per share is determined as of the close of
regular trading on the Exchange, (normally 4:00 p.m.,
eastern time), every Monday through Friday (exclusive
of national business holidays). The Trust's offices
will be closed, and net asset value will not be
calculated, on the following national business holidays: New
Year's Day, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. On those days when either or both of the Fund's
Custodian or the New York Stock Exchange close early as
a result of such day being a partial holiday or
otherwise, the right is reserved to advance the time on
that day by which purchase and redemption requests must
be received.
When the Fund writes an option, an amount equal to
the premium received by the Fund is included in the
Fund's Statement of Assets and Liabilities as an asset
and as an equivalent liability. The amount of the
liability will be subsequently marked-to-market daily
to reflect the current market value of the option
written. The current market value of a written option is
the last sale on the principal exchange on which such option is
traded or, in the absence of a sale, the last offering
price.
The premium paid by the Fund for the purchase of a
call or a put option will be deducted form its assets
and an equal amount will be included in the asset
section of the Fund's Statement of Assets and
Liabilities as an investment and subsequently adjusted
to the current market value of the option. For example, if the
current market value of the option exceeds the premium
paid, the excess would be unrealized appreciation and,
conversely, if the premium exceeds the current market
value, such excess would be unrealized depreciation.
The current market value of a purchased option will be
the last sale price on the principal exchange on which
the option is traded or, in the absence of a sale, the last
bid price. If the Fund exercises a call option which it has
purchased, the cost of the security which the Fund
purchased upon exercise will be increased by the
premium originally paid.
The valuations of below investment-grade debt
securities may be supplied by a pricing agent; if
valuations are not available through a pricing agent,
such valuations may be supplied through a broker or
otherwise as determined in good faith by the Board of
Trustees.
The sale of shares of the Fund will be suspended
during any period when the determination of its net
asset value is suspended pursuant to rules or orders of
the SEC and may be suspended by the Board of Trustees
whenever in its judgment it is in the best interest of
the Fund to do so.
PORTFOLIO TURNOVER
The Fund purchases securities that are believed by
IMI to have above average potential for capital
appreciation. Common stocks are disposed of in
situations where it is believed that potential for such
appreciation has lessened or that other common stocks
have a greater potential. Therefore, the Fund may
purchase and sell securities without regard to the length of time
the security is to be, or has been, held. The annual
Portfolio turnover rates for the Fund are provided in
the Fund's Prospectus under "Financial Highlights."
The Fund's Portfolio turnover rate is calculated
by dividing the lesser of purchases or sales of
portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned
by the Fund during the fiscal year. For purposes of
determining such portfolio turnover, all securities
whose maturities at the time of acquisition were one year or less
are excluded.
The Fund's Portfolio turnover rate for the fiscal
year ended December 31, 1995, for the six-month period
ended December 31, 1994 and for the fiscal year ended
June 30, 1994 was 54%, 143%, and 37%, respectively. A
Portfolio turnover rate that exceeds 100% involves
correspondingly higher brokerage commissions and other
transaction costs, which will be borne directly by the
Fund. In addition, short-term gains realized from portfolio
transactions are taxable to shareholders as ordinary income.
Fluctuations in the Fund's portfolio turnover rate are
due to the Fund's responding to changes in economic and
market developments.
REDEMPTIONS
Shares of the Fund are redeemed at their net asset
value next determined after a proper redemption request
has been received by IMSC, less any applicable
contingent deferred sales charge.
Unless a shareholder requests that the proceeds of
any redemption be wired to his or her bank account,
payment for shares tendered for redemption is made by
check within seven days after tender in proper form,
except that the Trust reserves the right to suspend the
right of redemption or to postpone the date of payment
upon redemption beyond seven days, (i) for any period
during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings) or during which
trading on the Exchange is restricted, (ii) for any
period during which an emergency exists as determined
by the SEC as a result of which disposal of securities
owned by the Fund is not reasonably practicable or it
is not reasonably practicable for the Fund to fairly
determine the value of its net assets, or (iii) for such
other periods as the SEC may by order permit for the protection
of shareholders of the Fund.
Under unusual circumstances, when the Board of
Trustees deems it in the best interest of the Fund's
shareholders, the Fund may make payment for shares
repurchased or redeemed in whole or in part in
securities of the Fund taken at current values. If any
such redemption in kind is to be made, the Fund intends to
make an election pursuant to Rule 18f-1 under the 1940 Act.
This will require the Fund to redeem with cash at a
shareholder's election in any case where the redemption
involves less than $250,000 (or 1% of the Fund's net
asset value at the beginning of each 90-day period
during which such redemptions are in effect, if that
amount is less than $250,000). Should payment be made in
securities, the redeeming shareholder may incur brokerage costs
in converting such securities to cash.
Subject to state law restrictions, the Trust may
redeem those accounts of shareholders who have
maintained an investment, including sales charges paid,
of less than $1,000 in the Fund for a period of more
than 12 months. All accounts below the applicable
minimum will be redeemed simultaneously when IMI deems
it advisable. The $1,000 balance will be determined by actual
dollar amounts invested by the shareholder, unaffected by
market fluctuations. The Trust will notify any such
shareholder by certified mail of its intention to
redeem such account, and the shareholder shall have 60
days from the date of such letter to invest such
additional sums as shall raise the value of such
account above that minimum. Should the shareholder fail to
forward such sum within 60 days of the date of the Trust's
letter of notification, the Trust will redeem the
shares held in such account and transmit the proceeds
to the shareholder. Such redemptions will be taxable
events. However, those shareholders who are investing
pursuant to the Automatic Investment Method will not be
redeemed automatically unless they have ceased making
payments pursuant to the plan for a period of at least six
consecutive months, and these shareholders will be given six-
months' notice by the Trust before such redemption.
Shareholders in a qualified retirement, pension or
profit sharing plan who wish to avoid tax consequences
must "rollover" any sum so redeemed into another
qualified plan within 60 days. The Board of Trustees
may increase or decrease the minimum shareholder
account balance which may be subject to redemption from time to
time.
If a shareholder has given authorization for
telephonic redemption privilege, shares can be redeemed
and proceeds sent by federal wire to a single
previously designated bank account. Delivery of the
proceeds of a wire redemption request of $250,000 or
more may be delayed by the Fund for up to seven days if deemed
appropriate under then-current market conditions. The
Trust reserves the right to change this minimum or to
terminate the telephonic redemption privilege without
prior notice. The Trust cannot be responsible for the
efficiency of the federal wire system of the
shareholder's dealer of record or bank. The
shareholder is responsible for any charges by the shareholder's
bank.
The Fund employs reasonable procedures that
require personal identification prior to acting on
redemption or exchange instructions communicated by
telephone to confirm that such instructions are
genuine. In the absence of such procedures, the Fund
may be liable for any losses due to unauthorized or
fraudulent telephone instructions.
TAXATION
The following is a general discussion of certain
tax rules thought to be applicable with respect to the
Fund. It is merely a summary and is not an exhaustive
discussion of all possible situations or of all
potentially applicable taxes. Accordingly,
shareholders and prospective shareholders should consult a
competent tax advisor about the tax consequences to them of
investing in the Fund.
The Fund intends to be taxed as a regulated
investment company under Subchapter M of the Code.
Accordingly, the Fund must, among other things, (a)
derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect
to certain securities loans, and gains from the sale or
other disposition of stock, securities or foreign currencies,
or other income derived with respect to its business of
investing in such stock, securities or currencies; (b)
derive in each taxable year less than 30% of its gross
income from the sale or other disposition of certain
assets held less than three months, namely: (i) stock
or securities; (ii) options, futures, or forward
contracts (other than those on foreign currencies); or
(iii) foreign currencies (or options, futures, or forward con-
tracts on foreign currencies) that are not directly related
to the Fund's principal business of investing in stock
or securities (or options and futures with respect to
stock or securities) (the "30% Limitation"); 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, U.S. Government
securities, the securities of other regulated investment
companies and other securities, with such other securities
limited, in respect of any one issuer, to an amount 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
total assets is invested in the securities of any one
issuer (other than U.S. Government securities and the
securities of other regulated investment companies).
As a regulated investment company, the Fund
generally will not be subject to U.S. Federal income
tax on its income and gains that it distributes to
shareholders, if at least 90% of its investment company
taxable income (which includes, among other items,
dividends, interest and the excess of any short-term
capital gains over long-term capital losses) for the taxable year
is distributed. The Fund intends to distribute all such
income.
Amounts not distributed on a timely basis in
accordance with a calendar year distribution
requirement are subject to a nondeductible 4% excise
tax at the Fund level. To avoid the tax, the Fund must
distribute during each calendar year (1) at least 98%
of its ordinary income (not taking into account any capital
gains or losses) for the calendar year, (2) at least 98% of
its capital gains in excess of its capital losses
(adjusted for certain ordinary losses) for a one-year
period generally ending on October 31 of the calendar
year, and (3) all ordinary income and capital gains for
previous years that were not distributed during such
years. To avoid application of the excise tax, the
Fund intends to make distributions in accordance with the
calendar year distribution requirements. A distribution will be
treated as paid on December 31 of the current calendar
year if it is declared by the Fund in October, November
or December of the year with a record date in such a
month and paid by the Fund during January of the
following year. Such distributions will be taxable to
shareholders in the calendar year the distributions are
declared, rather than the calendar year in which the
distributions are received.
DISTRIBUTIONS
Distributions of investment company taxable income
are taxable to a U.S. shareholder as ordinary income,
whether paid in cash or shares. If the Fund receives
dividends from U.S. corporations, a portion of the
dividends paid by the Fund to a corporate shareholder
may qualify for the dividends-received deduction.
Distributions of net capital gains (the excess of net
long-term capital gains over net short-term capital losses), if
any, designated by the Fund as capital gain dividends, are
taxable as long-term capital gains, whether paid in cash
or in shares, regardless of how long the shareholder
has held the Fund's shares and are not eligible for the
dividends-received deduction. Shareholders receiving
distributions in the form of newly issued shares will
have a cost basis in each share received equal to the
net asset value of a share of the Fund on the
distribution date. A distribution of an amount in excess of the
Fund's current and accumulated earnings and profits will
be treated by a shareholder as a return of capital
which is applied against and reduces the shareholder's
basis in his or her shares. To the extent that the
amount of any such distribution exceeds the
shareholder's basis in his or her shares, the excess will be
treated by the shareholder as gain from a sale or exchange of
the shares. Shareholders will be notified annually as
to the U.S. federal tax status of distributions and
shareholders receiving distributions in the form of
newly issued shares will receive a report as to the net
asset value of the shares received.
If the net asset value of shares is reduced below
a shareholder's cost as a result of a distribution by
the Fund, such distribution generally will be taxable
even though it represents a return of invested capital.
Investors should be careful to consider the tax
implications of buying shares just
prior to a distribution. The price of shares purchased
at this time may reflect the amount of the forthcoming
distribution. Those purchasing just prior to a
distribution will receive a distribution which
generally will be taxable to them.
DISPOSITION OF SHARES
Upon a redemption, sale or exchange of his or her
shares, a shareholder will realize a taxable gain or
loss depending upon his or her basis in the shares.
Such gain or loss will be treated as capital gain or
loss if the shares are capital assets in the
shareholder's hands and generally will be long-term or
short-term, depending upon the shareholder's holding period for
the shares. Any loss realized on a redemption, sale or
exchange will be disallowed to the extent the shares
disposed of are replaced (including through
reinvestment of dividends) within a period of 61 days
beginning 30 days before and ending 30 days after the
shares are disposed of. In such a case, the basis of
the shares acquired will be adjusted to reflect the disallowed
loss. Any loss realized by a shareholder on the sale of
Fund shares held by the shareholder for six-months or
less will be treated for tax purposes as a long-term
capital loss to the extent of any distributions of
capital gain dividends received or treated as having
been received by the shareholder with respect to such
shares.
In some cases, shareholders will not be permitted
to take all or a portion of their sales loads into
account for purposes of determining the amount of gain
or loss realized on the disposition of their shares.
This prohibition generally applies where (1) the
shareholder incurs a sales load in acquiring the shares
of the Fund, (2) the shares are disposed of before the
91st day after the date on which they were acquired, and (3) the
shareholder subsequently acquires shares in the same Fund
or another regulated investment company and the
otherwise applicable sales charge is reduced under a
"reinvestment right" received upon the initial purchase
of regulated investment company shares. The term
"reinvestment right" means any right to acquire shares
of one or more regulated investment companies without the payment
of a sales load or with the payment of a reduced sales
charge. Sales charges affected by this rule are
treated as if they were incurred with respect to the
shares acquired under the reinvestment right. This
provision may be applied to successive acquisitions of
fund shares.
DEBT SECURITIES ACQUIRED AT A DISCOUNT
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund may be treated as debt
securities that are issued originally at a discount.
Generally, the amount of the original issue discount
("OID") is treated as interest income and is included
in income over the term of the debt security, even
though payment of that amount is not received until a later time,
usually when the debt security matures. In addition,
if the Fund invests in certain high yield OID
obligations issued by corporations, a portion of the
OID accruing on such obligations may be eligible for
the deduction for dividends received by corporations.
In such event, dividends of investment company taxable
income received from the Fund by its corporate
shareholders, to the extent attributable to such portion of
accrued OID, may be eligible for this deduction for dividends
received by corporate shareholders if so designated by
the Fund in a written notice to shareholders.
Some of the debt securities (with a fixed maturity
date of more than one year from the date of issuance)
that may be acquired by the Fund in the secondary
market may be treated as having market discount.
Generally, gain recognized on the disposition of, and
any partial payment of principal on, a debt security
having market discount is treated as ordinary income to
the extent the gain, or principal payment, does not exceed the
"accrued market discount" on such debt security. In
addition, the deduction of any interest expenses
attributable to debt securities having market discount
may be deferred. Market discount generally accrues in
equal daily installments. The Fund may make one or
more of the elections applicable to debt securities
having market discount, which could affect the
character and timing of recognition of income.
Some debt securities (with a fixed maturity date
of one year or less from the date of issuance) that may
be acquired by the Fund may be treated as having
acquisition discount, or OID in the case of certain
types of debt securities. Generally, the Fund will be
required to include the acquisition discount, or OID, in
income over the term of the debt security, even though payment of
that amount is not received until a later time, usually
when the debt security matures. The Fund may make one
or more of the elections applicable to debt securities
having acquisition discount, or OID, which could affect
the character and timing of recognition of income.
The Fund generally will be required to distribute
dividends to shareholders representing discount on debt
securities that is currently includible in income, even
though cash representing such income may not have been
received by the Fund. Cash to pay such dividends may
be obtained from sales proceeds of securities held by
the Fund.
OPTIONS AND HEDGING TRANSACTIONS
The taxation of equity options and OTC options on
debt securities is governed by Code section 1234.
Pursuant to Code section 1234, the premium received by
the Fund for selling a put or call option is not
included in income at the time of receipt. If the
option expires, the premium is short-term capital gain to
the Fund. If the Fund enters into a closing transaction, the
difference between the amount paid to close out its
position and
the premium received is short-term capital gain or
loss. If a call option written by the Fund is
exercised, thereby requiring the Fund to sell the
underlying security, the premium will increase the
amount realized upon the sale of such security and any
resulting gain or loss will be a capital gain or loss, and
will be long-term or short-term depending upon the holding
period of the security. With respect to a put or call
option that is purchased by the Fund, if the option is
sold, any resulting gain or loss will be a capital gain
or loss, and will be long-term or short-term, depending
upon the holding period of the option. If the option
expires, the resulting loss is a capital loss and is
long-term or short-term, depending upon the holding period of the
option. If the option is exercised, the cost of the
option, in the case of a call option, is added to the
basis of the purchased security and, in the case of a
put option, reduces the amount realized on the
underlying security in determining gain or loss.
Certain options, futures contracts and forward
contracts in which the Fund may invest are "section
1256 contracts." Gains or losses on section 1256
contracts generally are considered 60% long-term and
40% short-term capital gains or losses; however,
foreign currency gains or losses (as discussed below) arising
from certain section 1256 contracts may be treated as
ordinary income or loss. Also, section 1256 contracts
held by the Fund at the end of each taxable year (and,
generally, for purposes of the 4% excise tax, on
October 31 of each year) are "marked-to-market" (that
is, treated as sold at fair market value), resulting in
unrealized gains or losses being treated as though they were
realized.
Generally, the hedging transactions undertaken by
the Fund may result in "straddles" for U.S. federal
income tax purposes. The straddle rules may affect the
character of gains (or losses) realized by the Fund.
In addition, losses realized by the Fund on positions
that are part of a straddle may be deferred under the
straddle rules, rather than being taken into account in
calculating the taxable income for the taxable year in which the
losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated,
the tax consequences to the Fund of engaging in hedging
transactions are not entirely clear. Hedging
transactions may increase the amount of short- term
capital gain realized by the Fund which is taxed as ordinary
income when distributed to shareholders.
The Fund may make one or more of the elections
available under the Code which are applicable to
straddles. If the Fund makes any of the elections, the
amount, character and timing of the recognition of
gains or losses from the affected straddle positions
will be determined under rules that vary according to
the election(s) made. The rules applicable under certain of the
elections may operate to accelerate the recognition of
gains or losses from the affected straddle positions.
Because the straddle rules may affect the
character of gains or losses, defer losses and/or
accelerate the recognition of gains or losses from the
affected straddle positions, the amount which may be
distributed to shareholders, and which will be taxed to
them as ordinary income or long-term capital gain, may be
increased or decreased as compared to a fund that did not engage
in such hedging transactions.
The 30% Limitation and the diversification
requirements applicable to the Fund's assets may limit
the extent to which the Fund will be able to engage in
transactions in options, futures contracts and forward
contracts.
CURRENCY FLUCTUATIONS - "SECTION 988" GAINS OR LOSSES
Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the
time the Fund accrues receivables or liabilities
denominated in a foreign currency and the time the Fund
actually collects such receivables, or pays such
liabilities, generally are treated as ordinary income or
ordinary loss. Similarly, on disposition of debt securities
denominated in a foreign currency and on disposition of
certain futures contracts, forward contracts and
options, gains or losses attributable to fluctuations
in the value of foreign currency between the date of
acquisition of the security or contract and the date of
disposition also are treated as ordinary gain or loss.
These gains or losses, referred to under the Code as
"section 988" gains or losses, may increase or decrease the
amount of the Fund's investment company taxable income to be
distributed to its shareholders as ordinary income.
FOREIGN WITHHOLDING TAXES
Income received by the Fund from sources within
foreign countries may be subject to withholding and
other taxes imposed by such countries.
INVESTMENT IN PASSIVE FOREIGN INVESTMENT COMPANIES
If the Fund invests in stock of certain foreign
investment companies either directly or through ADRs,
the Fund may be subject to U.S. federal income taxation
on a portion of any "excess distribution" with respect
to, or gain from the disposition of, such stock. The
tax would be determined by allocating such distribution
or gain ratably to each day of the Fund's holding
period for the stock. The distribution or gain so
allocated to any taxable year of the Fund, other than the taxable
year of the excess distribution or disposition, would be
taxed to the Fund at the highest ordinary income rate
in effect for such year, and the tax would be further
increased by an interest charge to reflect the value of
the tax deferral deemed to have resulted from the
ownership of the foreign company's stock. Any amount
of distribution or gain allocated to the taxable year of
the distribution or disposition would be included in the Fund's
investment company taxable income and, accordingly,
would not be taxable to the Fund to the extent
distributed by the Fund as a dividend to its
shareholders.
The Fund may be able to make an election, in lieu
of being taxable in the manner described above, to
include annually in income its pro rata share of the
ordinary earnings and net capital gain of the foreign
investment company, regardless of whether it actually
received any distributions from the foreign company.
These amounts would be included in the Fund's
investment company taxable income and net capital gain which, to
the extent distributed by the Fund as ordinary or capital
gain dividends, as the case may be, would not be
taxable to the Fund. In order to make this election,
the Fund would be required to obtain certain annual
information from the foreign investment companies in
which it invests, which in many cases may be difficult
to obtain. Alternatively, the Fund may be eligible for
another election that would involve marking to market its PFIC
stock at the end of each taxable year, with any resulting
mark to market gain being reported as ordinary income.
No mark to market losses would be recognized. The
effect of this election would be to treat excess
distributions and gain on dispositions as ordinary
income which is not subject to a fund-level tax when
distributed to shareholders as a dividend.
BACKUP WITHHOLDING
The Fund will be required to report to the
Internal Revenue Service ("IRS") all distributions as
well as gross proceeds from the redemption of the
Fund's shares, except in the case of certain exempt
shareholders. All such distributions and proceeds will
be subject to withholding of Federal income tax at a rate of
31% ("backup withholding") in the case of non-exempt
shareholders if (1) the shareholder fails to furnish
the Fund with and to certify the shareholder's correct
taxpayer identification number or social security
number, (2) the IRS notifies the shareholder or the
Fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to
notices to that effect, or (3) when required to do so,
the shareholder fails to certify that he or she is not
subject to backup withholding. If the withholding
provisions are applicable, any such distributions or
proceeds, whether reinvested in additional shares or
taken in cash, will be reduced by the amounts required
to be withheld.
Distributions may also be subject to additional
state, local and foreign taxes depending on each
shareholder's particular situation. In many states,
Fund distributions which are derived from interest on
certain U.S. government obligations are exempt from
taxation. Non-U.S. shareholders may be subject to U.S. tax
rules that differ significantly from those summarized above.
This discussion does not purport to deal with all of the
tax consequences applicable to the Fund or
shareholders. Shareholders are advised to consult
their own tax advisers with
respect to the particular tax consequences to them of
an investment in the Fund.
PERFORMANCE INFORMATION
Comparisons of the Fund's performance may be made
with respect to various unmanaged indices (including
the Toronto Stock Exchange 300, S&P 100, S&P 500, Dow
Jones Industrial Average and Major Market Index) which
assume reinvestment of dividends, but do not reflect
deductions for administrative and management costs.
The Fund also may be compared to Lipper's Analytical
Reports, reports produced by a widely used independent research
firm that ranks mutual funds by overall performance,
investment objectives and assets, or to Wiesenberger
Reports. Lipper Analytical Services does not include
sales charges in computing performance. Performance
information for the Fund may be compared, in
advertisements, sales literature and reports to
shareholders, to the Consumer Price Index (measure for inflation)
to assess the real rate of return from an investment in
the Fund, other groups of mutual funds tracked by
Lipper Analytical Services, or tracked by other
services, companies, publications or persons who rank
mutual funds on overall performance or other criteria.
Further information on comparisons is contained in the
Prospectus for the Fund. Performance rankings will be based on
historical information and are not intended to indicate
future performance.
In addition, the Trust may, from time to time,
include the yield and the average annual total return
of shares of the Fund in advertisements, promotional
literature or reports to shareholders or prospective
investors.
YIELD. Quotations of yield for a specific class
of shares of the Fund will be based on all investment
income attributable to that class earned during a
particular 30-day (or one month) period (including
dividends and interest), less expenses attributable to
that class accrued during the period ("net investment
income"), and will be computed by dividing the net
investment income per share of that class earned during the
period by the maximum offering price per share (in the case of
Class A and Class B shares) or the net asset value per
share (in the case of Class I shares) on the last day
of the period, according to the following formula:
YIELD = 2[({(a-b)/cd} + 1){superscript
6}-1]
Where: a = dividends and interest earned
during the period attributable
to a specific class of shares,
b = expenses accrued for the
period attributable to that
class (net of reimbursements),
c = the average daily number of
shares of that class
outstanding during the period
that were entitled to receive dividends,
and
d = the maximum offering price per
share (in the case of Class A
shares) or the net asset value
per share (in the case of
Class I shares) on the last day of the
period.
The yield for Class A [FN][Shares of the Fund
outstanding as of June 27, 1993, have been designated
as "Class A" shares of the Fund.] and Class B shares of
the Fund for the 30-day period ended December 30, 1995
was 5.41% and 5.15%. There were no Class I shares
outstanding as of such date.
From commencement until September 20, 1994, this
Fund (formerly Mackenzie Adjustable U.S. Government
Securities Trust) had an investment objective of
seeking a high level of current income, consistent with
lower volatility of principal. The Fund's performance
for periods prior to September 20, 1994 should not be
considered representative of the Fund's performance under
its current investment objective.
AVERAGE ANNUAL TOTAL RETURN QUOTATIONS.
Quotations of standardized average annual total return
("Standardized Return") for a specific class of shares
of the Fund will be expressed in terms of the average
annual compounded rate of return that would cause a
hypothetical investment in that class of the Fund made on
the first day of a designated period to equal the ending
redeemable value ("ERV") of such hypothetical investment on the
last day of the designated period, according to the
following formula:
P(1 + T){superscript n} = ERV
Where: P = a hypothetical initial payment of
$1,000 to purchase shares of a
specific class
T = the average annual total return of
shares of that class
n = the number of years
ERV = the ending redeemable value of a
hypothetical $1,000 payment made at
the beginning of the period.
For purposes of the above computation for the
Fund, it is assumed that all dividends and capital
gains distributions made by the Fund are reinvested at
net asset value in additional shares of the same class
during the designated period. In calculating the
ending redeemable value for Class A shares, the maximum
3.00% sales charge is deducted from the initial $1,000
payment and, for Class B shares, the applicable contingent
deferred sales charge imposed upon redemption of Class B shares
held for the period is deducted. Standardized Return
quotations for the Fund do not take into account any
required payments for federal or state income taxes.
Standardized Return quotations are determined to the
nearest 1/100 of 1%.
In determining the average annual total return for
a specific class of shares of the Fund, recurring fees,
if any, that are charged to all shareholder accounts
are taken into consideration. For any account fees
that vary with the size of the account of the Fund, the
account fee used for purposes of the above computation
is assumed to be the fee that would be charged to the
mean account size of the Fund.
The Fund may, from time to time, include in
advertisements, promotional literature or reports to
shareholders or prospective investors total return data
that are not calculated according to the formula set
forth above ("Non-Standardized Return"). Initial sales
charges are not taken into account in calculating Non-
Standardized Return; a sales charge, if deducted, would reduce
the return.
The following table summarizes the calculation of
Standardized and Non-Standardized Return for the Class A,
Class B and Class I shares of the Fund for the periods
indicated. Shares of the Fund outstanding as of June
27, 1993 have been redesignated as "Class A" shares of
the Fund.
STANDARDIZED RETURN[*] CLASS A[1]
CLASS B[2] CLASS I[6]
One year ended
December 31,
1995: 5.30% 3.60% N/A
Inception[#] to
December 31,
1995:[5] 4.01% 3.60% N/A
NON-STANDARDIZED RETURN[**]
CLASS A[3] CLASS B[4] CLASS I[6]
One year ended
December 31,
1995: 8.56% 8.71% N/A
Inception[#] to
December 31,
1995:[5] 4.68% 8.71% N/A
_________________________
[*] The Standardized Return figures for Class A shares
reflect the deduction of the maximum initial sales
charge of 3.00%. The Standardized Return figures
for Class B shares reflect the deduction of the
applicable CDSC imposed on a redemption of Class B
shares held for the period.
[**] The Non-Standardized Return figures do not reflect
the deduction of any initial sales charge or CDSC.
[#] The inception date for the Fund (and the Class A
shares of the Fund) was April 18, 1991; the
inception date for the Class I shares of the Fund
was June 28, 1993; and the inception date for
Class B shares of the Fund is January 1, 1995.
From commencement until September 20, 1994, the Fund
(formerly Mackenzie Adjustable U.S. Government Securities
Trust) had an investment objective of seeking a high level
of current income, consistent with lower volatility
of principal. Until December 31, 1994, Mackenzie
Investment Management Inc. served as investment
adviser to the Fund, which until that date was a
series of The Mackenzie Funds Inc.
[1] The Standardized Return figures for Class A shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class A
shares for the one year ended December 31, 1995,
and the period from inception through December 31,
1995 would have been 2.82% and 2.97%,
respectively.
[2] The Standardized Return figures for Class B shares
reflect expense reimbursement. Without expense
reimbursement, the Standardized Return for Class B
shares for the one year ended December 31, 1995,
and for the period from inception through December
31, 1995 would have been 2.29% and 2.29%,
respectively. Since the inception date for Class B shares
of the Fund was January 1, 1996, only figures during the
period from incepion of Class B shares of the Fund
are shown.
[3] The Non-Standardized Return figures for Class A
shares reflect expense reimbursement. Without
expense reimbursement, the Non-Standardized Return
for Class A
shares for the one year ended December 31, 1995
and the period from inception through December 31,
1995 would have been ___% and ___%, respectively.
[4] The Non-Standardized Return figures for Class B
shares reflect expense reimbursement. Without
expense reimbursement, the Non-Standardized Return
for Class B shares for the one year ended December
31, 1995, and for the period from inception
through December 31, 1995 would have been 7.34%
and 7.34%, respectively. Since the inception date
for Class B shares of the Fund was January 1, 1995,
only figures during the period from inception of Class B
shares of the Fund are shown.
[5] The total return for a period less than a full
year is calculated on an aggregate basis and is
not annualized.
[6] Class I shares are not subject to an initial sales
charge or a CDSC, therefore the Non-Standardized
and Standardized Return figures are identical.
There were no Class I shares of the Fund
outsatnding for the time periods indicated.
CUMULATIVE TOTAL RETURN. Cumulative total return
is the cumulative rate of return on a hypothetical
initial investment of $1,000 in a specific Class of
shares of the Fund for a specified period. Cumulative
total return quotations reflect changes in the price of
the Fund's shares and assume that all dividends and
capital gains distributions during the period were reinvested in
Fund shares. Cumulative total return is calculated by
computing the cumulative rates of return of a
hypothetical investment in a specific Class of shares
of the Fund over the periods indicated, according to
the following formula (cumulative total return is then
expressed as a percentage):
C = (ERV/P)-1
Where: C = cumulative total return
P = a hypothetical initial investment
of $1,000 to purchase shares of a
specific Class
ERV = ending redeemable value: ERV is
the value, at the end of the
applicable period, of a
hypothetical $1,000 investment made at the
beginning of the applicable period.
The following table summarizes the calculation of
the Cumulative Total Return for the Class A, Class B
and Class I shares of the Fund for the periods
indicated, assuming the maximum 3.00% sales charge HAS
been assessed.
CUMULATIVE TOTAL RETURN FOR PERIOD ENDED DECEMBER
31, 1995
SINCE
ONE YEAR INCEPTION[#]
Class A ____% ____%
Class B ____% ____%
Class I[*] N/A N/A
The following table summarizes the calculation of
Cumulative Total Return for the Class A, Class B and
Class I shares of the Fund for the periods indicated,
assuming the maximum 3.00% sales charge HAS NOT been
assessed.
CUMULATIVE TOTAL RETURN FOR PERIOD ENDED DECEMBER
31, 1995
SINCE
ONE YEAR INCEPTION[#]
Class A ____% ____%
Class B ____% ____%
Class I[*] N/A N/A
____________
[#] The inception date for the Fund (and the Class A
shares of the Fund) was April 18, 1991; the
inception date for the Class I shares of the Fund
was June 28, 1993; and the inception date for
Class B shares of the Fund is January 1, 1995.
From commencement until September 20, 1994, the Fund
(formerly Mackenzie Adjustable U.S. Government Securities
Trust) had an investment objective of seeking a high level
of current income, consistent with lower volatility
of principal. Until December 31, 1994, Mackenzie
Investment Management Inc. served as investment
adviser to the Fund, which until that date was a
series of The Mackenzie Funds Inc.
[*] There were no Class I shares of the Fund
outstanding during the time periods indicated.
OTHER QUOTATIONS, COMPARISONS AND GENERAL
INFORMATION. The foregoing computation methods are
prescribed for advertising and other communications
subject to SEC Rule 482. Communications not subject to
this rule may contain a number of different measures of
performance, computation methods and assumptions, including
but not limited to: historical total returns; results of
actual or hypothetical investments; changes in
dividends, distributions or share values; or any
graphic illustration of such data. These data may
cover any period of the Trust's existence and may or may
not include the impact of sales charges, taxes or other factors.
Performance quotations for the Fund will vary from
time to time depending on market conditions, the
composition of the
Fund's portfolio and operating expenses of the Fund.
These factors and possible differences in the methods
used in calculating performance quotations should be
considered when comparing performance information
regarding the Fund with information published for other
investment companies and other investment vehicles.
Performance quotations should also be considered
relative to changes in the value of the Fund's shares
and the risks associated with the Fund's investment objectives
and policies. At any time in the future, performance
quotations may be higher or lower than past performance
quotations and there can be no assurance that any
historical performance quotation will continue in the
future.
The Fund may also cite endorsements or use for
comparison its performance rankings and listings
reported in such newspapers or business or consumer
publications as, among others: AAII JOURNAL, BARRON'S,
BOSTON BUSINESS JOURNAL, BOSTON GLOBE, BOSTON HERALD,
BUSINESS WEEK, CONSUMER'S DIGEST, CONSUMER GUIDE
PUBLICATIONS, CHANGING TIMES, FINANCIAL PLANNING, FINANCIAL
WORLD, FORBES, FORTUNE, GROWTH FUND GUIDE, HOUSTON POST,
INSTITUTIONAL INVESTOR, INTERNATIONAL FUND MONITOR, INVESTOR'S
DAILY, LOS ANGELES TIMES, MEDICAL ECONOMICS, MIAMI
HERALD, MONEY MUTUAL FUND FORECASTER, MUTUAL FUND
LETTER, MUTUAL FUND SOURCE BOOK, MUTUAL FUND VALUES,
NATIONAL UNDERWRITER NELSON'S DIRECTOR OF INVESTMENT
MANAGERS, NEW YORK TIMES, NEWSWEEK, NO LOAD FUND
INVESTOR, NO LOAD FUND* X, OAKLAND TRIBUNE, PENSION WORLD,
PENSIONS AND INVESTMENT AGE, PERSONAL INVESTOR, RUGG AND
STEELE, TIME, U.S. NEWS AND WORLD REPORT, USA TODAY,
THE WALL STREET JOURNAL, AND WASHINGTON POST.
FINANCIAL STATEMENTS
The Portfolio of Investments as of December 31,
1995, the Statement of Assets and Liabilities as of
December 31, 1995, the Statement of Operations for the
fiscal year ended December 31, 1995, the Statement of
Changes in Net Assets for the six-month period ended
December 31, 1994 and for the fiscal years ended June
30, 1994 and December 31, 1995, Financial Highlights, the
Notes to Financial Statements, and the Report of Independent
Accountants are included in the Fund's December 31, 1995
Annual Report to Shareholders, which is incorporated by
reference into this SAI.
APPENDIX A
DESCRIPTION OF STANDARD & POOR'S CORPORATION
("S&P") AND MOODY'S INVESTORS SERVICE, INC.
("MOODY'S") CORPORATE BOND AND
COMMERCIAL PAPER RATINGS
[From "Moody's Bond Record," November 1994 Issue
(Moody's Investor Service, New York, 1994), and
"Standard & Poor's Municipal Ratings Handbook," October
1994 Issue (McGraw Hill, New York, 1994).]
MOODY'S:
(a) CORPORATE BONDS. Bonds rated Aaa by Moody's
are judged by Moody's to be of the best quality,
carrying the smallest degree of investment risk.
Interest payments are protected by a large or
exceptionally stable margin and principal is secure.
Bonds rated Aa are judged by Moody's to be of high quality by all
standards. Aa bonds are rated lower than Aaa bonds
because margins of protection may not be as large as
those of Aaa bonds, or fluctuations of protective
elements may be of greater amplitude, or there may be
other elements present which make the long-term risks
appear somewhat larger than those applicable to Aaa
securities. Bonds which are rated A by Moody's possess many
favorable investment attributes and are considered as upper
medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but
elements may be present which suggest a susceptibility
to impairment sometime in the future.
Bonds rated Baa by Moody's are considered medium-
grade obligations, I.E., they are neither highly
protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but
certain protective elements may be lacking or may be
characteristically unreliable over any great length of
time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well. Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered
well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack
characteristics of the desirable investment. Assurance of
interest and principal payments of or maintenance of other
terms of the contract over any long period of time may
be small.
Bonds which are rated Caa are of poor standing.
Such issues may be in default or there may be present
elements of danger with respect to principal or
interest. Bonds which are rated Ca represent
obligations which are speculative in a high degree.
Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class
of bonds and issues so rated can be regarded as having
extremely poor prospects of ever attaining any real
investment standing.
(b) COMMERCIAL PAPER. The Prime rating is the
highest commercial paper rating assigned by Moody's.
Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the
management of the issuer; (2) economic evaluation of
the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain
areas; (3) evaluation of the issuer's products in
relation to competition and customer acceptance; (4) liquidity;
(5) amount and quality of long-term debt; (6) trend of
earnings over a period of ten years; (7) financial
strength of a parent company and the relationships
which exist with the issuer; and (8) recognition by
management of obligations which may be present or may
arise as a result of public interest questions and
preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2 or 3, depending on
the relative strengths of these factors. The
designation of Prime-1 indicates the highest quality
repayment capacity of the rated issue.
S&P:
(a) CORPORATE BONDS. An S&P corporate debt
rating is a current assessment of the creditworthiness
of an obligor with respect to a specific obligation.
The ratings are based on current information furnished
by the issuer or obtained by S&P from other sources it
considers reliable. The ratings described below may be
modified by the addition of a plus or minus sign to
show relative standing within the major rating categories.
Debt rated AAA by S&P is considered by S&P to be
the highest grade obligation. Capacity to pay interest
and repay principal is extremely strong. Debt rated AA
is judged by S&P to have a very strong capacity to pay
interest and repay principal and differs from the
highest rated issues only in small degree. Debt rated
A by S&P has a strong capacity to pay interest and repay
principal, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
Debt rated BBB by S&P is regarded by S&P as having
an adequate capacity to pay interest and repay
principal. Although such bonds normally exhibit
adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay
principal than debt in higher rated categories.
Debt rated BB, B, CCC, CC and C is regarded as
having predominately speculative characteristics with
respect to capacity to pay interest and repay
principal. BB indicates the least degree of
speculation and C the highest. While such debt will
likely have some quality and protective characteristics,
these are outweighed by large uncertainties or exposures to
adverse conditions. Debt rated BB has less near-term
vulnerability to default than other speculative issues. However,
it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions
which could lead to inadequate capacity to meet timely
interest and principal payments. The BB rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BBB- rating.
Debt rated B has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB-
rating. Debt rated CCC has a currently identifiable
vulnerability to default, and is dependent upon
favorable business, financial, and economic conditions to meet
timely payment of interest and repayment of principal. In
the event of adverse business, financial or economic
conditions, it is not likely to have the capacity to
pay interest and repay principal. The CCC rating
category is also used for debt subordinated to senior
debt that is assigned an actual or implied B or B-
rating. The rating CC typically is applied to debt
subordinated to senior debt which is assigned an actual or
implied CCC debt rating. The rating C typically is applied to
debt subordinated to senior debt which is assigned an
actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy
petition has been filed, but debt service payments are
continued.
(b) COMMERCIAL PAPER. An S&P commercial paper
rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of
no more than 365 days.
Commercial paper rated A by S&P has the following
characteristics: (i) liquidity ratios are adequate to
meet cash requirements; (ii) long-term senior debt
rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh
the BBB; (iii) the issuer should have access to at
least one additional channel of borrowing; (iv) basic
earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the
issuer's industry should be well established and the
issuer should have a strong position within its
industry and the reliability and quality of management
should be unquestioned. Issues rated A are further
referred to by use of numbers 1, 2 and 3 to denote
relative strength within this highest classification.
For example, the A-1 designation indicates that the degree of
safety regarding timely payment of debt is strong.
Issues rated B are regarded as having only
speculative capacity for timely payment. The C rating
is assigned to short- term debt obligations with a
doubtful capacity for payment.
DECEMBER 31, 1995
[IVY FUNDS LOGO]
IVY
SHORT-TERM
BOND
FUND
ANNUAL REPORT
This report and the financial statements contained
herein are submitted for the
general information of the shareholders. This report is
not authorized for
distribution to prospective investors unless preceded
or accompanied by an
effective prospectus.
Ivy Management, Inc.
Via Mizner Financial Plaza
700 South Federal Hwy
Boca Raton, FL 33432
1-800-456-5111
[PHOTO]
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
Dear Shareholder:
During 1995 the domestic financial markets were
extremely favorable for
both equity and fixed income investors. Moderate
economic growth coupled with
an absence of inflationary pressure paved the way for
lower interest rates. In
January of 1996 the Federal Reserve Board once again
lowered the discount rate,
marking the third cut since last summer. At the same
time that rates were
declining, the economy remained strong enough for most
companies to report
respectable earnings gains. This combination of good
earnings, declining
interest rates, and a favorable inflation outlook
created a positive
environment for the fixed income market.
Against this backdrop, the total return of Ivy
Short-term Bond Fund was
8.56% on a net asset value basis for the twelve months
ended December 31, 1995.
This compares favorably to the one-year US Treasury,
the relevant benchmark,
which was up 8.09% for the same period. (For the Fund_s
total return with sales
charge, and performance commentary, please refer to the
following pages.)
The Fund is primarily invested in short-term
government issues. These
include both U.S. agency paper as well as short-term
treasury notes.
IVY SHORT-TERM BOND FUND SEEKS
TO OBTAIN AS HIGH A LEVEL OF
CURRENT INCOME AS IS
CONSISTENT WITH THE
PRESERVATION OF CAPITAL AND
LIQUIDITY BY INVESTING IN HIGH-QUALITY,
SHORT-TERM INSTRUMENTS.
The longer maturity corporate bonds, which have a
lower credit quality,
have performed well this year and provided a nice boost
in yield over treasury
issues. We believe the underlying credit fundamentals
continue to be positive
for these companies.
The current interest rate environment, low
inflationary pressures and
prospects for economic growth should continue to
provide a positive atmosphere
for Ivy Short-term Bond Fund.
Sincerely,
/s/ Michael G. Landry /s/ Michael
R. Peers Michael G. Landry
Michael R. Peers President
Chairman
BOARD OF TRUSTEES
John S. Anderegg, Jr
Paul H. Broyhill
Stanley Channick
Frank W. DeFriece, Jr.
Roy J. Glauber
Michael G. Landry
Michael R. Peers
Joseph G. Rosenthal
Richard Silverman
J. Brendan Swan
LEGAL COUNSEL
Dechert Price & Rhoads
Boston, MA
OFFICERS
Michael G. Landry, President
Keith J. Carlson, Vice President
C. William Ferris,
Secretary/Treasurer
Michael R. Peers, Chairman
Custodian
Brown Brothers Harriman & Co.
Boston, MA
TRANSFER AGENT
Mackenzie Ivy Investor
Services Corp.
P.O. Box 3022
Boca Raton, FL 33431-0922
1-800-777-6472
AUDITORS
Coopers & Lybrand L.L.P.
Fort Lauderdale, FL
MANAGER
Ivy Management,
Inc.Boca Raton, FL
DISTRIBUTOR
Mackenzie Ivy Funds
Distribution, Inc.
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, FL 33432
<PAGE>
IVY SHORT-TERM BOND FUND PERFORMANCE COMMENTARY
In a period of declining interest rates, Ivy Short-term
Bond Fund performed
well. For the twelve months ended December 31, 1995 the
Fund's total return on a
net asset value basis was 8.56%. This compares
favorably to the one-year U.S.
Treasury bond which was up 8.09% for the same period.
The additional return
provided by the Fund was primarily attributable to the
good performance of the
corporate bonds in the portfolio.
PERFORMANCE COMPARISONS OF THE
FUND SINCE INCEPTION (8/91) OF A
$10,000 INVESTMENT
[CHART]
<TABLE>
<S> <C> <C> <C>
<C> <C> <C>
-------------------------------------------------------
---------- -
IVY SHORT-TERM
BOND FUND FOR
PERIOD ENDING 12/31/95 Class A*-
with sales charge Class B**
Average Annual
Total Return
Average Annual Total Return
---------------------------------------------------
w/Reimb. w/o Reimb. w/Reimb.
w/o Reimb.
---------------------------------------------------
w/ w/o
w/ w/o
CDSC
CDSC CDSC CDSC
------------------------------
1 Yr. 5.30% 2.82% --
-- -- --
-------------------------------------------------------
---------- -----------------
Since Inception 4.01% 2.97% 3.60%
8.71% 2.29% 7.34%
-------------------------------------------------------
---------- ------------------
</TABLE>
*Class A performance figures include the maximum sales
charge of 3.00%.
**Class B performance figures are calculated with and
without the applicable
Contingent Deferred Sales Charge (CDSC) up to a
maximum of 3%.
Total returns in some periods were higher due to
reimbursement of the Fund's
expenses and a capital contribution by the Manager. See
Financial Highlights.
All charts and tables reflect past results and assume
reinvestment of dividends
and distributions from capital gains. Future results
will, of course, be
different. The principal value of Ivy Short-term Bond
Fund will fluctuate and at
redemption may be worth more or less than the amount of
the original investment.
Performance is calculated for Class A shares of the
Fund unless otherwise noted.
Because Class B shares bear the expense of a higher
distribution fee it is
expected that the level of performance of the Fund's
Class B shares will be
lower than that of the Fund's Class A shares.
-------------------------------------------------------
---------- ---------------
<PAGE>
IVY SHORT-TERM BOND FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY PAR
OBLIGATIONS -- 77.1%
VALUE VALUE
<S>
<C> <C>
-------------------------------------------------------
---------- ---
DIRECT U.S. OBLIGATIONS -- 32.1%
U.S. Treasury Note, 6.125%, 07/31/96....... $ 500,000
$ 502,335
U.S. Treasury Note, 5.75%, 10/31/97........ 500,000
504,805
U.S. Treasury Note, 6.25%, 01/31/97........ 500,000
505,415
U.S. Treasury Strip, 0.00%, 11/15/98....... 500,000
430,620
----------
1,943,175
----------
GOVERNMENT AGENCY OBLIGATIONS -- 45.0%
Federal Home Loan Mortgage Association,
7.775%, 10/01/20......................... 43,101
42,607
Federal National Mortgage Association,
7.664%, 12/01/18......................... 182,699
189,959
Student Loan Marketing Association,
FRN, 5.20%, 07/19/96..................... 400,000
399,496
Student Loan Marketing Association,
FRN, 5.35%, 02/17/98..................... 1,500,000
1,496,250
Student Loan Marketing Association,
FRN, 5.26%, 01/13/99..................... 500,000
499,365
Student Loan Marketing Association,
FRN, 5.31%, 03/07/01..................... 100,000
98,875
----------
2,726,552
----------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (COST -- $4,615,153).........
4,669,727
----------
DOMESTIC CORPORATE BONDS -- 1.7%
-------------------------------------------
Weirton Steel Inc., 11.50%, 03/01/98(a).... 100,000
103,000
----------
TOTAL DOMESTIC CORPORATE BONDS
(COST -- $100,000).......................
103,000
----------
U.S. DOLLAR DENOMINATED PAR
FOREIGN BONDS -- 13.4% VALUE
------------------------------------------
Banco Do Nordeste Brasil -- 144A
REGD, 9.00%, 11/12/96(a)................. $ 250,000
$ 244,062
Banpais S.A. -- 144A REGD,
7.25%, 01/28/97(a)....................... 300,000
279,000
Grupo Industrial Durango -- 144A REGD, FRN,
9.6875%, 11/18/96(a)..................... 300,000
285,000
----------
TOTAL U.S. DOLLAR DENOMINATED FOREIGN
BONDS (COST -- $753,745).................
808,062
----------
TOTAL INVESTMENTS -- 92.2%
(COST -- $5,468,898)*....................
5,580,789
OTHER ASSETS, LESS LIABILITIES -- 7.8%.....
473,130
----------
NET ASSETS -- 100%.........................
$6,053,919
==========
*Cost is approximately the same for Federal income tax
purposes. FRN -- Floating Rate Note; reflects rate at
December 31, 1995. REGD -- Registered.
(a) Below investment grade security.
FEDERAL INCOME TAX INFORMATION:
At December 31, 1995 the net unrealized appreciation
based on cost
for financial statement and Federal income tax purposes
is as follows:
Gross unrealized appreciation......................
$ 132,207
Gross unrealized depreciation......................
(20,316)
----------
Net unrealized appreciation....................
$ 111,891
==========
OTHER INFORMATION:
Purchases and sales of securities other than short-term
and U.S. Government and Government Agency obligations
aggregated $414,870 and
$2,112,775, respectively, for the year ended December
31, 1995. Purchases and sales of U.S. Government and
Government Agency obligations aggregated $2,943,765 and
$3,124,704, respectively, for
the year ended December 31, 1995.
</TABLE>
(See Notes to Financial
Statements)
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
<TABLE>
<S>
<C> ASSETS
Investments, at value (identified cost --
$5,468,898)......................................................
.......... $5,580,789
Cash.............................................................
....................................................
317,861 Receivables:
Interest.........................................................
..................................................
72,212 Manager for expense
reimbursement....................................................
.............................. 20,092
Deferred organization
expenses.........................................................
.............................. 65,656
Other
assets...........................................................
..............................................
8,145
---------- Total
assets...........................................................
............................................ 6,064,755
---------- LIABILITIES
Payables:
Fund shares
repurchased......................................................
...................................... 66
Management
fee..............................................................
....................................... 3,096
12b-1 service and distribution
fees.............................................................
................... 936
Administrative services
fee..............................................................
.......................... 516
Fund
accounting.......................................................
.............................................
2,001 Transfer
agent............................................................
......................................... 1,211
Other accrued expenses and
liabilities......................................................
......................... 3,010
---------
Total
liabilities......................................................
............................................ 10,836
---------- NET
ASSETS...........................................................
................................................
$6,053,919
========== CLASS A:
Net asset value and redemption price per share
($6,027,153 / 619,271 shares
outstanding)............................. $ 9.73
========== Maximum offering price per share ($9.73
x 100 /
97)*.............................................................
.... $ 10.03
========== CLASS B:
Net asset value and offering price per share ($26,766 /
2,751 shares
outstanding)**.................................. $
9.73
========== NET ASSETS CONSIST OF:
Capital
paid-
in..........................................................
.......................................... $6,723,281
Accumulated net realized loss on
investments......................................................
................. (806,470)
Accumulated undistributed net investment
income...........................................................
......... 25,217
Net unrealized appreciation on
investments......................................................
................... 111,891
---------- NET
ASSETS...........................................................
................................................
$6,053,919
========== </TABLE>
* On sales of more than $25,000 the offering price is
reduced. ** Redemption price per share is equal to the
net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial
Statements)
<PAGE>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<S>
<C> <C> INVESTMENT INCOME
Interest.........................................................
......................................... $
452,627
--------- EXPENSES
Management
fee..............................................................
.............................. $42,049
Transfer
agent............................................................
................................ 13,645
Administrative services
fee..............................................................
................. 7,008
Custodian
fees.............................................................
............................... 1,521
Blue Sky
fees.............................................................
................................ 31,386
Auditing and accounting
fees.............................................................
................. 25,323
Shareholder
reports..........................................................
............................. 4,105
Amortization of organization
expenses.........................................................
............ 24,640
Fund
accounting.......................................................
.................................... 22,290
Trustees'
fees.............................................................
............................... 3,960
12b-1 service and distribution fees
Class
A................................................................
................................. 17,428
Class
B................................................................
................................. 299
Legal............................................................
......................................... 27,587
Other............................................................
......................................... 8,401
---------
229,642 Expenses reimbursed by
manager..........................................................
.................. (163,233)
Fees paid
indirectly.......................................................
............................... (822)
--------- Net
expenses.........................................................
.....................................
65,587
--------- Net investment
income...........................................................
............................ 387,040
--------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS Net realized loss on investments and
foreign currency
transactions........................................
(321,600)
Net unrealized appreciation during the period on
investments..............................................
313,952
--------- Net loss on
investments......................................................
........................... (7,648)
--------- Net increase in net assets resulting from
operations.......................................................
. $ 379,392
========= </TABLE>
(See Notes to Financial
Statements)
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE
FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
1995
1994
---
--------- ------------ <S>
<C> <C> DECREASE IN NET ASSETS
Operations:
Net investment
income...........................................................
.................. $ 387,040 $ 251,814
Net realized loss on investments and foreign currency
transactions................................
(321,600 ) (184,971 )
Net unrealized appreciation (depreciation) during the
period on investments.......................
313,952 (47,477 )
------------ ------------ Net
increase resulting from
operations.......................................................
... 379,392 19,366
----------
-- ------------ CLASS A:
Distributions from
Net investment
income...........................................................
.................. (384,755 ) (230,499 )
In excess of net investment
income...........................................................
..... (572 ) --
----------
-- ------------ Total distributions to Class A
shareholders.....................................................
(385,327 ) (230,499 )
----------
-- ------------ CLASS B:
Distributions from
Net investment
income...........................................................
.................. (2,285 ) -
----------
-- ------------ Total distributions to Class B
shareholders.....................................................
(2,285 ) --
----------
-- ------------ CLASS I:
Distributions from
Net investment
income...........................................................
.................. -- (20,240 )
----------
-- ------------ Fund share transactions (Note 11):
Net decrease resulting from Fund share transactions
Class
A................................................................
......................... (2,720,391 ) (3,477,341 )
Class
B................................................................
......................... 27,045 --
Class
I................................................................
......................... -- (1,481,730 )
------------
------------ Net decrease resulting from Fund
share
transactions...........................................
(2,693,346 ) (4,959,071 )
----------
-- ------------ Capital contributed by manager (Note
9).............................................................
183,827 --
----------
-- ------------ Total decrease in net
assets...........................................................
............. (2,517,739 ) (5,190,444 )
NET ASSETS
Beginning of
period...........................................................
.................... 8,571,658 13,762,102
----------
-- ------------ End of
period...........................................................
.......................... $ 6,053,919 $ 8,571,658
============== =========== Accumulated
undistributed net investment
income..................................................... $
25,217 $ 27,935
============== =========== </TABLE>
(See Notes to Financial
Statements)
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED FOR THE YEAR ENDED
JUNE
DECEMBER 31, DECEMBER 31, 30,
CLASS A
------------ ------------ -------------------
---- SELECTED PER SHARE DATA
1995 1994 1994
1993
------------ ------------ -------
------- <S>
<C> <C> <C>
<C>
Net asset value, beginning of
period.................... $ 9.49 $ 9.71
$ 9.92 $ 9.96
------ -----
- ------- ------- Income (loss) from
investment operations
Net investment
income(a)............................... .54
.23 .36 .46 Net loss
on investment transactions (both realized and
unrealized)..........................................
(.02) (.22) (.21) (.04)
------ ------ ------- -------
Total from investment operations.....................
.52 .01 .15 .42
------ ------ ------- ---
---- Less distributions from
Net investment
income.................................. .54
.23 .36 .46 Capital
paid-in........................................
-- -- -- --
------ ------ ------- -------
Total distributions..................................
.54 .23 .36 .46
------ ------ ------- -------
Capital contributed by manager (Note 9)................
.26 -- -- -
------ ------ ------- --
----- Net asset value, end of
period.......................... $ 9.73 $
9.49 $ 9.71 $ 9.92
================ ================= ======== ========
Total return(%).........................................
8.56 (b)(g .03(c) 1.57(b)
4.33(b) RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................ $6,027 $8,572
$12,267 $44,375 Ratio of total expenses
to average daily net assets With expense reimbursement
and fees paid
indirectly(%)(e).....................................
.93 1.38(d) .92 .82
Without expense reimbursement and fees paid
indirectly(%)(e).....................................
3.27 2.80(d) 1.52 1.45
Ratio of net investment income to average daily net
assets(%)(a)...........................................
5.53 4.65(d) 3.73 4.54
Portfolio turnover rate(%)..............................
54 143(d) 37 69
</TABLE>
(See Notes to Financial
Statements)
<PAGE>
FINANCIAL HIGHLIGHTS -- (CONTINUED)
<TABLE>
<CAPTION>
JANUARY 12, 1995
(COMMENCEMENT) TO
DECEMBER 31,
CLASS B
-----------------
SELECTED PER SHARE
DATA
1995
----------------- <S>
<C>
Net asset value, beginning of
period...........................................................
............... $9.44
----- Income from investment operations
Net investment
income(a)........................................................
............................ .49
Net loss on investment transactions (both realized
and
unrealized)..........................................
.03
----- Total from investment
operations.......................................................
................... .52
----- Less distributions from
Net investment
income...........................................................
............................ .49
----- Capital contributed by manager (Note
9)...............................................................
...... .26
----- Net asset value, end of
period...........................................................
..................... $9.73
=============== Total
return(%)........................................................
.......................................
8.53(c)(g) RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
............... $ 27
Ratio of total expenses to average daily net assets
With expense reimbursement and fees paid
indirectly(%)(e).................................................
.. 1.43(d)
Without expense reimbursement and fees paid
indirectly(%)(e)................................................
3.77(d)
Ratio of net investment income to average daily net
assets(%)(a)..............................................
5.03(d)
Portfolio turnover
rate(%)..........................................................
.......................... 54
</TABLE>
<TABLE>
<CAPTION>
FOR THE
FOR THE PERIOD
YEAR ENDED
FOR THE SIX JULY 3, 1993
DECEMBER MONTHS ENDED (COMMENCEMENT)
31, DECEMBER 31, TO JUNE 30,
CLASS I
---------- ------------
-------------- SELECTED PER
SHARE DATA 1995(F)
1994 1994
-----
----- ------------ -------------- <S>
<C> <C> <C> Net
asset value, beginning of
period......................................... $
-- $ 9.71 $ 9.92
---------- -----
------ Income (loss) from investment operations
Net investment income
(a)..................................................
-- .14 .39
Net gain (loss) on investment transactions (both
realized and
unrealized)......................................................
........ -- (.22)
(.21)
---------- -----
------ Total from investment
operations.........................................
-- (.08) .18
---------- -----
------ Less distributions from
Net investment
income......................................................
-- .14 .39
---------- -----
------ Total
distributions....................................................
.. -- .14 .39
---------- -----
------ Net asset value, end of
period...............................................
$ -- $ 9.49 $ 9.71
============ ===============
============
Total
return(%)........................................................
...... -- (.99)(c)
1.77(c) RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)..................................... $
--(f) $ --(f) $1,495
Ratio of total expenses to average daily net assets:
With expense reimbursement and fees paid
indirectly(%)(e).................. --
1.13(d) .67(d)
Without expense reimbursement and fees paid
indirectly(%)(e)............... --
2.55(d) 1.27(d)
Ratio of net investment income to average daily net
assets(%)(a)............. -- 4.90(d)
3.98(d)
Portfolio turnover
rate(%)...................................................
-- 143(d) 37
(a) Net investment income is net of expenses
reimbursed by manager.
(b) Total return does not reflect a sales charge.
(c) Total return represents aggregate total return and
does not reflect a sales charge.
(d) Annualized.
(e) Beginning in 1995, total expenses include fees
paid indirectly through an expense offset arrangement.
(f) There were no Class I shares outstanding as of
December 31, 1994, or as of or during the year ended
December 31, 1995. (g) Without a capital contribution
by the manager, total return for Class A and Class B
would have been 5.82% and 5.78%, respectively.
</TABLE>
(See Notes to Financial
Statements)
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Ivy Short-Term Bond Fund (the Fund) (formerly
Mackenzie Short-Term U.S.
Government Securities Fund d/b/a Ivy Short-Term U.S.
Government Securities
Fund), is a series of shares of Ivy Fund. The shares of
beneficial interest are
assigned no par value and an unlimited number of shares
of Class A, Class B and
Class I are authorized. Ivy Fund was organized as a
Massachusetts business trust
under a Declaration of Trust dated December 21, 1983
and is registered under the
Investment Company Act of 1940, as amended, as a
diversified, open-end
management investment company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant
accounting policies consistently
followed by the Fund in the preparation of its
financial statements. The
policies are in conformity with generally accepted
accounting principles.
Preparation of the financial statements includes the
use of management
estimates.
a. Securities valuation -- Debt securities (other
than short-term
obligations) are valued on the basis of valuations
furnished by a pricing
service authorized by the Board of Trustees (the
Board), which determines
valuations based upon market transactions for normal,
institutional size trading
units of such securities. Short-term obligations are
valued at amortized cost,
which approximates market value.
b. Securities transactions and investment income -
- Securities transactions
are accounted for on the trade date. Interest income is
accrued on a daily
basis. Realized gains and losses from securities
transactions are calculated on
an identified cost basis for financial statement and
Federal income tax
purposes.
c. Federal income taxes -- The Fund is a separate
taxable entity and
intends to qualify for tax treatment applicable to
regulated investment
companies under the Internal Revenue Code, as amended,
and, among other things,
is required to make the requisite distributions to its
shareholders which will
relieve it from Federal income and excise taxes.
Therefore, no provision has
been recorded for Federal income or excise taxes.
The Fund has a net tax-basis capital loss
carryforward of approximately
$751,000 as of December 31, 1995, which may be applied
against any realized net
taxable gain of each succeeding year until fully
utilized or until the
expiration date, whichever occurs first. The
carryforward expires $21,000 in
2001, $570,000 in 2002 and $160,000 in 2003.
d. Distributions to shareholders -- Currently,
distributions from net
investment income are declared monthly. In addition,
distributions to Class A
shareholders are declared daily at the rate per share
of the excess of 12b-1
fees of Class B over Class A shares. Distributions are
paid at the earlier of
redemption or the last business day of the month.
Distributions derived from net
realized capital gain, if any, are made in December.
e. Deferred organization expense -- Expenses
incurred by the Fund in
connection with its organization and issuing Class B
and Class I shares have
been deferred and are being amortized on a straight-
line basis over a five-year
period.
f. Reclassifications -- The timing and
characterization of certain income
and net capital gain distributions are determined
annually in accordance with
Federal tax regulations which may differ from generally
accepted accounting
principles. These differences primarily relate to bond
premium amortization,
foreign denominated securities and certain securities
sold at a loss. As a
result, Net investment income (loss) and Net realized
gain (loss) on investments
for a reporting period may differ significantly in
amount and character from
distributions during such period. Accordingly, the Fund
may periodically make
reclassifications among certain of its capital accounts
without impacting the
net asset value of the Fund.
g. Fees paid indirectly -- The Fund has an
arrangement whereby a certain
percentage of quarterly cumulative credits resulting
from cash balances on
deposit with the custodian are used to offset custody
fees, including
transaction and out of pocket expenses. For the period,
custody fees were
reduced by $822 under this arrangement.
2. MANAGEMENT AND DISTRIBUTION
The Fund pays Ivy Management, Inc. (IMI), a wholly
owned subsidiary of
Mackenzie Investment Management Inc. (MIMI), a monthly
management fee at the
annual rate of .60% of its average daily net assets.
Mackenzie Ivy Funds Distribution, Inc. (MIFDI), a
wholly owned subsidiary
of MIMI, is the underwriter and distributor of the
Fund's shares, and, as such,
purchases shares from the Fund at net asset value to
settle orders from
investment dealers. For the year ended December 31,
1995, the net amount of
underwriting discounts retained by MIFDI was $506.
If the Fund's total expenses in any fiscal year
exceed the permissible
limits applicable to the Fund in any state in which its
shares are then
qualified for sale, IMI will bear the excess expenses.
The most restrictive
state expense limitation provision limits a fund's
annual expenses (excluding
interest, taxes, brokerage commissions, extraordinary
expenses and other
expenses subject to approval by state securities
administrators) to 2.5% of the
first $30 million of the average daily net assets; 2.0%
of the next $70 million
of the average daily
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
net assets; and 1.5% of the remaining average daily net
assets. In addition, IMI
may voluntarily reimburse the Fund's expenses.
Voluntary expense reimbursements
may be terminated or revised at any time. Expenses
reimbursed by manager
reflected in the Statement of Operations consist of
required and voluntary
reimbursements of $36,704 and $126,529, respectively.
3. ADMINISTRATIVE SERVICES
MIMI provides certain administrative services to
the Fund. As compensation
for these services, the Fund pays MIMI a monthly fee at
the annual rate of .10%
of its average daily net assets. Such fee is reflected
as Administrative
services fee in the Statement of Operations.
4. FUND ACCOUNTING SERVICES
MIMI provides certain accounting and pricing
services for the Fund. As
compensation for those services, the Fund pays MIMI a
monthly fee plus
telephone, delivery and other out-of-pocket expenses.
The monthly fee is based
upon the net assets of the Fund at the preceding month
end at the following
rates: $1,000 when net assets are $20 million and
under; $1,500 when net assets
are over $20 million to $75 million; $4,000 when net
assets are over $75 million
to $100 million; and $6,000 when net assets are over
$100 million. Such fee and
expenses are reflected as Fund accounting in the
Statement of Operations.
5. TRANSFER AGENCY AND SHAREHOLDER SERVICE
Mackenzie Ivy Investor Services Corp. (MIISC), a
wholly owned subsidiary of
MIMI, is the transfer and shareholder servicing agent
for the Fund. The Fund
pays a monthly fee at an annual rate of $20.75 per open
account for Class A and
Class B, and $10.25 per open account for Class I and
$4.36 per account that is
closed. In addition, the Fund pays certain out-of-
pocket expenses. Such fees and
expenses are reflected as Transfer agent in the
Statement of Operations.
6. DISTRIBUTION PLANS
Under Service and Distribution Plans, the Fund
reimburses MIFDI for service
fee payments made to brokers at an annual rate not to
exceed .25% of its average
daily net asset value of Class A and Class B shares.
Class B shares are also
subject to an ongoing distribution fee at an annual
rate of .50% of the average
daily net asset value attributable to Class B shares.
MIFDI may use such
distribution fee for purposes of advertising and
marketing shares of the Fund.
Such fees are reflected as 12b-1 service and
distribution fees in the Statement
of Operations. Class I shares are not subject to
service or distribution fees.
7. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI
receive compensation from
the Fund, which is reflected as Trustees' fees in the
Statement of Operations.
8. ACQUISITION OF MACKENZIE SHORT-TERM
U.S. GOVERNMENT SECURITIES FUND
On January 1, 1995, the Fund acquired the net
assets of Mackenzie
Short-Term U.S. Government Securities Fund (MSTUSGSF)
d/b/a Ivy Short-Term U.S.
Government Securities Fund pursuant to a plan of
reorganization adopted by the
Board September 29, 1994 and approved by MSTUSGSF's
shareholders on December 31,
1994. The reorganization was accomplished by a tax-free
exchange of 903,236
Class A shares (NAV $9.49) shares of the Fund for the
903,236 Class A shares
(NAV $9.49) of MSTUSGSF outstanding on December 31,
1994. MSTUSGSF's net assets
at that date of $8,571,658, including $645,132 realized
loss and $202,061
unrealized depreciation, were combined with the Fund
for total net assets after
acquisition of $8,571,686.
9. NET REALIZED LOSS ON INVESTMENTS AND
MIMI'S CONTRIBUTION OF CAPITAL
In January, 1995 certain notes held by the Fund
and collateralized by the
Mexican peso matured and were paid at 63.23% of par
value. The notes provided
that they would mature at par value and the amount paid
at maturity would not be
affected by currency fluctuations except if the Mexican
peso, relative to the
U.S. dollar, declined in value more that 40% as of the
note's maturity date.
Prior to the maturity date, MIMI, the former Manager,
believed that the bonds
would mature at par and they were priced accordingly.
The substantial
devaluation of the Mexican peso, which was occurring at
about the same time as
the notes matured, resulted in a downward adjustment to
the par value of the
notes in an aggregate amount of $183,827, when the
notes were paid off. Because
of the significance of this trading loss to the Fund
and for other
business-related reasons, MIMI made a contribution of
capital to the Fund in the
amount of the loss. The contribution was made in
January, 1995.
10. SUBSEQUENT EVENT
On January 1, 1996, under a Plan pursuant to Rule
18f-3 under the
Investment Company Act of 1940, approved by the Fund's
Board December 2, 1995,
the Fund discontinued its practice of declaring daily a
dividend to Class A
shares at the rate per share of the excess 12b-1 fees
of Class B shares over
Class A and Class I shares. As a result of this change,
the net asset value per
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
share of Class A, Class B and Class I are expected to
differ.
11. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and
Class I were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED
DECEMBER 31, 1995
DECEMBER 31, 1994
----------------------
----------------------
CLASS A SHARES AMOUNT
SHARES AMOUNT
------------------------------ -------- -----------
-------- -----------
<S> <C> <C>
<C> <C>
Sold.......................... 29,579 $ 283,933
60,720 $ 585,954
Issued on reinvestment of
distributions................ 28,768 276,261
17,751 170,596
Repurchased................... (342,312) (3,280,585)
(438,073) (4,233,891)
-------- -----------
-------- -----------
Net decrease.................. (283,965) $(2,720,391)
(359,602) $(3,477,341)
==========
============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
JANUARY 12, 1995
(COMMENCEMENT) TO
DECEMBER 31, 1995
-----------------------
CLASS B
SHARES AMOUNT
---------------------------------------------------- -
------ ---------
<S>
<C> <C>
Sold................................................
20,705 $ 198,314
Issued on reinvestment of
distributions......................................
169 1,615
Repurchased.........................................
(18,123) (172,884)
-
------ ---------
Net increase........................................
2,751 $ 27,045
======== ===========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS ENDED
DECEMBER 31, 1995
DECEMBER 31, 1994
----------------------
----------------------
CLASS I SHARES AMOUNT
SHARES AMOUNT
------------------------------ -------- -----------
-------- ----------
<S> <C> <C>
<C> <C>
Sold.......................... -- $ --
-- $ --
Issued on reinvestment of
distributions................ -- --
2,072 20,014
Repurchased................... -- --
(155,974) (1,501,744)
-------- -----------
-------- -----------
Net decrease.................. -- $ --
(153,902) $(1,481,730)
==========
============= ========== =============
</TABLE>
<PAGE>
REPORT OF INDEPENDENT
ACCOUNTANTS
To the Shareholders and Board of Trustees of
Ivy Short-term Bond Fund (the Fund)
We have audited the accompanying statement of
assets and liabilities of the
Fund, including the schedule of portfolio investments,
as of December 31, 1995,
and the related statement of operations for the year
then ended, the statement
of changes in net assets for the six month period ended
December 31, 1994 and
for the year ended December 31, 1995, and the financial
highlights for each of
the periods indicated. 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.
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, 1995, by correspondence with the
custodian. 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 that 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
Fund as of December 31, 1995, the results of its
operations for the year then
ended, the changes in its net assets for the six month
period ended December 31,
1994 and for the year ended December 31, 1995, and the
financial highlights for
each of the periods indicated, in conformity with
generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
Fort Lauderdale, Florida
February 16, 1996
ISTBF-2-296
<PAGE>
<TABLE>
<CAPTION>
IVY FUNDS <S> <C>
<C>
JUNE 30, 1996
IVY MARKET COMMENTARY:
SHORT TERM
BOND FUND During the first
six months of this year IVY SHORT-TERM BOND
FUND SEEKS TO interest
rates trended higher in response to faster
OBTAIN AS HIGH A LEVEL OF CURRENT
than expected economic growth. Additionally,
INCOME AS IS CONSISTENT WITH THE
energy and grain prices went up
because of PRESERVATION OF CAPITAL AND LIQUIDITY
colder than normal weather
and low inventories BY INVESTING IN HIGH-
QUALITY, ------------------- of these
commodities. On the labor front, a
SHORT-TERM INSTRUMENTS. SEMI-ANNUAL
surprising number of new jobs were
REPORT created and
unemployment declined, Given
these circumstances, the Ivy
------------------- leading to an increase
in labor costs. Histori- Short-term Bond Fund
remains primarily This report and the
cally, these factors have presaged an increase in
concentrated in short-term government
financial statements inflation and as market
participants feared a repeat issues which include both
US agency and
contained herein are of the downturn in bond
prices similar to 1994, short-term treasury
notes. submitted for the general the tone of
the fixed income markets has swung The
Fund remains invested in longer
information of the share- dramatically from
complacency to caution. maturity corporate
bonds with underlying holders. This report is
Our research indicates the pace of eco-
credit fundamentals that, we believe, not authorized
for distri- nomic growth will moderate in the
months continue to bode well for the issuing
bution to prospective to come as the economy appears
to be in the companies.
investors unless preced- later stages of a
longer term economic recovery. It is out
opinion that low inflation,
ed or accompanied by This deceleration
should allay fears of a stable to lower
interest rates an a typically
an effective prospectus. resurgence of
inflation. Additionally, the healthier
corporate America, will continue
Federal Reserve Board
is firmly committed to to provide a favorable
environment for the Ivy Management, Inc.
price stability and we expect that they will act
Ivy Short-term Bond Fund. Via Mizner Financial
to defend this mission. Monetary policy is
Plaza currently somewhat
restrictive which should act as IVY MANAGEMENT,
INC.
700 South Federal Hwy. a brake on the economy
over the near future.
Boca Raton, FL 33432 Corporate
earnings and cash flows continue
1-800-456-5111 to be good, with second
quarter earnings
generally coming in
better than expected and
up about 8% over the
past year. There were,
however, a few highly
publicized earnings
disappointments.
According to Moody's
Investors Service,
defaults on corporate bonds
have declined, credit
upgrades are outpacing
downgrades and
corporate balance sheets are
stronger than they have
been in a decade. Many
companies have been
busy deleveraging and
have taken advantage of
lower interest rate levels
to pay off higher
coupon debt thus cutting their
interest costs
significantly.
-------------------------------------------------------
---------- ----------------------------------
BOARD OF TRUSTEES
OFFICERS TRANSFER AGENT
MANAGER John S.
Anderegg, Jr. Michael G. Landry, Ivy Mackenzie
Ivy Management, Inc.
Paul H. Broyhill President
Services Corp. Boca Raton, FL
Stanley Channick Keith J.
Carlson, P.O. Box 3022
Frank W. DeFriece,
Jr. Vice President Boca Raton, FL
DISTRIBUTOR
Roy J. Glauber
James W. Broadfoot, 33431-0922
Ivy Mackenzie
Michael G. Landry Vice President
1-800-777-6472 Distributors, Inc.
Michael R. Peers
C. William Ferris, Via
Mizner Financial Plaza
Joseph G. Rosenthal
Secretary/Treasurer AUDITORS 700
South Federal Highway
Richard Silverman
Michael R. Peers, Coopers & Lybrand L.L.P. Boca
Raton, FL 33432
J. Brendan Swan
Chairman Fort Lauderdale, FL
LEGAL COUNSEL
CUSTODIAN
[LOGO IVY MACKENZIE]
Dechert Price
Brown Brothers
& Rhoads
Harriman & Co.
Boston, MA
Boston, MA
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS -- 83.4%
PRINCIPAL VALUE
<S>
<C>
<C> ----------------------------------------------
------------------- ------------------------------------
---------------------------- DIRECT U.S. OBLIGATIONS --
33.1%
U.S. Treasury Note, 6.125%,
07/31/96.........................................................
........... $ 500,000 $ 500,480
U.S. Treasury Note, 6.25%,
01/31/97.........................................................
............ 500,000 502,000
U.S. Treasury Note, 5.75%,
10/31/97.........................................................
............ 500,000 498,935
U.S. Treasury Strip, 0.00%,
11/15/98.........................................................
........... 500,000 432,475
----------
1,933,890
----------
GOVERNMENT AGENCY OBLIGATIONS -- 50.3%
Federal Home Loan Mortgage Association, 7.843%,
10/01/20................................................
28,273 28,679
Federal National Mortgage Association, 5.284%,
07/24/96.................................................
250,000 249,162
Federal National Mortgage Association, 5.74%,
12/01/18..................................................
166,640 171,639
Student Loan Marketing Association, FRN, 5.39%,
07/19/96................................................
400,000 399,996
Student Loan Marketing Association, FRN, 5.54%,
02/17/98................................................
1,500,000 1,500,000
Student Loan Marketing Association, FRN, 5.43%,
01/13/99................................................
500,000 497,060
Student Loan Marketing Association, FRN, 5.50%,
03/07/01................................................
100,000 99,125
---------
2,945,661
---------- TOTAL U.S. GOVERNMENT
AND AGENCY OBLIGATIONS
(Cost --
$4,855,266)......................................................
............................ 4,879,551
---------- DOMESTIC CORPORATE BONDS -- 1.8%
-------------------------------------------------------
---------- ---------------------------------------
Weirton Steel Inc., 11.50%, 03/01/98
(Cost --
$100,000)........................................................
............................ 100,000 104,500
---------- U.S. DOLLAR DENOMINATED FOREIGN BONDS --
9.3%
-------------------------------------------------------
---------- ---------------------------------------
Banco Do Nordeste Brasil -- 144A REGD, 9.00%,
11/12/96..................................................
250,000 250,000
Banpais S.A. -- 144A REGD, 7.25%,
01/28/97.........................................................
..... 300,000 296,625
---------- TOTAL U.S. DOLLAR DENOMINATED FOREIGN
BONDS
(Cost --
$453,745)........................................................
............................ 546,625
---------- TOTAL INVESTMENTS -- 94.5%
(Cost --
$5,409,011)*.....................................................
............................ 5,530,676
OTHER ASSETS, LESS LIABILITIES --
5.5%.............................................................
..... 319,260
---------- NET ASSETS --
100%.............................................................
......................... $5,849,936
========== * Cost is approximately the same for Federal
income tax purposes. FRN - Floating Rate Note;
reflects rate at June 30, 1996. REGD - Registered.
OTHER INFORMATION:
At June 30, 1996, net unrealized appreciation based on
cost for financial statement and Federal income tax
purposes is as follows:
Gross unrealized
appreciation.....................................................
.............................. $ 122,808
Gross unrealized
depreciation.....................................................
.............................. (1,143)
---------- Net unrealized
appreciation.....................................................
............................ $ 121,665
========== Purchases and sales of securities other
than short-term, U.S. Government and Government Agency
obligations aggregated $284,250 and $584,250,
respectively, for the period ended June 30, 1996.
Purchases and sales of U.S. Government and Government Agency
obligations aggregated $0 and $31,304, respectively, for the
period ended June 30, 1996.
</TABLE>
(See Notes to Financial
Statements)
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S>
<C> ASSETS
Investments, at value (identified cost --
$5,409,011)......................................................
.......... $5,530,676
Cash.............................................................
....................................................
201,388 Receivables:
Interest.........................................................
..................................................
64,259 Manager for expense
reimbursement....................................................
.............................. 18,064
Deferred organization
expenses.........................................................
.............................. 52,035
Other
assets...........................................................
..............................................
582
---------- Total
assets...........................................................
............................................ 5,867,004
---------- LIABILITIES
Payables:
Management
fee..............................................................
....................................... 2,882
12b-1 service and distribution
fees.............................................................
................... 896
Administrative services
fee..............................................................
.......................... 480
Fund
accounting.......................................................
.............................................
1,801 Other accrued expenses and
liabilities......................................................
......................... 11,009
---------- Total
liabilities......................................................
............................................ 17,068
---------- NET
ASSETS...........................................................
................................................
$5,849,936
========== CLASS A:
Net asset value and redemption price per share
($5,765,549 / 592,727 shares
outstanding)............................. $ 9.73
========== Maximum offering price per share ($9.73
x 100 /
97)*.............................................................
.... $ 10.03
========== CLASS B:
Net asset value and offering price per share ($84,387 /
8,689 shares
outstanding)**.................................. $
9.71
========== NET ASSETS CONSIST OF:
Capital
paid-
in..........................................................
.......................................... $6,522,221
Accumulated net realized loss on
investments......................................................
................. (813,787)
Accumulated undistributed net investment
income...........................................................
......... 19,837
Net unrealized appreciation on
investments......................................................
................... 121,665
---------- NET
ASSETS...........................................................
................................................
$5,849,936
========== </TABLE>
* On sales of more than $25,000 the offering price is
reduced. ** Redemption price per share is equal to the
net asset value per share less any
applicable contingent deferred sales charge.
(See Notes to Financial
Statements)
<PAGE>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
<TABLE>
<S>
<C>
<C> Investment income
Interest.........................................................
........................................
$176,062
-------- Expenses
Management
fee..............................................................
............................. $17,850
Transfer
agent............................................................
............................... 5,372
Administrative services
fee..............................................................
................ 2,975
Custodian
fees.............................................................
.............................. 4
Blue Sky
fees.............................................................
............................... 1,992
Auditing and accounting
fees.............................................................
................ 12,021
Shareholder
reports..........................................................
............................ 2,279
Amortization of organization
expenses.........................................................
........... 13,620
Fund
accounting.......................................................
................................... 11,207
Trustees'
fees.............................................................
.............................. 1,788
12b-1 service and distribution fees
Class
A................................................................
................................ 7,365
Class
B................................................................
................................ 202
Legal............................................................
........................................ 13,774
Other............................................................
........................................ 1,815
--------
92,264 Expenses reimbursed by
manager..........................................................
................. (62,190)
Fees paid
indirectly.......................................................
.............................. (504)
-------- Net
expenses.........................................................
.................................. 29,570
-------- NET INVESTMENT
INCOME...........................................................
........................... 146,492
-------- NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENT TRANSACTIONS
Net realized loss on
investments......................................................
................... (7,317)
Net unrealized appreciation during the period on
investments.............................................
9,774
-------- Net gain on investment
transactions.....................................................
............... 2,457
-------- NET INCREASE IN NET ASSETS RESULTING
FROM
OPERATIONS.......................................................
$148,949
======== </TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS
FOR THE
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------- ------------
1996*
1995
------
----- ------------ <S>
<C> <C> DECREASE IN NET ASSETS
Operations:
Net investment
income...........................................................
................. $ 146,492 $ 387,040
Net realized loss on
investments......................................................
........... (7,317 ) (321,600 )
Net unrealized appreciation during the period on
investment transactions.........................
9,774 313,952
-----------
------------ Net increase resulting from
operations.......................................................
.. 148,949 379,392
-----------
------------ Class A distributions
From net investment
income...........................................................
............ (145,296 ) (384,755 )
In excess of net investment
income...........................................................
.... (5,148 ) (572 )
-----------
------------ Total distributions to Class A
shareholders....................................................
(150,444 ) (385,327 )
-----------
------------ Class B distributions
From net investment
income...........................................................
............ (1,196 ) (2,285 )
In excess of net investment
income...........................................................
.... (232 ) --
-----------
------------ Total distributions to Class B
shareholders....................................................
(1,428 ) (2,285 )
-----------
------------ Fund share transactions (Note 6):
Class
A................................................................
.......................... (258,908 ) (2,720,391
) Class
B................................................................
.......................... 57,848 27,045
-----------
------------ Net decrease resulting from Fund share
transactions............................................
(201,060 ) (2,693,346 )
-----------
-----------
Capital contributed by
manager..........................................................
........... -- 183,827
-----------
------------ TOTAL DECREASE IN NET
ASSETS...........................................................
............ (203,983 ) (2,517,739 )
NET ASSETS
Beginning of
period...........................................................
................... 6,053,919 8,571,658
-----------
------------ END OF
PERIOD...........................................................
......................... $5,849,936 $ 6,053,919
=============
============== ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME.................................................... $
19,837 $ 25,217
============= ============== </TABLE>
* Unaudited.
(See Notes to Financial
Statements)
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE SIX
FOR THE FOR THE SIX
APRIL 18, 1991
MONTHS ENDED YEAR ENDED MONTHS ENDED
(COMMENCEMENT)
CLASS A JUNE 30, DECEMBER 31,
DECEMBER 31, FOR THE YEAR ENDED JUNE 30,
TO JUNE 30,
------------- ------------
------------ -----------------------------------
--------------
SELECTED PER SHARE DATA 1996* 1995
1994 1994 1993 1992
1991 ------------- -
----------- ------------ ------- -------
------- -------------
<S> <C> <C>
<C> <C> <C> <C>
<C> Net asset value,
beginning of period..... $ 9.73 $ 9.49
$ 9.71 $ 9.92 $ 9.96 $ 9.97
$ 10.00 ------
------ ------ ------- -------
------- ------- Income from investment
operations
Net investment income
(a)................... .24 .54
.23 .36 .46 .66
.16 Net gain (loss) on
investment
transactions (both
realized and
unrealized)........... .01 (.02)
(.22) (.21) (.04) --
(.03) ------
------ ------ ------- -------
------- ------- Total from investment
operations.......... .25 .52
.01 .15 .42 .66
.13 ------
------ ------ ------- -------
------- ------- Less distributions
From net investment
income................ .24 .54
.23 .36 .46 .66
.16 In excess of net
investment income..... .01 --
-- -- -- --
-- From capital paid-in.... --
-- -- -- --
.01 --
------ ------ ------ -------
------- ------- ------- Total
distributions... .25 .54
.23 .36 .46 .67 .16
------ ------
------ ------- ------- -------
------- Capital contributed by
manager (Note 5)...... -- .26
-- -- -- --
-- ------
------ ------ ------- -------
------- ------- Net asset value, end of
period.................. $ 9.73 $ 9.73
$ 9.49 $ 9.71 $ 9.92 $ 9.96
$ 9.97
================== ================ =================
======== ======== ======== =========== Total
return(%).......... 2.58(b) 8.56(c)(d)
.03(b) 1.57(c) 4.33(c) 6.80(c)
1.33(b) RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
(in thousands).......... $ 5,766 $6,027
$8,572 $12,267 $44,375 $25,259
$ 13,708 Ratio of total expenses
to average net assets
With expense
reimbursement and fees
paid
indirectly(%)(e)...... .99(f) .93
1.38(f) .92 .82 .86
.25(f) Without expense
reimbursement and fees
paid
indirectly(%)(e)...... 3.10(f) 3.27
2.80(f) 1.52 1.45 1.30
3.00(f) Ratio of net investment
income to
average net
assets(%)(a)............ 4.93(f) 5.53
4.65(f) 3.73 4.54 6.43
8.70(f) Portfolio turnover
rate(%)................. 11(f) 54
143(f) 37 69 106
7(f) </TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 12,
1995
FOR THE SIX (COMMENCEMENT)
MONTHS ENDED TO
DECEMBER
CLASS B
JUNE 30, 31,
------------ --------------
SELECTED PER SHARE DATA
1996* 1995
------------ --------------
<S>
<C>
<C> Net asset value, beginning of
period...........................................................
. $ 9.73 $ 9.44
-----
------ Income from investment operations
Net investment
income(a)........................................................
.............. .19 .49
Net gain on investment transactions
(both realized and
unrealized)......................................................
........ .02 .03
-----
------ Total from investment
operations.......................................................
..... .21 .52
-----
------ Less distributions
From net investment
income...........................................................
......... .19 .49
In excess of net investment
income...........................................................
. .04 --
-----
------ Total
distributions....................................................
..................... .23 .49
-----
------ Capital contributed by manager (Note
5).......................................................
-- .26
-----
------ Net asset value, end of
period...........................................................
....... $ 9.71 $ 9.73
=============== ============= Total
return(%)(b).....................................................
......................... 2.16
8.53(d) RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
. $ 84 $ 27
Ratio of total expenses to average net assets
With expense reimbursement and fees paid
indirectly(%)(e)(f)..................................
1.49 1.43
Without expense reimbursement and fees paid
indirectly(%)(e)(f)...............................
3.60 3.77
Ratio of net investment income to
average net
assets(%)(a)(f)..................................................
................. 4.43 5.03
Portfolio turnover
rate(%)..........................................................
............ 11(f) 54
</TABLE>
(See Notes to Financial
Statements)
<PAGE>
FINANCIAL HIGHLIGHTS (CONTINUED)
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE SIX FOR THE
FOR THE SIX JULY 3, 1993
MONTHS ENDED
YEAR ENDED MONTHS ENDED (COMMENCEMENT)
CLASS I
JUNE 30, DECEMBER 31, DECEMBER 31,
TO JUNE 30,
------------ ------------ --
---------- --------------
SELECTED PER SHARE DATA
1996*(G) 1995(G) 1994
1994
------------ ------------ -----
------- --------------
<S>
<C> <C> <C>
<C> Net asset value, beginning of
period....................... $ -- $
-- $ 9.71 $ 9.92
-----------
- ------------ ------------ -------------
-
Income (loss) from investment operations
Net investment
income(a)................................. --
-- .14 .39
Net loss on investment transactions
(both realized and
unrealized)......................... --
-- (.22) (.21)
----
-------- ------------ ------------ ------
--------
Total from investment
operations....................... --
-- (.08) .18
--------
---- ------------ ------------ ----------
---
Less distributions
From net investment
income............................... --
-- .14 .39
----
-------- ------------ ------------ ------
--------
Total
distributions....................................
-- -- .14 .39
------------ ------------ ------------
--------------
Net asset value, end of
period............................. $ --
$ -- $ 9.49 $ 9.71
=============== ============== ===============
==================
Total
return(%)(b).........................................
-- -- (.99) 1.77
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................... $ -- $
-- $ -- $ 1,495 Ratio of total
expenses to average net assets
With expense reimbursement and fees paid
indirectly(%)(e).......................................
-- -- 1.13(f)
.67(f) Without expense reimbursement and fees paid
indirectly(%)(e).......................................
-- -- 2.55(f)
1.27(f) Ratio of net investment income to average net
assets(%)(a).............................................
-- -- 4.90(f)
3.98(f) Portfolio turnover
rate(%)................................. --
-- 143(f) 37 (a)
Net investment income is net of expenses reimbursed by
manager.
(b) Total return represents aggregate total return
and does not reflect a sales charge.
(c) Total return does not reflect a sales charge.
(d) Without a capital contribution by the manager, total
return for Class A and Class B would have been 5.82%
and 5.78%, respectively.
(e) Beginning in 1995, total expenses include fees
paid indirectly through an expense offset arrangement.
(f) Annualized.
(g) There were no Class I shares outstanding during
the periods ended December 31, 1995 and June 30, 1996.
* Unaudited.
</TABLE>
(See Notes to Financial
Statements)
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Ivy Short-Term Bond Fund (the Fund) is a series of
shares of Ivy Fund. The
shares of beneficial interest are assigned no par value
and an unlimited number
of shares of Class A, Class B and Class I are
authorized. Ivy Fund was organized
as a Massachusetts business trust under a Declaration
of Trust dated December
21, 1983 and is registered under the Investment Company
Act of 1940, as amended,
as a diversified, open-end management investment
company.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Following is a summary of significant accounting
policies consistently
followed by the Fund in the preparation of its
financial statements. The
policies are in conformity with generally accepted
accounting principles.
Preparation of the financial statements includes the
use of management
estimates. Actual results could differ from those
estimates.
SECURITY VALUATION -- Debt securities (other than
short-term obligations)
are valued on the basis of valuations furnished by a
pricing service authorized
by the Board of Trustees (the Board), which determines
valuations based upon
market transactions for normal, institutional-size
trading units of such
securities. Short-term obligations are valued at
amortized cost, which
approximates market. All other securities are valued at
their fair value as
determined in good faith by the Valuation Committee of
the Board; as of June 30,
1996, there were no such securities.
SECURITY TRANSACTIONS AND INVESTMENT INCOME --
Security transactions are
accounted for on the trade date. Interest income is
accrued on a daily basis.
Realized gains and losses from security transactions
are calculated on an
identified cost basis.
FEDERAL INCOME TAXES -- The Fund intends to qualify
for tax treatment
applicable to regulated investment companies under the
Internal Revenue Code, as
amended, and distribute all of its taxable income to
its shareholders.
Therefore, no provision has been recorded for Federal
income or excise taxes.
The Fund has a net tax-basis capital loss
carryforward of approximately
$751,000 as of December 31, 1995, which may be applied
against any realized net
taxable gain of each succeeding year until fully
utilized or until the
expiration date, whichever occurs first. The
carryforward expires $21,000 in
2001, $570,000 in 2002 and $160,000 in 2003.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from
net investment income
are declared monthly. Distributions of net realized
capital gain, if any, are
declared in December. An additional distribution may be
declared if necessary to
avoid the payment of a four percent Federal excise tax.
On January 1, 1996, under a Plan pursuant to Rule
18f-3 under the Investment
Company Act of 1940, approved by the Fund's Board
December 2, 1995, the Fund
discontinued its practice of declaring daily a dividend
to Class A shares at the
rate per share of the excess 12b-1 fees of Class B
shares over Class A shares.
DEFERRED ORGANIZATION EXPENSES -- Expenses incurred
by the Fund in
connection with its organization and issuing Class B
and Class I shares have
been deferred and are being amortized on a straight-
line basis over a five year
period.
RECLASSIFICATIONS -- The timing and
characterization of certain income and
net capital gain distributions are determined annually
in accordance with
Federal tax regulations which may differ from generally
accepted accounting
principles. These differences primarily relate to
certain securities sold at a
loss. As a result, Net investment income (loss) and Net
realized gain (loss) on
investments and foreign currency transactions for a
reporting period may differ
significantly in amount and character from
distributions during such period.
Accordingly, the Fund may periodically make
reclassifications among certain of
its capital accounts without impacting the net asset
value of the Fund.
FEES PAID INDIRECTLY -- The Fund has an arrangement
whereby a certain
percentage of quarterly cumulative credits resulting
from cash balances on
deposit with the custodian are used to offset custody
fees, including
transaction and out of pocket expenses. For the six
months ended June 30, 1996,
custody fees were reduced by $504 under this
arrangement.
2. RELATED PARTIES
Ivy Management, Inc. (IMI) is the Manager and
Investment Adviser of the
Fund. For its services, IMI receives a fee monthly at
the annual rate of .60% of
the Fund's average net assets.
If the Fund's total expenses in any fiscal year
(excluding interest, taxes,
brokerage commissions, extraordinary expenses and other
expenses subject to
approval by state securities administrators) exceed
limits applicable under
state securities laws, IMI will bear the excess
expenses. In addition, IMI may
voluntarily reimburse the Fund's expenses. Expenses
reimbursed by manager
reflected in the Statement of Operations consists of
required and voluntary
reimbursements of $9,861 and $52,329, respectively.
Mackenzie Investment Management Inc. (MIMI), of
which IMI is a wholly owned
subsidiary, provides certain administrative, accounting
and pricing services for
the Fund. As compensation for those services, the Fund
pays MIMI fees plus
certain out-of-pocket expenses. Such fees are reflected
as Administrative
services fee and Fund accounting in the Statement of
Operations.
Ivy Mackenzie Distributors, Inc. (IMDI), a wholly
owned subsidiary of MIMI,
is the underwriter and distributor of the Fund's
shares, and as such, purchases
shares from the Fund at net asset value to settle
orders from investment
dealers. For the six months ended June 30, 1996, the
net amount of underwriting
discount retained by IMDI was $518.
Under Service and Distribution Plans, the Fund
reimburses IMDI for service
fee payments made to brokers at an annual rate not to
exceed .25% of its average
net asset value of Class A and Class B shares. Class B
shares are also subject
to an ongoing distribution fee at an annual rate of
.75% of the average net
asset value attributable to Class B shares. IMDI may
use such distribution fee
for purposes of advertising and marketing shares of the
Fund. Such fees are
reflected as 12b-1 service and distribution fees in the
Statement of Operations.
Ivy Mackenzie Services Corp. (IMSC), a wholly owned
subsidiary of MIMI, is
the transfer and shareholder servicing agent for the
Fund. The Fund pays a
monthly fee and certain out-of-pocket expenses. Such
fees and expenses are
reflected as Transfer agent in the Statement of
Operations.
3. BOARD'S COMPENSATION
Trustees who are not affiliated with IMI or MIMI
receive compensation from
the Fund, which is reflected as Trustees' fees in the
Statement of Operations.
4. ACQUISITION OF MACKENZIE SHORT-TERM U.S. GOVERNMENT
SECURITIES FUND
On January 1, 1995, the Fund acquired the net
assets of Mackenzie Short-Term
U.S. Government Securities Fund (MSTUSGSF) d/b/a Ivy
Short-Term U.S. Government
Securities Fund pursuant to a plan of reorganization
adopted by the Board
September 29, 1994 and approved by MSTUSGSF's
shareholders December 31, 1994.
The reorganization was accomplished by a tax-free
exchange of 903,236 Class A
shares (NAV $9.49) of the Fund for the 903,236 Class A
shares (NAV $9.49) of
MSTUSGSF outstanding on December 31, 1994. MSTUSGSF's
net assets at that date of
$8,571,658, including $645,132 realized loss and
$202,061 unrealized
depreciation, were combined with the Fund for total net
assets after acquisition
of $8,571,686.
5. NET REALIZED LOSS ON INVESTMENTS AND MIMI'S
CONTRIBUTION OF CAPITAL
In January, 1995 certain notes held by the Fund and
collateralized by the
Mexican peso matured and were paid at 63.23% of par
value. The notes provided
that they would mature at par value and the amount paid
at maturity would not be
affected by currency fluctuations except if the Mexican
peso, relative to the
U.S. dollar, declined in
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
value more that 40% as of the note's maturity date.
Prior to the maturity date,
MIMI, the former Manager, believed that the bonds would
mature at par and they
were priced accordingly. The substantial devaluation of
the Mexican peso, which
was occurring at about the same time as the notes
matured, resulted in a
downward adjustment to the par value of the notes in an
aggregate amount of
$183,827, when the notes were paid off. Because of the
significance of this
trading loss to the Fund and for other business-related
reasons, MIMI made a
contribution of capital to the Fund in the amount of
the loss. The contribution
was made in January, 1995.
6. FUND SHARE TRANSACTIONS
Fund share transactions for Class A, Class B and
Class I* were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED
JUNE 30, 1996
DECEMBER 31, 1995
---------------------
----------------------
CLASS A SHARES AMOUNT
SHARES AMOUNT
------------------------------- ------- -----------
-------- -----------
<S> <C> <C>
<C> <C>
Sold........................... 14,480 $ 141,570
29,579 $ 283,933
Issued on reinvestment of
distributions................. 11,391 110,919
28,768 276,261
Repurchased.................... (52,415) (511,397)
(342,312) (3,280,585)
------- -----------
-------- -----------
Net decrease................... (26,544) $ (258,908)
(283,965) $(2,720,391)
========
============= ========== =============
</TABLE>
<TABLE>
<CAPTION>
JANUARY 12, 1995
SIX MONTHS ENDED
(COMMENCEMENT)
JUNE 30, 1996
TO DECEMBER 31, 1995
---------------------
----------------------
CLASS B SHARES AMOUNT
SHARES AMOUNT
------------------------------- ------- -----------
-------- -----------
<S> <C> <C>
<C> <C>
Sold........................... 6,049 $ 58,924
20,705 $ 198,314
Issued on reinvestment of
distributions................. 140 1,364
169 1,615
Repurchased.................... (251) (2,440)
(18,123) (172,884)
------- -----------
-------- -----------
Net increase................... 5,938 $ 57,848
2,751 $ 27,045
========
============= ========== =============
</TABLE>
* There were no Class I shares outstanding during the
periods.
ISTBF-3-896
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Government Fund and Ivy Short-Term
Bond Fund Pro Forma Combining Statement of
Investments June 30, 1996
(Unaudited)
Tocqueville
Ivy
Government Short-Term
Fund Bond Fund
Principal
Amount
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
DIRECT U.S. OBLIGATIONS
U.S. Treasury Bill, 10/24/96 $ 450,000 $
U.S. Treasury Bill, 12/26/96 250,000
U.S. Treasury Note, 6.125%, 07/31/96
500,000 U.S. Treasury Note, 6.25%, 01/31/97
500,000 U.S. Treasury Note, 5.75%, 10/31/97
500,000 U.S. Treasury Note, 5.50%,
04/15/2000 1,000,000 U.S. Treasury Note, 5.875%,
6/30/2000 1,000,000 U.S. Treasury Note, 5.625%,
02/15/2006 2,500,000 U.S. Treasury Strip, 0.00%,
11/15/98 500,000 U.S. Treasury
Strip, 0.00%, 05/15/2006 3,000,000
GOVERNMENT AGENCY OBLIGATIONS
Federal Home Loan Banks, 7.085%,
03/27/2001 1,500,000
Federal Home Loan Banks, 7.13%,
10/02/2001 750,000
Federal Home Loan Mortgage Association,
6.38%, 10/24/2000 750,000
Federal Home Loan Mortgage Association,
7.843%, 10/01/2020
28,273 Federal National Mortgage Association,
5.284%, 07/24/96
250,000 Federal National Mortgage Association,
5.75%, 12/01/18
166,640 Student Loan Marketing Association, FRN,
5.39%, 07/19/96
400,000 Student Loan Marketing Association, FRN,
5.54%, 02/17/98
1,500,000 Student Loan Marketing Association, FRN,
5.43%, 01/13/99
500,000 Student Loan Marketing Association, FRN,
5.50%, 03/07/2001
100,000
Tocqueville
Pro-Forma Government
Combined Fund
Principal
Amount
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
DIRECT U.S. OBLIGATIONS
U.S. Treasury Bill, 10/24/96 $ 450,000 $
442,806 U.S. Treasury Bill, 12/26/96
250,000 243,573 U.S. Treasury Note, 6.125%,
07/31/96 500,000 U.S. Treasury Note, 6.25%,
01/31/97 500,000 U.S. Treasury Note, 5.75%,
10/31/97 500,000 U.S. Treasury Note, 5.50%,
04/15/2000 1,000,000 970,625 U.S. Treasury
Note, 5.875%, 6/30/2000 1,000,000 980,936
U.S. Treasury Note, 5.625%, 02/15/2006 2,500,000 2,320,313
U.S. Treasury Strip, 0.00%, 11/15/98 500,000
U.S. Treasury Strip, 0.00%, 05/15/2006
1,539,240
_________
6,497,493
_________
GOVERNMENT AGENCY OBLIGATIONS
Federal Home Loan Banks, 7.085%,
03/27/2001 1,500,000
1,479,510 Federal Home Loan Banks, 7.13%,
10/02/2001 750,000
745,778 Federal Home Loan Mortgage Association,
6.38%, 10/24/2000 750,000
739,103 Federal Home Loan Mortgage Association,
7.843%, 10/01/2020 28,273
Federal National Mortgage Association,
5.284%, 07/24/96 250,000
Federal National Mortgage Association,
5.75%, 12/01/18 166,640
Student Loan Marketing Association, FRN,
5.39%, 07/19/96 400,000
Student Loan Marketing Association, FRN,
5.54%, 02/17/98 1,500,000
Student Loan Marketing Association, FRN,
5.43%, 01/13/99 500,000
Student Loan Marketing Association, FRN,
5.50%, 03/07/2001 100,000
_________
2,964,391
_________
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS
9,461,884
_________
Ivy
Short-Term
Pro-Forma
Bond Fund Combined
Value
U.S. GOVERNMENT AND AGENCY OBLIGATIONS
DIRECT U.S. OBLIGATIONS
U.S. Treasury Bill, 10/24/96 $ $
442,806 U.S. Treasury Bill, 12/26/96
243,573 U.S. Treasury Note, 6.125%, 07/31/96
500,480 500,480 U.S. Treasury Note, 6.25%,
01/31/97 502,000 502,000 U.S. Treasury
Note, 5.75%, 10/31/97 498,935 498,935
U.S. Treasury Note, 5.50%, 04/15/2000 970,625
U.S. Treasury Note, 5.875%, 6/30/2000
980,936 U.S. Treasury Note, 5.625%, 02/15/2006
2,320,313 U.S. Treasury Strip, 0.00%, 11/15/98
432,475 432,475 U.S. Treasury Strip, 0.00%,
05/15/2006 1,539,240
_________ _________
1,933,890 8,431,383
_________ _________
GOVERNMENT AGENCY OBLIGATIONS
Federal Home Loan Banks, 7.085%,
03/27/2001
1,479,510 Federal Home Loan Banks, 7.13%,
10/02/2001
745,778 Federal Home Loan Mortgage Association,
6.38%, 10/24/2000
739,103 Federal Home Loan Mortgage Association,
7.843%, 10/01/2020 28,679
28,679 Federal National Mortgage Association,
5.284%, 07/24/96 249,162
249,162 Federal National Mortgage Association,
5.75%, 12/01/18 171,639
171,639 Student Loan Marketing Association, FRN,
5.39%, 07/19/96 399,996
399,996 Student Loan Marketing Association, FRN,
5.54%, 02/17/98 1,500,000
1,500,000 Student Loan Marketing Association, FRN,
5.43%, 01/13/99 497,060
497,060 Student Loan Marketing Association, FRN,
5.50%, 03/07/2001 99,125
99,125
_________ _________
2,945,661 5,910,052
_________ _________
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS 4,879,551
14,341,435
_________ _________
Tocqueville
Ivy
Government Short-Term
Fund Bond Fund
Principal
Amount
DOMESTIC CORPORATE BONDS
Weirton Steel Inc., 11.50%, 03/01/98
100,000
U.S. DOLLAR DENOMINATED FOREIGN BONDS
Banco Do Nordeste Brasil - 144A REGD,
9.00%, 11/12/96
250,000 Banpais S.A. - 144A REGD,
7.25%, 01/28/97
300,000
TOTAL U.S. DOLLAR DENOMINATED
FOREIGN BONDS
SHORT TERM INVESTMENTS
Repurchase Agreement State Street Bank &
Trust Company, dated 06/28/96, 2% due
07/01/96, Collateralized by $425,000
U.S. Treasury Notes valued at $433,249 422,000
TOTAL INVESTMENTS
OTHER ASSETS, LESS LIABILITIES
NET ASSETS - 100%
FRN - Floating Rate Note; reflects rate
at June 30, 1996
REGD-Registered
See Notes to Pro Forma Financial Statements
Tocqueville
Pro-Forma Government
Combined Fund
Principal
Value Amount
DOMESTIC CORPORATE BONDS
Weirton Steel Inc., 11.50%, 03/01/98 100,000
_________
U.S. DOLLAR DENOMINATED FOREIGN BONDS
Banco Do Nordeste Brasil - 144A REGD,
9.00%, 11/12/96 250,000
_________ Banpais S.A. - 144A REGD,
7.25%, 01/28/97 300,000
_________
TOTAL U.S. DOLLAR DENOMINATED
FOREIGN BONDS
SHORT TERM INVESTMENTS
Repurchase Agreement State Street Bank &
Trust Company, dated 06/28/96, 2% due
07/01/96, Collateralized by $425,000
U.S. Treasury Notes valued at $433,249 422,000
422,000
_________ TOTAL INVESTMENTS
9,883,884
OTHER ASSETS, LESS LIABILITIES
(72,554)
_________
NET ASSETS - 100% $
9,811,330
_________
FRN - Floating Rate Note; reflects rate
at June 30, 1996
REGD-Registered
See Notes to Pro Forma Financial Statements
Ivy
Short-Term
Pro-Forma
Bond Fund Combined
Value
DOMESTIC CORPORATE BONDS
Weirton Steel Inc., 11.50%, 03/01/98 104,500
104,500
_________ _________
U.S. DOLLAR DENOMINATED FOREIGN BONDS
Banco Do Nordeste Brasil - 144A REGD,
9.00%, 11/12/96 250,000
250,000 Banpais S.A. - 144A REGD,
7.25%, 01/28/97 296,625
296,625
_________ _________ TOTAL U.S. DOLLAR
DENOMINATED 546,625 546,625 FOREIGN
BONDS _________ _________
SHORT TERM INVESTMENTS
Repurchase Agreement State Street Bank &
Trust Company, dated 06/28/96, 2% due
07/01/96, Collateralized by $425,000
U.S. Treasury Notes valued at $433,249
422,000
_________ _________ TOTAL INVESTMENTS
5,530,676 15,414,560
OTHER ASSETS, LESS LIABILITIES 319,260
246,706
_________ _________
NET ASSETS - 100% $ 5,849,936 $
15,661,266
_________ _________
FRN - Floating Rate Note; reflects rate
at June 30, 1996
REGD-Registered
See Notes to Pro Forma Financial Statements
THE TOCQUEVILLE GOVERNMENT FUND
PRO FORMA COMBINING STATEMENT OF
ASSETS AND LIABILITIES
June 30, 1996
(Unaudited)
TOCQUEVILLE
GOVERNMENT IVY
SHORT TERM ASSETS
FUND BOND FUND Investments at value (identified
cost - TGF $9,980,085, ISTBF
$5,409,011, Combined
$15,389,096) $9,883,884
$5,530,676 Cash
177 201,388 Interest receivable
143,820 64,259 Expense reimbursement
receivable 6,313 18,064 Deferred
organization expense 19,123 52,035
Other assets 30,306 582
___________
___________
10,083,623 5,867,004
___________ ___________
LIABILITIES
Investments purchased payable 243,756
Fund shares repurchased payable 238
Dividend payable 3,065
Accrued expenses 25,234
17,068 ___________
___________
272,293 17,068
___________ ___________ NET ASSETS
$ 9,811,330 $ 5,849,936
___________ ___________
At June 30, 1996 net assets
consisted of:
Capital paid in $ 9,893,995 $
6,522,221 Accumulated net realized
gain (loss) 13,536
(813,787) Undistributed net investment
income
19,837 Net unrealized appreciation
(depreciation) (96,201)
121,665
___________ ___________
$ 9,811,330 $ 5,849,936
___________ ___________
CLASS A
Net assets 9,811,124
5,765,549
Shares outstanding 986,268
592,727
Net asset value per share $9.95
$9.73 ___________
___________
CLASS B
Net assets 206
84,387
Shares outstanding 21
8,689
Net asset per share $9.95
$9.71 ___________
___________
PRO FORMA PRO
FORMA ASSETS ADJUSTMENTS
COMBINED Investments at value (identified
cost - TGF $9,980,085, ISTBF
$5,409,011, Combined
$15,389,096)
$15,414,560 Cash
52,035 253,600 Interest receivable
208,079 Expense reimbursement
receivable 24,377 Deferred
organization expense (52,035) 19,123
Other assets 30,888
___________
___________ -
15,950,627
___________ ___________
LIABILITIES
Investments purchased payable
243,756 Fund shares repurchased payable
238 Dividend payable
3,065 Accrued expenses
42,302
___________ ___________
- 289,361
___________ ___________ NET
ASSETS - $15,661,266
___________
___________
At June 30, 1996 net assets
consisted of:
Capital paid in (793,950)
$15,622,266 Accumulated net realized
gain (loss) 813,787
13,536 Undistributed net investment
income (19,837)
- Net unrealized appreciation
(depreciation)
25,464 ___________
___________
- $15,661,266
___________ ___________
CLASS A
Net assets 84,387
15,661,060
Shares outstanding 587,933
1,574,201
Net asset value per share
$9.95
___________
CLASS B
Net assets (84,387)
206
Shares outstanding (8,689)
21
Net asset per share
$9.95 ___________
___________
See Notes to Pro Forma Financial Statements.
THE TOCQUEVILLE GOVERNMENT FUND
PRO FORMA COMBINING STATEMENT OF OPERATIONS
(Unaudited)
TOCQUEVILLE IVY
SHORT GOVERNMENT
TERM BOND FUND
FUND Eight
Months Six Months
Ended June 30, Ended June 30,
1996 1996
INVESTMENT INCOME
Interest $ 346,148 $
176,062 ___________
__________
EXPENSES
Investment adviser's fee 28,229
17,850 Custodian and fund accounting 36,450
11,211 Transfer agent and shareholder
services 20,655
5,372 Professional fees 17,015
25,795 Distribution
Class A 14,139
7,365 Class B 1
202 Administration fee
8,484 2,975 Printing
1,215 2,279 Registration
4,319 1,992 Trustees' fee
1,215 1,788 Fidelity bond
1,215
Amortization of organization costs 2,986
13,620 Other 1,139
1,815
___________ __________ Total expenses
137,062 92,264 Less fees waived
(44,584) (62,190) Expenses
reimbursed (6,313)
Expenses paid indirectly
(504) ___________
__________ Net expenses
86,165 29,570
___________ __________ NET INVESTMENT INCOME
259,983 146,492
___________ __________
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
on investments 14,366
(7,317) Net unrealized appreciation
(depreciation) of investments
during the period (123,981)
9,774 ___________
__________ Net gain (loss) on
investments (109,615)
2,457 ___________
__________
Net increase in net assets
resulting from operations $150,368
$148,949 ___________
__________
PRO FORMA PRO
FORMA ADJUSTMENTS
COMBINED
INVESTMENT INCOME
Interest $
522,210 ___________
__________
EXPENSES
Investment adviser's fee (2,975)
43,104 Custodian and fund accounting (11,211)
36,450 Transfer agent and shareholder
services (5,372)
20,655 Professional fees (25,795)
17,015 Distribution
Class A 67
21,571 Class B (202)
1 Administration fee
1,488 12,947 Printing
3,494 Registration
6,311 Trustees' fee
(1,788) 1,215 Fidelity bond
1,215 Amortization
of organization costs (13,620) 2,986 Other
2,954
___________ __________
Total expenses (59,408) 169,918
Less fees waived 23,568
(83,206) Expenses reimbursed 6,313
0 Expenses paid indirectly
(504)
___________ __________ Net expenses
(29,527) 86,208
___________ __________ NET
INVESTMENT INCOME 29,527 436,002
___________ __________
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss)
on investments
7,049 Net unrealized appreciation
(depreciation) of investments
during the period
(114,207) ___________
__________ Net gain (loss) on
investments 0
(107,158) ___________
__________
Net increase in net assets
resulting from operations $ 29,527 $
328,844 ___________
__________
See Notes to Pro Forma Financial Statements.
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Government Fund and Ivy Short-Term
Bond Fund
Notes to Pro Forma Financial Statements
(Unaudited)
1. BASIS OF PRESENTATION
(a) The pro forma financial statements give
effect to the proposed combination of The
Tocqueville Government Fund ("TGF") and Ivy
Short-Term Bond Fund ("ISTBF"), pursuant to a
Plan of Reorganization, under which all the assets of
ISTBF will be transferred to TGF in exchange solely
for TGF-Class A shares and the assumption of all
the liabilities of ISTBF by TGF as of the
"closing date." TGF terminated the offering of
Class B shares August 16, 1996.
The Reorganization will be accounted for as a
tax free business combination. In accordance
with the method of accounting for such
combinations of investment companies, the
historical cost basis of the investment securities
acquired from ISTBF will be carried forward to TGF, and the
statements of operations, changes in net assets
and the selected financial information are not
restated. The number of TGF-Class A share to be
issued in the combination will be determined by
dividing the value of the total net assets of
ISTBF on the closing date by the net asset value per share
of TGF-Class A shares.
(b) The pro forma statement of assets and
liabilities reflects the reimbursement of
organization costs of ISTBF which will not be an
asset after the Reorganization.
(c) The pro forma statement of operations
excludes by adjustment certain expenses which
would have been eliminated upon the effectiveness
of the proposed combination; reflects adjustment
for ISTBF assets at TGF contractual rates; and
reflects adjustment for expense waiver and/or reimbursement
provisions effective following the Reorganization. The
pro forma statement of operations does not
necessarily reflect the result of operations as
they would have been had TGF and ISTBF constituted
a single entity during the eight months ended
June 30, 1996.
(d) The pro forma statement of investments, the
pro forma statement of operations, and the pro
forma statement of assets and liabilities should
be read in conjunction with the historical
financial statements of TGF and ISTBF.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) SECURITY VALUATION. Investments in
securities, including foreign securities, traded
on an exchange or quoted on the over-the-
counter market are valued at the last sale price
or, if no sale occurred during the day, at the
mean between closing bid and asked prices, as last reported
by a pricing service approved by the Trustees. When
market quotations are not readily available, or
when restricted securities or other assets are
being valued, such assets are valued at fair value
as determined in good faith by or under procedures
established by the Trustees. Short-term
investments are stated at cost which, together with accrued
interest, approximates market value.
(b) FEDERAL INCOME TAX. It is the Trust's policy
to comply with the provisions of the Internal
Revenue Code ("Code") applicable to regulated
investment companies and to distribute all
of its taxable income to its shareholders. It
is also the Trust's intention to distribute amounts
sufficient to avoid imposition of any excise tax under
Section 4982 of the Code. Therefore, no federal
income or excise tax provision is required.
(c) DEFERRED ORGANIZATION EXPENSES. Expenses
incurred in connection with the organization
of The Tocqueville Government Fund ("the
Fund") are being amortized on a straight-line
basis over a five-year period from the Fund's
commencement of operations. In the event any initial shares
of the Tocqueville Government Fund are redeemed during
the amortization period, the proceeds of
redemption will be reduced by the pro-rata
portion of any unamortized organization
expenses in the same proportion as the number of
shares redeemed bears to the number of initial shares
held at the time of redemption.
(d) OTHER. Security transactions are accounted
for on the trade date, the date the order to buy
or sell is executed. Interest income is
recognized on the accrual basis and market
discount is accounted for using the effective
interest method. The Trust uses the first-in, first out
method for determining realized gain or loss on
investments sold for both financial reporting and
federal tax purposes. Distributions to
shareholders are recorded on the ex- dividend
date. Expenses incurred by the Trust not
specifically identified to a Fund are allocated on a basis
relative to the size of each Fund's daily net asset
value.
THE TOCQUEVILLE TRUST
PART C. - OTHER INFORMATION
ITEM 15. INDEMNIFICATION.
Article VIII of the Registrant's Declaration
of Trust provides as follows:
The Trust shall indemnify each of its Trustees,
officers (including persons who serve at its request as
directors, officers or trustees of another organization
in which it has any interest, as a shareholder,
creditor or otherwise) against all liabilities and
expenses (including amounts paid in satisfaction of
judgments, in compromise, as fines and penalties, and as
counsel fees) reasonably incurred by him in connection with the
defense or disposition of any action, suit or other
proceeding, whether civil or criminal, in which he may
be involved or with which he may be threatened, while
in office or thereafter, by reason of his being or
having been such a trustee, officer, employee or agent,
except with respect to any matter to which he shall
have been adjudicated to have acted in bad faith, willful
misfeasance, gross negligence or reckless disregard of his
duties; provided, however, that as to any matter disposed of
by a compromise payment by such person, pursuant to
consent decree or otherwise, no indemnification either
for said payment or for any other expenses shall be
provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the
Trustees to the effect that if the matter of willful
misfeasance, gross negligence or reckless disregard of
duty, or the matter of good faith and reasonable belief as to the
best interests of the Trust, had been adjudicated, it
would have been adjudicated in favor of such person.
The rights accruing to any Person under these
provisions shall not exclude any other right to which
he may be lawfully entitled; provided that no Person
may satisfy any right of indemnity or reimbursement
granted herein or in Section 5.1 or to which he may be otherwise
entitled except out of the property of the Trust, and no
Shareholder shall be personally liable to any Person with
respect to any claim for indemnity or reimbursement or
otherwise. The Trustees may make advance payments in
connection with indemnification under this Section 5.3,
provided that the indemnified person shall have given a
written undertaking to reimburse the Trust in the event
it is subsequently determined that he is not entitled
to such indemnification.
Insofar as the conditional advancing of
indemnification monies for action based upon the
Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions:
(i) the advances must be limited to amounts used, or to
be used, for the preparation or presentation of a
defense to the action, including costs connected with the
preparation of a settlement; (ii) advances may be made only upon
receipt of a written promise by, or on behalf of, the
recipient to repay that amount of the advance which
exceeds that amount to which it is ultimately
determined that he is entitled to receive from the
Registrant by reason of indemnification; and (iii) (a)
such promise must be secured by a surety bond, other suitable
insurance or any equivalent form of security which assures
that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or
other form of security must be provided by the
recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Trustees,
or an independent legal counsel in a written opinion, shall
determine, based upon a review of readily available facts,
that the recipient of the advance ultimately will be
found entitled to indemnification.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to
Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions or
otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses
incurred or paid by a Trustee, officer or controlling
person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in
connection with shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as
expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 16. EXHIBITS.
1.(a) Agreement and Declaration of Trust of
Registrant.(1)
(b) Amendment to the Agreement and Declaration
of Trust of Registrant dated August 4,
1995.(5)
2. Bylaws of Registrant.(1)
3. None.
4. Agreement and Plan of Reorganization filed
herewith as Exhibit "A" to the Proxy
Statement/Prospectus.
5. Specimen certificate for shares of
beneficial interest of Registrant.(3)
6.(a) Investment Advisory Agreement between
Registrant on behalf of The Tocqueville Fund
and Tocqueville Asset Management L.P.(4)
(b) Investment Advisory Agreement between
Registrant on behalf of The Tocqueville
Asia-Pacific Fund and Tocqueville Asset
Management L.P.(5)
(c) Investment Advisory Agreement between
Registrant on behalf of The Tocqueville
Europe Fund and The Tocqueville Asset
Management L.P.(5)
(d) Investment Advisory Agreement between
Registrant on behalf of The Tocqueville
Small Cap Value Fund and Tocqueville Asset
Management L.P.(5)
(e) Investment Advisory Agreement between
Registrant on behalf of The Tocqueville
Government Fund and Tocqueville Asset
Management L.P.(5)
7. Distribution Agreement between Registrant
and Tocqueville Securities L.P.(5)
8. None.
9. Custodian and Transfer Agency Agreements
between Registrant and State Street Bank and
Trust Company.(3)
10.(a) Rule 12b-1 Plan for the Class A shares of
The Tocqueville Fund, as amended.(5)
(b) Rule 12b-1 Plan for the Class B shares of
The Tocqueville Fund.(5)
(c) Rule 12b-1 Plan for the Class A shares of
The Tocqueville Asia-Pacific Fund, as
amended.(5)
(d) Rule 12b-1 Plan for the Class B shares of
The Tocqueville Asia-Pacific Fund.(5)
(e) Rule 12b-1 Plan for the Class A shares of
The Tocqueville Europe Fund.(5)
(f) Rule 12b-1 Plan for the Class B shares of
The Tocqueville Europe Fund.(5)
(g) Rule 12b-1 Plan for the Class A shares of
The Tocqueville Small Cap Value Fund.(5)
(h) Rule 12b-1 Plan for the Class B shares of
The Tocqueville Small Cap Value Fund.(5)
(i) Rule 12-b Plan for the Class A Shares of The
Tocqueville Government Fund.(5)
(j) Rule 12b-1 Plan for the Class B shares of
The Tocqueville Government Fund.(5)
11.(a) Opinion of Kramer, Levin, Naftalis &
Frankelas to the legality of the securities
being issued.(2)
(b) Opinion of Peabody & Brown as to the
legality of the securities being issued. (2)
12. Opinion and Consent of Dechert Price &
Rhoads as to tax matters and consequences of
the
Reorganization.(2)
13. None.
14.(a) Opinion and Consent of Coopers & Lybrand
LLP, independent accountants (as to Ivy
Short-Term Bond Fund).(2)
(b) Opinion and Consent of McGladrey & Pullen,
LLP, independent accountants (as to The
Tocqueville Government Fund).(2)
15. Inapplicable.
16. None.
17.(a) Form of Proxy Card.(2)
(b) Registrant's Declaration pursuant to Rule
24f-2 under the Investment Company Act as
amended.(6)
(c) Prospectus of Ivy Short-Term Bond Fund dated
April 30, 1996.(2)
_____________
(1) Previously filed in the Fund's Registration
Statement on September 15, 1986.
(2) Filed herewith.
(3) Previously filed in Pre-Effective Amendment
No. 1, on December 2, 1986.
(4) Previously filed in Post-Effective Amendment
No. 4 on December 29, 1989.
(5) Previously filed in Post-Effective Amendment
No. 14 on February 28, 1996.
(6) Registrant has registered an indefinite
number of its securities under the
Securities Act of 1933 pursuant to Rule
24f-2 under the Investment Company Act of
1940. The Registrant electronically filed its Rule
24f-2 Notice for its fiscal year ended October 31,
1995 on December 26, 1995 accession number
0000922423-95-000264.
ITEM 17. UNDERTAKINGS.
1. The undersigned Registrant agrees that prior
to any public reoffering of the securities
registered through the use of a prospectus
which is a part of this registration
statement by any person or party who is
deemed to be an underwriter within the meaning
of Rule 145(c) under the Securities Act of 1933, the
reoffering prospectus will contain the information
called for by the applicable registration form for
reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable form.
2. The undersigned Registrant agrees that every
prospectus that is filed under paragraph (1)
above will be filed as a part of an
amendment to the registration statement and
will not be used until the amendment is
effective, and that, in determining any
liability under the Securities Act of 1933, each
post-effective amendment shall be deemed to be a new
registration statement for the securities offered
therein, and the offering of the securities at that
time shall be deemed to be the initial bona
fide offering of them.
SIGNATURES SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 the Registrant has caused this Registration
Statement to be signed on its behalf in the City of New
York and State of New York, on the 6th day of
September, 1996.
THE TOCQUEVILLE TRUST
By: /s/ Francois D.
Sicart Francois D.
Sicart Principal
Executive Officer
As required by the Securities Act of 1933, as
amended, this Registration Statement on Form N-14 has
been signed by the following persons in the capacities
and on the dates indicated.
Signatures Title Date
/s/ Francois D. Sicart Principal Executive
September 6, 1996 Francois D. Sicart Officer
and Trustee
____________________ Trustee
September 6, 1996 Bernard F. Combemale
____________________ Trustee
September 6, 1996 James B. Flaherty
/s/ Inge Heckel Trustee
September 6, 1996 Inge Heckel
/s/ Robert Kleinschmidt President, Principal
September 6, 1996 Robert Kleinschmidt Operating
Officer
and Trustee
/s/ Francois Letaconnoux Trustee
September 6, 1996 Francois Letaconnoux
/s/ Kieran Lyons Vice President and
September 6, 1996 Kieran Lyons Principal
Financial
Officer
[Kramer, Levin, Naftalis & Frankel Letterhead]
September 9, 1996
Ivy Short-Term Bond Fund
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
Re: Registration Statement on Form N-14
Gentlemen:
Reference is made to the Registration Statement on Form N-14
under the Securities Act of 1933, as amended (the "Registration
Statement"), to be filed with the Securities and Exchange
Commission (the "Commission") to register shares of beneficial
interest, without par value ("Shares") of the Tocqueville
Government Fund ("TGF"), a Massachusetts business trust. Such
shares are to be issued in connection with an Agreement and Plan
of Reorganization (the "Agreement") whereby all or substantially
all of the then-existing assets of Ivy Short-Term Bond Fund
("ISTBF") will be transferred to TGF in exchange for (i) the
assumption of all the identified and stated liabilities of ISTBF
by TGF and (ii) the issuance and delivery to ISTBF of full and
fractional voting shares of TGF's voting shares of beneficial
interest, par value $0.01 per share (the "Shares"), and such
Shares shall be distributed by ISTBF pro rata to its shareholders
upon its liquidation. The Agreement was approved by the Board of
Trustees of Ivy Fund on August 30, 1996 and is to become
effective upon its approval by shareholders of ISTBF.
We have reviewed the Declaration of Trust of The Tocqueville
Trust ("Tocqueville Trust"), its By-Laws, resolutions of the
Trustees of Tocqueville Trust, and the Registration Statement
(including exhibits thereto). We have also made such inquiries
and have examined originals, certified copies or copies otherwise
identified to our satisfaction of such documents, records and
other instruments as we have deemed necessary or appropriate for
the purposes of this opinion. For purposes of such examination,
we have assumed the genuineness of all signatures on original
documents and the conformity to the original documents of all
copies submitted. In addition, we have assumed that the
representations to be made as of the closing date by Tocqueville
Trust and Ivy Fund will be made by such parties in the form
acceptable to us and that Tocqueville Trust's and Ivy Fund's
activities in connection with the Agreement and the transactions
contemplated therein have been and will be conducted in the
manner provided in such documents and as set forth herein.
The opinions expressed herein are limited to matters of law
which govern the due organization of Tocqueville Trust and the
authorization and issuance of the Shares. We are members of the
Bar of the State of New York and do not hold ourselves out as
experts as to the law of any other state or jurisdiction. As to
matters of Massachusetts law, we have relied upon the opinion of
Peabody & Brown. Based upon and subject to the foregoing and
provided that the terms of Reorganization occur in accordance
with the terms of the Agreement, as of the date of the closing,
we are of the opinion that, and so advise you as follows:
(1) Tocqueville Trust is duly organized and validly
existing as a business trust in good standing under the laws of
the Commonwealth of Massachusetts with requisite power and
authority to own its properties and, to our knowledge, to carry
on its business as presently conducted; and
(2) Under federal laws and the laws of the Commonwealth of
Massachusetts, the Agreement has been duly authorized by TGF and,
assuming due authorization, execution and delivery of the
agreement by ISTBF, when executed and delivered by TGF, will
constitute a valid and legally binding obligation of TGF
enforceable against TGF in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equitable
principles;
(3) The execution and delivery of the Agreement will not
and the exchange of ISTBF's assets for shares of TGF does not
violate (i) TGF's declaration of trust of bylaws or (ii) any
federal law of the United States or the laws of the Commonwealth
of Massachusetts applicable to TGF; we, however, express no
opinion with respect to federal and state securities laws, other
antifraud laws and fraudulent transfer laws. Furthermore,
insofar as performance by TGF of its obligations under the
Agreement is concerned, we express no opinion as to bankruptcy,
insolvency, reorganization, moratorium or similar laws of general
applicability relating to or affecting creditors' rights;
(4) All regulatory consents, authorizations, approvals and
filings required to be obtained or made by the Acquiring Fund
under the federal laws of the United States and the laws of the
Commonwealth of Massachusetts for the consummation of the
transactions contemplated in the Agreement will have been
obtained or made.
This opinion is solely for your information and is not to be
quoted in whole or in part, summarized or otherwise referred to,
nor is it to be filed with or supplied to or relied upon by any
governmental agency or other person without the prior written
consent of this firm. This opinion is as of the date hereof. We
disclaim any responsibility to update or supplement this opinion
to reflect any events or state of facts which may hereafter come
to our attention, or any changes in statutes or regulations or
any court decisions which may hereafter occur.
We consent to the filing of this opinion as an exhibit to
the Registration Statement and to the references therein to our
firm as Counsel to Tocqueville Trust.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
[Peabody & Brown Letterhead]
September 6, 1996
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022-3862
Gentlemen:
We have acted as special counsel in connection with your
delivery of an opinion letter as counsel to The Tocqueville
Trust, a Massachusetts business trust (the "Trust") in connection
with the Registration Statement on Form N-14 under the Securities
Act of 1933, as amended (the "Registration Statement"), to be
filed with the Securities and Exchange Commission to register
Class A shares of beneficial interest, without par value
("Shares") of The Tocqueville Government Fund (the "Fund"). Such
shares are to be issued in connection with an Agreement and Plan
of Reorganization (the "Plan") whereby all the assets of the Ivy
Short-Term Bond Fund ("ISTBF") will be transferred to the Fund in
exchange for the Shares and such Shares shall be distributed to
shareholders of the ISTBF upon its liquidation.
In rendering this opinion, we have examined and are familiar
with the following:
(a) the Declaration of Trust, (the "Trust Agreement"),
certified by the Secretary of State of the Commonwealth of
Massachusetts, and the By-Laws, as amended of the Trust,
certified by the Trust's Secretary;
(b) a certificate of the Secretary of State of the
Commonwealth of Massachusetts as to the legal existence and good
standing of the Trust in Massachusetts dated August 27, 1996; and
(c) the votes of the Board of Trustees of the Trust adopted
on August 29, 1996, certified by the Trust's Secretary, approving
the Plan and the transactions contemplated thereby.
Our opinion in paragraph 1 below, as it relates to the valid
existence and good standing of the Trust, is based solely upon
the certificate of the Secretary of State of the Commonwealth of
Massachusetts referred to in (b) above and is limited
accordingly, and as to such matters our opinion is rendered as of
the date of such certificate.
Our opinion in paragraph 2 below, as it relates to the
nonassessability of the shares of the Fund, is qualified to the
extent that under Massachusetts law, shareholders of a
Massachusetts business trust may be held personally liable for
the obligations of the Trust. In this regard, however, please be
advised that the Trust Agreement disclaims shareholder liability
for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trust or the Trustees.
Also, the Trust Agreement provides for indemnification out of the
Trust's property for all loss and expense of any shareholder held
personally liable for the obligations of the Trust.
Insofar as our opinions relate to factual matters,
information with respect to which is in the possession of the
Trust, we have made inquiries to the extent we believe reasonable
with respect to such matter, and have relied upon representations
made to us by one or more officers of the Trust.
We express no opinion as to compliance with any state or
federal securities laws. For purposes of this opinion letter, we
have not made an independent review of the laws of any state or
jurisdiction other than the Commonwealth of Massachusetts and
express no opinion with respect to the laws of any jurisdiction
other than the laws of the Commonwealth of Massachusetts.
We understand that the foregoing assumptions, limitations
and qualifications are acceptable to you.
Based on, in reliance upon, and subject to the foregoing, we
are of the opinion that:
1. The Trust is a duly organized and validly existing
business trust in good standing under the laws of the
Commonwealth of Massachusetts.
2. The Shares when issued in accordance with the terms of
the Plan and the Trust's Registration Statement on Form N-14,
will be validly issued, fully paid and non-assessable by the
Trust.
We understand you will be delivering an opinion to the Trust
as to, among other things, the legality of the Shares, which
opinion will be fled as an exhibit to the Registration Statement.
This opinion letter is solely for your use in connection with the
delivery of your opinion to the Trust, and we consent to the
inclusion of this opinion with your opinion to the Trust, as an
exhibit to the Registration Statement.
This opinion may not be used for any other purpose or relied
upon by you or by other person or entity without our prior
written consent.
Very truly yours,
/s/Peabody & Brown
[DECHERT PRICE & RHOADS LETTERHEAD]
September 6, 1996
Ivy Fund
in respect of
Ivy Short-Term Bond Fund
Via Mizner Financial Plaza
700 South Federal Highway
Boca Raton, Florida 33432
The Tocqueville Trust
in respect of
The Tocqueville Government Fund
1675 Broadway
New York, New York 10018
Gentlemen:
You have requested our opinion regarding certain federal
income tax consequences to Ivy Short-Term Bond Fund ("Target"), a
separate series of Ivy Fund ("Ivy"), to the holders of the shares
of beneficial interest (the "shares") of Target (the "Target
shareholders"), and to The Tocqueville Government Fund
("Acquiring Fund"), a separate series of The Tocqueville Trust
("Tocqueville"), in connection with the proposed transfer of
substantially all of the assets of Target to Acquiring Fund in
exchange solely for voting shares of beneficial interest of
Acquiring Fund ("Acquiring Fund shares") and the assumption by
Acquiring Fund of certain liabilities of Target, followed by the
distribution of such Acquiring Fund shares received by Target in
complete liquidation, all pursuant to the Agreement and Plan of
Reorganization (the "Plan") dated as of September 6, 1996 (the
"Reorganization").
For purposes of this opinion, we have examined and rely upon
(1) the Plan, (2) the Form N-14, filed by Tocqueville on
September 6, 1996, with the Securities and Exchange Commission,
(3) the facts and representations contained in the letter dated
September 6, 1996, addressed to us from Ivy, (4) the facts and
representations contained in the letter dated September 6, 1996,
addressed to us from Tocqueville, and (5) such other documents
and instruments as we have deemed necessary or appropriate for
purposes of rendering this opinion.
This opinion is based upon the Internal Revenue Code of
1986, as amended (the "Code"), United States Treasury
regulations, judicial decisions and administrative rulings and
pronouncements of the Internal Revenue Service, all as in effect
on the date hereof. This opinion is conditioned upon (a) the
Reorganization taking place in the manner described in the Plan
and the Form N-14 referred to above, (b) the facts and
representations contained in the letters dated September 6, 1996,
addressed to us from Ivy and Tocqueville, respectively, being
true and accurate as of the closing date of the Reorganization,
and (c) there being no change in the Code, United States Treasury
regulations, judicial decisions, or administrative rulings and
pronouncements of the Internal Revenue Service between the date
hereof and the closing date of the Reorganization.
Based upon the foregoing, it is our opinion that:
(1) The acquisition by Acquiring Fund of substantially all
of the assets of Target in exchange solely for
Acquiring Fund shares and the assumption by Acquiring
Fund of certain liabilities of Target, followed by the
distribution of such Acquiring Fund shares to the
Target shareholders in exchange for their Target shares
in complete liquidation of Target, will constitute a
reorganization within the meaning of Section 368(a) of
the Code. Acquiring Fund and Target will each be "a
party to a reorganization" within the meaning of
Section 368(b) of the Code.
(2) No gain or loss will be recognized to Target upon the
transfer of substantially all of its assets to
Acquiring Fund in exchange solely for Acquiring Fund
shares and the assumption by Acquiring Fund of certain
liabilities of Target, or upon the distribution to the
Target shareholders of the Acquiring Fund shares.
(3) No gain or loss will be recognized by Acquiring Fund
upon the receipt of Target's assets in exchange for
Acquiring Fund shares.
(4) The basis of the assets of Target in the hands of
Acquiring Fund will be, in each instance, the same as
the basis of those assets in the hands of Target
immediately prior to the Reorganization exchange.
(5) The holding period of Target's assets in the hands of
Acquiring Fund will include the period during which the
assets were held by Target.
(6) No gain or loss will be recognized to the Target
shareholders upon the receipt of Acquiring Fund shares
solely in exchange for Target shares.
(7) The basis of the Acquiring Fund shares received by the
Target shareholders will be the same as the basis of
the Target shares surrendered in exchange therefor.
(8) The holding period of the Acquiring Fund shares
received by the Target shareholders will include the
holding period of the Target shares surrendered in
exchange therefor, provided that such Target shares
were held as capital assets in the hands of the Target
shareholders upon the date of the exchange.
We express no opinion as to the federal income tax
consequences of the Reorganization except as expressly set forth
above, or as to any transaction except those consummated in
accordance with the Plan.
This opinion must be confirmed by us in writing on the
closing date of the Reorganization or will be deemed to have been
withdrawn.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement on Form N-14 filed by
Tocqueville with the Securities and Exchange Commission.
Very truly yours,
/s/ Dechert Price & Rhoads
CONSENT OF INDEPENDENT ACCOUNTANTS
To The Shareholders and
Board of Trustees of
Ivy Short-Term Bond Fund (the Fund)
We consent to the inclusion in the Registration Statement of
Tocqueville Government Fund on Form N-14 of our report dated
February 16, 1996, on our audit of the financial statements and
financial highlights of Ivy Short-Term Bond Fund (a series of the
Ivy Fund) appearing in the December 31, 1995 Annual Report to
Shareholders of the Fund, which Annual Report is included in this
Form N-14 Registration Statement.
/s/ Coopers & Lybrand LLP
Fort Lauderdale, Florida
September 5, 1996
[McGLADREY & PULLEN, LLP LETTERHEAD]
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference of our
report dated December 1, 1995 on the financial statements of The
Tocqueville Government Fund series of The Tocqueville Trust,
referred to therein in the Registration Statement on Form N-14 as
filed with the Securities and Exchange Commission.
We also consent to the reference to our firm under the
caption "Financial Highlights for TGF."
/s/ McGladrey & Pullen, LLP
New York, New York
September 10, 1996
FORM OF PROXY
IVY SHORT-TERM BOND FUND
a Series of Ivy Fund
________________
PROXY SOLICITED BY THE TRUSTEES
The undersigned, having received Notice of the__________,
1996 Special Meeting of Shareholders of Ivy Short-Term Bond Fund
("ISTBF"), a series of shares of Ivy Fund, and the related Proxy
Statement, hereby appoints _______________, _____________, and
________________, and each of them as proxies, with full power of
substitution and revocation, to represent the undersigned and to
vote all shares of ISTBF which the undersigned is entitled to
vote at the special meeting of shareholders of ISTBF to be held
at 10:00 a.m., Eastern Time, at the offices of ISTBF, Via Mizner
Financial Plaza, 700 South Federal Highway, Boca Raton, Florida
33432 and any adjournments thereof:
UNLESS OTHERWISE SPECIFIED IN THE SPACES PROVIDED, THE
UNDERSIGNED'S VOTE WILL BE CAST FOR EACH NUMBERED ITEM LISTED
BELOW.
1. Approval of an Agreement and Plan of Reorganization (the
"Plan") providing for (a) the acquisition of substantially
all of the assets and the assumption of all identified and
stated liabilities of ISTBF as of the closing of the
reorganization by The Tocqueville Government Fund ("TGF"),
in exchange for shares of beneficial interest of TGF having
an aggregate net asset value equal to the aggregate value of
the assets acquired (less liabilities assumed) of ISTBF and
(b) the complete liquidation of ISTBF and the pro rata
distribution of TGF shares to shareholders of ISTBF. Under
the Plan, ISTBF's shareholders will receive Class A shares
of TGF having a net asset value equal as of the effective
time of the Plan to the net asset value of their Class A and
Class B shares of ISTBF as described in the accompanying
Proxy Statement/Prospectus.
FOR AGAINST ABSTAIN
2. In the discretion of the proxies, on any other matters that
may properly come before the meeting and any adjournment or
adjournments thereof.
YOUR PROMPT ATTENTION WILL BE APPRECIATED. PLEASE DATE, SIGN
AND RETURN IN THE ENVELOPE PROVIDED. NO POSTAGE REQUIRED WHEN
MAILED IN THE UNITED STATES. IF YOU PREFER TO USE OUR
TELEPHONE VOTING SERVICE TO RECORD YOUR VOTE IMMEDIATELY,
SIMPLY CALL 1-800-XXX-XXXX AND FOLLOW INSTRUCTIONS.
Number of Shares:
(Name of Record holder) Account Number _____
By: _______________________ DATED: ____________________,
1995
By: _______________________ DATED: ____________________,
1995
(If held jointly)
Please sign this proxy exactly as your name appears on the books
of the fund. Joint owners should each sign personally. Trustees
and other fiduciaries should indicate the capacity in which they
sign, and where more than one name appears, a majority must sign.
If a corporation, the signature should be that of an authorized
officer who should state his or her title.
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be
of assistance to you and may help avoid the time and expense
involved in validating your vote if you fail to sign your proxy
card properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in
the registration on the proxy card.
2. JOINT ACCOUNTS: Either party may sign, but the name of the
party signing should conform exactly to a name shown in the
registration.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing
the proxy card should be indicated unless it is reflected in
the form of registration. For example:
REGISTRATION VALID SIGNATURE
Corporate Accounts:
(1) ABC Corp. John Doe, Treasurer
(2) ABC Corp., c/o John Doe John Doe, Treasurer
(3) ABC Corp. Profit Sharing Plan John Doe,
Trustee
Trust Accounts:
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee u/t/d 12/28/78 Jane B.
Doe,
Trustee
Custodial or Estate Accounts:
(1) John B. Smith, Cust. f/b/o
John B. Smith, Jr., UGMA John B. Smith
(2) John B. Smith John B. Smith, Jr.,
Executor
<PAGE>
April 30, 1996
Ivy
Short-Term
Bond Fund
----------
Prospectus
----------
Ivy Management, Inc.
Via Mizner Financial
Plaza
700 South Federal Hwy.
Boca Raton, FL 33432
1-800-456-5111
Ivy Fund (the "Trust") is a registered investment company
currently consisting
of thirteen separate portfolios. One portfolio of the Trust, Ivy
Short-Term
Bond Fund (the "Fund"), is described in this Prospectus.
This Prospectus sets forth concisely the information about the
Fund that a
prospective investor should know before investing. Please read it
carefully and
retain it for future reference. Additional information about the
Fund is
contained in the Statement of Additional Information for the Fund
dated April
30, 1996 (the "SAI"), which has been filed with the Securities
and Exchange
Commission ("SEC") and is incorporated by reference into this
Prospectus. The
SAI is available upon request and without charge from the Trust
at the
Distributor's address and telephone number below. Investments in
the Fund are
neither insured nor guaranteed by the U.S. Government or any
governmental
agency.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Expense Information . . . . . . . . . . . . . . . . . 2
The Fund's Financial Highlights . . . . . . . . . . . 3
Investment Objectives and Policies . . . . . . . . . 4
Risk Factors and Investment Techniques . . . . . . . 5
Organization and Management of the Fund . . . . . . . 8
Fund Administration and Accounting . . . . . . . . . 8
Transfer Agent . . . . . . . . . . . . . . . . . . . 9
Alternative Purchase Arrangements . . . . . . . . . . 9
Dividends and Taxes . . . . . . . . . . . . . . . . . 9
Performance Data . . . . . . . . . . . . . . . . . . 10
How to Buy Shares . . . . . . . . . . . . . . . . . . 10
How Your Purchase Price is Determined . . . . . . . . 11
How the Fund Values Its Shares . . . . . . . . . . . 11
Initial Sales Charge Alternative - Class A Shares . . 11
Contingent Deferred Sales Charge - Class A Shares . . 12
Qualifying for a Reduced Sales Charge . . . . . . . . 12
Contingent Deferred Sales Charge Alternative -
Class B Shares . . . . . . . . . . . . . . . . . . 13
How to Redeem Shares . . . . . . . . . . . . . . . . 14
Check Writing . . . . . . . . . . . . . . . . . . . . 15
Minimum Account Balance Requirements . . . . . . . . 15
Signature Guarantees . . . . . . . . . . . . . . . . 15
Choosing a Distribution Option . . . . . . . . . . . 15
Tax Identification Number . . . . . . . . . . . . . . 16
Certificates . . . . . . . . . . . . . . . . . . . . 16
Exchange Privilege . . . . . . . . . . . . . . . . . 16
Reinvestment Privilege . . . . . . . . . . . . . . . 17
Systematic Withdrawal Plan . . . . . . . . . . . . . 17
Automatic Investment Method . . . . . . . . . . . . . 17
Consolidated Account Statements . . . . . . . . . . . 17
Retirement Plans . . . . . . . . . . . . . . . . . . 17
Shareholder Inquiries . . . . . . . . . . . . . . . . 18
</TABLE>
<TABLE>
<S> <C>
<C> <C>
BOARD OF TRUSTEES OFFICERS
TRANSFER AGENT INVESTMENT
John S. Anderegg, Jr. Michael G. Landry, President
Ivy Mackenzie MANAGER
Paul H. Broyhill Keith J. Carlson, Vice President
Services Corp. Ivy Management, Inc.
Stanley Channick C. William Ferris,
P.O. Box 3022 Boca Raton, FL
Frank W. DeFriece, Jr. Secretary/Treasurer
Boca Raton, FL
Roy J. Glauber Michael R. Peers, Chairman
33431-0922 DISTRIBUTOR;
Michael G. Landry
1-800-777-6472 Ivy Mackenzie
Michael R. Peers LEGAL COUNSEL
Distributors, Inc.
Joseph G. Rosenthal Dechert Price & Rhoads
AUDITORS Via Mizner Financial Plaza
Richard N. Silverman Boston, MA
Coopers & Lybrand L.L.P. 700 South Federal Highway
J. Brendan Swan
Ft. Lauderdale, FL Boca Raton, FL 33432
CUSTODIAN;
1-800-456-5111
Brown Brothers Harriman & Co.
Boston, MA
</TABLE>
THROUGHOUT THE
CENTURIES,
THE CASTLE KEEP HAS
BEEN A SOURCE
OF LONG-RANGE VISION
AND STRATEGIC
ADVANTAGE.
<PAGE>
EXPENSE INFORMATION
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS I
------- ------- -------
<S> <C>
<C> <C>
Maximum sales load imposed on purchases (as a percentage of
offering price at time of purchase).......................
3.00%* None None
Maximum contingent deferred sales charge (as a percentage
of original purchase price)...............................
None** 3.00%*** None
The Fund has no sales load on reinvested dividends, no
redemption fees and no exchange fees.
</TABLE>
* Class A Shares of the Fund may be purchased under a variety
of plans that
provide for the reduction or elimination of the sales charge.
** A contingent deferred sales charge may apply to the
redemption of Class A
shares that are purchased without an initial sales charge.
See "Purchases of
Class A Shares at Net Asset Value" and "Contingent Deferred
Sales
Charge -- Class A Shares."
*** The maximum contingent deferred sales charge on Class B
shares applies to
redemptions during the first year after purchase. The charge
declines to
2 1/2% during the second year; 2% during the third year; 1
1/2% during the
fourth year; 1% during the fifth year; and 0% in the sixth
year and
thereafter.
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS)
<TABLE>
<CAPTION>
CLASS A
CLASS B CLASS I
-------
------- -------
<S> <C>
<C> <C>
Management Fees After Expense Reimbursements(1)..... 0.00%
0.00% 0.00%
12b-1 Service/Distribution Fees..................... 0.25%
0.75%(2) 0.00%
Other Expenses...................................... 0.68%
0.68% 0.59%(3)
--
-- --
Total Fund Operating Expenses After Expense
Reimbursements(4).................................. 0.93%
1.43% 0.59%
=======
======= ======
</TABLE>
(1) Management Fees reflect expense reimbursements (see note (4)
below). Without
expense reimbursements, Management Fees for all classes would
have been
0.60%.
(2) Long-term investors may, as a result of the Fund's 12b-1
fees, pay more than
the economic equivalent of the maximum front-end sales charge
permitted by
the Rules of Fair Practice of the National Association of
Securities
Dealers, Inc.
(3) The "Other Expenses" of Class I of the Fund are lower than
such expenses for
the Fund's other classes because Class I shares bear lower
shareholder
services fees than Class A and Class B shares.
(4) The voluntary portion of the Fund's expense reimbursement may
be terminated
or revised at any time, at which time the Fund's expenses
would increase.
Total Fund Operating Expenses for all classes (excluding
12b-1 fees) without
expense reimbursement would have been 3.02%.
EXAMPLE
CLASS A AND CLASS I SHARES*
You would pay the following expenses on a $1,000 investment
in the Fund,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YEAR 3
YEARS 5 YEARS 10 YEARS
------
------- ------- --------
<S> <C> <C>
<C> <C>
Class A(1)................................... $ 39 $59
$80 $141
Class I(2)................................... $ 7 $22
$38 $ 85
</TABLE>
* Net of expense reimbursements. See Note (4) in the Annual
Fund Operating
Expense Table above.
(1) Assumes deduction of the maximum 3% initial sales charge at
the time of
purchase and no deduction of a contingent deferred sales
charge at the time
of redemption.
(2) Class I shares are not subject to initial sales charges at
the time of
purchase, nor are they subject to the deduction of a
contingent deferred
sales charge at the time of redemption.
EXAMPLE (1 OF 2)
CLASS B SHARES*
You would pay the following expenses on a $1,000 investment
in the Fund,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
<TABLE>
<CAPTION>
1 YEAR(1) 3 YEARS(2) 5 YEARS(3) 10 YEARS(4)
--------- ---------- ---------- -----------
<S> <C> <C> <C>
$45 $ 65 $ 88 $ 158
</TABLE>
EXAMPLE (2 OF 2)
CLASS B SHARES*
You would pay the following expenses on a $1,000 investment
in the Fund,
assuming (1) 5% annual return and (2) no redemption:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS(4)
------ ------- ------- -----------
<S> <C> <C> <C>
$ 15 $45 $78 $ 158
</TABLE>
* Net of expense reimbursements.
(1) Assumes deduction of a 3% contingent deferred sales charge at
the time of
redemption.
(2) Assumes deduction of a 2% contingent deferred sales charge at
the time of
redemption.
(3) Assumes deduction of a 1% contingent deferred sales charge at
the time of
redemption.
(4) Ten-year figures assume conversion of Class B shares to Class
A shares at
the end of the eighth year and, therefore, reflect Class A
expenses for
years nine and ten.
The purpose of the foregoing tables is to provide an investor
with an
understanding of the various costs and expenses that an investor
in the Fund
will bear, directly or indirectly. The Examples assume
reinvestment of all
dividends and distributions and that the percentage amounts under
"Total Fund
Operating Expenses After Expense Reimbursement" remain the same
each year. The
assumed annual return of 5% is required by applicable law to be
applied by all
investment companies and is used for illustrative purposes only.
This assumption
is not a projection of future performance. The actual expenses
for the Fund may
be higher or lower than the estimates given.
Except as set forth below, the percentages expressing annual
fund operating
expenses are based on amounts incurred by the Fund during the
year ended
December 31, 1995. The management fees for the Fund have been
adjusted to
reflect the expected level of expense reimbursement for the
current fiscal year.
The information in the table does not reflect the charge of
$10.00 per
transaction if a shareholder makes a request to have redemption
proceeds wired
to his or her bank account. For a more detailed discussion of the
Fund's fees
and expenses, see the following sections of the Prospectus:
"Organization and
Management of the Fund," "Initial Sales Charge Alternative --
Class A Shares,"
"Contingent Deferred Sales Charge Alternative -- Class B Shares,"
and "How to
Buy Shares," and the following section of the SAI: "Investment
Advisory and
Other Services."
2
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
The Fund results from a reorganization of Mackenzie
Short-Term U.S.
Government Securities Fund (formerly Mackenzie Adjustable U.S.
Government
Securities Trust), a series of The Mackenzie Funds Inc., which
reorganization
was approved by shareholders in December, 1994. From commencement
of operations
until September 20, 1994 (during which time the Fund was known as
Mackenzie
Adjustable U.S. Government Securities Trust) the Fund had an
investment
objective of seeking a high level of current income, consistent
with lower
volatility of principal. From September 20, 1994 until December
31, 1994 the
Fund was known as Mackenzie Short-Term U.S. Government Securities
Fund (d/b/a
Ivy Short-Term U.S. Government Securities Fund), with the same
investment
objective as that described in this Prospectus and the SAI.
The following information through December 31, 1995 relating
to the Fund,
operating prior to the reorganization of Mackenzie Short-Term
U.S. Government
Securities Fund (d/b/a Ivy Short-Term U.S. Government Securities
Fund) into Ivy
Short-Term U.S. Government Securities Fund, has been audited by
Coopers &
Lybrand L.L.P., independent accountants. The report of Coopers &
Lybrand L.L.P.
on the Fund's financial statements appears in the Fund's Annual
Report dated
December 31, 1995 which is incorporated by reference into the
Fund's SAI. The
Annual Report contains further information about and management's
discussion of
the Fund's performance, and is available to shareholders upon
request and
without charge. The information presented below should be read in
conjunction
with the financial statements and notes thereto.
Expense and income ratios and portfolio turnover rates have
been annualized
for periods of less than one year. Total returns do not reflect
sales charges,
and are not annualized for periods of less than one year.
Prior to December 31, 1994, Mackenzie Investment Management
Inc. ("MIMI"),
of which IMI is a wholly owned subsidiary, served as investment
adviser to the
Fund.
<TABLE>
<CAPTION>
CLASS A
-------------------------------
FOR THE FOR THE SIX
YEAR ENDED MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------ ------------
SELECTED PER SHARE DATA
1995 1994
------------ ------------
<S>
<C> <C>
Net asset value, beginning of
period.................................................... $
9.49 $ 9.71
----- -----
Income from investment operations:
Net investment
income(a)........................................................
....... .54 .23
Net loss on investments (both realized and
unrealized)................................. (.02)
(.22)
----- -----
Total from investment
operations..................................................
.52 .01
----- -----
Less distributions:
From net investment
income...........................................................
.. .54 .23
From capital
paid-in..........................................................
......... -- --
----- -----
Total
distributions....................................................
........... .54 .23
----- -----
Capital contributed by
manager.........................................................
.26 --
----- -----
Net asset value, end of
period..........................................................
$ 9.73 $ 9.49
============ ============
Total
return(%)........................................................
................. 8.56(c) .03
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................................................
$6,027 $8,572
Ratio of total expenses to average net assets:
With expense reimbursement and fees paid
indirectly(%)................................. .93
1.38
Without expense reimbursement and fees paid
indirectly(%).............................. 3.27
2.80
Ratio of net investment income to average net
assets(%)(a).............................. 5.53
4.65
Portfolio turnover
rate(%)..........................................................
.... 54 143
<CAPTION>
CLASS A
---------------------------------------
FOR THE YEAR ENDED JUNE 30,
---------------------------------------
SELECTED PER SHARE DATA
1994 1993 1992
------- ------- -------
<S>
<C>
Net asset value, beginning of
period.................................................... $
9.92 $ 9.96 $ 9.97
------- ------- -------
Income from investment operations:
Net investment
income(a)........................................................
....... .36 .46 .66
Net loss on investments (both realized and
unrealized)................................. (.21)
(.04) --
------- ------- -------
Total from investment
operations..................................................
.15 .42 .66
------- ------- -------
Less distributions:
From net investment
income...........................................................
.. .36 .46 .66
From capital
paid-in..........................................................
......... -- -- --
------- ------- -------
Total
distributions....................................................
........... .36 .46 .67
------- ------- -------
Capital contributed by
manager.........................................................
-- -- --
Net asset value, end of
period..........................................................
$ 9.71 $ 9.92 $ 9.96
======= ======= =======
Total
return(%)........................................................
................. 1.57 4.33 6.80
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................................................
$12,267 $44,375 $25,259
Ratio of total expenses to average net assets:
With expense reimbursement and fees paid
indirectly(%)................................. .92
.82 .86
Without expense reimbursement and fees paid
indirectly(%).............................. 1.52
1.45 1.30
Ratio of net investment income to average net
assets(%)(a).............................. 3.73
4.54 6.43
Portfolio turnover
rate(%)..........................................................
.... 37 69 106
<CAPTION>
CLASS A
-------------------------------
FOR THE YEAR ENDED JUNE 30,
-------------------------------
SELECTED PER SHARE DATA
1991(B)
-------
Net asset value, beginning of
period....................................................
$10.00
-------
Income from investment operations:
Net investment
income(a)........................................................
....... .16
Net loss on investments (both realized and
unrealized)................................. (.03)
-------
Total from investment
operations..................................................
.13
-------
Less distributions:
From net investment
income...........................................................
.. .16
From capital
paid-in..........................................................
......... --
-------
Total
distributions....................................................
........... .16
-------
Capital contributed by
manager.........................................................
--
-------
Net asset value, end of
period..........................................................
$ 9.97
=======
Total
return(%)........................................................
................. 6.65
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands)................................................
$13,708
Ratio of total expenses to average net assets:
With expense reimbursement and fees paid
indirectly(%)................................. .25
Without expense reimbursement and fees paid
indirectly(%).............................. 3.00
Ratio of net investment income to average net
assets(%)(a).............................. 8.70
Portfolio turnover
rate(%)..........................................................
.... 7
</TABLE>
---------------
<TABLE>
<S> <C>
(a) Net investment income is net of expenses reimbursed by
the Fund's Manager.
(b) April 18, 1991 (commencement) to June 30, 1991.
(c) Without a capital contribution by the Manager, total
return would have been 5.82%.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
CLASS B
-----------------
JANUARY 12, 1995
(COMMENCEMENT) TO
DECEMBER 31,
1995
-----------------
<S>
<C>
Net asset value, beginning of
period...........................................................
.......... $9.44
---
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ .49
Net income (loss) on investments (both realized and
unrealized)......................................... .03
---
Total from investment
operations.......................................................
............ .52
---
Less distributions:
From net investment
income...........................................................
................... .49
---
Capital contributed by
manager..........................................................
................ .26
---
Net asset value, end of
period...........................................................
................ $9.73
===================
Total
return(%)........................................................
.................................. 8.53(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ 27
Ratio of total expenses to average net assets:
With expense
reimbursement(%).................................................
.......................... 1.43
Without expense
reimbursement(%).................................................
....................... 3.77
Ratio of net investment income to average net
assets(%)(a)...............................................
5.03
Portfolio turnover
rate(%)..........................................................
..................... 54
<CAPTION>
CLASS I
------------
FOR THE YEAR
ENDED
DECEMBER 31,
1995*
------------
<S>
<C>
Net asset value, beginning of
period...........................................................
.......... $ --
---
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ --
Net income (loss) on investments (both realized and
unrealized)......................................... --
---
Total from investment
operations.......................................................
............ --
---
Less distributions:
From net investment
income...........................................................
................... --
---
Capital contributed by
manager..........................................................
................ --
---
Net asset value, end of
period...........................................................
................ $ --
============
Total
return(%)........................................................
.................................. --
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ --
Ratio of total expenses to average net assets:
With expense
reimbursement(%).................................................
.......................... --
Without expense
reimbursement(%).................................................
....................... --
Ratio of net investment income to average net
assets(%)(a)...............................................
--
Portfolio turnover
rate(%)..........................................................
..................... --
<CAPTION>
CLASS I
------------
FOR THE SIX
MONTHS ENDED
DECEMBER 31,
1994
------------
Net asset value, beginning of
period...........................................................
.......... $ 9.71
---
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ .14
Net income (loss) on investments (both realized and
unrealized)......................................... (.22)
---
Total from investment
operations.......................................................
............ (.08)
---
Less distributions:
From net investment
income...........................................................
................... .14
---
Capital contributed by
manager..........................................................
................ --
---
Net asset value, end of
period...........................................................
................ $ 9.49
============
Total
return(%)........................................................
.................................. (.99)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ --
Ratio of total expenses to average net assets:
With expense
reimbursement(%).................................................
.......................... 1.13
Without expense
reimbursement(%).................................................
....................... 2.55
Ratio of net investment income to average net
assets(%)(a)...............................................
4.90
Portfolio turnover
rate(%)..........................................................
..................... 143
<CAPTION>
CLASS I
-----------------
FOR THE PERIOD
JULY 3, 1993
(COMMENCEMENT) TO
JUNE 30,
1994
-----------------
Net asset value, beginning of
period...........................................................
.......... $ 9.92
-----
Income (loss) from investment operations:
Net investment
income(a)........................................................
........................ .39
Net income (loss) on investments (both realized and
unrealized).........................................
(.21)
-----
Total from investment
operations.......................................................
............ .18
-----
Less distributions:
From net investment
income...........................................................
................... .39
-----
Capital contributed by
manager..........................................................
................ --
-----
Net asset value, end of
period...........................................................
................ $ 9.71
===================
Total
return(%)........................................................
.................................. 1.77
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in
thousands).......................................................
.......... $ 1,495
Ratio of total expenses to average net assets:
With expense
reimbursement(%).................................................
.......................... .67
Without expense
reimbursement(%).................................................
....................... 1.27
Ratio of net investment income to average net
assets(%)(a)...............................................
3.98
Portfolio turnover
rate(%)..........................................................
..................... 37
</TABLE>
---------------
<TABLE>
<S> <C>
*
(a)
(b)
<CAPTION>
* There were no Class I shares outstanding during the
period.
<S> <C>
(a) Net investment income is net of expenses reimbursed by
the Fund's Manager.
(b) Without a capital contribution by the Manager, total
return would have been 5.78%.
</TABLE>
INVESTMENT OBJECTIVES AND POLICIES
The Fund is a diversified company which offers investors a
convenient way to
invest in a managed portfolio of government debt securities. The
Fund seeks a
high level of current income consistent with a high degree of
principal
stability. The Fund pursues this objective by investing primarily
(at least 65%
of its total assets) in short-term U.S. Government securities,
including bonds,
notes and bills issued by the U.S. Treasury, and securities
issued by agencies
or instrumentalities of the U.S. Government.
Although the Fund may purchase individual securities with a
greater
maturity, the dollar-weighted average maturity of the Fund's
portfolio may not
exceed three years. In addition, whenever in IMI's judgment
abnormal market or
economic conditions warrant, the Fund may, for temporary
defensive purposes,
invest without limit in short-term U.S. Government Securities
(maturing in 13
months or less), certificates of deposit, banker's acceptances,
repurchase
agreements and commercial paper rated Prime-A by Moody's
Investors Services,
Inc. ("Moody's") or A-1 by S&P, or, if not rated by Moody's or
S&P, issued by
companies having an outstanding debt issue currently rated Aa or
better by
Moody's or AA or better by S&P.
The Fund may invest up to 20% of its net assets in debt
securities of
foreign issuers meeting the credit quality standards described
above, including
non-U.S. dollar-denominated debt securities, American Depository
Receipts
("ADRs"), Eurodollar securities, and debt securities issued,
assumed or
guaranteed by foreign governments or political subdivisions or
instrumentalities
thereof. The Fund may also enter into forward foreign currency
contracts to
protect against the uncertainty in the level of future foreign
exchange rates,
but not for speculative purposes.
The Fund may invest up to 5% of its net assets in dividend
paying common
stocks (including adjustable rate preferred stocks); zero coupon
bonds in
accordance with the Fund's credit quality standards; and
securities sold on a
"when-issued" or firm-commitment basis. The Fund may lend its
portfolio
securities to increase current income, and borrow from banks as a
temporary
measure for emergency purposes. The Fund may also invest in
mortgage-related
securities, including mortgage pass-through securities (such as
adjustable rate
mortgage securities, or "ARMs") and collateralized mortgage
obligations (CMOs).
The Fund may invest up to 35% of its assets in corporate debt
securities
rated Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P at
the time of
purchase. The Fund may invest less than 35% of its net assets in
corporate debt
securities considered medium or lower grade (commonly referred to
as "high
yield" or "junk" bonds). The Fund will not invest in corporate
debt securities
that, at the time of investment, are rated less than C by either
Moody's or S&P.
During the twelve months ended December 31, 1995, based upon
the
dollar-weighted average ratings of the Fund's portfolio holdings
at the end of
each month during such period, the Fund had the following
percentages of its
total assets invested in securities rated in the categories
indicated (all
ratings are by either S&P or Moody's, whichever rating is
higher): 75.1% in
securities rated AAA/Aaa; 0% in securities rated AA/Aa; 0% in
securities rated
A/A; 0% in securities rated BBB/Baa; 7.3% in securities rated
BB/Ba; 11.4% in
securities rated B/B; and 0% in securities which were unrated.
These figures are
intended solely to provide disclosure about the Fund's asset
composition during
the period specified above. The asset composition after this time
may or may not
be approximately the same as represented by such figures.
The Fund can use various techniques to increase or decrease
its exposure to
changing security prices, interest rates, currency exchange
rates, commodity
prices, or other factors that affect security values. These
techniques may
involve derivative transactions such as selling call options and
purchasing put
and call options on U.S. government securities, interest rate
futures, foreign
currency futures and foreign currencies that are traded on an
exchange or board
of trade. IMI can use these practices to adjust the risk and
return
characteristics of the Fund's portfolio of investments. If IMI
judges market
conditions incorrectly or employs a strategy that does not
correlate well with
the Fund's investments, these techniques could result in a loss.
These
techniques may increase the
4
<PAGE>
volatility of the Fund and may involve a small investment of cash
relative to
the magnitude of the risk assumed. In addition, these techniques
could result in
a loss if the counterparty to the transaction does not perform as
promised. The
Fund may only engage in transactions in interest rate futures,
currency rate
futures and options on interest rate futures and currency futures
contracts for
hedging purposes.
The Fund's investment objectives are fundamental and may not
be changed
without the approval of a majority of the outstanding voting
shares of the Fund.
The Trustees may make non-material changes in the Fund's
objectives without
shareholder approval. Except for the Fund's investment objective
and those
investment restrictions specifically identified as fundamental,
all investment
policies and practices described in this Prospectus and in the
SAI are
non-fundamental and, therefore, may be changed by the Trustees
without
shareholder approval. There can be no assurance that the Fund's
objectives will
be met. The different types of securities and investment
techniques used by the
Fund involve varying degrees of risk. For information about the
particular risks
associated with each type of investment, see "Risk Factors and
Investment
Techniques," below, and the SAI.
Whenever an investment objective, policy or restriction of
the Fund
described in this Prospectus or in the SAI states a maximum
percentage of assets
that may be invested in a security or other asset or describes a
policy
regarding quality standards, that percentage limitation or
standard will, unless
otherwise indicated, apply to the Fund only at the time a
transaction takes
place. Thus, for example, if a percentage limitation is adhered
to at the time
of investment, a later increase or decrease in the percentage
that results from
circumstances not involving any affirmative action by the Fund
will not be
considered a violation.
RISK FACTORS AND INVESTMENT TECHNIQUES
The following discussion describes in greater detail the
different types of
securities and investment techniques used by the Fund, as well as
the risks
associated with such securities and techniques.
DEBT SECURITIES, IN GENERAL: Investment in debt securities
involves both
interest rate and credit risk. Generally, the value of debt
instruments rises
and falls inversely with interest rates. As interest rates
decline, the value of
debt securities generally increases. Conversely, rising interest
rates tend to
cause the value of debt securities to decrease. Bonds with longer
maturities
generally are more volatile than bonds with shorter maturities.
The market value
of debt securities also varies according to the relative
financial condition of
the issuer. In general, lower-quality bonds offer higher yields
due to the
increased risk that the issuer will be unable to meet its
obligations on
interest or principal payments at the time called for by the debt
instrument.
The Fund may invest up to 35% of its assets in corporate debt
securities rated
Aaa, Aa, A or Baa by Moody's or AAA, AA, A or BBB by S&P at the
time of
purchase.
U.S. GOVERNMENT SECURITIES: U.S. Government securities are
obligations of,
or guaranteed by, the U.S. Government, its agencies or
instrumentalities. Such
securities include: (1) direct obligations of the U.S. Treasury
(such as
Treasury bills, notes, and bonds) and (2) Federal agency
obligations guaranteed
as to principal and interest by the U.S. Treasury (such as GNMA
certificates,
which are mortgage-backed securities). When such securities are
held to
maturity, the payment of principal and interest is
unconditionally guaranteed by
the U.S. Government, and thus they are of the highest possible
credit quality.
U.S. Government securities that are not held to maturity are
subject to
variations in market value caused by fluctuations in interest
rates.
Mortgage-backed securities are securities representing part
ownership of a
pool of mortgage loans. Although the mortgage loans in the pool
will have
maturities of up to 30 years, the actual average life of the
loans typically
will be substantially less because the mortgages will be subject
to principal
amortization and may be prepaid prior to maturity. In periods of
falling
interest rates, the rate of prepayment tends to increase, thereby
shortening the
actual average life of the security. Conversely, rising interest
rates tend to
decrease the rate of prepayment, thereby lengthening the
security's actual
average life. Since it is not possible to predict accurately the
average life of
a particular pool, and because prepayments are reinvested at
current rates, the
market value of mortgage-backed securities may decline during
periods of
declining interest rates.
INVESTMENT-GRADE DEBT SECURITIES: Bonds rated Aaa by Moody's
and AAA by S&P
are judged to be of the best quality (i.e., capacity to pay
interest and repay
principal is extremely strong). Bonds rated Aa/AA are considered
to be of high
quality (i.e., capacity to pay interest and repay interest is
very strong and
differs from the highest rated issues only to a small degree).
Bonds rated A are
viewed as having many favorable investment attributes, but
elements may be
present that suggest a susceptibility to the adverse effects of
changes in
circumstances and economic conditions than debt in higher rated
categories.
Bonds rated Baa/BBB (considered by Moody's to be "medium grade"
obligations) are
considered to have an adequate capacity to pay interest and repay
principal, but
certain protective elements may be lacking (i.e., such bonds lack
outstanding
investment characteristics and have some speculative
characteristics).
LOW-RATED DEBT SECURITIES: Securities rated lower than Baa
or BBB (and
comparable unrated securities), commonly referred to as "high
yield" or "junk"
bonds, are considered by major credit-rating organizations to
have predominately
speculative characteristics with respect to the issuer's capacity
to pay
interest and repay principal. While such debt securities are
likely to have some
quality and protective characteristics, these are largely
outweighed by the risk
of exposure to adverse conditions and other uncertainties.
Accordingly,
investments in such securities, while generally providing for
greater income and
potential opportunity for gain than investments in higher-rated
securities, also
entail greater risk (including the possibility of default or
bankruptcy of the
issuer of such securities) and generally involve greater price
volatility than
securities in higher rating categories. Investors in the Fund
should be willing
to accept the risks associated with high-yield securities. IMI
seeks to reduce
risk through diversification (including investments in foreign
securities),
credit analysis and attention to current developments and trends
in both the
economy and financial markets.
Should the rating of a portfolio security be downgraded, IMI
will determine
whether it is in the Fund's best interest to retain or dispose of
the security.
However, should any individual bond held by the Fund be
downgraded below the
rating of C, IMI currently intends to dispose of it based on then
existing
market conditions. See Appendix A to the SAI for a more complete
description of
the ratings assigned by Moody's and S&P.
MORTGAGE-RELATED SECURITIES: The market value of mortgage
securities, like
that of U.S. Government securities, will generally vary inversely
with changes
in market interest rates, declining when interest rates rise and
rising when
interest rates decline. However, mortgage securities, while
having less risk of
a decline during periods of rapidly rising interest rates, may
also have less
potential for capital appreciation than other investments of
comparable
maturities due to the likelihood of increased prepayments of
mortgages as
interest rates decline and the possibility of a lower rate of
return upon
reinvestment. In addition, to the extent mortgage securities are
purchased at a
premium,
5
<PAGE>
mortgage foreclosures and unscheduled principal repayments may
result in some
loss of the holders' principal investment to the extent of
premium paid. On the
other hand, if mortgage securities are purchased at a discount,
both a scheduled
payment of principal and an unscheduled prepayment of principal
will increase
current and total returns and will accelerate the recognition of
income which
when distributed to shareholders will be taxable as ordinary
income.
Mortgage pass-through securities are securities representing
interests in
"pools" of mortgage loans secured by residential or commercial
real property in
which payments of both interest and principal on the securities
are generally
made monthly, in effect "passing through" monthly payments made
by the
individual borrowers on the mortgage loans which underlie the
securities (net of
fees paid to the issuer or guarantor of the securities).
ARMs are pass-through mortgage securities which are
collateralized by
mortgages with adjustable rather than fixed interest rates. The
ARMs in which
the Fund invests are issued primarily by GNMA, FNMA and FHLMC and
are actively
traded in the secondary market. The Fund will not benefit from
increases in
interest rates to the extent that interest rates rise to the
point where they
cause the current coupon of adjustable rate mortgages held as
investments to
exceed the maximum allowable annual or lifetime reset limits (or
"cap rates")
for a particular mortgage. Also, the Fund's net asset value could
vary to the
extent that current yields on mortgage securities are different
than market
yields during interim periods between coupon reset dates.
Payment of principal and interest on some mortgage
pass-through securities
(but not the market value of the securities themselves) may be
guaranteed by the
full faith and credit of the U.S. Government (in the case of
securities
guaranteed by GNMA); or guaranteed by agencies or
instrumentalities of the U.S.
Government (in the case of securities guaranteed by FNMA or the
Federal Home
Loan Mortgage Corporation ("FHLMC"), which are supported only by
the
discretionary authority of the U.S. Government to purchase the
agency's
obligations). Mortgage-related securities created by
non-governmental issuers
(such as commercial banks, savings and loan institutions, private
mortgage
insurance companies, mortgage bankers and other secondary market
issuers) may be
supported by various forms of insurance or guarantees, including
individual
loan, title, pool and hazard insurance and letters of credit,
which may be
issued by governmental entities, private insurers or the mortgage
poolers.
CMOs are bonds issued by single-purpose, stand-alone finance
subsidiaries or
trusts of financial institutions, government agencies, investment
bankers or
other similar institutions. CMOs purchased by the Fund may be:
(1)
collateralized by pools of mortgages in which each mortgage is
guaranteed as to
payment of principal and interest by an agency or instrumentality
of the U.S.
Government; (2) collateralized by pools of mortgages in which
payment of
principal and interest are guaranteed by the issuer and the
guarantee is
collateralized by U.S. Government securities; or (3) securities
in which the
proceeds of the issuance are invested in mortgage securities and
payment of the
principal and interest are supported by the credit of an agency
or
instrumentality of the U.S. Government. All CMOs purchased by the
Fund will be
either issued by a U.S. Government agency or rated AAA by S&P or
Aaa by Moody's.
BANKING INDUSTRY AND SAVING AND LOAN OBLIGATIONS: The bank
obligations in
which the Fund may invest include certificates of deposit,
bankers' acceptances,
and other short-term debt obligations. Investments in
certificates of deposit
and bankers' acceptances are limited to obligations of (i) banks
having total
assets in excess of $1 billion, and (ii) other banks if the
principal amount of
such obligation is fully insured by the Federal Deposit Insurance
Corporation
("FDIC"). Investments in certificates of deposit of savings
associations are
limited to obligations of federally or state-chartered
institutions that have
total assets in excess of $1 billion and whose deposits are
insured by the FDIC.
COMMERCIAL PAPER: Commercial paper represents short-term
unsecured
promissory notes issued in bearer form by bank holding companies,
corporations,
and finance companies. Investments in commercial paper are
limited to
obligations rated Prime-1 by companies having an outstanding debt
issue
currently rated Aaa or Aa by Moody's or AAA or AA by S&P.
FOREIGN SECURITIES: The foreign securities in which the Fund
may invest
include non-U.S. dollar-denominated debt securities, Eurodollar
securities, and
debt securities issued, assumed or guaranteed by foreign
governments or
political subdivisions or instrumentalities thereof. The Fund may
also purchase
sponsored or unsponsored ADRs. Eurodollar securities are
securities that are
issued offshore and which pay interest and principal in U.S.
dollars. ADRs are
dollar-denominated receipts issued generally by U.S. banks and
which represent a
deposit with the bank of a foreign company's securities.
Unsponsored ADRs differ
from sponsored ADRs in that the establishment of unsponsored ADRs
is not
approved by the issuer of the underlying foreign securities.
Ownership of
unsponsored ADRs may not entitle the Fund to financial or other
reports of the
issuer, to which it would be entitled as the owner of sponsored
ADRs. ADRs are
publicly traded on exchanges or over the counter in the United
States. See the
Fund's SAI. Investors should consider carefully the substantial
risks involved
in investing in securities issued by companies and governments of
foreign
nations, which are in addition to the usual risks inherent in
domestic
investments.
The Fund may invest in debt securities issued by governments,
government-related entities and corporations in foreign countries
with emerging
or developing economies ("emerging markets"), including the
developing countries
of Latin America and Eastern Europe. Securities of many issuers
in emerging
markets may be less liquid and more volatile than securities of
issuers
operating in developed economies, such as the United States,
Canada and most of
Europe. The risks described above with respect to investment in
foreign
countries are heightened when the foreign country is an emerging
market.
Furthermore, throughout the last decade, many emerging markets
have experienced
and continue to experience high rates of inflation. In certain
countries,
inflation has at times accelerated rapidly to hyperinflationary
levels, creating
a negative interest rate environment and sharply eroding the
value of
outstanding financial assets in those countries.
Although the Fund intends to invest only in nations that the
Investment
Manager considers to have relatively stable and friendly
governments, there is
the possibility of expropriation, nationalization or confiscatory
taxation,
taxation of income earned in a foreign country and other foreign
taxes, foreign
exchange controls (which may include suspension of the ability to
transfer
currency from a given country), default in foreign government
securities,
political or social instability or diplomatic developments which
could affect
investments in securities of issuers in those nations. In
addition, in many
countries there is less publicly available information about
issuers than is
available in reports about companies in the United States.
Foreign companies are
not generally subject to uniform accounting, auditing and
financial reporting
standards, and auditing practices and requirements may not be
comparable to
those applicable to U.S. companies. In many foreign countries,
there is less
government supervision and regulation of business and industry
practices, stock
exchanges, brokers and listed companies than in the United
States. Foreign
securities transactions may be subject to higher brokerage costs
than domestic
securities transactions. In addition, the foreign securities
markets of many of
the countries in which the
6
<PAGE>
Fund may invest may also be smaller, less liquid and subject to
greater price
volatility than those in the United States. Further, the Fund may
encounter
difficulties or be unable to pursue legal remedies and obtain
judgments in
foreign courts.
OPTIONS AND FUTURES TRANSACTIONS: A put option is a
short-term contract
that gives the purchaser of the option, in return for a premium,
the right to
sell the underlying security or currency to the seller of the
option at a
specified price during the term of the option. A call option is a
short-term
contract that gives the purchaser of the option, in return for a
premium, the
right to buy the underlying security or currency from the seller
of the option
at a specified price during the term of the option. When the Fund
writes a put
or call option, the Fund will segregate assets, such as cash,
U.S. Government
securities or other high-grade debt securities, or "cover" its
position in
accordance with the Investment Company Act of 1940, as amended
(the "1940 Act").
The Fund will not write puts with respect to more than 50% of the
value of its
net assets (calculated at market value at the time of the
transaction). The Fund
will not write any call options if as a result it would have more
than 20% of
its net assets (calculated at market value at the time of the
writing of the
call) subject to being purchased upon the exercise of calls. The
Fund may
purchase options provided the aggregate premium paid for all
options held will
not exceed 10% (calculated at market value) of the value of its
net assets at
the time of purchase.
An interest rate futures contract is an agreement between two
parties to buy
or sell a specified debt security at a set price on a future
date. A foreign
currency futures contract is an agreement to buy or sell a
specified amount of a
foreign currency for a set price on a future date. See
"Investment Objectives
and Policies -- Futures Contracts and Options on Futures
Contracts" in the SAI.
When the Fund enters into a futures contract, it must make an
initial
deposit known as an "initial margin," as a partial guarantee of
its performance
under the contract. As the value of the security or currency
fluctuates, either
party to the contract is required to make additional margin
payments, known as
"variation margins," to cover any additional obligation it may
have under the
contract. In addition, when the Fund enters into a futures
contract, it will
segregate assets, such as cash, U.S. Government securities or
other high-grade
debt securities, or "cover" its position in accordance with the
1940 Act.
Use of option contracts, foreign currency contracts, futures
contracts and
options on futures contracts is subject to special risk
considerations. The risk
of loss from the use of futures is potentially unlimited. A
liquid secondary
market for any futures or related options contract may not be
available when a
futures or options position is sought to be closed and the Fund
would remain
obligated to meet margin requirements until the position is
closed. In addition,
there may be an imperfect correlation between price movements in
the securities
or currency on which the futures or options contract is based and
in the Fund's
portfolio securities being hedged. Use of futures or related
options contracts
is further dependent on the Investment Manager's ability to
predict correctly
price movements in the securities or currency being hedged, and
no assurance can
be given that its judgment will be correct. Currency futures
contracts and
options thereon may be traded on foreign exchanges; such
transactions may not be
regulated as effectively as similar transactions in the United
States; may not
involve a clearing mechanism and related guarantees; and are
subject to the risk
of governmental action affecting trading in, or the prices of,
foreign
securities.
FORWARD FOREIGN CURRENCY CONTRACTS: A forward foreign
currency contract
involves an obligation to purchase or sell a specific currency at
a future date,
which may be any fixed number of days from the date of the
contract agreed upon
by the parties, at a price set at the time of the contract.
Although these
contracts are intended to minimize the risk of loss due to a
decline in the
value of the hedged currencies, at the same time, they tend to
limit any
potential gain which might result should the value of such
currencies increase.
Although the Fund may enter into forward contracts to reduce
currency
exchange risks, changes in currency exchange rates may result in
poorer overall
performance for the Fund than if it had not engaged in such
transactions.
Moreover, there may be an imperfect correlation between the
Fund's portfolio
holdings of securities denominated in a particular currency and
forward
contracts entered into by the Fund. Such imperfect correlation
may prevent the
Fund from achieving the intended hedge or expose the Fund to the
risk of
currency exchange loss. The Fund will enter into such a forward
contract only if
it is expected that there will be a liquid market in which to
close out the
contract. However, there can be no assurance that a liquid market
will exist in
which to close a forward contract, in which case the Fund may
suffer a loss.
ZERO COUPON BONDS: Zero coupon bonds are debt obligations
issued without
any requirement for the periodic payment of interest. Zero coupon
bonds are
issued at a significant discount from face value. Because
interest on zero
coupon obligations is not distributed to the Fund on a current
basis but is in
effect compounded, the value of the securities of this type is
subject to
greater fluctuations in response to changing interest rates than
the value of
debt obligations which distribute income regularly.
REPURCHASE AGREEMENTS: Repurchase agreements are agreements
under which the
Fund buys a money market instrument and obtains a simultaneous
commitment from
the seller to repurchase the instrument at a specified time and
at an
agreed-upon yield. The Fund will not enter into a repurchase
agreement with more
than seven days to maturity if, as a result, more than 10% of the
Fund's net
assets would be invested in illiquid securities including such
repurchase
agreements. The Fund may enter into repurchase agreements with
banks or
broker-dealers deemed to be creditworthy by the Investment
Manager under
guidelines approved by the Board of Trustees. In the unlikely
event of failure
of the executing bank or broker-dealer, the Fund could experience
some delay in
obtaining direct ownership of the underlying collateral and might
incur a loss
if the value of the security should decline, as well as costs in
disposing of
the security.
BORROWING, LENDING, "WHEN-ISSUED" SECURITIES AND FIRM
COMMITMENTS: The Fund
may borrow from a bank up to a limit of 10% of its total assets,
but only for
temporary or emergency purposes. Borrowing may exaggerate the
effect on the
Fund's net asset value of any increase or decrease in the value
of the Fund's
portfolio securities. Money borrowed will be subject to interest
costs (which
may include commitment fees and/or the cost of maintaining
minimum average
balances).
Loans of securities by the Fund will be collateralized by
cash, letters of
credit or securities issued or guaranteed by the U.S. Government
or its agencies
or instrumentalities. There may be risks of delay in receiving
additional
collateral, or risks of delay in recovery of the securities or
even loss of
rights in the collateral, should the borrower of the securities
fail
financially. As a non-fundamental policy, loans will not be made
if, as a
result, the aggregate of all outstanding securities loaned
exceeds 30% of the
value of the Fund's total assets.
The Fund may invest in securities issued on a "when-issued"
or firm
commitment basis in order to secure an advantageous price and
yield to the Fund
at the time of entering into the transaction. Purchasing
securities on a
"when-issued" or firm commitment basis involves a risk of loss if
the value of
the security to be purchased declines prior to the settlement
date.
7
<PAGE>
RESTRICTED AND ILLIQUID SECURITIES: The Fund's policy is
that restricted
and other illiquid securities (including repurchase agreements of
more than
seven days' duration and other securities which are not readily
marketable or
which have a limited trading market) may not constitute more than
10% of the
value of the Fund's net assets. In addition, as a matter of
nonfundamental
policy, the Fund may not invest more than 10% of its net assets
in securities
which are not readily marketable, repurchase agreements maturing
in more than
seven days, and restricted securities; in no event may the Fund
invest more than
5% of its assets in restricted securities. Issuers of restricted
securities may
not be subject to the disclosure and other investor protection
requirements that
would be applicable if their securities were publicly traded.
Restricted
securities may be sold only in privately negotiated transactions
or in a public
offering with respect to which a registration statement is in
effect under the
Securities Act of 1933. Where a registration statement is
required, the Fund may
be required to bear all or part of the registration expenses.
There may be a
lapse of time between the Fund's decision to sell a restricted or
illiquid
security and the point at which the Fund is permitted or able to
sell such
security. If, during such a period, adverse market conditions
were to develop,
the Fund might obtain a price less favorable than the price that
prevailed when
it decided to sell.
ORGANIZATION AND MANAGEMENT OF THE FUND
The Fund is organized as a separate, diversified portfolio of
the Trust, an
open-end management investment company organized as a
Massachusetts business
trust on December 21, 1983. The Fund results from a
reorganization of Mackenzie
Short-Term U.S. Government Securities Fund, a series of The
Mackenzie Funds
Inc., into the Fund, a newly created series of the Trust, which
reorganization
was approved by shareholders in December, 1994. The business and
affairs of the
Fund are managed under the direction of the Trustees. Information
about the
Trustees, as well as the Trust's executive officers, may be found
in the SAI.
The Trust has an unlimited number of authorized shares of
beneficial interest,
and currently has 13 series of shares. The Trustees have
authorized the issuance
of three classes of the Fund, designated as Class A, Class B and
Class I. Shares
of the Fund entitle their holders to one vote per share (with
proportionate
voting for fractional shares). The shares of each class represent
an interest in
the same portfolio of investments of the Fund. Each class of
shares has a
different 12b-1 distribution plan and bears different
distribution fees. Shares
of each class have equal rights as to voting, redemption,
dividends and
liquidation but have exclusive voting rights with respect to
their Rule 12b-1
distribution plans. As of March 29,1996, M. Fraser, 184 Euclid
Avenue, Hamburg,
New York 14075, held 2,572.28 (43.23%) of the outstanding Class B
shares of the
Fund, and is considered to hold a controlling interest (as
defined under the
1940 Act) in Class B shares of the Fund.
The Trust employs IMI to provide business management and
investment advisory
services; MIMI to provide administrative and accounting services;
Ivy Mackenzie
Distributors, Inc. ("IMDI") to distribute the Fund's shares and
Ivy Mackenzie
Services Corp. ("IMSC") to provide transfer agent and
shareholder-related
services. IMI, IMDI and IMSC are wholly-owned subsidiaries of
MIMI. Until
December 31, 1994, MIMI served as investment adviser to the Fund.
As of March
29, 1996, IMI and MIMI had approximately $1.39 billion and $186
million,
respectively, in assets under management. MIMI is a subsidiary of
Mackenzie
Financial Corporation ("MFC"), which has been an investment
counsel and mutual
fund manager in Toronto, Ontario, Canada for more than 25 years.
PORTFOLIO MANAGEMENT: The Fund is managed by a team, with
each team member
having specific responsibilities for management of the Fund:
Leslie A. Ferris, a
Senior Vice President of IMI and Managing Director-Fixed Income,
is portfolio
manager for the Fund. Ms. Ferris joined the Ivy/Mackenzie fund
complex (the
"Fund Complex") in 1988 and has 14 years of professional
investment experience.
She is a Chartered Financial Analyst and holds an MBA degree from
The University
of Chicago. Prior to joining Ivy/Mackenzie, Ms. Ferris was a
portfolio manager
at Kemper Financial Services Inc. from 1982 to 1988. Michael G.
Landry, the
President and a Director of MIMI and IMI, and the President and a
Trustee of the
Trust, is the investment strategist for the Fund. Mr. Landry
joined the Fund
Complex in 1987 and has over 20 years of professional invesment
experience.
INVESTMENT MANAGEMENT EXPENSES: For management of its
investments and
business affairs, the Fund pays IMI a monthly fee calculated on
the basis of the
Fund's average daily net assets at an annual rate of 0.60%.
Under the Fund's management agreement, IMI pays all expenses
incurred by it
in rendering management services to the Fund. The Fund bears its
cost of
operations. See the SAI. If, however, the Fund's total expenses
in any fiscal
year exceed the permissible limit applicable to the Fund in any
state in which
the shares are then qualified for sale, IMI will bear the excess
expenses. The
ratio of operating expenses after expense reimbursements to
average net assets
for Class A and Class B shares for the period ended December 31,
1995 was 0.93%
and 1.43% (annualized), respectively. Without expense
reimbursements, the ratio
of operating expenses to average net assets for Class A and Class
B Shares for
the period ended December 31, 1995 was 3.27% and 3.77%
(annualized),
respectively. There were no Class I shares outstanding during the
year ended
December 31, 1995.
The assets received by each class of the Fund for the issue
or sale of its
shares and all income, earnings, profits, losses and proceeds
therefrom, subject
only to the rights of creditors, are allocated to, and constitute
the underlying
assets of that class of the Fund. The underlying assets of each
class of the
Fund are allocated and are charged with the expenses with respect
to that class
of the Fund and with a share of the general expenses of the
Trust. General
expenses of the Trust (such as the costs of maintaining the
Trust's existence,
legal fees, proxy and shareholders' meeting costs, etc.) that are
not readily
identifiable as belonging to a particular fund or to a particular
class of a
fund will be allocated among and charged to the assets of that
fund on a fair
and equitable basis, which may be based on the relative assets of
that fund or
the nature of the services performed and their relative
applicability to that
fund. Expenses that relate exclusively to the Fund, such as
certain registration
fees, brokerage commissions and other portfolio expenses, will be
borne directly
by the Fund.
FUND ADMINISTRATION AND ACCOUNTING
The Trust has entered into an Administrative Services
Agreement with MIMI
pursuant to which MIMI provides various administrative services
for the Fund,
including maintenance of registration or qualification of Fund
shares under
state "Blue Sky" laws, assisting in the preparation of Federal
and state income
tax returns and preparing financial statements of additional
information, and
periodic reports to shareholders. In addition, MIMI will assist
the Trust's
legal counsel with SEC registration statements, proxies and other
required
filings. Under the agreement, the Fund pays MIMI a monthly fee
based upon the
Fund's average daily net assets at the annual rate of 0.10%.
MIMI also provides certain accounting and pricing services
for the Fund (see
"Fund Accounting Services" in the SAI for more information).
8
<PAGE>
TRANSFER AGENT
IMSC is the transfer and dividend-paying agent for the Fund
and provides
certain shareholder and shareholder-related services. Certain
broker/dealers
that maintain shareholder accounts with the Fund through an
omnibus account
provide transfer agent and other shareholder-related services
that would
otherwise be provided by IMSC if the individual accounts that
comprise the
omnibus account were opened by their beneficial owners directly.
(See
"Investment Advisory and Other Services" in the SAI).
ALTERNATIVE PURCHASE ARRANGEMENTS
You can purchase shares of the Fund at a price equal to their
net asset
value per share, plus a sales charge. At your election, this
charge may be
imposed either at the time of the purchase (see "Initial Sales
Charge
Alternative -- Class A shares") or on a contingent deferred basis
(see
"Contingent Deferred Sales Charge Alternative -- Class B
shares"). If you do not
specify on your account application which class of shares you are
purchasing, it
will be assumed that you are investing in Class A shares.
CLASS A SHARES: If you elect to purchase Class A shares, you
will incur an
initial sales charge unless the amount you purchase is $1,000,000
or more. If
you purchase $1,000,000 or more of Class A shares, you will not
be subject to an
initial sales charge, but you will incur a contingent deferred
sales charge
("CDSC") if you redeem your shares within 24 months of purchase.
See "Contingent
Deferred Sales Charge -- Class A Shares". Class A shares are
subject to ongoing
service fees at an annual rate of 0.25% of the Fund's average
daily net assets
attributable to Class A shares. Certain purchases of Class A
shares qualify for
a reduced initial sales charge. See "Qualifying for a Reduced
Sales Charge." If
you do not specify on your account application which class of
shares you are
purchasing, it will be assumed that you are investing in Class A
shares.
CLASS B SHARES: You will not incur a sales charge when you
purchase Class B
shares, but the shares are subject to a CDSC if you redeem them
within five
years of purchase. Class B shares are subject to ongoing service
and
distribution fees at a combined annual rate of 0.75% of the
Fund's average daily
net assets attributable to Class B shares. The ongoing
distribution fee will
cause these shares to have a higher expense ratio than that of
Class A shares.
To the extent that any dividends are paid by the Fund, these
higher expenses
will also result in lower dividends than those paid on Class A
shares.
CLASS I SHARES: Class I shares are offered only to
institutions and certain
individuals. They are not subject to an initial or a contingent
deferred sales
charge nor to ongoing service/distribution fees.
FACTORS TO CONSIDER IN CHOOSING AN ALTERNATIVE: The
multi-class structure
of the Fund allows you to choose the most beneficial way to buy
shares given the
amount of your purchase, the length of time you expect to hold
your shares and
other circumstances. You should consider whether, during the
anticipated life of
your Fund investment, the accumulated fees on Class B shares
would be less than
the initial sales charge and accumulated fees on Class A shares
purchased at the
same time, and to what extent this differential would be offset
by the Class A
shares' potentially higher yield. Also, sales personnel may
receive different
compensation depending on which class of shares they are selling.
To help you
make this determination, the table under the caption "Expense
Data Table" at the
beginning of this Prospectus gives examples of the charges
applicable to each
class of shares. Class A shares will normally be more beneficial
if you qualify
for a reduced sales charge. See "Qualifying for a Reduced Sales
Charge."
DIVIDENDS AND TAXES
Dividends and capital gain distributions received from the
fund are
reinvested in additional shares of your class unless your elect
to receive them
in cash. If you elect the cash option and the U.S. Postal Service
cannot deliver
your checks, your election will be converted to the reinvestment
option. Because
of the higher expenses associated with Class B shares, any
dividend on these
shares will be lower than on the Class A and Class I shares.
In order to provide a steady cash flow to the Fund's
shareholders, the Board
of Trustees intends normally to make monthly distributions from
the Fund's net
investment income to the Fund's Class A, Class B and Class I
shareholders based
on their relative net asset value. The Fund intends to make a
final distribution
for each fiscal year of any remaining net investment income and
net realized
short-term capital gain, as well as undistributed net long-term
capital gain
realized during the year. An additional distribution may be made
of net
investment income, net realized short-term capital gains and net
realized
long-term capital gains to comply with the calendar year
distribution
requirement under the excise tax provisions of Section 4982 of
the Internal
Revenue Code of 1986, as amended (the "Code").
If, for any year, the total distributions from the Fund
exceed net
investment income and net realized capital gain for the Fund, the
excess,
distributed from the assets of the Fund, will generally be
treated as a return
of capital. The amount treated as a return of capital will reduce
a
shareholder's adjusted basis in his or her shares (thereby
increasing his or her
potential gain or reducing his or her potential loss on the sale
of his or her
shares) and, to the extent that the amount exceeds this basis,
will be treated
as a taxable gain. However, if the Fund has current or
accumulated earnings and
profits, so as to characterize all or a portion of such excess as
a dividend for
federal income tax purposes, the distributions, to that extent,
would normally
be taxable as ordinary income (or, if a capital gain dividend, as
long-term
capital gain).
TAXATION: The following discussion is intended for general
information
only. An investor should consult with his or her own tax adviser
as to the tax
consequences of an investment in the Fund, including the status
of distributions
from the Fund under applicable state or local law.
The Fund intends to qualify annually and elect to be treated
as a regulated
investment company under the Code. To qualify, the Fund must meet
certain
income, distribution and diversification requirements. In any
year in which the
Fund qualifies as a regulated investment company and timely
distributes all of
its taxable income, the Fund generally will not pay any U.S.
Federal income or
excise tax.
Dividends paid out of the Fund's investment company taxable
income
(including dividends, interest and net short-term capital gain)
will be taxable
to a shareholder as ordinary income. If a portion of the Fund's
income consists
of dividends paid by U.S. corporations, a portion of the
dividends paid by the
Fund may be eligible for the corporate dividends-received
deduction.
Distributions of net capital gains (the excess of net long-term
capital gains
over net short-term capital losses), if any, designated as
capital gain
dividends are taxable as long-term capital gains, regardless of
how long the
shareholder has held the Fund's shares. Dividends are taxable to
shareholders in
the same manner whether received in cash or reinvested in
additional Fund
shares.
A distribution will be treated as paid on December 31 of the
current
calendar year if it is declared by a Fund in October, November or
December with
a record date in such a month and paid by the Fund during January
of the
following calendar year. Such distributions will be taxable to
shareholders in
the
9
<PAGE>
calendar year in which the distributions are declared, rather
than the calendar
year in which the distributions are received.
Each year the Fund will notify shareholders of the tax status
of dividends
and distributions.
Any gain or loss realized by a shareholder upon the sale or
other
disposition of shares of the Fund, or upon receipt of a
distribution in complete
liquidation of the Fund, generally will be a capital gain or loss
which will be
long-term or short-term, generally depending upon the
shareholder's holding
period for the shares.
The Fund may be required to withhold U.S. Federal income tax
at the rate of
31% of all taxable distributions payable to shareholders who fail
to provide the
Fund with their correct taxpayer identification number or to make
required
certifications, or who have been notified by the IRS that they
are subject to
backup withholding. Backup withholding is not an additional tax.
Any amounts
withheld may be credited against the shareholder's U.S. Federal
income tax
liability.
Further information relating to tax consequences is contained
in the SAI.
Fund distributions may be subject to state, local and foreign
taxes. Fund
distributions that are derived from interest on obligations of
the U.S.
Government and certain of its agencies, authorities and
instrumentalities may be
exempt from state and local taxes in certain states. Shareholders
should consult
their own tax advisers regarding the particular tax consequences
of an
investment in the Fund.
PERFORMANCE DATA
Performance information (e.g., "total return" and "yield") is
computed
separately for each class of Fund shares in accordance with
formulas prescribed
by the SEC. Performance information for each class may be
compared in reports
and promotional literature to indices such as the Standard and
Poor's 500 Stock
Index, Dow Jones Industrial Average, and Morgan Stanley Capital
International
World Index. Advertisements, sales literature and communications
to shareholders
may also contain statements of the Fund's current yield, various
expressions of
total return and current distribution rate. Performance figures
will vary in
part because of the different expense structures of the Fund's
different
classes. ALL PERFORMANCE INFORMATION IS HISTORICAL AND IS NOT
INTENDED TO
SUGGEST FUTURE RESULTS.
"Total return" is the change in value of an investment in the
Fund for a
specified period, and assumes the reinvestment of all
distributions and
imposition of the maximum applicable sales charge. "Average
annual total return"
represents the average annual compound rate of return of an
investment in a
particular class of Fund shares assuming the investment is held
for one year,
five years and ten years as of the end of the most recent
calendar quarter.
Where the Fund provides total return quotations for other
periods, or based on
investments at various sales charge levels or at net asset value,
"total return"
is based on the total of all income and capital gains paid to
(and reinvested
by) shareholders, plus (or minus) the change in the value of the
original
investment expressed as a percentage of the purchase price.
"Current yield" reflects the income per share earned by the
Fund's portfolio
investments, and is calculated by dividing the Fund's net
investment income per
share during a recent 30-day period by the maximum public
offering price on the
last day of that period and then annualizing the result.
Dividends or
distributions that were paid to the Fund's shareholders are
reflected in the
"current distribution rate," which is computed by dividing the
total amount of
dividends per share paid by the Fund during the preceding 12
months by the
Fund's current maximum offering price (which includes any
applicable sales
charge). The "current distribution rate" will differ from the
"current yield"
computation because it may include distributions to shareholders
from sources
other than dividends and interest, short term capital gain and
net equalization
credits and will be calculated over a different period of time.
HOW TO BUY SHARES
The minimum initial investment is $1,000; the minimum
additional investment
is $100. Initial or additional investment amounts for retirement
accounts may be
less. See "Retirement Plans." Accounts in Class I of the Fund can
be opened with
a minimum initial investment of $5,000,000; the minimum
additional investment is
$10,000. The minimum initial investment in Class I of the Fund
may be spread
over the thirteen-month period after an Institution or a high net
worth
individual opens an account and the Fund, at its discretion, may
accept initial
and additional investments of small amounts. All purchases must
be made in U.S.
dollars. Complete the Account Application attached to this
Prospectus. Indicate
whether you are purchasing Class A, Class B or Class I shares. If
you do not
specify which class of shares you are purchasing, IMSC will
assume you are
investing in Class A shares. The Fund reserves the right to
reject for any
reason any purchase order.
OPENING AN ACCOUNT
BY CHECK
1. Make your check payable to the fund in which you are
investing.
2. Deliver the completed application and check to your
registered
representative or selling broker, or mail it directly to
IMSC.
3. Our address is:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
4. Our courier address is:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
BY WIRE
1. Deliver a completed fund application to your registered
representative or
selling broker, or mail it directly to IMSC. Before wiring
any funds,
please contact IMSC at 1-800-777-6472 to verify your
account number.
2. Instruct your bank to wire funds to:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FLORIDA
ABA #063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
Your bank may charge a fee for wiring funds.
THROUGH A REGISTERED SECURITIES DEALER: You may also place
an order to
purchase shares through your Registered Securities Dealer.
10
<PAGE>
BUYING ADDITIONAL CLASS A AND CLASS B SHARES
BY CHECK
1. Complete the investment stub attached to your statement or
include a note
with your investment listing the name of the Fund, the
class of shares to
purchase, your account number and the name(s) in which the
account is
registered.
2. Make your check payable to the fund in which you are
investing.
3. Mail the account information and check to:
IVY MACKENZIE SERVICES CORP.
P.O. BOX 3022
BOCA RATON, FL 33431-0922
Our courier address is:
IVY MACKENZIE SERVICES CORP.
700 SOUTH FEDERAL HIGHWAY, SUITE 300
BOCA RATON, FL 33432
or deliver it to your registered representative or selling
broker.
BY WIRE
Instruct your bank to wire funds to:
FIRST UNION NATIONAL BANK OF FLORIDA
JACKSONVILLE, FLORIDA
ABA #063000021
ACCOUNT #2090002063833
FOR FURTHER CREDIT TO:
YOUR IVY ACCOUNT REGISTRATION
YOUR FUND NUMBER AND ACCOUNT NUMBER
Your bank may charge a fee for wiring funds.
THROUGH A REGISTERED SECURITIES DEALER
You may also place an order to purchase shares through your
Registered
Securities Dealer.
BY AUTOMATIC INVESTMENT METHOD ("AIM")
1. Complete the "Automatic Investment Method" and "Wire/EFT
Information"
sections on the Account Application designating a bank
account from which
funds may be drawn. Please note that in order to invest
using this
method, your bank must be a member of the Automated
Clearing House system
(ACH). The minimum investment under this plan is $50 per
month ($25 per
month for retirement plans).
Please remember to attach a voided check to your account
application.
2. At pre-specified intervals, your bank account will be
debited and the
proceeds will be credited to your account.
HOW YOUR PURCHASE PRICE IS DETERMINED
Your purchase price for Class A shares of the Fund is the net
asset value
("NAV") per share plus a sales charge, which may be reduced or
eliminated in
certain circumstances. The purchase price per share is known as
the public
offering price. Your purchase price for Class B and Class I
shares of the Fund
is the net asset value per share.
Your purchase of shares will be made at the next determined
price after the
purchase order is received. The price is effective for orders
received by IMSC
or by your registered securities dealer prior to the time of the
determination
of the net asset value. Any orders received after the time of the
determination
of the net asset value will be entered at the next calculated
price.
Orders placed with a securities dealer prior to the time of
determination of
the net asset value and transmitted through the facilities of the
National
Securities Clearing Corporation on the same day are confirmed at
that day's
price. Any loss resulting from the dealer's failure to submit an
order by the
deadline will be borne by that dealer.
You will receive an account statement after any purchase,
exchange or full
liquidation. Statements related to reinvestment of dividends,
capital gains,
automatic investment plans (see the SAI for further explanation)
and/or
systematic withdrawal plans will be sent quarterly.
HOW THE FUND VALUES ITS SHARES
The NAV per share is the value of one share. The NAV is
determined for each
Class of shares as of the close of the New York Stock Exchange on
each day the
Exchange is open by dividing the value of a Fund's net assets
attributable to a
class by the number of shares of that class that are outstanding,
adjusted to
the nearest cent.
The Trust's Board of Trustees has established procedures to
value the Fund's
securities in order to determine the NAV. The value of a foreign
security is
determined as of the normal close of trading on the foreign
exchange on which it
is traded or as of the close of regular trading on the New York
Stock Exchange,
whichever is earlier. If no sale is reported at that time, the
average between
the current bid and asked price is used. All other securities for
which OTC
market quotations are readily available are valued at the average
between the
current bid and asked price. Securities and other assets for
which market prices
are not readily available are valued at fair market value as
determined by IMI
and approved in good faith by the Board. Money market instruments
are valued at
amortized cost, which approximates market value.
INITIAL SALES CHARGE ALTERNATIVE -- CLASS A SHARES
Shares are purchased at a public offering price equal to
their NAV per share
plus a sales charge, as set forth below.
<TABLE>
<CAPTION>
SALES CHARGE
----------------------- PORTION OF
AS A
AS A PUBLIC
PERCENTAGE PERCENTAGE OFFERING
OF
PUBLIC OF NET PRICE
OFFERING AMOUNT RETAINED
AMOUNT INVESTED PRICE
INVESTED BY DEALER
-------------------------------------------------------
---------- ---------- ----------
<S> <C>
<C> <C>
Less than $25,000...................................... 3.00%
3.09% 2.50%
$25,000 but less than $250,000......................... 2.50%
2.56% 2.00%
$250,000 but less than $500,000........................ 2.00%
2.04% 1.65%
$500,000 and over*..................................... 0.00%
0.00% 0.00%
</TABLE>
* A CDSC may apply to the redemption of Class A shares that are
purchased
without an initial sales charge. See "Contingent Deferred Sales
Charge --
Class A Shares."
With respect to purchases of $1,000,000 or more made on or
after September
20, 1994 through dealers or agents, IMDI may, at the time of
purchase, pay such
dealers or agents, from its own resources, a commission to
compensate such
dealers or agents for their distribution assistance in connection
with such
purchases. The commission would be computed at .75% of the first
$3,000,000
invested; .50% of the next $2,000,000 invested; and .25% of the
amount invested
in excess of $5,000,000. Dealers who receive 90% or more of
11
<PAGE>
the sales charge may be deemed to be underwriters as that term is
defined in the
Securities Act of 1933.
Sales charges are not applied to any dividends that are
reinvested in
additional shares of the Fund. An investor may be charged a
transaction fee for
Class A and Class I shares purchased or redeemed at net asset
value through a
broker or agent other than IMDI.
IMDI compensates participating brokers who sell Class A
shares through the
initial sales charge. IMDI retains that portion of the initial
sales charge that
is not reallowed to the dealers, which it may use to distribute
the Fund's Class
A shares. Pursuant to separate distribution plans for the Fund's
Class A and
Class B shares, IMDI bears various promotional and sales related
expenses,
including the cost of printing and mailing prospectuses to
persons other than
shareholders. Pursuant to the Fund's distribution plans
applicable to its Class
A and Class B shares, IMDI currently pays a continuing service
fee to qualified
dealers at an annual rate of 0.25% of qualified investments.
IMDI may from time to time pay a bonus or other incentive to
dealers (other
than IMDI) which employ a registered representative who sells a
minimum dollar
amount of the shares of the fund and/or other funds distributed
by IMDI during a
specified period of time. This bonus or other incentive may take
the form of
payment for travel expenses, including lodging, incurred in
connection with
trips taken by qualifying registered representatives and members
of their
families to places within or without the United States or other
bonuses such as
gift certificates or the cash equivalent of such bonus or
incentive.
CONTINGENT DEFERRED SALES CHARGE -- CLASS A SHARES
Purchases of $1,000,000 or more of Class A shares will be
made at net asset
value with no initial sales charge, but if the shares are
redeemed within 24
months after the end of the calendar month in which the purchase
was made (the
contingent deferred sales charge period), a contingent deferred
sales charge of
.75% will be imposed.
In order to recover commissions paid to dealers on NAV
transfers (as defined
in "Purchases of Class A Shares at Net Asset Value"), Class A
shares of the Fund
are subject to a contingent deferred sales charge of .75% for
certain
redemptions within 24 months after the date of purchase.
The charge will be assessed on an amount equal to the lesser
of the current
market value or the original purchase cost of the Class A shares
redeemed.
Accordingly, no CDSC will be imposed on increases in account
value above the
initial purchase price, including any dividends which have been
reinvested in
additional Class A shares.
In determining whether a CDSC applies to a redemption, the
calculation will
be determined in a manner that results in the lowest possible
rate being
charged. Therefore, it will be assumed that the redemption is
first made from
any shares in your account not subject to the CDSC. The CDSC is
waived in
certain circumstances. See the discussion below under the caption
"Waiver of
Contingent Deferred Sales Charge."
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The contingent
deferred sales
charge is waived for (i) redemptions in connection with
distributions not
exceeding 12% annually of the initial account balance (i.e., the
value of the
shareholder's Class A Fund account at the time of the initial
distribution) (a)
following retirement under a tax qualified retirement plan, or
(b) upon
attaining age 59 1/2 in the case of an IRA, a custodial account
pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii) redemption
resulting from
tax-free return of an excess contribution to an IRA; or (iii) any
partial or
complete redemption following the death or disability (as defined
in Section
72(m)(7) of the Code) of a shareholder from an account in which
the deceased or
disabled is named, provided that the redemption is requested
within one year of
death or disability. IMDI may require documentation prior to
waiver of the
contingent deferred sales charge.
Class A shareholders may exchange their Class A shares
subject to a
contingent deferred sales charge ("outstanding Class A shares")
for Class A
shares of another Ivy or Mackenzie Fund ("new Class A shares") on
the basis of
the relative net asset value per Class A share, without the
payment of any
contingent deferred sales charge that would be due upon the
redemption of the
outstanding Class A shares. The original CDSC rate that would
have been charged
if the outstanding Class A shares were redeemed will carry over
to the new Class
A shares received in the exchange, and will be charged
accordingly at the time
of redemption.
QUALIFYING FOR A REDUCED SALES CHARGE
RIGHTS OF ACCUMULATION (ROA): Rights of Accumulation ("ROA")
is calculated
by determining the current market value of all Class A shares in
all Ivy or
Mackenzie fund accounts (except Ivy Money Market Fund) owned by
you, your
spouse, and your children under 21 years of age. ROA is also
applicable to
accounts under a trustee or other single fiduciary (including
retirement
accounts qualified under Section 401 of the Code). The current
market value of
each of your accounts as described above is added together and
then added to
your current purchase amount. If the combined total is equal or
greater than a
breakpoint amount for the Fund, then you qualify for the reduced
sales charge.
To reduce or eliminate the sales charge, you must complete
Section 4B of the
Account Application.
LETTER OF INTENT (LOI): A Letter of Intent ("LOI") is a
non-binding
agreement that states your intention to invest in additional
Class A shares,
within a thirteen month period after the initial purchase, an
amount equal to a
breakpoint amount for the Fund. The LOI may be backdated up to 90
days. To sign
an LOI, please complete Section 4B of the Account Application.
Should the LOI not be fulfilled within the thirteen month
period, your
account will be debited for the difference between the full sales
charge that
applies for the amount actually invested and the reduced sales
charge actually
paid on purchases placed under the terms of the LOI.
PURCHASES OF CLASS A SHARES AT NET ASSET VALUE: An investor
who was a
shareholder of any Ivy Fund on December 31, 1991 or a shareholder
of American
Investors Income Fund, Inc. or American Investors Growth Fund,
Inc. on October
31, 1988 and who became a shareholder of Ivy Bond Fund (formerly
Mackenzie Fixed
Income Trust) or Ivy Growth Fund as a result of the respective
reorganizations
of the funds will be exempt from sales charges on the purchase of
Class A shares
of any Ivy or Mackenzie Fund. This privilege is also available to
immediate
family members of a shareholder (i.e., the shareholder's
children, the
shareholder's spouse and the children of the shareholder's
spouse). This no-load
privilege terminates for the investor if the investor redeems all
shares owned.
Shareholders and their relatives as described above should call
1-800-235-3322
for information about additional purchases or to inquire about
their account.
Officers and Trustees of the Trust (and their relatives) and
IMI, MIMI,
Mackenzie Financial Corporation (of which MIMI is a subsidiary)
and their
officers, directors, employees and retired employees, and legal
counsel and
independent accountants (and their relatives) may buy Class A
shares of the Fund
without an initial sales charge or a contingent deferred sales
charge.
12
<PAGE>
Directors, officers, partners, registered representatives,
employees and
retired employees (and their relatives) of dealers having a sales
agreement with
IMDI, or trustees or custodians of any qualified retirement plan
established for
the benefit of a person enumerated above, may buy Class A shares
of the Fund
without an initial sales charge or a contingent deferred sales
charge. In
addition, certain investment advisers and financial planners who
charge a
management, consulting or other fee for their services and who
place trades for
their own accounts or the accounts of their clients may purchase
Class A shares
of the Fund without an initial sales charge or a contingent
deferred sales
charge provided such purchases are placed through a broker or
agent who
maintains an omnibus account with the Fund. Also, clients of
these advisers and
planners may make purchases under the same conditions if the
purchases are
through the master account of such adviser or planner on the
books of such
broker or agent. THIS PROVISION APPLIES TO ASSETS OF RETIREMENT
AND DEFERRED
COMPENSATION PLANS AND TRUSTS USED TO FUND THOSE PLANS INCLUDING,
BUT NOT
LIMITED TO, THOSE DEFINED IN SECTION 401(A), 403(B) OR 457 OF THE
CODE AND
"RABBI TRUSTS" WHOSE ASSETS ARE USED TO PURCHASE SHARES OF THE
FUND THROUGH THE
AFOREMENTIONED CHANNELS.
Class A shares of the Fund may be purchased at net asset
value by retirement
plans qualified under section 401(a) or 403(b) of the Code and
subject to the
Employee Retirement Income Security Act of 1974. A contingent
deferred sales
charge of 0.75% will be imposed on such purchases in the event of
certain
redemption transactions within 24 months following such
purchases.
If investments by retirement plans at NAV are made through a
dealer who has
executed a dealer agreement with respect to the Fund, IMDI may,
at the time of
purchase, pay such dealer, out of IMDI's own resources, a
commission to
compensate such dealer for its distribution assistance in
connection with such
purchase. Commissions would be computed as 0.75% of the first $3
million
invested; 0.50% of the next $2 million invested; and 0.25% of the
amount
invested in excess of $5 million. Please contact IMDI for
additional
information.
Class A shares of the Fund may also be purchased at net asset
value, without
an initial sales charge, but subject to a contingent deferred
sales charge of
0.75% during the first 24 months after the date of purchase (see
"Contingent
Deferred Sales Charge -- Class A Shares"), by any state, county,
or city, or any
instrumentality, department, authority or agency thereof, which
is prohibited by
applicable investment laws from paying a sales charge or
commission in
connection with the purchase of shares of any registered
management investment
company (an "Eligible Governmental Authority"). If an investment
by an Eligible
Governmental Authority is made at net asset value through a
dealer who has
executed a dealer agreement with respect to the Fund, IMDI may,
at the time of
purchase, pay such dealers, from its own resources, a commission
to compensate
such dealers for their distribution assistance in connection with
such
purchases. The commission would be computed at .75% of the first
$3,000,000
invested; .50% of the next $2,000,000 invested; and .25% of the
amount invested
in excess of $5,000,000. Please contact IMDI for additional
information.
Class A shares can also be purchased without an initial sales
charge, but
subject to a contingent deferred sales charge of .75% in the
first 24 months, by
trust companies, bank trust departments, credit unions, savings
and loans and
other similar organizations in their fiduciary capacity or for
their own
accounts subject to any minimum requirements set by IMDI.
Currently, these
criteria require that the amount invested or to be invested in
the subsequent
13-month period totals at least $250,000. IMDI may, at the time
of any such
purchase, pay out of IMDI's own resources commissions to dealers
which provided
distribution assistance in connection with the purchase.
Commissions would be
computed at .75% of the first $3,000,000 invested, .50% of the
next $2,000,000
invested, and .25% of the amount invested in excess of
$5,000,000.
Class A shares of the Fund may also be purchased without a
sales charge in
connection with certain liquidation, merger or acquisition
transactions
involving other investment companies or personal holding
companies.
The Fund may, from time to time, waive the initial sales
charge on its Class
A shares sold to clients of various broker-dealers with which
IMDI has a selling
relationship. This privilege will apply only to Class A Shares of
the Fund that
are purchased using all or a portion of the proceeds obtained by
such clients
through redemptions of shares (on which a commission has been
paid) of an
investment company (other than Mackenzie Series Trust or the
Trust), unit
investment trust or limited partnership ("NAV transfers"). Some
dealers may
elect not to participate in this program. Those dealers that do
elect to
participate in the program must complete certain forms required
by IMDI. The
normal service fee, as described in the "Initial Sales Charge
Alternative --
Class A Shares" and "Contingent Deferred Sales Charge Alternative
-- Class B
Shares" sections of this Prospectus, will be paid to dealers in
connection with
these purchases. Additional information on reductions or waivers
may be obtained
from IMDI at the address listed on the cover of the Prospectus.
CONTINGENT DEFERRED SALES CHARGE ALTERNATIVE -- CLASS B SHARES
Class B shares are offered at net asset value per share
without a front end
sales charge. However, Class B shares redeemed within five years
of purchase
will be subject to a CDSC at the rates set forth below. This
charge will be
assessed on an amount equal to the lesser of the current market
value or the
original purchase cost of the shares being redeemed. Accordingly,
you will not
be assessed a CDSC on increases in account value above the
initial purchase
price, including shares derived from dividend reinvestment. In
determining
whether a CDSC applies to a redemption, the calculation will be
determined in a
manner that results in the lowest possible rate being charged. It
will be
assumed that your redemption comes first from shares you have
held beyond the
5-year CDSC redemption period or those you acquire through
reinvestment of
dividends or distributions, and next from the shares you have
held the longest
during the 5-year period.
Proceeds from the contingent deferred sales charge are paid
to IMDI. The
proceeds are used, in whole or in part, to defray its expenses
related to
providing the Fund with distribution services in connection with
the sale of
Class B shares, such as compensating selected dealers and agents
for selling
these shares. The combination of the contingent deferred sales
charge and the
distribution and service fees makes it possible for the Fund to
sell Class B
shares without deducting a sales charge at the time of the
purchase.
The amount of the contingent deferred sales charge, if any,
will vary
depending on the number of years from the time you purchase your
Class B shares
until the time you redeem them. Solely for purposes of
determining this holding
period, any payments you make during the quarter will be
aggregated and deemed
to have been made on the last day of the quarter.
13
<PAGE>
<TABLE>
<CAPTION>
CONTINGENT
DEFERRED SALES
CHARGE AS A
CLASS B
PERCENTAGE OF
DOLLAR AMOUNT
YEAR SINCE PURCHASE
SUBJECT TO CHARGE
-----------------------------------------------------------------
------ -----------------
<S>
<C>
First............................................................
...... 3%
Second...........................................................
...... 2 1/2%
Third............................................................
...... 2%
Fourth...........................................................
...... 1 1/2%
Fifth............................................................
...... 1%
Sixth and
thereafter...................................................
0%
</TABLE>
IMDI currently intends to pay dealers a sales commission of
3% of the sale
price of Class B shares that they have sold. IMDI will retain
0.50% of the
continuing 0.75% service/distribution fee assessed to Class B
shareholders and
will receive the entire amount of the contingent deferred sales
charge paid by
shareholders on the redemption of Class B shares to finance the
3% commission
plus related marketing expenses.
CONVERSION OF CLASS B SHARES: Your Class B shares and an
appropriate
portion of both reinvested dividends and capital gains on those
shares will be
converted into Class A shares automatically no later than the
month following
eight years after the shares were purchased, resulting in no
annual distribution
fees. If you exchanged Class B shares into the Fund from another
Ivy or
Mackenzie Class B shares fund, the calculation will be based on
the time the
shares in the original fund were purchased.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE: The contingent
deferred sales
charge is waived for (i) redemptions in connection with
distributions not
exceeding 12% annually of the initial account balance (i.e., the
value of the
shareholder's Class B Fund account at the time of the initial
distribution) (a)
following retirement under a tax qualified retirement plan, or
(b) upon
attaining age 59 1/2 in the case of an IRA, a custodial account
pursuant to
section 403(b)(7) of the Code or a Keogh Plan; (ii) redemption
resulting from
tax-free return of an excess contribution to an IRA; or (iii) any
partial or
complete redemption following the death or disability (as defined
in Section
72(m)(7) of the Code) of a shareholder from an account in which
the deceased or
disabled is named, provided that the redemption is requested
within one year of
death or disability. The Distributor may require documentation
prior to waiver
of the contingent deferred sales charge.
ARRANGEMENTS WITH BROKER/DEALERS AND OTHERS: IMDI may, at
its own expense,
pay concessions in addition to those described above to dealers
which satisfy
certain criteria established from time to time by IMDI. These
conditions relate
to increasing sales of shares of the Fund over specified periods
and to certain
other factors. These payments may, depending on the dealer's
satisfaction of the
required conditions, be periodic and may be up to (i) 0.25% of
the value of Fund
shares sold by such dealer during a particular period, and (ii)
0.10% of the
value of Fund shares held by the dealer's customers for more than
one year,
calculated on an annual basis.
HOW TO REDEEM SHARES
You may redeem your Fund shares through your registered
securities
representative, by mail, by telephone, or by Federal Funds wire.
A contingent deferred sales charge may apply to certain Class
A share
redemptions, and to Class B share redemptions prior to
conversion. All
redemptions are made at the net asset value next determined after
a redemption
request has been received in good order. Requests for redemptions
must be
received by 4:00 p.m. Eastern time to be processed at the net
asset value for
that day. Any redemption request in good order that is received
after 4:00 p.m.
Eastern time will be processed at the price determined on the
following business
day. IF SHARES TO BE REDEEMED WERE PURCHASED BY CHECK, PAYMENT OF
THE REDEMPTION
MAY BE DELAYED UNTIL THE CHECK HAS CLEARED OR FOR UP TO 15 DAYS
AFTER THE DATE
OF PURCHASE, WHICHEVER IS LESS. If you own shares of more than
one class of the
Fund, the Fund will redeem first the shares having the highest
12b-1 fees; any
shares subject to a contingent deferred sales charge will be
redeemed last
unless you specifically elect otherwise.
When shares are redeemed, the Fund generally sends you
payment on the next
business day. Under unusual circumstances, the Fund may suspend
redemptions or
postpone payment to the extent permitted by federal securities
laws. The
proceeds of the redemption may be more or less than the purchase
price of your
shares, depending upon, among other factors, the market value of
the Fund's
securities at the time of the redemption. If the redemption is
for over $50,000,
or the proceeds are to be sent to an address other than the
address of record,
or an address change has occurred in the last 30 days, it must be
requested in
writing with a signature guarantee. See "Signature Guarantees,"
below.
If you are not certain of the requirements for a redemption,
please contact
IMSC at 1-800-777-6472.
THROUGH YOUR REGISTERED SECURITIES DEALER: The Dealer is
responsible for
promptly transmitting redemption orders. Redemptions requested by
dealers will
be made at the net asset value (less any applicable contingent
deferred sales
charge) determined at the close of regular trading (4:00 p.m.
Eastern time) on
the day that a redemption request is received in good order by
IMSC.
BY MAIL: Requests for redemption in writing are considered
to be in "proper
or good order" if they contain the following:
- Any outstanding certificate(s) for shares being redeemed.
- A letter of instruction, including the fund name, the
account number, the
account name(s), the address and the dollar amount or
number of shares to
be redeemed.
- Signatures of all registered owners whose names appear on
the account.
- Any required signature guarantees.
- Other supporting legal documentation, if required (in the
case of estates,
trusts, guardianships, corporations, retirement plans or
other
representative capacities).
The dollar amount or number of shares indicated for
redemption must not
exceed the available shares or net asset value of your account at
the next-
determined prices. If your request exceeds these limits, then the
trade will be
rejected in its entirety.
BY TELEPHONE: Individual and joint accounts may redeem up to
$50,000 per
day over the telephone by contacting IMSC Corp. at
1-800-777-6472. In times of
unusual economic or market changes, the telephone redemption
privilege may be
difficult to implement. If you are unable to execute your
transaction during
such times, you may want to consider placing the order in writing
and sending it
by mail or overnight courier.
Checks will be made payable to the current account
registration and sent to
the address of record. If there has been a change of address in
the last 30
days, please use the instructions for redemption requests by mail
described
above. A signature guarantee would be required.
14
<PAGE>
Requests for telephone redemptions will be accepted from the
registered
owner of the account, the designated registered representative or
his/her
assistant.
Shares held in certificate form cannot be redeemed by
telephone.
If Section 6E of the Account Application is not completed,
telephone
redemption privileges will be provided automatically. Although
telephone
redemptions may be a convenient feature, you should realize that
you may be
giving up a measure of security that you may otherwise have if
you terminated
the privilege and redeemed your shares in writing. If you do not
wish to make
telephone redemptions or let your registered representative or
his/her assistant
do so on your behalf, you must notify IMSC in writing.
The Fund employs reasonable procedures that require personal
identification
prior to acting on redemption instructions communicated by
telephone to confirm
that such instructions are genuine. In the absence of such
procedures, the Fund
may be liable for any losses due to unauthorized or fraudulent
telephone
instructions.
BY FEDERAL FUNDS WIRE: For shareholders who established this
feature at the
time they opened their account, telephone instructions will be
accepted for
redemption of amounts up to $50,000 ($1,000 minimum) and proceeds
will be wired
on the next business day to a predesignated bank account.
In order to add this feature to an existing account or to
change existing
bank account information, please submit a letter of instructions
including your
bank information to IMSC at the address provided above. The
letter must be
signed by all registered owners, and their signatures must be
guaranteed.
Your account will be charged a fee of $10 each time that
redemption proceeds
are wired to your bank.
Neither IMSC nor the Fund can be responsible for the
efficiency of the
Federal Funds wire system or the shareholder's bank.
CHECK WRITING
Check writing is only available on Class A shares. Checks
must be written
for a minimum of $500. You may sign up for this option by
completing the Check
Writing Enrollment Form on the last page of the Account
Application. IF THE
CLASS A SHARES TO BE REDEEMED HAVE BEEN PURCHASED BY CHECK,
AVAILABILITY OF THE
SHARES FOR REDEMPTION BY CHECK MAY BE DELAYED UNTIL YOUR CHECK
CLEARS OR FOR UP
TO 15 CALENDAR DAYS AFTER THE DATE OF PURCHASE, WHICHEVER IS
LESS.
In order to qualify for check writing, Fund shareholders must
maintain a
minimum average balance of $1,000. Class A shares must be
unissued (held at the
Fund) for any account requesting checkwriting privileges.
Checks can be reordered by calling IMSC at 1-800-777-6472.
Checking activity
is reported on your statement, and cancelled check copies are
returned to you
each month. There is no limitation on the number of checks a
shareholder may
write.
Checks written on the Fund are redemptions of shares and
considered taxable
events by the IRS. As such, they must be reported on your income
tax return.
When a check is presented for payment, the Fund redeems a
sufficient number
of Class A shares to cover the amount of the check. Checks
written on accounts
with insufficient shares will be returned to the payee marked
"non-sufficient
funds". There is a nominal charge for each supply of checks,
copies of cancelled
checks, stop payment orders, checks drawn for amounts less than
the Fund minimum
(see above) and checks returned for "non-sufficient funds". To
pay for these
charges, the Fund automatically redeems an appropriate number of
the
shareholder's Class A shares after the charges are incurred.
You may not close your Fund account by writing a check
because any earned
dividends will remain in your account. Check writing is not
available for
retirement accounts or accounts in Class B or Class I of the
Fund. The Fund
reserves the right to change, modify or terminate the check
writing service at
any time upon notification mailed to the address of record of the
shareholder(s).
MINIMUM ACCOUNT BALANCE REQUIREMENTS
Due to the high cost of maintaining small accounts and
subject to state law
requirements, the Fund may redeem the accounts of shareholders
who have
maintained an investment, including sales charges paid, of less
than $1,000 for
more than 12 months. No redemption will be made unless the
shareholder has been
given at least 60 day's notice of the Fund's intention to redeem
the shares. No
redemption will be made if a shareholder's account falls below
the minimum due
to a reduction in the value of the Fund's portfolio securities.
This provision
does not apply to IRAs, other retirement accounts and UGMA/UTMA
accounts.
SIGNATURE GUARANTEES
For your protection, and to prevent fraudulent redemptions,
we require a
signature guarantee in order to accommodate the following
requests:
- Redemption requests over $50,000.
- Requests for redemption proceeds to be sent to someone
other than the
registered shareholder.
- Requests for redemption proceeds to be sent to an address
other than the
address of record.
- Registration transfer requests.
- Requests for redemption proceeds to be wired to your bank
account (if this
option was not selected on your original application, or if
you are
changing the bank wire information).
A signature guarantee may be obtained only from an eligible
guarantor
institution as defined in Rule 17Ad-15 of the Securities Exchange
Act of 1934,
as amended. An eligible guarantor institution includes banks,
brokers, dealers,
municipal securities dealers, government securities dealers,
government
securities brokers, credit unions, national securities exchanges,
registered
securities associations, clearing agencies and savings
associations. The
signature guarantee must not be qualified in any way.
Notarizations from notary
publics are not the same as signature guarantees, and are not
accepted.
Circumstances other than those described above may require a
signature
guarantee. Please contact IMSC at 1-800-777-6472 for more
information.
CHOOSING A DISTRIBUTION OPTION
You have the option of selecting the distribution option that
best suits
your needs:
AUTOMATIC REINVESTMENT OPTION -- Both dividends and capital
gains are
automatically reinvested at net asset value in additional shares
of the same
class of the Fund unless you specify one of the other options.
15
<PAGE>
INVESTMENT IN ANOTHER IVY OR MACKENZIE FUND -- Both dividends
and capital
gains are automatically invested at net asset value in another
Ivy or Mackenzie
Fund of the same class.
DIVIDENDS IN CASH/CAPITAL GAINS REINVESTED -- Dividends will
be paid in
cash. Capital gains will be reinvested at net asset value in
additional shares
of the same class of the fund or another Ivy or Mackenzie Fund of
the same
class.
DIVIDENDS AND CAPITAL GAINS IN CASH -- Both dividends and
capital gains will
be paid in cash.
If you wish to have your cash distributions deposited
directly to your bank
account via electronic funds transfer, or if you wish to change
your
distribution option, please contact IMSC at 1-800-777-6472.
If you wish to have your cash distributions go to an address
other than the
address of record, a signature guarantee is required.
TAX IDENTIFICATION NUMBER
In general, to avoid being subject to a 31% U.S. Federal
backup withholding
tax on dividends, capital gains distributions and redemption
proceeds, you must
furnish the Fund with your certified tax identification number
("TIN") and
certify that you are not subject to backup withholding due to
prior
underreporting of interest and dividends to the IRS. If you fail
to provide a
certified TIN or such other tax-related certifications as the
Fund may require,
within 30 days of opening your new account, the Fund reserves the
right to
involuntarily redeem your account and send the proceeds to your
address of
record.
You can avoid the above withholding and/or redemption by
correctly
furnishing your TIN, and making certain certifications, in
Section 2 of the
Account Application at the time you open your new account, unless
the IRS
requires that backup withholding be applied to your account.
Certain payees, such as corporations, generally are exempt
from backup
withholding. Please complete IRS Form W-9 with the new account
application to
claim this exemption. If the registration is for an UGMA/UTMA
account, please
provide the social security number of the minor. Non-U.S.
investors who do not
have a TIN must provide, with their Account Application, a
completed IRS Form
W-8.
CERTIFICATES
In order to facilitate transfers, exchanges and redemptions,
most
shareholders elect not to receive certificates. Should you wish
to have a
certificate issued, please contact IMSC at 1-800-777-6472 and
request that one
be sent to you. (Retirement plan accounts are not eligible for
this service.)
Please note that if you were to lose your certificate, you would
incur an
expense to replace it.
Certificates requested by telephone for shares valued up to
$50,000 will be
issued to the current registration and mailed to the address of
record. Should
you wish to have your certificates mailed to a different address,
or registered
differently from the current registration, you must provide a
letter of
instruction signed by all registered owners with signatures
guaranteed.
EXCHANGE PRIVILEGE
Shareholders of the Fund have an exchange privilege with
other Ivy and
Mackenzie funds. Class A shareholders may exchange their
outstanding Class A
shares for Class A shares of another Ivy or Mackenzie fund on the
basis of the
net asset value per Class A share, plus an amount equal to the
difference
between the sales charge previously paid on the outstanding Class
A shares and
the sales charge payable at the time of the exchange on the new
Class A shares.
Incremental sales charges are waived for outstanding Class A
shares that have
been invested for 12 months or longer.
Class B shareholders may exchange their outstanding Class B
shares for Class
B shares of another Ivy or Mackenzie Fund on the basis of the net
asset value
per Class B share, without the payment of any contingent deferred
sales charge
that would otherwise be due upon the redemption of Class B
shares. Class B
shareholders who exercise the exchange privilege would continue
to be subject to
the Fund's contingent deferred sales charge schedule (or period)
following an
exchange if such schedule is higher (or longer) than the
contingent deferred
sales charge for the new Class B shares.
Class I shareholders may exchange their outstanding Class I
shares for Class
I shares of another Ivy or Mackenzie fund on the basis of the net
asset value
per Class I share.
Shares resulting from the reinvestment of dividends and other
distributions
will not be charged an initial sales charge or a contingent
deferred sales
charge when exchanged into another Ivy or Mackenzie fund.
Exchanges are considered to be taxable events, and may result
in a capital
gain or a capital loss for tax purposes. Prior to executing an
exchange, you
should obtain and read the prospectus and consider the investment
objective of
the fund to be purchased. Shares must be unissued in order to
execute an
exchange. Exchanges are available only in states where they can
be legally made.
This privilege is not intended to provide shareholders a means by
which to
speculate on short-term movements in the market The Fund reserves
the right to
limit the frequency of exchanges. Exchanges are accepted only if
the
registrations of the two accounts are identical. Amounts to be
exchanged must
meet minimum investment requirements for the Ivy or Mackenzie
Fund into which
the exchange is made.
With respect to shares subject to a contingent deferred sales
charge, if
less than all of an investment is exchanged out of the Fund, the
shares
exchanged will reflect, pro rata, the cost, capital appreciation
and/or
reinvestment of distributions of the original investment as well
as the original
purchase date, for purposes of calculating any contingent
deferred sales charge
for future redemptions of the exchanged shares.
An investor who was a shareholder of American Investors
Income Fund, Inc. or
American Investors Growth Fund, Inc. prior to October 31, 1988,
or a shareholder
of the Ivy Fund prior to December 31, 1991, who became a
shareholder of the Fund
as a result of a reorganization or merger between the Funds may
exchange between
funds without paying a sales charge. An investor who was a
shareholder of
American Investors Income Fund, Inc. or American Investors Growth
Fund, Inc. on
or after October 31, 1988, who became a shareholder of the Fund
as a result of
the reorganization between the Funds will receive credit toward
any applicable
sales charge imposed by any Ivy or Mackenzie fund into which an
exchange is
made.
In calculating the sales charge assessed on an exchange,
shareholders will
be allowed to use the Rights of Accumulation privilege.
EXCHANGES BY TELEPHONE: When you fill out the application
for your purchase
of Fund shares, if Section 6D of the Account Application is not
completed,
telephone exchange privileges will be provided automatically.
Although telephone
exchanges may be a convenient feature, you should realize that
you may be giving
up a measure of security that you may otherwise have if you
terminated the
privilege and exchanged your shares in writing. If you do not
16
<PAGE>
wish to make telephone exchanges or let your registered
representative or
his/her assistant do so on your behalf, you must notify IMSC in
writing.
In order to execute an exchange, please contact IMSC at
1-800-777-6472. Have
the account number of your current fund and the exact name in
which it is
registered available to give to the telephone representative.
The Fund employs reasonable procedures that require personal
identification
prior to acting on exchange instructions communicated by
telephone to confirm
that such instructions are genuine. In the absence of such
procedures, the Fund
may be liable for any losses due to unauthorized or fraudulent
telephone
instructions.
EXCHANGES IN WRITING: In a letter, request an exchange and
provide the
following information:
- The name and class of the fund whose shares you currently
own.
- Your account number.
- The name(s) in which the account is registered.
- The name of the fund in which you wish your exchange to be
invested.
- The number of shares, all shares or the dollar amount you
wish to
exchange.
The request must be signed by all registered owners.
REINVESTMENT PRIVILEGE
Investors who have redeemed Class A shares of the Fund have
the privilege of
reinvesting all or a part of the proceeds of the redemption back
into Class A
shares of the Fund at net asset value (without a sales charge)
within 24 months
after the date of redemption (with no limit on the number of
times this
privilege may be used). IN ORDER TO REINVEST WITHOUT A SALES
CHARGE,
SHAREHOLDERS OR THEIR BROKERS MUST INFORM IMSC THAT THEY ARE
EXERCISING THE
REINVESTMENT PRIVILEGE AT THE TIME OF REINVESTMENT. The tax
status of a gain
realized on a redemption generally will not be affected by the
exercise of the
reinvestment privilege, but a loss realized on a redemption
generally may be
disallowed by the IRS if the reinvestment privilege is exercised
within 30 days
after the redemption. In addition, upon a reinvestment, the
shareholder may not
be permitted to take into account sales charges incurred on the
original
purchase of shares in computing their taxable gain or loss.
SYSTEMATIC WITHDRAWAL PLAN
You may elect the Systematic Withdrawal Plan at any time by
completing the
Account Application, which is attached to this Prospectus. You
can also obtain
this application by contacting your registered representative or
IMSC at
1-800-777-6472. To be eligible, you must have at least $5,000 in
your account.
Payments (minimum distribution amount -- $50) from your account
can be made
monthly, quarterly, semi-annually, annually or on a selected
monthly basis, to
yourself or any other designated payee. You may elect to have
your systematic
withdrawal paid directly to your bank account via electronic
funds transfer
("EFT"). Share certificates must be unissued (held by the Fund)
while the plan
is in effect. A Systematic Withdrawal Plan may not be established
if you are
currently participating in the Automatic Investment Method. For
more
information, please contact IMSC at 1-800-777-6472.
If payments you receive through the Systematic Withdrawal
Plan exceed the
dividends and capital appreciation of your account, you will be
reducing the
value of your account. Additional investments made by
shareholders participating
in the Systematic Withdrawal Plan must equal at least $1,000
while the plan is
in effect. However, it may not be advantageous to purchase
additional Class A or
Class B shares when you have a Systematic Withdrawal Plan,
because you may be
subject to an initial sales charge on your purchase of Class A
shares or to a
contingent deferred sales charge imposed on your redemptions of
Class B shares.
In addition, redemptions are taxable events.
Amounts paid to you through the Systematic Withdrawal Plan
are derived from
the redemption of shares in your account. Any applicable
contingent deferred
sales charge will be assessed upon the redemptions. A contingent
deferred sales
charge will not be assessed on withdrawals not exceeding 12%
annually of the
initial account balance when the Systematic Withdrawal Plan was
started.
Should you wish at any time to add a Systematic Withdrawal
Plan to an
existing account or change payee instructions, you will need to
submit a written
request, signed by all registered owners, with signatures
guaranteed.
Retirement accounts are eligible for Systematic Withdrawal
Plans. Please
contact IMSC at 1-800-777-6472 to obtain the necessary paperwork
to establish a
plan.
If the U.S. Postal Service cannot deliver your checks, or if
deposits to a
bank account are returned for any reason, your redemptions will
be discontinued.
AUTOMATIC INVESTMENT METHOD
You may authorize an investment to be automatically drawn
each month from
your bank for investment in Fund shares under the "Automatic
Investment Method"
and "Fed Wire/EFT" sections of the Account Application. There is
no charge to
you for this program.
You may terminate or suspend your Automatic Investment Method
by telephone
at any time by contacting IMSC at 1-800-777-6472.
If you have investments being withdrawn from a bank account
and we are
notified that the account has been closed, your Automatic
Investment Method will
be discontinued.
CONSOLIDATED ACCOUNT STATEMENTS
Shareholders with two or more Ivy or Mackenzie Fund accounts
will receive a
single quarterly account statement, unless otherwise specified.
This feature
consolidates the activity for each account onto one statement.
Requests for
quarterly consolidated statements for all other accounts must be
submitted in
writing and must be signed by all registered owners.
RETIREMENT PLANS
The Ivy Mackenzie Funds offer several tax sheltered
retirement plans that
may fit your needs:
- IRA (Individual Retirement Account)
- 401(k) Plan
Money Purchase Pension Plan
Profit Sharing Plan
- SEP-IRA (Simplified Employee Pension Plan)
- 403(b)(7) Plan
Minimum initial and subsequent investments for retirement
plans are $25.00.
17
<PAGE>
Investors Bank & Trust, which serves as custodian or trustee
under the
retirement plan prototypes available from the Fund, charges
certain nominal fees
for annual maintenance. A portion of these fees is remitted to
MIMI, as
compensation for its services to the retirement plan accounts
maintained with
the Fund.
Distributions from retirement plans are subject to certain
requirements
under the Code, including withholding requirements, and various
documents
(available from IMSC), including IRS Form W-4P, and information
must be provided
before the distribution may be made. The Ivy Mackenzie Funds and
IMSC assume no
responsibility to determine whether a distribution satisfies the
conditions of
applicable tax laws, and will not be responsible for any
penalties assessed. For
additional information, please contact your broker, tax adviser
or IMSC.
Please call IMSC at 1-800-777-6472 for complete information
kits describing
the plans, their benefits, restrictions, provisions and fees.
SHAREHOLDER INQUIRIES
Inquiries regarding the Fund should be directed to IMSC at
1-800-777-6472.
18
<PAGE>
IVY SHORT-TERM BOND FUND
________________________
ACCOUNT APPLICATION
ACCOUNT NUMBER
USE THIS APPLICATION FOR
CLASS A, CLASS B AND CLASS I
Please mail applications and checks to: Mackenzie Ivy Investor
Services Corp.,
P.O. Box 3022, Boca Raton, FL
33431-0922.
(This application should not be used for retirement accounts for
which Ivy is
custodian.)
<TABLE>
<S> <C> <C>
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IVY SHORT-TERM BOND
FUND ACCOUNT APPLICATION
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--
FUND
USE 101/
1 / 2 1 / 2 0 / 1 0 / X
ONLY ----------------------- --------- ---------
------------ -------- ---------- --------- ---------
------------
Dealer # Branch # Rep # Acct
Type Soc Cd Div Cd CG Cd Exc Cd Red Cd
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REGISTRATION
1 [ ] Individual
_________________________________________________________________
_______________________
[ ] Joint Tenant Owner, Custodian or
Trustee
[ ] Estate
_________________________________________________________________
_______________________
[ ] UGMA/UTMA Co-owner or Minor
[ ] Corporation
_________________________________________________________________
_______________________
[ ] Partnership
Minor's State of Residence
[ ] Sole Proprietor
_________________________________________________________________
_______________________
[ ] Trust Street
__________________
_________________________________________________________________
_______________________
Date of Trust
[ ] Other ____________
_________________________________________________________________
_______/__/__/__/__/__/
__________________ City
State Zip Code
/__/__/__/-/__/__/__/-/__/__/__/__/
/__/__/__/-/__/__/__/-/__/__/__/__/
Phone Number -- Day
Phone Number -- Evening
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TAX ID #
2 /__/__/__/-/__/__/-/__/__/__/__/ of
/__/__/-/__/__/__/__/__/__/__/ Citizenship [ ] U.S. [ ] Other
_______________
Social Security Number Tax
Identification Number
Under penalties of perjury, I certify by signing in
Section 9 below that: (1) the number shown in this section is my
correct taxpayer identification number (TIN), and (2) I
am not subject to backup withholding because: (a) I have not
been notified by the Internal Revenue Service (IRS)
that I am subject to backup withholding as a result of a failure
to report all interest or dividends, or (b) the IRS has
notified me that I am no longer subject to backup
withholding. (Cross out item (2) if you have been
notified by the IRS that you are currently subject to backup
withholding because of underreporting interest or
dividends on your tax return.) Please see the "Tax Identification
Number" section of the Prospectus for additional
information on completing this section.
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DEALER INFORMATION
3 The undersigned ("Dealer") agrees to all applicable
provisions in this Application, guarantees the signature and
legal
capacity of the Shareholder, and agrees to notify the
Manager of any purchases made under a Letter of Intent or Rights
of Accumulation.
__________________________________________________________
__________________________________________________________
Dealer Name
Representative's Name and Number
__________________________________________________________
__________________________________________________________
Branch Office Address
Representative's Phone Number
__________________________________________________________
__________________________________________________________
City State Zip Code
Authorized Signature of Dealer
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--
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INVESTMENTS
4 A. Enclosed is my check for $__________________
($1,000 minimum, except $5,000,000 for Class I) made payable to
Ivy
Short-Term Bond Fund. Please invest it in Class A
[ ] Class B [ ] or Class I [ ] shares.
B. I qualify for an elimination of the sales charge
due to the following privilege (applies only to Class A shares):
[ ] New Letter of Intent (if ROA or 90-day backdate
privilege is applicable, provide account(s) information below).
[ ] ROA with the account(s) listed below.
[ ] Existing Letter of Intent with account(s)
listed below.
____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ] or New
Fund Name
Account Number
____________________________________
/__/__/__/__/__/__/__/__/__/__/ [ ] or New
Fund Name
Account Number
If establishing a Letter of Intent, you will need
to purchase Class A shares over a thirteen-month period in
accordance with the provisions in the Prospectus.
The aggregate amount of these purchases will be at least equal to
$500,000.
C. FOR DEALER USE ONLY
Confirmed trade orders:
/__/__/__/__/__/__/ /__/__/__/__/__/__/ - /__/__/__/
/__/__/__/__/__/__/
Confirm
Number Number of Shares Trade Date
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--
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--
DISTRIBUTION OPTIONS
5 I would like to reinvest dividends and capital gains
into additional shares of the same class in this account at net
asset
value unless a different option is checked below.
A. [ ] Reinvest all dividends and capital gains into
additional shares in this Fund or a different Ivy or Mackenzie
fund.
_____________________________________
/__/__/__/__/__/__/__/ [ ] New Account
Fund Name Account
Number
B. [ ] Pay all dividends in cash and reinvest capital
gains into additional shares of the same class in this account or
an account in a different Mackenzie or Ivy
fund.
_____________________________________
/__/__/__/__/__/__/__/ [ ] New Account
Fund Name Account
Number
C. [ ] Pay all dividends and capital gains in cash.
I REQUEST THE ABOVE CASH
DISTRIBUTION, SELECTED IN B OR C ABOVE, BE:
[ ] Sent to the address listed in the registration.
[ ] Sent to the special payee listed in Section 7A [ ] (By Mail)
7B [ ] (By E.F.T.)
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</TABLE>
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<TABLE>
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OPTIONAL SPECIAL FEATURES
6 A. [ ] AUTOMATIC INVESTMENT METHOD (AIM)
I wish to invest [ ] once per month.
My bank account will be debited on or about the
[ ] twice
______________ day of the month
[ ] 3 times
______________ day of the month
[ ] 4 times
______________ day of the month
______________ day of the month(*)
Please invest $_____________ each period starting in
the month of _______ in Class A [ ] or Class B [ ] of Ivy
Short-Term
Dollar Amount
Month
Bond Fund.
[ ] I have attached a voided check to ensure my
correct bank account will be debited.
(*) There must be a period of at least seven calendar
days between each investment period.
B. [ ] SYSTEMATIC WITHDRAWAL PLANS*
I wish to automatically withdraw funds from my
[ ] Monthly [ ] Quarterly [ ] Semiannually [ ]Annually
account in Class A [ ] or Class B [ ] of Ivy
Short-Term
Bond Fund.
I request the distribution be:
[ ] Sent to the address listed in the registration.
[ ] Once [ ] Twice [ ] 3 times [ ] 4 times per
month [ ] Sent to the special payee listed in Section
7.
[ ] Invested into additional shares of the same
class of a different Ivy or Mackenzie fund.
------
------------------------------------------------------
Fund Name
/_/_/_/_/_/_/_/_/_/_/
Account Number
Amount $ _______________, starting on or about
the_______________day of the________________________
Minimum $50
month
_______________day of the________________________
month
_______________day of the________________________
month(**)
(choose one)
NOTE: Account minimum: $5,000 in shares at current
offering price)
(**) There must be a period of at least seven calendar
days between each withdrawal period.
C. [ ] FEDERAL FUNDS WIRE FOR REDEMPTION PROCEEDS(*)
I authorize the Agent to honor telephone
instructions for the redemption of Fund shares up to $50,000.
Proceeds may
be wire transferred to the bank account designated
($1,000 minimum, except $10,000 minimum for Class I). Shares
issued in certificate form may not be redeemed
under this privilege. (COMPLETE SECTION 7B)
D. [ ] TELEPHONE EXCHANGES(*) [ ] Yes [ ] No
I authorize exchanges by telephone among The Ivy
and Mackenzie family of funds upon instructions from any person
as
more fully described in the Prospectus. To change
this option once established, written instruction must be
received
from the shareholder of record or the current
registered representative.
If neither box is checked, the telephone exchange
privilege will be provided automatically.
E. [ ] TELEPHONE REDEMPTIONS(*) [ ] Yes [ ] No
The Fund or its agents are authorized to honor
telephone instructions from any person as more fully described in
the
Prospectus for the redemption of Fund shares. The
amount of the redemption shall not exceed $50,000 and the
proceeds
are to be payable to the shareholder of record and
mailed to the address of record. To change this option once
established, written instruction must be received
from the shareholder of record or the current registered
representative.
If neither box is checked, the telephone exchange
privilege will be provided automatically.
*MAY NOT BE USED IF SHARES
ARE ISSUED IN CERTIFICATE FORM.
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--
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--
SPECIAL PAYEE
7 A. MAILING ADDRESS
B. FED WIRE / E.F.T. INFORMATION
-------------------------------------------------------
----------------------------------------------------
Please send all disbursements to this special payee
-------------------------------------------------------
----------------------------------------------------
Name of Bank or Individual
Financial Institution
-------------------------------------------------------
---------------------------- ---------------------
Account Number (if applicable)
ABA # Account #
-------------------------------------------------------
----------------------------------------------------
Street
Street
-------------------------------------------------------
----------------------------------------------------
City/State/Zip
City/State/Zip
(Please attach a voided check)
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--
(Remember to
Sign Section 9)
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--
CHECK WRITING IVY SHORT
TERM BOND FUND
ENROLLMENT FORM (checks must be written
for a minimum of $500)
8 Check writing privileges are available to Class A
shareholders only. Shares purchased in the Fund may be subject
to a
holding period of up to 15 calendar days before being
redeemed by check. Please see the Prospectus for details.
HOW TO ENROLL
1. ALL REGISTERED OWNERS MUST SIGN THIS FORM IN THE
SPACE PROVIDED BELOW.
2. Check the appropriate Number of Signatures Required
box to indicate the number of signatures required when writing
checks.
NUMBER OF SIGNATURES REQUIRED
[ ] All signatures are required
[ ] One signature is required
[ ] More than one signature is required
--------------------------------------
number of
signatures required
IF NONE OF THE ABOVE IS CHECKED THAN ALL SIGNATURES WILL
BE REQUIRED
-----------------------------------------------
--------------------
Authorized Signature Date
-----------------------------------------------
--------------------
Authorized Signature Date
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--
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--
SIGNATURES
9 Investors should be aware that failure to check "No" under
Section 6D or 6E above means that the Telephone
Exchange/Redemptions Privileges will be provided. The Fund
employs reasonable procedures that require personal
identification prior to acting on exchange/redemption
instructions communicated by telephone to confirm that such
instructions are genuine. In the absence of such
procedures, the Fund may be liable for any losses due to
unauthorized or
fraudulent telephone instructions. Please see "Exchange
Privilege" and "How to Redeem Shares" in the Prospectus for more
information on these privileges.
I certify to my legal capacity to purchase or redeem
shares of the Fund for my own account or for the account of the
organization named in Section 1. I have received a current
Prospectus and understand its terms are incorporated in this
application by reference. I am certifying my taxpayer
information as stated in Section 2.
THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT
TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATE
REQUIRED TO AVOID BACKUP WITHHOLDING.
-----------------------------------------------------------------
---------- ------------------
Signature of Owner, Custodian, Trustee or Corporate
Officer Date
-----------------------------------------------------------------
---------- ------------------
Signature of Joint Owner, Co-Trustee or Corporate Officer
Date
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--
</TABLE>
ISTBF-1-496
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 121
[NAME] IVY SHORT-TERM BOND FUND - CLASS A
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 5,468,898
[INVESTMENTS-AT-VALUE] 5,580,789
[RECEIVABLES] 92,304
[ASSETS-OTHER] 391,662
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,064,755
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 10,836
[TOTAL-LIABILITIES] 10,836
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6,723,281
[SHARES-COMMON-STOCK] 619,271
[SHARES-COMMON-PRIOR] 903,236
[ACCUMULATED-NII-CURRENT] 25,217
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (806,470)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 111,891
[NET-ASSETS] 6,053,919
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 452,627
[OTHER-INCOME] 0
[EXPENSES-NET] 65,587
[NET-INVESTMENT-INCOME] 387,040
[REALIZED-GAINS-CURRENT] (321,600)
[APPREC-INCREASE-CURRENT] 313,952
[NET-CHANGE-FROM-OPS] 379,392
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 385,327
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 29,579
[NUMBER-OF-SHARES-REDEEMED] 342,312
[SHARES-REINVESTED] 28,768
[NET-CHANGE-IN-ASSETS] (2,517,739)
[ACCUMULATED-NII-PRIOR] 27,935
[ACCUMULATED-GAINS-PRIOR] (645,132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 42,049
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 229,642
[AVERAGE-NET-ASSETS] 6,968,301
[PER-SHARE-NAV-BEGIN] 9.44
[PER-SHARE-NII] .80
[PER-SHARE-GAIN-APPREC] (.02)
[PER-SHARE-DIVIDEND] .54
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.73
[EXPENSE-RATIO] .93
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 122
[NAME] IVY SHORT-TERM BOND FUND - CLASS B
<TABLE>
<S> <C>
[PERIOD-TYPE] OTHER
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-01-1995
[INVESTMENTS-AT-COST] 5,468,898
[INVESTMENTS-AT-VALUE] 5,580,789
[RECEIVABLES] 92,304
[ASSETS-OTHER] 391,662
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,064,755
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 10,836
[TOTAL-LIABILITIES] 10,836
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6,723,281
[SHARES-COMMON-STOCK] 2,751
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 25,217
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (806,470)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 111,891
[NET-ASSETS] 6,053,919
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 452,627
[OTHER-INCOME] 0
[EXPENSES-NET] 65,587
[NET-INVESTMENT-INCOME] 387,040
[REALIZED-GAINS-CURRENT] (321,600)
[APPREC-INCREASE-CURRENT] 313,952
[NET-CHANGE-FROM-OPS] 379,392
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 2,285
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 20,705
[NUMBER-OF-SHARES-REDEEMED] 18,123
[SHARES-REINVESTED] 169
[NET-CHANGE-IN-ASSETS] (2,517,739)
[ACCUMULATED-NII-PRIOR] 27,935
[ACCUMULATED-GAINS-PRIOR] (645,132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 42,049
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 229,642
[AVERAGE-NET-ASSETS] 39,775
[PER-SHARE-NAV-BEGIN] 9.44
[PER-SHARE-NII] .75
[PER-SHARE-GAIN-APPREC] .03
[PER-SHARE-DIVIDEND] .49
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 9.73
[EXPENSE-RATIO] 1.43
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
<PAGE>
[ARTICLE] 6
[SERIES]
[NUMBER] 123
[NAME] IVY SHORT-TERM BOND FUND - CLASS I
<TABLE>
<S> <C>
[PERIOD-TYPE] YEAR
[FISCAL-YEAR-END] DEC-31-1995
[PERIOD-START] JAN-01-1995
[PERIOD-END] DEC-31-1995
[INVESTMENTS-AT-COST] 5,468,898
[INVESTMENTS-AT-VALUE] 5,580,789
[RECEIVABLES] 92,304
[ASSETS-OTHER] 391,662
[OTHER-ITEMS-ASSETS] 0
[TOTAL-ASSETS] 6,064,755
[PAYABLE-FOR-SECURITIES] 0
[SENIOR-LONG-TERM-DEBT] 0
[OTHER-ITEMS-LIABILITIES] 10,836
[TOTAL-LIABILITIES] 10,836
[SENIOR-EQUITY] 0
[PAID-IN-CAPITAL-COMMON] 6,723,281
[SHARES-COMMON-STOCK] 0
[SHARES-COMMON-PRIOR] 0
[ACCUMULATED-NII-CURRENT] 25,217
[OVERDISTRIBUTION-NII] 0
[ACCUMULATED-NET-GAINS] (806,470)
[OVERDISTRIBUTION-GAINS] 0
[ACCUM-APPREC-OR-DEPREC] 111,891
[NET-ASSETS] 6,053,919
[DIVIDEND-INCOME] 0
[INTEREST-INCOME] 452,627
[OTHER-INCOME] 0
[EXPENSES-NET] 65,587
[NET-INVESTMENT-INCOME] 387,040
[REALIZED-GAINS-CURRENT] (321,600)
[APPREC-INCREASE-CURRENT] 313,952
[NET-CHANGE-FROM-OPS] 379,392
[EQUALIZATION] 0
[DISTRIBUTIONS-OF-INCOME] 0
[DISTRIBUTIONS-OF-GAINS] 0
[DISTRIBUTIONS-OTHER] 0
[NUMBER-OF-SHARES-SOLD] 0
[NUMBER-OF-SHARES-REDEEMED] 0
[SHARES-REINVESTED] 0
[NET-CHANGE-IN-ASSETS] (2,517,739)
[ACCUMULATED-NII-PRIOR] 27,935
[ACCUMULATED-GAINS-PRIOR] (645,132)
[OVERDISTRIB-NII-PRIOR] 0
[OVERDIST-NET-GAINS-PRIOR] 0
[GROSS-ADVISORY-FEES] 42,049
[INTEREST-EXPENSE] 0
[GROSS-EXPENSE] 229,642
[AVERAGE-NET-ASSETS] 0
[PER-SHARE-NAV-BEGIN] 0
[PER-SHARE-NII] 0
[PER-SHARE-GAIN-APPREC] 0
[PER-SHARE-DIVIDEND] 0
[PER-SHARE-DISTRIBUTIONS] 0
[RETURNS-OF-CAPITAL] 0
[PER-SHARE-NAV-END] 0
[EXPENSE-RATIO] 0
[AVG-DEBT-OUTSTANDING] 0
[AVG-DEBT-PER-SHARE] 0
</TABLE>
