Rule 497(c)
Registration No. 33-8746
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
that consists of separate series (each, a "Fund," and collectively, the
"Funds"). The following Funds are open-end, diversified management investment
companies with the following investment objectives:
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 INTERNATIONAL VALUE FUND -- This Fund's investment
objective is long-term capital appreciation consistent with
preservation of capital primarily through investments in securities of
non-U.S. issuers.
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, 1997,
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 1-800-697-3863 or writing the Trust c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
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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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is February 28, 1997.
<PAGE>
TABLE OF CONTENTS
Page
Highlights ................................................................ 2
Fee Table.................................................................. 5
Financial Highlights....................................................... 6
Performance Calculation.................................................... 10
Investment Objective, Policies and Risks................................... 10
Additional Investment Policies and Risk
Considerations........................................................... 16
Investment Advisor and Investment
Advisory Agreements...................................................... 20
Distribution Plans......................................................... 21
Administrative Services Agreement.......................................... 22
Brokerage Allocation....................................................... 22
Purchase of Shares......................................................... 23
Redemption of Shares....................................................... 28
Shareholder Privileges..................................................... 29
Dividends, Distributions and Tax Matters................................... 31
Organization and Description of Shares of
the Trust................................................................ 33
Custodian, Transfer Agent and Dividend
Paying Agent............................................................. 33
Counsel and Independent Accountants........................................ 33
Shareholder Inquiries...................................................... 33
Other Information.......................................................... 34
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<PAGE>
HIGHLIGHTS
WHAT IS THE TOCQUEVILLE TRUST?
The Tocqueville Trust is a business trust formed under the laws of the
Commonwealth of Massachusetts. Each series is an open-end, diversified
management investment company, as defined by the Investment Company Act of 1940,
as amended (the "1940 Act"). Shares of each Fund may be purchased at a price
equal to the next determined net asset value per share plus a charge which may
be imposed at the time of purchase. 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.")
WHAT IS THE TOCQUEVILLE INTERNATIONAL VALUE FUND AND HOW IS ITS INVESTMENT
OBJECTIVE ACHIEVED?
The Tocqueville International Value 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 non-U.S. issuers. The Fund will invest in securities 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 will invest at
least 65% of its total assets in securities of issuers located in at least three
different countries outside the United States, including common stock,
investment grade debt convertible into common stock, depository receipts for
these securities and warrants. The Fund does not intend to engage on an ongoing
basis in short-term trading. (See "Investment Objective, Policies and Risks.")
<PAGE>
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 65% of its assets in short and
intermediate-term securities backed by the full faith and credit of the
U.S.Government, as well as in repurchase agreements collateralized by such
securities. Also, at least 50% of the Fund's assets will be invested in
U.S.Treasury bills, notes and bonds, as well as in repurchase agreements
collateralized by such securities. 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 the 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 more
than $600 million. (See "Investment Advisor and Investment Advisory
Agreements.")
DISTRIBUTION PLANS
Each Fund has adopted a distribution plan, pursuant to Rule 12b-1 of
the 1940 Act, that allows a Fund to incur distribution expenses related to the
sale of its shares of up to .25% 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 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.")
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<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
TOCQUEVILLE SMALL CAP INTERNATIONAL GOV'T
FUND VALUE FUND VALUE FUND FUND
---- ---------- ---------- ----
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases....... 4.00% 4.00% 4.00% 4.00%
Maximum Sales Load Imposed on
Reinvested Dividends............... None None None None
Maximum Deferred Sales Load........... None None None None
Redemption Fee * * * *
Exchange Fee ** ** ** **
ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee........................ .75% .75% 1.00% .50%
12b-1 Fee(1).......................... .25% .25% .25% .25%
Other Expenses (after fee waivers).... .40% .75% .75% .25%
------ ------ ------ -----
Total Operating Expenses (after fee waivers)... 1.40%(2) 1.75%(2) 2.00(2) 1.00%(3)
</TABLE>
- ----------
(1) Under each 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.
(2) Total Operating Expenses reflect the voluntary waiver and/or the
reimbursement of certain expenses. Absent such voluntary waiver and/or
reimbursement, Other Expenses and Total Operating Expenses for each Fund
would be: Tocqueville Fund: .65% and 1.65%, respectively; Tocqueville Small
Cap Value Fund: 1.69% and 2.69%, respectively; and Tocqueville
International Value Fund: 1.28% and 2.53%, respectively. The Advisor has
voluntarily undertaken to waive and/or reimburse expenses during the
current fiscal year so that Total Fund Operating Expenses do not exceed
those stated in the Fee Table. Should the Advisor decide during the current
fiscal year that such waiver and/or reimbursement cannot be maintained,
shareholders will receive 30 days notice of the change.
(3) Tocqueville Government Fund's operating expenses will be capped at 1%
through November 29, 1999. Without voluntary fee waivers, deferrals and/or
expense reimbursements, Other Expenses would be 1.97% and Total Operating
Expenses would be 2.72%.
* The Transfer Agent charges a $12 service fee for each payment of redemption
proceeds made by wire.
** The Transfer Agent charges a $5 fee for each telephone exchange.
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<PAGE>
EXAMPLE: 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.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Tocqueville Fund $54 $ 83 $114 $201
Tocqueville Small Cap Value Fund $57 $ 93 $131 $238
Tocqueville International Value Fund $59 $100 $143 $263
Tocqueville Government Fund $50 $ 71 $ 93 $158
</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
expected to be incurred by each Fund during the current fiscal year. 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 example includes the initial sales
charge.
These examples should not be considered a representation of past or
future expenses and actual expenses may be greater or less than those shown.
-4-
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information with respect
to the financial highlights for the Funds for the periods indicated. The
information below has been derived from financial statements audited by
McGladrey & Pullen, LLP as independent accountants for the Trust, whose reports
thereon, together with the financial statements of the Funds, are incorporated
by reference into the Statement of Additional Information. The information set
forth below is for a share outstanding of each Fund for each period indicated.
THE TOCQUEVILLE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
Per share operating performance
(For a share outstanding throughout the
period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $14.07 $13.74 $13.67 $11.83 $11.33
------ ------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) ............ 0.07 0.15 0.12 0.11 0.17
Net realized and unrealized gain (loss) 2.92 1.70 0.88 2.55 1.33
---- ---- ---- ---- ----
Total from investment operations ..... 2.99 1.85 1.00 2.66 1.50
---- ---- ---- ---- ----
Less distributions:
Dividends from net investment income .... (0.15) (0.11) (0.14) (0.16) (0.36)
Distributions from net realized gains ... (1.06) (1.41) (0.79) (0.66) (0.64)
----- ----- ----- ----- -----
Total Distributions .................. (1.21) (1.52) (0.93) (0.82) (1.00)
----- ----- ----- ----- -----
Change in net asset value for the period .... 1.78 0.33 0.07 1.84 0.50
---- ---- ---- ---- ----
Net asset value, end of period .............. $15.85 $14.07 $13.74 $13.67 $11.83
====== ====== ====== ====== ======
Total Return(a) ............................. 22.7% 16.0% 7.7% 23.7% 14.9%
Ratios/supplemental data:
Net assets, end of period (000) ............. $42,414 $33,438 $29,140 $27,745 $19,496
Ratio to average net assets :
Expenses(b) ............................ 1.49% 1.54% 1.54% 1.56% 1.74%
Net investment income(b) ................ .44% 1.07% 0.87% 0.96% 1.44%
Portfolio turnover rate ..................... 48% 47% 52% 64% 89%
Average commission rate paid(c) ............. $.0596
YEAR ENDED OCTOBER 31,
1991 1990 1989 1988 1987**
---- ---- ---- ---- ------
Per share operating performance
(For a share outstanding throughout the
period)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ........ $10.21 $11.33 $9.98 $8.63 $10.00
------ ------ ----- ----- ------
Income (loss) from investment operations:
Net investment income (loss) ............ 0.33 0.56 0.33 0.08 --
Net realized and unrealized gain (loss) 1.41 (0.90) 1.29 1.68 (1.37)
---- ----- ---- ---- -----
Total from investment operations ..... 1.74 (0.34) 1.62 1.76 (1.37)
---- ----- ---- ---- -----
Less distributions:
Dividends from net investment income .... (0.51) (0.37) (0.06) (0.02) --
Distributions from net realized gains ... (0.11) (0.41) (0.21) (0.39) --
----- ----- ----- -----
Total Distributions .................. (0.62) (0.78) (0.27) (0.41) --
----- ----- ----- -----
Change in net asset value for the period .... 1.12 (1.12) 1.35 1.35 (1.37)
---- ----- ---- ---- -----
Net asset value, end of period .............. $11.33 $10.21 $11.33 $9.98 $8.63
====== ====== ====== ===== =====
Total Return(a) ............................. 17.7% (3.4)% 16.7% 21.1% (13.70)%
Ratios/supplemental data:
Net assets, end of period (000) ............. $17,388 $13,377 $17,014 $15,515 $9,477
Ratio to average net assets :
Expenses(b) ............................ 1.96% 1.61% 1.70% 2.09% 2.50%
Net investment income(b) ................ 3.38% 4.71% 2.86% 0.85% (0.03)%*
Portfolio turnover rate ..................... 97% 125% 34% 65% 73%
Average commission rate paid(c) .............
</TABLE>
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(a) Does not include maximum initial sales charge of 4.00%.
(b) Net of fees waived amounting to 0.16%, 0.02%, 0.61% and 0.16% of average
net assets, for the periods ended October 31, 1996, 1995, 1988 and 1987,
respectively.
(c) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
* Annualized.
** From commencement of operations, January 13, 1987.
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<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 31, AUGUST 1, 1994
1996 1995 TO OCTOBER 31, 1994
---- ---- -------------------
<S> <C> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period............ $11.91 $10.22 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss).................. (0.10) (0.05) 0.02
Net realized and unrealized gain (loss)........ 2.33 1.96 0.20
------ ------- ------
Total from investment operations....... 2.23 1.91 0.22
------ ------- ------
Less Distributions:
Dividends from net investment income............ -- (0.03) --
Distributions from net realized gains.......... (0.77) (0.19) --
------ --------- ------
Total Distributions.................... (0.77) (0.22) --
------ --------- ------
Change in net asset value for the period................. 1.46 1.69 0.22
------ -------- ------
Net asset value, end of period........................... $13.37 $ 11.91 $10.22
====== ======= ======
Total Return(a).......................................... 19.7% 19.2% 2.2%
Ratios/supplemental data:
Net assets, end of period (000).......................... $11,545 $9,383 $6,755
Ratio to average net assets :
Expenses(b)..................................... 2.36% 2.50% 2.08%*
Net investment income(b)....................... (1.18)% (0.53)% 0.85%*
Portfolio turnover rate................................. 107% 88% 9%
Average commission rate paid(c) $.0599
</TABLE>
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(a) Does not include maximum initial sales charge of 4.00%. For the period
ended October 31, 1994, not annualized.
(b) Net of fees waived amounting to 0.33%, 0.33% and 0.75% of average net
assets for the periods ended October 31, 1996, 1995, and 1994,
respectively.
(c) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
* Annualized.
-6-
<PAGE>
THE TOCQUEVILLE INTERNATIONAL VALUE FUND(1a/c)
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 31, AUGUST 1, 1994
1996 1995 TO OCTOBER 31, 1994
---- ---- -------------------
<S> <C> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period .............. $10.83 $10.02 $10.00
------ ------ ------
Income (loss) from investment operations:
Net investment income (loss) ..................... 0.16 (0.01) (0.04)
Net realized and unrealized gain (loss) .......... 1.58 0.82 0.06
------ ------ ------
Total from investment operations .............. 1.74 0.81 0.02
---- ------ ------
Less Distributions:
Dividends from net investment income............... -- -- --
Distributions from net realized gains ............. -- -- --
------ ------ ------
Total Distributions .......................... -- -- --
------ ------ ------
Change in net asset value for the period ............. 1.74 0.81 0.02
------ ------ ------
Net asset value, end of period ....................... $12.57 $10.83 $10.02
====== ====== ======
Total Return(b) ...................................... 16.1% 8.1% 0.2%
Ratios/supplemental data:
Net assets, end of period (000) ...................... $23,932 $6,270 $2,516
Ratio to average net assets:
Expenses(c) ....................................... 1.98% 4.43% 6.18%(c)
Net investment income(c) .......................... 1.45% (0.53)% (2.47)%(e)
Portfolio turnover rate ............................. 135% 109% 0%
Average commission rate paid(d) ...................... $.0040
</TABLE>
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(a) Effective February 28, 1997, The Tocqueville Europe Fund changed its
investment objective and policies to invest primarily in the securities
of non-U.S. issuers as described in this Prospectus. In addition, the
name of the Fund was changed to The Tocqueville International Value Fund.
(b) Does not include maximum initial sales charge of 4.00%.
(c) Net of fees waived amounting to .55%, 1.28% and 1.00% of average net
assets for the periods ended October 31, 1996, 1995, and 1994,
respectively.
(d) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
(e) Annualized.
-7-
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 4, 1995
YEAR ENDED TO OCTOBER 31,
OCTOBER 31, 1996 1995
---------------- ----
<S> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period...................... $ 10.05 $ 10.00
------- -------
Income (loss) from investment operations:
Net investment income (loss).............................. 0.49 0.05
Net realized and unrealized gain (loss)................... 0.08 0.05
------- ------
Total from investment operations....................... 0.57 0.10
------- ------
Less Distributions:
Dividends from net investment income...................... (0 .49) (0.05)
Distributions from net realized gains..................... -- --
------- -------
Total distributions.................................... (0.49) (0.05)
-------- --------
Change in net asset value for the period...................... $ 0.08 0.05
------- -------
Net asset value, end of period............................ $ 10.13 $ 10.05
======= =======
Total Return (a).............................................. 5.9% 6.3%(c)
Ratios/supplemental data:
Net assets, end of period..................................... $9,788 $6,506
Ratio to average net assets :
Expenses(b)............................................... 1.47% 2.74%(c)
Net investment income(b)................................. 4.94% 3.08%(c)
Portfolio turnover rate....................................... 85% 0%
</TABLE>
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(a) Does not include maximum initial sales charge of 4.00%.
(b) Net of fees waived amounting to 1.25% and 0.77% of average net assets for
the periods ended October 31, 1996 and 1995, respectively.
(c) Annualized.
-8-
<PAGE>
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 reflects the deduction of the maximum initial
sales charge at the time of purchase. 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 income and net
realized capital gains, respectively. In addition, each Fund may calculate
performance on a total return basis at net asset value.
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 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 to which investments in shares of the Fund may
be subject.
The Tocqueville Government Fund will provide 30-day "yield" quotations.
The "yield" quotations of the Fund will be based upon 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
Each Fund's investment objective is fundamental and may not be changed
without a vote of the holders of a majority of its outstanding voting securities
(as defined in the Statement of Additional Information). There can be no
assurance that a Fund will achieve its investment objective.
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.
-9-
<PAGE>
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 (ADRs). 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 interest 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 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.
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In addition, the Fund may invest up to 25% of its total assets in
common stock of small capitalization companies located in developed countries in
Europe and Asia. Such securities will be denominated in foreign currencies and
will be listed on a foreign stock exchange. See "Additional Investment Policies
and Risk Considerations - Risks Associated with Foreign Investments."
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 ADRs. 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 INTERNATIONAL VALUE FUND
The investment objective of The Tocqueville International Value Fund
is long-term capital appreciation consistent with preservation of capital
primarily through investments in securities of non-U.S. issuers. Toward this end
the Fund invests in a diversified portfolio consisting of common stocks of
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 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.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in at least three different countries outside the United States. The
Fund will invest most of its assets in developed countries, although it may
purchase securities of companies located in developing countries . In addition,
the Fund may invest up to 20% of its assets in the United States.
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 Tocqueville International Value 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, the Fund will normally invest substantially all of its assets
in
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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. The 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 the 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 the Fund's portfolio. The 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.
The 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 the Fund's entire investment
holdings. Of course, a decline in the value of the 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. 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 65% of
its assets in short and intermediate term securities backed by the full faith
and credit of the U.S. Government, as well as in repurchase agreements
collateralized by such securities. Also, at least 50% of the Fund's assets will
be invested in U.S. Treasury bills, notes and bonds, as well as in repurchase
agreements collateralized by such securities. 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 35% of its assets in Government National
Mortgage Association ("GNMA") pass-through certificates. 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
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in additional securities and distributes the interest portion as income to the
Fund's shareholders. Under normal circumstances, GNMA pass-through certificates
are expected to provide higher yields than U.S. Treasury securities of
comparable maturity.
The mortgage loans underlying GNMA pass-through 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 pass-through 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
pass-through certificates are repaid within 12 years and so are classified as
intermediate-term securities.
The Fund also may invest up to 35% of its assets in: (a) agencies or
instrumentalities of the U.S. Government, including but not limited to: (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) securities issued by the Student Loan
Marketing Association ("SLMA") and the Federal Home Loan Bank System ("FHLB");
and (b) collateralized mortgage obligations ("CMOs"). The Fund will limit its
investments in CMOs to 10% of its portfolio.
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.
SLMA securities consist of debt obligations including nonguaranteed
discount notes, short-term floating rate notes, long-term floating rate
securities and fixed-rate securities. SLMA securities are supported by the
ability of SLMA to borrow from the U.S. Government, but are not backed by the
full faith and credit of the U.S. Government.
FHLB securities are debt securities issued in the form of consolidated
bonds and discount notes. FHLB securities are supported by the ability of FHLB
to borrow from the U.S. Government, 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
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point interest rate movement; 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 nor
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 backed 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.
Unlike other government securities, mortgage-backed securities are
subject to "prepayment risk" and "extension 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
The following investment strategies and techniques 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.
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
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collateral. Each Fund attempts to minimize such risks specifying the required
value of the underlying collateral.
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 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 Board of Trustees . 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, and The
Tocqueville International Value 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. For
temporary defensive purposes, when deemed necessary by the Investment Advisor,
each Fund may invest up to 100% of its assets in U.S. Government obligations or
"high-quality" debt obligations of companies incorporated and having principal
business activities in the United States. When a Fund's assets are so invested,
they are not invested so as to meet the Fund's investment objective.
"High-quality" short-term obligations are those obligations which, at the time
of purchase, (1) possess a rating in one of the two highest ratings categories
from at least one nationally recognized statistical ratings organization
("NRSRO") (for example, commercial paper rated "A-1" or "A-2" by Standard &
Poor's Corporation ("S&P") or "P-1" or "P-2" by Moody's Investors Service, Inc.
("Moody's")) or (2) are unrated by an NRSRO but are determined by the Investment
Advisor to present minimal credit risks and to be of comparable quality to rated
instruments eligible for purchase by the Fund under guidelines adopted by the
Board of Trustees (the "Trustees").
PORTFOLIO TURNOVER
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 investment by The Tocqueville Small Cap Value Fund and
The Tocqueville International Value Fund 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
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to "investment grade" securities. "Investment grade" securities are those rated
within the four highest quality grades as determined by Moody's or S&P .
Securities rated Aaa by Moody's and AAA by S&P are judged to be of the best
quality and carry the smallest degree of risk. Securities rated Baa by Moody's
and BBB by S&P 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 and The Tocqueville International
Value 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 Cap Value 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 is a technique known as selling short "against the
box." Such a transaction serves to defer a gain or loss for Federal income tax
purposes.
OPTIONS TRANSACTIONS
The Tocqueville International Value Fund may purchase put and call
options on securities and on stock indices to attempt to hedge its portfolio and
to increase its total return. The 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. The 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 the 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 the
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.
The 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 the Fund's
position, it would lose the premium it paid and transactions costs. This
discussion is a general summary. See the Statement of Additional Information for
information concerning the 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
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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.
The Tocqueville International Value Fund may enter into contracts for
the future delivery of securities or foreign currencies and futures contracts
based on a specific security, class of securities, foreign currency or an index,
purchase or sell options on any such futures contracts and engage in related
closing transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
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 to hedge effectively 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 currencies,
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 Advisor'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 International Value 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 its net assets. A
call option is "covered" if the Fund owns the underlying security covered by the
call. The Fund 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 ADRs, which are certificates issued
by U.S. banks representing the right to receive securities of a foreign issuer
deposited with
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that bank or a correspondent bank, and The Tocqueville Small Cap Value Fund and
The Tocqueville International Value 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 TOCQUEVILLE INTERNATIONAL VALUE FUND.
In addition to the risks described above, the economies of other 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 Fund may invest, without limit, in companies located 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.
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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, and as the portfolio manager of The Tocqueville International
Value Fund . Mr. Sicart, the Chairman 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. 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 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 1933 Act
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, calculated daily and 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) The Tocqueville
International Value Fund, calculated daily and 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
the Fund, .75% of 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, calculated daily and
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
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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 (each a "Plan") pursuant to
Rule 12b-1 of the 1940 Act. Pursuant to the Plans, a Fund may incur distribution
expenses related to the sale of its shares of up to .25% per annum of the Fund's
average daily net assets.
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. (See the Statement of
Additional Information--"Distribution Plan" for further information about the
Plan.)
As of October 31, 1996, The Tocqueville Fund, The Tocqueville Small Cap
Value Fund, The Tocqueville International Value Fund, and The Tocqueville
Government Fund had $96,670, $78,055, $71,716 and $22,255, respectively, of
unreimbursed distribution expenses (0.23%, 0.68%, 0.30% and 0.23%, respectively,
as a percentage of each Fund's net assets). (See the Statement of Additional
Information--"Distribution Plans" for further information about the Plans.)
ADMINISTRATIVE SERVICES AGREEMENTS
Under an Administrative Services Agreement, Tocqueville Asset
Management L.P. 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 Asset Management L.P. and its
affiliates. For these services and facilities, Tocqueville Asset Management L.P.
receives with respect to each Fund a fee computed and paid monthly at an annual
rate of .15% of the average daily net assets of the Fund. Certain administrative
responsibilities have been delegated to and are being performed by Firstar Trust
Company.
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
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the value of the services provided by such broker-dealer. Subject to the
supervision of the Trustees, the Investment Advisor is authorized to allocate
brokerage to affiliated broker-dealers on an agency basis to effect portfolio
transactions. The Trustees have adopted procedures incorporating the standards
of Rule 17e-1 of the 1940 Act, which require that the commission paid to
affiliated broker-dealers must be reasonable and fair compared to the
commission, fee or other remuneration received, or to be received, by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. It is expected that brokerage will be
allocated to the Distributor, Tocqueville Securities L.P., an affiliate of the
Investment Advisor. 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
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.
The minimum initial investment in The Tocqueville Trust is $5,000
except for 401(k), IRA, Keogh and other pension or profit sharing plan accounts
where the minimum is $2,000. For example, an investor may choose to make an
initial investment in a Fund equal to an amount which is less than $5,000 so
long as such investor's total initial investments in the Funds are equal to
$5,000. The minimum subsequent investment in the Trust is $1,000. The
Distributor may, in its discretion, waive the minimum investment requirements
for purchases, including those made via the Automatic Investment Plan, which is
discussed below .
Shares of a Fund may be purchased from the following entities: (a) the
Funds' 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 brokers who have entered into
agreements with the Trust to provide distribution and shareholder services; and
(c) the Funds' transfer agent, Firstar Trust Company (the "Transfer Agent").
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 other 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 (the "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, a Selling Broker or other broker may purchase a Fund's shares
through such broker. Payment for purchase orders through Tocqueville Securities,
the Selling Broker or other broker must be made to Tocqueville Securities, the
Selling Broker or other 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.
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INITIAL SALES CHARGES
The initial sales charge, imposed upon a sale of 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 sales charges apply to the aggregate of purchases
of 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.
Upon notice to Selling Brokers, Tocqueville Securities may reallow up
to the full applicable initial sales charge and such Selling Broker may
therefore be deemed an "underwriter" under the 1933 Act, as amended, during such
periods. The Distributor may, from time to time, provide promotional incentives
to certain Selling Brokers whose representatives have sold or are expected to
sell significant amounts of one or all of the funds of the Trust. At various
times the Distributor may implement programs under which a Selling Broker'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 generated by the Selling Broker during
such programs to any Selling Broker 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 Selling Brokers, consisting of written informational
material relating to sales incentive campaigns conducted by such Selling Brokers
for their representatives.
PURCHASES OF SHARES AT NET ASSET VALUE
PURCHASES THROUGH CERTAIN BROKERAGE ACCOUNTS. Shares may be purchased
at net asset value through brokerage accounts with Tocqueville Securities L.P.,
Selling Brokers and other brokers who have entered into agreements with the
Trust to provide distribution and shareholder services.
QUALIFIED PERSONS. There is no initial sales charge 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) Selling Brokers or other
brokers who have entered into agreements with the Trust to provide distribution
and shareholder services, 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 ADVISORS. Purchases also may be made with
no initial sales charge through a registered investment adviser who has
registered with the Securities and
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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 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 shares by an investor through a 401(k) Plan
or 457 (state deferred compensation) Plan.
RECENTLY REDEEMED SHARES. Shares of a Fund may be purchased at net
asset value by persons who have, within the previous 30 days, redeemed their
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.
SHAREHOLDERS AS OF JANUARY 1, 1994. Shareholders who held shares of a
Fund of the Tocqueville Trust prior to January 1, 1994, may purchase shares of
any Fund of the Trust at net asset value for as long as they continue to own
shares of any Fund of the Trust, provided that there is no change in the account
registration. However, once a shareholder has closed an account by redeeming all
of their Fund shares for a period of more than thirty days such shareholder will
no longer be able to purchase shares of the Fund at net asset value.
REDUCED INITIAL SALES CHARGES
CUMULATIVE QUANTITY DISCOUNT. 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 shares of such Fund and the other Funds
of 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
defined below) may also purchase 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 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 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.
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A "qualified group" is one which: (a) has been in existence for more
than six months; (b) has a purpose other than acquiring shares at a discount;
and (c) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing 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 shares purchased thereafter.
LETTER OF INTENT. Investors may also qualify for reduced initial sales
charges by signing a Letter of Intent (the "LOI"). This enables the investor to
aggregate purchases of shares of a Fund with purchases of shares of any other
Fund of the Trust acquired by exchange, during a 13-month period. The initial
sales charge is based on the total amount invested in shares during the 13-month
period. Shares of the Funds currently owned by the investor including such Fund,
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, or on
the Fund to sell, the full amount indicated; however, on the initial purchase
(or subsequent purchases if necessary), 5% of the dollar amount specified in the
LOI will be held in escrow by the Transfer Agent in 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
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 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 The Tocqueville Trust, c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, WI 53201-0701, accompanied by a
check payable to the Fund whose shares are being purchased. Purchase
applications sent to the Funds will be forwarded to the Transfer Agent, and will
not be effective until received by the Transfer Agent. The price per share is
the next determined per share net asset value (plus a varying initial sales
charge) after receipt of an application by Firstar Trust Company. Purchase
applications should be mailed directly to: The Tocqueville Trust [name of fund],
c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The
U.S. Postal Service and other independent delivery services are not agents of
the Trust. Therefore, deposit of purchase applications in the mail or with such
services does not constitute receipt by Firstar Trust Company or the Trust.
Please do not mail letters by overnight courier to the post office box address.
To purchase shares by overnight or express mail, please use the following street
address: The Tocqueville Trust [name of fund], c/o Firstar Trust Company, Mutual
Fund Services, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin
53202. All applications must be accompanied by payment in the form of a check
drawn on a U.S. bank payable to The Tocqueville Trust or by direct wire
transfer. No cash will be accepted. Firstar Trust Company will charge a $20 fee
against a shareholder's account for any payment check returned to the custodian.
The shareholder will also be responsible for any losses suffered by the Fund as
a result.
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<PAGE>
BY AUTOMATIC INVESTMENT PLAN. The Funds have an Automatic Investment
Plan which permits an existing shareholder to purchase additional shares of any
Fund (minimum $100 per transaction) at regular intervals. Under the Automatic
Investment Plan, shares are purchased by transferring funds from a shareholder's
checking, bank money market, NOW account, or savings account in an amount of
$100 or more designated by the shareholder. At the shareholder's option, the
account designated will be debited and shares will be purchased on the date
selected by the shareholder. There must be a minimum of seven days between
automatic purchases. If the date selected by the shareholder is not a business
day, funds will be transferred the next business day thereafter. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Automatic Investment Account,
complete and sign Section F of the Purchase Application and send it to the
Transfer Agent. Shareholders may cancel this privilege or change the amount of
purchase at any time by calling 1-800-697-3863 or by mailing written
notification to: The Tocqueville Trust [name of fund], c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The change will be
effective five business days following receipt of notification by the Transfer
Agent. A Fund may modify or terminate this privilege at any time or charge a
service fee, although no such fee currently is contemplated. However, a $20 fee
will be imposed by Firstar Trust Company if sufficient funds are not available
in the shareholder's account at the time of the automatic transaction .
While investors may use this option to purchase shares in their IRA or
other retirement plan accounts, neither the Distributor nor the Transfer Agent
will monitor the amount of contributions to ensure that they do not exceed the
amount allowable for Federal tax purposes. Firstar 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 shares directly from the Transfer Agent
may also purchase shares by wire. Funds should be wired to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA # 075000022
Credit: Firstar Trust Company
Account # 112952137
Further credit: The Tocqueville Trust
Name of shareholder and account number (if known)
(Wired funds must be received prior to 4:00 p.m. Eastern time to be
eligible for same day pricing.)
The establishment of a new account or any additional purchases for an
existing account by wire transfer should be preceded by a phone call to Firstar
Trust Company, 1-800-697-3863, to provide information for the account. A
properly signed share purchase application marked "Follow Up" must be sent for
all new accounts opened by wire transfer. Applications are subject to acceptance
by the Fund, and are not binding until so accepted.
REDEMPTION OF SHARES
GENERAL INFORMATION
In order to redeem shares purchased through Tocqueville Securities, a
Selling Broker or other broker, the broker must be notified by telephone or mail
to execute a redemption. A properly completed order to redeem 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 will be held in a
shareholder's account with Tocqueville Securities unless the broker is
instructed to remit all proceeds directly to the shareholder.
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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 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 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) where the
shareholder has not elected to permit telephone redemptions, the request must be
in writing, specifying the number of shares or dollar amount to be redeemed and
sent to the Transfer Agent, Attn. [name of fund] at P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. The U.S. Postal Service and other independent delivery
services are not agents of the Trust. Therefore, deposit of redemption requests
in the mail or with such services does not constitute receipt by Firstar Trust
Company or the Trust. Please do not mail letters by overnight courier to the
post office box address. Redemption requests sent by overnight or express mail
should be directed to: [name of fund] c/o Firstar Trust Company, Mutual Fund
Services, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202.
Requests for redemption by telegram and requests which are subject to any
special conditions or which specify an effective date other than as provided
herein cannot be honored; (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. 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 Firstar Trust Company, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. The Transfer Agent charges a $12 service fee
for each payment of redemption proceeds made by Federal Fund wire. Additional
information regarding redemptions may be obtained by calling 1-800-697-3863.
Redemption of the Funds' shares or payments therefore may be suspended
at such times (a) when the Exchange is closed, (b) when trading on the 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
$500 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.
TELEPHONE REDEMPTION
Shareholders of the Funds will also be permitted to redeem fund shares
by telephone. To redeem shares by telephone, call 1-800-697-3863 with your
account name, account number and amount of redemption. Redemption proceeds will
only be sent to a shareholder's address or a pre-authorized bank account of a
commercial bank located within the United States as shown on the Transfer
Agent's records. (Available only if established on the account application and
if there has been no change of address by telephone within the preceding 15
days.)
The Funds reserve the right to refuse a telephone redemption if they
believe it is advisable to do so. Procedures for redeeming shares by telephone
may be modified or terminated by the Funds at any time upon
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notice to shareholders. During periods of substantial economic or market change,
telephone redemptions may be difficult to implement. If a shareholder is unable
to contact the Transfer Agent by telephone, shares may also be redeemed by
delivering the redemption request to the Transfer Agent.
In an effort to prevent unauthorized or fraudulent redemption requests
by telephone, the Funds and the Transfer Agent employ reasonable procedures to
confirm that such instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or exchange by telephone
will be required to provide their account number. All such telephone
transactions will be tape recorded. The Tocqueville Funds may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Funds and/or the Transfer Agent may be liable for any loss due to unauthorized
or fraudulent transactions. In all other cases, the shareholder is liable for
any loss for unauthorized transactions.
SHAREHOLDER PRIVILEGES
SYSTEMATIC WITHDRAWAL PLAN. The funds offer a Systematic Withdrawal
Plan for shareholders who own shares worth at least $10,000 at current net asset
value of any Fund. Under the Systematic Withdrawal Plan, a fixed sum (minimum
$500) will be distributed at regular intervals (on any day, either monthly or
quarterly). In electing to participate in the Systematic Withdrawal Plan,
investors should realize that within any given period the appreciation of their
investment in a particular Fund may not be as great as the amount withdrawn. A
shareholder may vary the amount of frequency of withdrawal payments or
temporarily discontinue them by notifying Firstar Trust Company at
1-800-697-3863. The Systematic Withdrawal Plan does not apply to shares of any
Fund held in Individual Retirement Accounts or defined contribution retirement
plans. For additional information or to request an application please call
Firstar Trust Company at 1-800-697-3863.
EXCHANGE PRIVILEGE. Subject to certain conditions, shares of a Fund may
be exchanged for the shares of another Fund of The Tocqueville Trust at such
Fund's then current net asset value. No initial sales charge is imposed on the
shares being acquired 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 of 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, each Fund will use reasonable procedures in
an attempt to verify the identity of a person making a telephone exchange
request. Each Fund reserves 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 their agents will be liable for loss, liability
or cost which results from 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
Purchase Application which indicates that you wish to have the privilege. The
exchange privilege may be modified or discontinued at any time.
Shareholders may also exchange shares of any or all of an investment in
the Funds for shares of the Portico Money Market Fund, the Portico Tax-Exempt
Money Market Fund, or the Portico U.S. Government Fund (collectively the "Money
Market Funds"). This Exchange Privilege is a convenient way for shareholders to
buy shares in a money market fund in order to respond to changes in their goals
or market conditions. Before exchanging into the Money Market Funds,
shareholders must read the Portico Money Market Funds' Prospectus. To obtain the
Money Market Funds' Prospectus and the necessary exchange authorization forms,
call the Transfer Agent at 1-800-697-3863. The Transfer Agent charges a $5 fee
for each telephone exchange which will be deducted from the investor's account
from which the funds are being withdrawn prior to effecting
-27-
<PAGE>
the exchange. There is no charge for exchange transactions that are requested by
mail. Use of the Exchange Privilege is subject to the minimum purchase and
redemption amounts set forth in the Prospectus for the Money Market Funds. All
accounts opened in a Money Market Fund as a result of using the Exchange
Privilege must be registered in the identical name and taxpayer identification
number as a shareholder's existing account with the Funds.
For purposes of the Exchange Privilege, exchanges into and out of the
Money Market Funds will be treated as shares owned in the Funds. For example, if
an investor who owned shares in any one of the Funds moved an investment from
one of the Funds to one of the Money Market Funds and then decided at a later
date to move the investment back to one of the Funds, he or she would be deemed,
once again, to own shares of one of the Funds and may do so without the
imposition of any additional sales charges, so long as the investment has been
continuously invested in shares of the Money Market Fund during the period
between withdrawal and reinvestment.
Remember that each exchange represents the sale of shares of one fund
and the purchase of shares of another. Therefore, shareholders may realize a
taxable gain or loss on the transaction. Before making an exchange request, an
investor should consult a tax or other financial adviser to determine the tax
consequences of a particular exchange. The Distributor is entitled to receive a
fee from the Money Market Funds for certain support services at the annual rate
of .20 of 1% of the average daily net asset value of the shares for which it is
the holder or dealer of record. Because excessive trading can hurt the Funds'
performance and shareholders, the Funds reserve the right to temporarily or
permanently limit the number of exchanges or to otherwise prohibit or restrict
shareholders from using the Exchange Privilege at any time, without notice to
shareholders. In particular, a pattern of exchanges with a "market timing"
strategy may be disruptive to the Funds and may thus be restricted or refused.
Excessive use of the Exchange Privilege is defined as more than five exchanges
per calendar year. The restriction or termination of the Exchange Privilege does
not affect the rights of shareholders to redeem shares, as discussed in the
Prospectus.
The Money Market Funds are managed by Firstar Investment Research and
Management Company, an affiliate of Firstar Trust Company. The Portico Funds,
including the Money Market Funds, are unrelated to The Tocqueville Trust.
CHECK REDEMPTION. A shareholder may request on the Purchase Application
or by later written request to establish check redemption privileges for any of
the Money Market Funds. The redemption checks ("Checks") will be drawn on the
Money Market Fund in which the investor has made an investment. Checks will be
sent only to the registered owner(s) and only to the address of record. Checks
may be made payable to the order of any person in the amount of $250 or more.
Dividends are earned until the Check clears the Transfer Agent. When a Check is
presented to the Transfer Agent for payment, the Transfer Agent, as the
investor's agent, will cause the particular Money Market Fund involved to redeem
a sufficient number of the investor's shares to cover the amount of the Check.
Checks will not be returned to shareholders after clearance. The initial
checkbook is free, additional checkbooks are $5. The fee for additional
checkbooks will be deducted from the shareholder's account. There is no charge
to the investor for the use of the Checks; however, the Transfer Agent will
impose a $20 charge for stopping payment of a Check upon the request of the
investor, or if the Transfer Agent cannot honor a Check due to insufficient
funds or other valid reason. Because dividends on each Money Market Fund accrue
daily, Checks may not be used to close an account, as a small balance is likely
to result.
-28-
<PAGE>
DIVIDENDS, DISTRIBUTIONS, AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. Dividends from net investment income are
declared daily and paid monthly by The Tocqueville Government Fund . Dividends
are paid at least annually by The Tocqueville Fund, The Tocqueville Small Cap
Value Fund, and The Tocqueville International Value Fund . The Funds also
distribute net capital gains (if any) at least annually. Dividends and
distributions of shares may be reinvested 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 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 investment income of The Tocqueville International Value Fund and The
Tocqueville Government Fund 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 the source. The economic effect of such withholding
taxes or the total return of each Fund cannot be predicted. The Tocqueville
International Value Fund may elect to "pass through" to its shareholders these
foreign taxes, in which event each shareholder will be required to include their
pro rata portion thereof in their 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 if the Fund so designates. 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.
-29-
<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% backup withholding tax on ordinary income dividends,
capital gain dividends and redemption proceeds paid 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 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, therefore, 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
Firstar Trust Company serves as custodian for the portfolio securities
and cash of The Tocqueville Fund, The Tocqueville Small Cap Value Fund and The
Tocqueville Government Fund, and as each Fund's
-30-
<PAGE>
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 615 East Michigan Street, Milwaukee, WI 53202.
Firstar Trust Company and The Chase Manhattan Bank serve as custodian for the
portfolio securities and cash of The Tocqueville International Value Fund.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Kramer, Levin, Naftalis & 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 The Tocqueville Trust c/o
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202,
Attention: [name of Fund], or may be made by calling 1- 800-697-3863.
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. Both organizations maintain careful monitoring of compliance with
the Code of Ethics.
-33-
<PAGE>
PROSPECTUS
FEBRUARY 28, 1997
THE
TOCQUEVILLE
TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE
INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOVERNMENT FUND
INVESTMENT ADVISOR
Tocqueville Asset Management L.P.
1675 Broadway
New York, New York 10019
Telephone: (212) 698-0800
DISTRIBUTOR
Tocqueville Securities L.P.
1675 Broadway
New York, New York 10019
Telephone: (800) 697-3863
SHAREHOLDERS' SERVICING,
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone: (800) 697-3863
BOARD OF TRUSTEES
Francois Sicart -- Chairman
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Robert W. Kleinschmidt
Francois Letaconnoux
-32-
<PAGE>
Rule 497(c)
Registration No. 33-8746
PROSPECTUS
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE ASIA-PACIFIC FUND
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
currently consisting of five separate funds. Each Fund of the Trust is an
open-end, diversified management investment company. This Prospectus relates to
The Tocqueville Asia-Pacific Fund only. The investment objective of The
Tocqueville Asia-Pacific Fund (the "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.
Tocqueville Asset Management L.P. provides the 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 the Fund and should be read and retained for future
reference. A Statement of Additional Information, dated February 28, 1997,
containing additional information about the 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 1-800-697-3863 or writing the Trust c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
-----------------
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK -- INCLUDING POSSIBLE LOSS
OF PRINCIPAL -- AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND 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 NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
-----------------
The date of this Prospectus is February 28, 1997.
<PAGE>
TABLE OF CONTENTS
Page
----
Highlights .................................................................. 3
Fee Table.................................................................... 3
Financial Highlights......................................................... 4
Performance Calculation...................................................... 5
Investment Objective, Policies and Risks..................................... 5
Additional Investment Policies and Risk
Considerations............................................................. 6
Investment Advisor and Investment
Advisory Agreement........................................................ 10
Distribution Plan........................................................... 11
Administrative Services Agreement............................................ 11
Brokerage Allocation......................................................... 12
Purchase of Shares........................................................... 12
Redemption of Shares......................................................... 19
Shareholder Privileges....................................................... 19
Dividends, Distributions and Tax Matters..................................... 20
Organization and Description of Shares of
the Trust.................................................................. 22
Custodian, Transfer Agent and Dividend
Paying Agent............................................................... 22
Counsel and Independent Accountants.......................................... 22
Shareholder Inquiries........................................................ 23
Other Information............................................................ 23
-----------------
<PAGE>
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.
WHAT IS THE TOCQUEVILLE ASIA-PACIFIC FUND
The Tocqueville Asia-Pacific Fund is an open-end, diversified
management investment company as defined by the Investment Company Act of 1940,
as amended (the "1940 Act"). The Fund 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.") Shares of the Fund may be
purchased at a price equal to the next determined net asset value per share plus
a charge which may be imposed at the time of purchase. As an open-end investment
company, the Fund has an obligation to redeem its 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.")
WHO MANAGES THE FUND?
Tocqueville Asset Management L.P. (the "Investment Advisor") serves as
the Fund's investment advisor pursuant to an Investment Advisory Agreement.
Under the terms of the Agreement, the Investment Advisor supervises all aspects
of the Fund's operations and provides investment advisory services. As
compensation, the Investment Advisor receives a fee based on the 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 more
than $600 million. (See "Investment Advisor and Investment Advisory
Agreements.")
DISTRIBUTION PLAN
The Fund has adopted a distribution plan, pursuant to Rule 12b-1 of the
1940 Act, that allows it to incur distribution expenses related to the sale of
its shares of up to .25% per annum of average daily net assets. (See
"Distribution Plan").
SPECIAL RISK CONSIDERATIONS
An investor should be aware that there are risks associated with
certain investment techniques and strategies employed by the Fund, including
those relating to investments in foreign securities and option transactions.
(See "Investment Objective, Policies and Risks" and "Additional Investment
Policies and Risk Considerations.")
<PAGE>
FEE TABLE
ASIA-PACIFIC FUND
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases 4.00%
Maximum Sales Load Imposed on
Reinvested Dividends................................. None
Maximum Deferred Sales Load............................. None
Redemption Fee *
Exchange Fee **
ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee.......................................... 1.00%
12b-1 Fee............................................... .25%
Other Expenses (after fee waiver)....................... .75%
------
Total Operating Expenses(2) (after fee waiver)................... 2.00%
- -----------------------
(1) 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 Fund 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.
(2) Total Operating Expenses reflect the voluntary waiver and/or the
reimbursement of certain expenses. Absent such voluntary waiver and/or
reimbursement, Other Expenses and Total Operating Expenses for the Fund
would be 2.04% and 3.29%, respectively. The Advisor has voluntarily
undertaken to waive and/or reimburse expenses during the current fiscal
year so that Total Fund Operating Expenses do not exceed 2.00%. Should
the Advisor decide during the current fiscal year that such waiver
and/or reimbursement cannot be maintained, shareholders will receive 30
days notice of the change.
* The Transfer Agent charges a $12 service fee for each payment of
redemption proceeds made by wire.
** The Transfer Agent charges a $5 fee for each telephone exchange.
EXAMPLE: 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.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
$59 $100 $143 $263
-2-
<PAGE>
The purpose of the expense summary provided above is to assist
investors in understanding the various costs and expenses that a shareholder in
the Fund will bear directly or indirectly. The "Annual Fund Operating Expenses"
summary shows the management fee, Rule 12b-1 fee, and other operating expenses
expected to be incurred by the Fund during the current fiscal year. 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 Example includes the initial sales
charge.
The Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
-3-
<PAGE>
FINANCIAL HIGHLIGHTS
The table below sets forth certain financial information with respect
to the financial highlights for the Fund for the periods indicated. The
information below has been derived from financial statements audited by
McGladrey & Pullen, LLP as independent accountants for the Trust, whose reports
thereon, together with the financial statements of the Fund, are incorporated by
reference into the Statement of Additional Information. The information set
forth below is for a share outstanding of the Fund for each period indicated.
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 12, 1991 TO
YEAR ENDED OCTOBER 31, OCTOBER 31, 1992
----------------
1996 1995 1994(A) 1993
<S> <C> <C> <C> <C> <C>
Per share operating performance $ 9.07
(For a share outstanding throughout
the period)
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) (0.05) (0.21) (0.07)
Net realized and unrealized gain
(loss)....................... 0.01 (1.39) 1.45 1.62 0.57
--------- --------- ------- ------- -------
Total from investment operations 0.01 (1.40) 1.40 1.41 0.50
--------- --------- ------- ------- -------
Less Distributions :
Dividends from net investment
income....................... -- -- -- -- --
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.......................... 0.01 (3.09) 0.90 0.76 0.50
---------- --------- ------- ------- -------
Net asset value, end of period. $ 9.08 $ 9.07 $ 12.16 $ 11.26 $ 10.50
========= ======== ========== ======== ========
Total Return(b)................. 0.1% (11.6%) 12.8% 15.0% 5.0%
Ratios/supplemental data:......
Net assets, end of period (000). $18,138 $4,686 $5,187 $3,886 $1,898
Ratio to average net assets :
Expenses(c).................. 2.63% 3.55% 2.82% 4.63% 4.90%(e)
Net investment income(c)..... (0.06)% (0.26)% (0.87)% (2.42)% (0.73)%(e)
Portfolio turnover rate......... 61% 106% 168% 216%(d) 101%
Average commission rate paid(f) $.0060
</TABLE>
- --------------------
(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) Does not include maximum initial sales charge of 4.00%.
(c) Net of fees waived amounting to 0.66%, 1.27%, 1.00% and 0.28% of
average net assets, for the periods ended October 31, 1996, 1995, 1994
and 1992, respectively.
(d) 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.
-4-
<PAGE>
(e) Annualized.
(f) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
-5-
<PAGE>
PERFORMANCE CALCULATION
The 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 reflects the deduction of the maximum initial
sales charge at the time of purchase. 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 the
Fund. Dividends and distributions are comprised of net investment income and net
realized capital gains, respectively. In addition, the Fund may calculate
performance on a total return basis at net asset value.
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 the Fund's 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 the Fund will
disclose the maximum sales charge to which investments in shares of the Fund may
be subject.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund's investment objective is fundamental and may not be changed
without a vote of the holders of a majority of its outstanding voting securities
(as defined in the Statement of Additional Information). There can be no
assurance that the Fund will achieve its investment objective.
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
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 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, the 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. The 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. The 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 the 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 the Fund's portfolio. The 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.
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<PAGE>
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.
The 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 the Fund's entire investment
holdings. Of course, a decline in the value of the Fund's investments in one
country may offset potential gains from investments in another country.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following investment strategies and techniques are not fundamental
policies of the Fund and may be changed without prior shareholder approval. The
Fund will notify shareholders in writing and amend the Prospectus accordingly
should any such modifications in investment strategies or techniques occur.
REPURCHASE AGREEMENTS
The 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 Fund will receive interest from the institution until the time
when the repurchase is to occur.
The 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. The Fund attempts to
minimize such risks specifying the required value of the underlying collateral.
ILLIQUID SECURITIES
The 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
The 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 technically considered "restricted securities," the Fund 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 Board of Trustees . 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, the 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.
-7-
<PAGE>
TEMPORARY INVESTMENTS
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 Fund's portfolio will be incidental. For temporary defensive
purposes, when deemed necessary by the Investment Advisor, the Fund may invest
up to 100% of its assets in U.S. Government obligations or "high-quality" debt
obligations of companies incorporated and having principal business activities
in the United States. When the Fund's assets are so invested, they are not
invested so as to meet the Fund's investment objective. "High-quality"
short-term obligations are those obligations which, at the time of purchase, (1)
possess a rating in one of the two highest ratings categories from at least one
nationally recognized statistical ratings organization ("NRSRO") (for example,
commercial paper rated "A-1" or "A-2" by Standard & Poor's Corporation ("S&P")
or "P-1" or "P-2" by Moody's Investors Service, Inc. ("Moody's")) or (2) are
unrated by an NRSRO but are determined by the Investment Advisor to present
minimal credit risks and to be of comparable quality to rated instruments
eligible for purchase by the Fund under guidelines adopted by the Board of
Trustees (the "Trustees").
PORTFOLIO TURNOVER
It is anticipated that the annual turnover rate for the 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 the Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
INVESTMENTS IN DEBT SECURITIES
With respect to the 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 the 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 or S&P. Securities rated Aaa by Moody's and AAA
by S&P are judged to be of the best quality and carry the smallest degree of
risk. Securities rated Baa by Moody's and BBB by S&P 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 Fund may invest in other investment companies. As a shareholder in
an investment company, the 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 the Fund's assets invested in shares of other investment companies.
OPTIONS TRANSACTIONS
The Fund may purchase put and call options on securities and on stock
indices to attempt to hedge the Fund's portfolio and to increase the Fund's
total return. The 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. The 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 the 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 the 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.
The 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
-8-
<PAGE>
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 the Fund's position, it would lose the premium it
paid and transactions costs. This discussion is a general summary. See the
Statement of Additional Information for information concerning the Fund's
options transactions and strategies.
FUTURES AND OPTIONS ON FUTURES TRANSACTIONS
The Fund may enter into contracts for the future delivery of securities
or foreign currencies and futures contracts based on a specific security, class
of securities, foreign currency or an index, purchase or sell options on any
such futures contracts and engage in related closing transactions. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index.
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 to hedge effectively 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 currencies,
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 Advisor'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 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 respective net assets. A call option is "covered" if the Fund owns the
underlying security covered by the call. The Fund 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 its investment objective and policies, the
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 the
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 the 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
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confiscatory taxation, limitations on the removal of funds or other assets of
the Fund, political or social instability or revolution, or diplomatic
developments which could affect investments in those countries.
The value of the Fund's investments denominated in foreign currencies
may depend in part on the relative strength of the U.S. dollar, and the 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 the
Fund invests in foreign securities they will usually be denominated in foreign
currency, and the Fund may temporarily hold funds in foreign currencies. Thus,
the 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 the 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 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.
The Fund may invest, without limit, in companies located 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 Fund invests 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.
In addition to the risks described above, the economies of other
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.
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
Tocqueville Asset Management L.P., 1675 Broadway, New York, New York
10019, acts as Investment Advisor to the Fund under a separate investment
advisory agreement (the "Agreement") which provides that the Investment Advisor
identify and analyze possible investments for the Fund, and determine the
amount, timing, and form of such investments. The Investment Advisor has the
responsibility of monitoring and reviewing the 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 the 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., the Fund's distributor.
Francois Sicart serves the Investment Advisor as portfolio manager of
the Fund. Mr. Sicart is the Chairman of Tocqueville Management Corporation, the
general partner of the Investment Advisor. 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.
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<PAGE>
Under the terms of the Agreement, the 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 the Fund's maintenance of its registration under the 1933 Act
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 the Fund, calculated daily
and 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 the Fund, .75%
of 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. The
fee is accrued daily for the purposes of determining the offering and redemption
price of the Fund's shares.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 of the 1940 Act. Pursuant to the Plan, the Fund may incur distribution
expenses related to the sale of its shares of up to .25% per annum of the Fund's
average daily net assets.
The Plan provides that the 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 Plan will only make payments for expenses
actually incurred on a first-in, first-out basis. The Plan may carry forward for
an unlimited number of years any unreimbursed expenses. If the 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. (See the Statement of
Additional Information--"Distribution Plan" for further information about the
Plan.)
As of October 31, 1996, the Fund had $66,730 of unreimbursed
distribution expenses (0.37% as a percentage of the Fund's net assets). (See the
Statement of Additional Information--"Distribution Plan" for further information
about the Plan.)
ADMINISTRATIVE SERVICES AGREEMENT
Under an Administrative Services Agreement, Tocqueville Asset
Management L.P. 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 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 Asset Management L.P. and its
affiliates. For these services and facilities, Tocqueville Asset Management L.P.
receives a fee computed and paid monthly at an annual rate of .15% of the
average daily net assets of the Fund. Certain administrative responsibilities
have been delegated to and are being performed by Firstar Trust Company.
BROKERAGE ALLOCATION
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the 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 the 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 Fund's brokerage allocation policies may
permit the 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
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the value of the services provided by such broker-dealer. Subject to the
supervision of the Trustees, the Investment Advisor is authorized to allocate
brokerage to affiliated broker-dealers on an agency basis to effect portfolio
transactions. The Trustees have adopted procedures incorporating the standards
of Rule 17e-1 of the 1940 Act, which require that the commission paid to
affiliated broker-dealers must be reasonable and fair compared to the
commission, fee or other remuneration received, or to be received, by other
brokers in connection with comparable transactions involving similar securities
during a comparable period of time. It is expected that brokerage will be
allocated to the Distributor, Tocqueville Securities L.P., an affiliate of the
Investment Advisor. 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
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.
The minimum initial investment in The Tocqueville Trust is $5,000
except for 401(k), IRA, Keogh and other pension or profit sharing plan accounts
where the minimum is $2,000. For example, an investor may choose to make an
initial investment in the Fund or any other Fund of the Trust equal to an amount
which is less than $5,000 so long as such investor's total initial investments
in the Funds are equal to $5,000. The minimum subsequent investment in the Trust
is $1,000. The Distributor may, in its discretion, waive the minimum investment
requirements for purchases, including those made via the Automatic Investment
Plan, which is discussed below .
Shares of the 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 brokers who have entered
into agreements with the Trust to provide distribution and shareholder services;
and (c) the Fund's transfer agent, Firstar Trust Company (the "Transfer Agent").
The 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 other 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 the 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. The Fund will determine the net asset value of its shares once
daily as of the close of trading on the New York Stock Exchange (the "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, a Selling Broker or other broker may purchase the Fund's shares
through such broker. Payment for purchase orders through Tocqueville Securities,
the Selling Broker or other broker must be made to Tocqueville Securities, the
Selling Broker or other broker within three business days of the purchase order.
All dealers are responsible for forwarding orders for the purchase of the Fund's
shares on a timely basis.
The 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 Fund to any person.
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INITIAL SALES CHARGES
The initial sales charge, imposed upon a sale of shares, varies
according to the size of the purchase as follows:
<TABLE>
<CAPTION>
CONCESSION
INITIAL SALES CHARGE TO DEALERS
-------------------- ----------
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
----- -------- -----
<S> <C> <C> <C>
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
</TABLE>
The reduced initial sales charges apply to the aggregate of purchases
of shares of the 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.
Upon notice to Selling Brokers, Tocqueville Securities may reallow up
to the full applicable initial sales charge and such Selling Broker 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 Selling Brokers whose representatives have
sold or are expected to sell significant amounts of one or all of the funds of
the Trust. At various times the Distributor may implement programs under which a
Selling Broker'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 generated by the Selling
Broker during such programs to any Selling Broker 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 Selling Brokers, consisting of written
informational material relating to sales incentive campaigns conducted by such
Selling Brokers for their representatives.
PURCHASES OF SHARES AT NET ASSET VALUE
PURCHASES THROUGH CERTAIN BROKERAGE ACCOUNTS. Shares may be purchased
at net asset value through brokerage accounts with Tocqueville Securities L.P.,
Selling Brokers and other brokers who have entered into agreements with the
Trust to provide distribution and shareholder services.
QUALIFIED PERSONS. There is no initial sales charge 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) Selling Brokers or other
brokers who have entered into agreements with the Trust to provide distribution
and shareholder services, 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. Purchases 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 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 shares by an investor through a 401(k)
Plan, a 403(b) Plan or 457 (state deferred compensation )Plan.
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<PAGE>
RECENTLY REDEEMED SHARES. Shares of the Fund may be purchased at net
asset value by persons who have, within the previous 30 days, redeemed their
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.
SHAREHOLDERS AS OF JANUARY 1, 1994. Shareholders who held shares of a
Fund of the Tocqueville Trust prior to January 1, 1994, may purchase shares of
the Fund at net asset value for as long as they continue to own shares of any
Fund of the Trust, provided that there is no change in the account registration.
However, once a shareholder has closed their account by redeeming all of their
Fund shares for a period of more than thirty days such shareholder will no
longer be able to purchase shares of the Fund at net asset value.
REDUCED INITIAL SALES CHARGES
CUMULATIVE QUANTITY DISCOUNT. Shares of the 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 shares of the Fund and
the other Funds of 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
defined below) may also purchase shares of the 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 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 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 shares at a discount;
and (c) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing shares. A qualified group must
have more than 10 members, must be available to arrange for group meetings
between representatives of the Fund and the members, must agree to include sales
and other materials related to the Fund 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 Fund. This
privilege is subject to modification or discontinuance at any time with respect
to all shares purchased thereafter.
LETTER OF INTENT. Investors may also qualify for reduced initial sales
charges by signing a Letter of Intent (the "LOI"). This enables the investor to
aggregate purchases of shares of the Fund with purchases of shares of any other
Fund of the Trust acquired by exchange, during a 13-month period. The initial
sales charge is based on the total amount invested in shares during the 13-month
period. Shares of the Fund currently owned by the investor including such Fund,
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
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<PAGE>
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, or on
the Fund to sell, the full amount indicated; however, on the initial purchase
(or subsequent purchases if necessary), 5% of the dollar amount specified in the
LOI will be held in escrow by the Transfer Agent in 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
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 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 The Tocqueville Trust, c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, WI 53201-0701, accompanied by a
check payable to the Fund. Purchase applications sent to the Fund will be
forwarded to the Transfer Agent, and will not be effective until received by the
Transfer Agent. The price per share is the next determined per share net asset
value (plus a varying initial sales charge) after receipt of an application by
Firstar Trust Company. Purchase applications should be mailed directly to: The
Tocqueville Trust -- The Tocqueville Asia-Pacific Fund, c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service
and other independent delivery services are not agents of the Trust. Therefore,
deposit of purchase applications in the mail or with such services does not
constitute receipt by Firstar Trust Company or the Trust. Please do not mail
letters by overnight courier to the post office box address. To purchase shares
by overnight or express mail, please use the following street address: The
Tocqueville Trust - The Tocqueville Asia-Pacific Fund, c/o Firstar Trust
Company, Mutual Fund Services, Third Floor, 615 East Michigan Street, Milwaukee,
Wisconsin 53202. All applications must be accompanied by payment in the form of
a check drawn on a U.S. bank payable to The Tocqueville Trust or by direct wire
transfer. No cash will be accepted. Firstar Trust Company will charge a $20 fee
against a shareholder's account for any payment check returned to the custodian.
The shareholder will also be responsible for any losses suffered by the Fund as
a result.
BY AUTOMATIC INVESTMENT PLAN. The Fund has an Automatic Investment Plan
which permits an existing shareholder to purchase additional shares (minimum
$100 per transaction) at regular intervals. Under the Automatic Investment Plan,
shares are purchased by transferring funds from a shareholder's checking, bank
money market, NOW account, or savings account in an amount of $100 or more
designated by the shareholder. At the shareholder's option, the account
designated will be debited and shares will be purchased on the date selected by
the shareholder. There must be a minimum of seven days between automatic
purchases. If the date selected by the shareholder is not a business day, funds
will be transferred the next business day thereafter. Only an account maintained
at a domestic financial institution which is an Automated Clearing House member
may be so designated. To establish an Automatic Investment Account, complete and
sign Section F of the Purchase Application and send it to the Transfer Agent.
Shareholders may cancel this privilege or change the amount of purchase at any
time by calling 1-800-697-3863 or by mailing written notification to: The
Tocqueville Trust -- The Tocqueville Asia-Pacific Fund, c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The change will be
effective five business days following receipt of notification by the Transfer
Agent. The Fund may modify or terminate this privilege at any time or charge a
service fee, although no such fee currently is contemplated. However, a $20 fee
will be imposed by Firstar Trust Company if sufficient funds are not available
in the shareholder's account at the time of the automatic transaction .
While investors may use this option to purchase shares in their IRA or
other retirement plan accounts, neither the Distributor nor the Transfer Agent
will monitor the amount of contributions to ensure that they do not exceed the
amount allowable for Federal tax purposes. Firstar Trust Company will assume
that all retirement plan contributions are being made for the tax year in which
they are received.
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<PAGE>
BY WIRE. Investors who purchase shares directly from the Transfer Agent
may also purchase shares by wire. Funds should be wired to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA # 075000022
Credit: Firstar Trust Company
Account # 112952137
Further credit: The Tocqueville Trust
Name of shareholder and account number (if known)
(Wired funds must be received prior to 4:00 p.m. Eastern time to be
eligible for same day pricing.)
The establishment of a new account or any additional purchases for an
existing account by wire transfer should be preceded by a phone call to Firstar
Trust Company, 1-800-697-3863, to provide information for the account. A
properly signed share purchase application marked "Follow Up" must be sent for
all new accounts opened by wire transfer. Applications are subject to acceptance
by the Fund, and are not binding until so accepted.
REDEMPTION OF SHARES
GENERAL INFORMATION
In order to redeem shares purchased through Tocqueville Securities, a
Selling Broker or other broker, the broker must be notified by telephone or mail
to execute a redemption. A properly completed order to redeem 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 will be held in a
shareholder's account with Tocqueville Securities unless the broker is
instructed to remit all proceeds directly to the shareholder.
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 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 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) where the
shareholder has not elected to permit telephone redemptions, the request must be
in writing, specifying the number of shares or dollar amount to be redeemed and
sent to the Transfer Agent, Attn. The Tocqueville Asia-Pacific Fund at P.O. Box
701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other
independent delivery services are not agents of the Trust. Therefore, deposit of
redemption requests in the mail or with such services does not constitute
receipt by Firstar Trust Company or the Trust. Please do not mail letters by
overnight courier to the post office box address. Redemption requests sent by
overnight or express mail should be directed to: The Tocqueville Asia- Pacific
Fund c/o Firstar Trust Company, Mutual Fund Services, Third Floor, 615 East
Michigan Street, Milwaukee, Wisconsin 53202. Requests for redemption by telegram
and requests which are subject to any special conditions or which specify an
effective date other than as provided herein cannot be honored; (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. Any written
requests sent to the 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 Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The Transfer Agent
charges a $12 service fee for each payment of redemption proceeds made by
Federal Fund wire. Additional information regarding redemptions may be obtained
by calling 1-800-697-3863.
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<PAGE>
Redemption of the Fund's shares or payments therefore may be suspended
at such times (a) when the Exchange is closed, (b) when trading on the Exchange
is restricted, (c) when an emergency exists which makes it impractical for the
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 the 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 Fund reserves the right to close an account that has dropped below
$500 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.
TELEPHONE REDEMPTION
Shareholders of the Fund will also be permitted to redeem fund shares
by telephone. To redeem shares by telephone, call 1-800-697-3863 with your
account name, account number and amount of redemption. Redemption proceeds will
only be sent to a shareholder's address or a pre-authorized bank account of a
commercial bank located within the United States as shown on the Transfer
Agent's records. (Available only if established on the account application and
if there has been no change of address by telephone within the preceding 15
days.)
The Fund reserves the right to refuse a telephone redemption if they
believe it is advisable to do so. Procedures for redeeming shares by telephone
may be modified or terminated by the Fund at any time upon notice to
shareholders. During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If a shareholder is unable to contact
the Transfer Agent by telephone, shares may also be redeemed by delivering the
redemption request to the Transfer Agent.
In an effort to prevent unauthorized or fraudulent redemption requests
by telephone, the Fund and the Transfer Agent employ reasonable procedures to
confirm that such instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or exchange by telephone
will be required to provide their account number. All such telephone
transactions will be tape recorded. The Tocqueville Funds may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Fund and/or the Transfer Agent may be liable for any loss due to unauthorized or
fraudulent transactions. In all other cases, the shareholder is liable for any
loss for unauthorized transactions.
SHAREHOLDER PRIVILEGES
SYSTEMATIC WITHDRAWAL PLAN. The Fund offers a Systematic Withdrawal
Plan for shareholders who own shares worth at least $10,000 at current net asset
value. Under the Systematic Withdrawal Plan, a fixed sum (minimum $500) will be
distributed at regular intervals (on any day, either monthly or quarterly). In
electing to participate in the Systematic Withdrawal Plan, investors should
realize that within any given period the appreciation of their investment in the
Fund may not be as great as the amount withdrawn. A shareholder may vary the
amount of frequency of withdrawal payments or temporarily discontinue them by
notifying Firstar Trust Company at 1-800-697-3863. The Systematic Withdrawal
Plan does not apply to shares held in Individual Retirement Accounts or defined
contribution retirement plans. For additional information or to request an
application please call Firstar Trust Company at 1-800-697-3863.
EXCHANGE PRIVILEGE. Subject to certain conditions, shares of the Fund
may be exchanged for the shares of another Fund of The Tocqueville Trust at such
Fund's then current net asset value. No initial sales charge is imposed on the
shares being acquired 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 of 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 Fund will use reasonable procedures in an
attempt to verify the identity of a person making a telephone exchange request.
The Fund reserves 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
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<PAGE>
promptly notified of any refused request for a telephone exchange. As long as
these normal identification procedures are followed, neither the Fund nor its
agents will be liable for loss, liability or cost which results from 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 Purchase Application which indicates
that you wish to have the privilege. The exchange privilege may be modified or
discontinued at any time.
Shareholders may also exchange shares of any or all of an investment in
the Fund for shares of the Portico Money Market Fund, the Portico Tax-Exempt
Money Market Fund, or the Portico U.S. Government Fund (collectively the "Money
Market Funds"). This Exchange Privilege is a convenient way for shareholders to
buy shares in a money market fund in order to respond to changes in their goals
or market conditions. Before exchanging into the Money Market Funds,
shareholders must read the Portico Money Market Funds' Prospectus. To obtain the
Money Market Funds' Prospectus and the necessary exchange authorization forms,
call the Transfer Agent at 1-800-697-3863. The Transfer Agent charges a $5 fee
for each telephone exchange which will be deducted from the investor's account
from which the funds are being withdrawn prior to effecting the exchange. There
is no charge for exchange transactions that are requested by mail. Use of the
Exchange Privilege is subject to the minimum purchase and redemption amounts set
forth in the Prospectus for the Money Market Funds. All accounts opened in a
Money Market Fund as a result of using the Exchange Privilege must be registered
in the identical name and taxpayer identification number as a shareholder's
existing account with the Fund.
For purposes of the Exchange Privilege, exchanges into and out of the
Money Market Funds will be treated as shares owned in the Fund. For example, if
an investor who owned shares in any one of the Fund moved an investment from one
of the Funds to one of the Money Market Funds and then decided at a later date
to move the investment back to the Fund, he or she would be deemed, once again,
to own shares of the Fund and may do so without the imposition of any additional
sales charges, so long as the investment has been continuously invested in
shares of the Money Market Fund during the period between withdrawal and
reinvestment.
Remember that each exchange represents the sale of shares of one fund
and the purchase of shares of another. Therefore, shareholders may realize a
taxable gain or loss on the transaction. Before making an exchange request, an
investor should consult a tax or other financial adviser to determine the tax
consequences of a particular exchange. The Distributor is entitled to receive a
fee from the Money Market Funds for certain support services at the annual rate
of .20 of 1% of the average daily net asset value of the shares for which it is
the holder or dealer of record. Because excessive trading can hurt the Fund's
performance and shareholders, the Fund reserves the right to temporarily or
permanently limit the number of exchanges or to otherwise prohibit or restrict
shareholders from using the Exchange Privilege at any time, without notice to
shareholders. In particular, a pattern of exchanges with a "market timing"
strategy may be disruptive to the Fund and may thus be restricted or refused.
Excessive use of the Exchange Privilege is defined as more than five exchanges
per calendar year. The restriction or termination of the Exchange Privilege does
not affect the rights of shareholders to redeem shares, as discussed in the
Prospectus.
The Money Market Funds are managed by Firstar Investment Research and
Management Company, an affiliate of Firstar Trust Company. The Portico Funds,
including the Money Market Funds, are unrelated to The Tocqueville Trust.
CHECK REDEMPTION. A shareholder may request on the Purchase Application
or by later written request to establish check redemption privileges for any of
the Money Market Funds. The redemption checks ("Checks") will be drawn on the
Money Market Fund in which the investor has made an investment. Checks will be
sent only to the registered owner(s) and only to the address of record. Checks
may be made payable to the order of any person in the amount of $250 or more.
Dividends are earned until the Check clears the Transfer Agent. When a Check is
presented to the Transfer Agent for payment, the Transfer Agent, as the
investor's agent, will cause the particular Money Market Fund involved to redeem
a sufficient number of the investor's shares to cover the amount of the Check.
Checks will not be returned to shareholders after clearance. The initial
checkbook is free, additional checkbooks are $5. The fee for additional
checkbooks will be deducted from the shareholder's account. There is no charge
to the investor for the use of the Checks; however, the Transfer Agent will
impose a $20 charge for stopping payment of a Check upon the request of the
investor, or if the Transfer Agent cannot honor a Check due to insufficient
funds or other valid reason. Because dividends on each Money Market Fund accrue
daily, Checks may not be used to close an account, as a small balance is likely
to result.
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DIVIDENDS, DISTRIBUTIONS, AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. Dividends are paid at least annually by
the Fund. The Fund also distributes net capital gains (if any) at least
annually. Dividends and distributions of shares may be reinvested 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 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. The 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 the 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 or the 4% excise tax. If the 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 the Fund's net long-term capital gains) to the
extent of the Fund's current and accumulated earnings and profits.
Distributions by the 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 investment income of the Fund will not include dividends
from domestic corporations, none of the ordinary income dividends paid by the
Fund should qualify for the 70% dividends-received deduction for corporate
shareholders. Distributions by the 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 the Fund's investment income may be subject to foreign
income taxes withheld at the source. The economic effect of such withholding
taxes or the total return of the Fund cannot be predicted. The Fund may elect to
"pass through" to its shareholders these foreign taxes, in which event each
shareholder will be required to include their pro rata portion thereof in their
gross income, but will be able to deduct or (subject to various limitations)
claim a foreign tax credit for such amount.
Distributions by the 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 the 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 if the Fund so designates. A shareholder who purchases shares of the 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.
A shareholder will recognize gain or loss upon the sale or redemption
of shares of the 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 the
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.
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Under the backup withholding rules of the Code, certain shareholders
may be subject to 31% backup withholding of federal income tax on ordinary
income dividends, capital gain dividends and redemption proceeds paid by the
Fund. In order to avoid this backup withholding, a shareholder must provide the
Fund 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 Fund 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 Fund, 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 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 the Fund and in the 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
Firstar Trust Company serves as the Fund's 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 615
East Michigan Street, Milwaukee, WI 53202. Firstar Trust Company and The Chase
Manhattan Bank serve as custodian for the portfolio securities and cash of the
Fund.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Kramer, Levin, Naftalis & 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 The Tocqueville Trust c/o
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202,
Attention: The Tocqueville Asia Pacific Fund, or may be made by calling
1-800-697-3863.
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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 Fund prohibits all
affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of the Fund's planned portfolio
transactions. Both organizations maintain careful monitoring of compliance with
the Code of Ethics.
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Prospectus
February 28, 1997
THE
TOCQUEVILLE
TRUST
The Tocqueville
Asia-Pacific Fund
INVESTMENT ADVISOR
Tocqueville Asset Management L.P.
1675 Broadway
New York, New York 10019
Telephone: (212) 698-0800
DISTRIBUTOR
Tocqueville Securities L.P.
1675 Broadway
New York, New York 10019
Telephone: (800) 697-3863
SHAREHOLDERS' SERVICING,
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone: (800) 697-3863
BOARD OF TRUSTEES
Francois Sicart -- Chairman
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Robert W. Kleinschmidt
Francois Letaconnoux
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Rule 497(c)
Registration No. 33-8746
STATEMENT OF ADDITIONAL INFORMATION - February 28, 1997
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOVERNMENT FUND
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus and should be read in conjunction with the Trust's current
Prospectus, copies of which may be obtained by writing The Tocqueville Trust,
c/o Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202
or calling (800) 697-3863.
This Statement of Additional Information relates to the Trust's
Prospectus which is dated February 28, 1997.
TABLE OF CONTENTS
PAGE
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Investment Policies and Risks.............................................. 2
Investment Restrictions..................................................... 6
Management................................................................. 7
Investment Advisor and Investment Advisory Agreements...................... 9
Distribution Plans......................................................... 10
Administrative Services Agreement......................................... 11
Portfolio Transactions and Brokerage....................................... 11
Allocation of Investments.................................................. 12
Computation of Net Asset Value............................................. 12
Purchase and Redemption of Shares.......................................... 13
Tax Matters................................................................ 13
Performance Calculation.................................................... 19
General Information........................................................ 21
Reports .................................................................. 22
Financial Statements....................................................... 22
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The Tocqueville Trust (the "Trust") is a Massachusetts business trust
currently 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. This Statement of Additional Information relates to the
following four funds only: The Tocqueville Fund, The Tocqueville Small Cap Value
Fund, The Tocqueville International Value Fund and The Tocqueville Government
Fund. 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 International Value Fund's (the "International Fund") investment
objective is long-term capital appreciation consistent with preservation of
capital primarily through investments in securities of non-U.S. issuers. 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. Much of the information contained in this Statement
of Additional Information expands on subjects discussed in the Prospectus.
Capitalized terms not defined herein are used as defined in the Prospectus. No
investment in shares of the Funds should be made without first reading the
Funds' Prospectus.
INVESTMENT POLICIES AND RISKS
The following descriptions supplement the investment policies of each Fund set
forth in the Prospectus. Each Fund's investments in the following securities and
other financial instruments are subject to the investment policies and
limitations described in the Prospectus and this Statement of Additional
Information.
1. WRITING COVERED CALL OPTIONS ON SECURITIES AND STOCK INDICES
The International 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. A call option written by a
Fund give 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 International 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 International 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.
The International 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
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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 International Fund may purchase put options to protect its
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 the 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, the 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 International Fund may also purchase call options to hedge against
an increase in prices of stock indices or securities that it ultimately wants to
buy. Such hedge protection is provided during the life of the call option since
the 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, the 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.
5. FUTURES CONTRACTS
The Government Fund and the International Fund may enter into futures
contracts, options on futures contracts and stock index futures contracts and
options thereon for the purposes of remaining fully invested and reducing
transaction costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security,
class of securities, currency or an index at a specified future time and at a
specified price. A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times
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the difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission (the "CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position (buying a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified securities index. The
acquisition of put and call options on futures contracts will, respectively,
give the Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period. Brokerage commissions are incurred when a
futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the contract
is marked-to-market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. Each Fund
expects to earn interest income on its margin deposits.
In addition to the margin restrictions discussed above, transactions in
futures contracts may involve the segregation of funds pursuant to requirements
imposed by the CFTC. Under those requirements, where a Fund has a long position
in a futures contract, it may be required to establish a segregated account (not
with a futures commission merchant or broker, except as may be permitted under
CFTC rules) containing cash or certain liquid assets equal to the purchase price
of the contract (less any margin on deposit). For a short position in futures or
forward contracts held by a Fund, those requirements may mandate the
establishment of a segregated account (not with a futures commission merchant or
broker, except as may be permitted under CFTC rules) with cash or certain liquid
assets that, when added to the amounts deposited as margin, equal the market
value of the instruments underlying the futures contracts (but are not less than
the price at which the short positions were established). However, segregation
of assets is not required if a Fund "covers" a long position. For example,
instead of segregating assets, a Fund, when holding a long position in a futures
contract, could purchase a put option on the same futures contract with a strike
price as high or higher than the price of the contract held by the Fund. In
addition, where a Fund takes short positions, or engages in sales of call
options, it need not segregate assets if it "covers" these positions. For
example, where the Fund holds a short position in a futures contract, it may
cover by owning the instruments underlying the contract. A Fund may also cover
such a position by holding a call option permitting it to purchase the same
futures contract at a price no higher than the price at which the short position
was established. Where the Fund sells a call option on a futures contract, it
may cover either by entering into a long position in the same contract at a
price no higher than the strike price of the call option or by owning the
instruments underlying the futures contract. A Fund could also cover this
position by holding a separate call option permitting it to purchase the same
futures contract at a price no higher than the strike price of the call option
sold by the Fund.
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When interest rates are expected to rise or market values of portfolio
securities are expected to fall, a Fund can seek through the sale of futures
contracts to offset a decline in the value of its portfolio securities. When
interest rates are expected to fall or market values are expected to rise, a
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
A Fund will only sell futures contracts to protect securities and
currencies it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase.
A Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that the Fund could lose more than the original margin deposit
required to initiate a futures transaction.
RISK FACTORS IN FUTURES TRANSACTIONS
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, a Fund would continue to be
required to make daily cash payments to maintain the required margin. In such
situations, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to make delivery
of the instruments underlying futures contracts it holds. The inability to close
options and futures positions also could have an adverse impact on the ability
to effectively hedge them. The Fund will minimize the risk that it will be
unable to close out a futures contract by only entering into futures contracts
which are traded on national futures exchanges and for which there appears to be
a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Funds are only for hedging purposes, the
Investment Advisor does not believe that the Funds are subject to the risks of
loss frequently associated with futures transactions. A Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Funds does involve the risk
of imperfect or no correlation where the securities underlying futures contract
have different maturities than the portfolio securities being hedged. It is also
possible that a Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by a Fund of margin deposits in the event of bankruptcy of a broker
with whom the Fund has an open position in a futures contract or related option.
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CONCLUSION
Unlike the fundamental investment objective of each Fund set forth
above 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 shares of a Fund which, as defined by the Investment Company Act of 1940,
as amended (the "1940 Act"), means the affirmative vote of the lesser of (a) 67%
or more of the shares of the Fund present at a meeting at which the holders of
more than 50% of the outstanding shares of the Fund are represented in person or
by proxy, or (b) more than 50% of the outstanding shares of the Fund.
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; and
(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,
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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) 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;
(3) 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; and
(4) except for The Tocqueville International Value 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.
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,
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* Interested person of the Funds as defined in the 1940 Act.
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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. (investment bank) from 1988
to present; Managing Director, Lepercq Capital Partners (real estate investment
firm), from 1974 to present.
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 January 31, 1997, the Trustees and officers as a group owned beneficially
9.63% of The Tocqueville Fund's outstanding shares, 2.67% of the International
Fund's outstanding shares, 7.87% of the Small Cap Fund's outstanding shares, and
16.30% of the Government Fund's outstanding shares, all of which were acquired
for investment purposes. Certain of the
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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, 1996,
the Trust paid the "disinterested" Trustees an aggregate of $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.
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 Compensation
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: (1) both The Tocqueville
Fund and The Tocqueville Small Cap Value Fund, calculated daily and 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) The Tocqueville
International Value Fund, calculated daily and 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, .75% of 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,
calculated daily and 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. The advisory fees are higher than
that paid by most investment companies but the Board of Trustees believes them
to be reasonable
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in light of the services each Fund receives thereunder. For the years ended
October 31, 1994, 1995 and 1996, with respect to The Tocqueville Fund , the
Investment Advisor earned advisory fees of $219,470, $240,219, and $256,312,
respectively, after waivers of $0, $0 and $36,154, respectively. For the period
August 1, 1994 to October 31, 1994 and the fiscal years ended October 31, 1995
and 1996, with respect to the International Fund , the Investment Advisor earned
advisory fees of $0, $0, and $99,116, respectively, after waivers of $4,201,
$35,890, and $68,161, respectively. For the period August 1, 1994 to October 31,
1994 and the fiscal years ended October 31, 1995 and 1996, with respect to the
Small Cap Fund , the Investment Advisor earned advisory fees of $0, $58,456, and
$62,717, respectively, after waivers of $11,420, $4,147, and $19,096,
respectively. Finally, for the period August 14, 1995 to October 31, 1995 and
the fiscal year ended October 31, 1996, with respect to the Government Fund ,
the Investment Advisor earned advisory fees of $0 and $0, respectively, after
waivers of $3,453 and $44,692, respectively.
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 pursuant to Rule 12b-1 of the
1940 Act (each a "Plan"). The Plans provide that a Fund may incur distribution
expenses related to the sale of shares of up to .25% per annum of such Fund's
average daily net assets.
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 Tocqueville Fund accrued after
waiver $73,157, $80,011 and $97,578, respectively, in distribution expenses for
the years ended October 31, 1994, 1995, and 1996, respectively. The
International Fund accrued after waiver $0, $0 and $27,121, respectively, for
the period August 1, 1994 to October 31, 1994 and the fiscal years ended October
31, 1995 and 1996, respectively. The Small Cap Fund accrued after waiver $0, $0
and $14,595, respectively, for the period August 1, 1994 to October 31, 1994 and
the fiscal years ended October 31, 1995 and 1996, respectively. The Government
Fund accrued after waiver $0 and $8,058, respectively, for the period August 14,
1995 to October 31, 1995 and the fiscal year ended October 31, 1996,
respectively.
As of October 31, 1996, The Tocqueville Fund, Small Cap Fund,
International Fund, and Government Fund had $96,670, $78,055 , $71,716, and
$22,255, respectively, (0.23%, 0.68%, 0.30%, and 0.23%, respectively, as a
percentage of each Fund's net assets) of unreimbursed distribution expenses.
In approving the Plans in accordance with the requirements of Rule
12b-1 under the 1940 Act, the Trustees (including the "disinterested" Trustees,
as defined in the 1940 Act) considered various factors and
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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 disinterested 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 disinterested Trustees cast in
person at a meeting called specifically for that purpose. While the Plans are in
effect, the selection and nomination of the disinterested Trustees shall be made
by those disinterested Trustees then in office.
ADMINISTRATIVE SERVICES AGREEMENT
Tocqueville Asset Management L.P., supervises administration of the
Funds pursuant to an Administrative Services Agreement with each Fund. Under the
Administrative Services Agreement, Tocqueville Asset Management L.P. supervises
the administration of all aspects of each Fund's operations, including each
Fund's receipt of services for which the Fund is obligated to pay, provides the
Funds with general office facilities and provides, at each Fund's expense, the
services of persons necessary to perform such supervisory, administrative and
clerical functions as are needed to effectively operate the Funds. Those
persons, as well as certain employees and Trustees of the Funds, may be
directors, officers or employees of (and persons providing services to the Funds
may include) Tocqueville Asset Management L.P. and its affiliates. For these
services and facilities, Tocqueville Asset Management L.P. receives with respect
to each Fund a fee computed and paid monthly at an annual rate of 0.15% of the
average daily net assets of each 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. The Trustees have
authorized the allocation of brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions. The Trustees have adopted procedures
incorporating the standards of Rule 17e-1 of the 1940 Act, which require that
the commission paid to affiliated broker-dealers must be "reasonable and fair
compared to the commission, fee or other remuneration received, or to be
received, by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." At times, a Fund may
also purchase portfolio securities directly from dealers acting as principals,
underwriters or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.
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
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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,
and International Fund paid total brokerage commissions on portfolio
transactions in the amount of $84,586, $25,057 and $1,116, respectively, and for
the fiscal year ended October 31, 1995, the Tocqueville Fund, Small Cap Fund,
International Fund, and Government Fund paid total brokerage commissions on
portfolio transactions in the amount of $71,728, $71,128, $39,142, and $7,913,
respectively. For the fiscal year ended October 31, 1996, the Tocqueville Fund,
Small Cap Fund, International Fund, and Government Fund paid total brokerage
commissions on portfolio transactions in the amount of $103,140, $101,089,
$130,401, and $24,363, respectively. Commissions earned by Tocqueville
Securities L.P., the Funds' distributor for services rendered as a registered
broker-dealer in securities transactions for the fiscal year ended October 31,
1994, 1995 and 1996, respectively, were: the Tocqueville Fund: $84,586, $39,665
and $63,555, respectively; the Small Cap Fund: $25,057, $23,016 and $47,933
respectively; the International Fund: $1,116, $0 and $1,509 respectively; and
the Government Fund: $0, $7,912 and $9,213 respectively. For the fiscal year
ended October 31, 1996, the percentage of each Fund's brokerage commissions
paid, and the aggregate dollar amount of transactions involving the payment of
such commissions, to Tocqueville Securities L.P. were: the Tocqueville Fund:
60.09% and $63,555, respectively; the Small Cap Fund: 46.61% and $47,933,
respectively; the International Fund: 1.15% and $1,509, respectively; and the
Government Fund: 37.81% and $9,213, 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.
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 (the "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
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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 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.
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
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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 the Government Fund or International 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 Government Fund or the International 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 the Government Fund or International Fund on
the lapse of, or any gain or loss recognized by the Government Fund, or the
International 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 Government Fund or
International Fund (such as regulated futures contracts, certain foreign
currency contracts, and options on stock indexes and futures 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. The 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. 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.
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The Government Fund, or International Fund may purchase securities of
certain foreign investment funds or trusts which constitute passive foreign
investment companies ("PFICs") for federal income tax purposes. If the 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 proposed Treasury Regulations the International 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 the 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 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.
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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 Government Fund
and the International 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 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
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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-the- money 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 International 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. For purposes of the corporate AMT, 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, a corporate shareholder 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 International 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 the Fund to a reduced rate of, or exemption from, taxes
on such income. It is impossible to determine the effective rate of foreign tax
in advance since the amount of the Fund's assets to be invested in various
countries is not known. If more than 50% of the value of the Fund's total assets
at the close of its taxable year consist of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign taxes paid by the Fund. If the 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.
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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 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 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
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<PAGE>
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 International 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
their 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. 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.)
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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:
a-b
YIELD = 2[( ----- +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
"a" 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 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 total
return for the 1 year, 3 year, 5 year and since inception periods ended October
31, 1996 was 17.74%, 13.74%, 15.91% and 11.47%, respectively; the total return
for the International Fund for the 1 year and since inception periods ended
October 31, 1996 was 11.44% and 8.68%; the total return for the Small Cap Fund
for the 1 year and since inception periods ended October 31, 1996 was 14.92% and
16.08%; and the total return for the Government Fund for the 1 year and since
inception periods ended October 31, 1996 was 1.62% and 2.22%. For the 30 day
period ended October 31, 1996, the Government Fund's yield was 3.54%.
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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 International Value 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, 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.
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 of January 31, 1997, the following shareholders owned 5% or more
of a Fund's shares:
- - The Tocqueville Fund Tocqueville Asset Management L.P. held discretion over
1,375,705.697 shares (48.57%)
- - The Tocqueville Small Cap Value Fund Tocqueville Asset Management L.P. held
discretion over 556,968.856 shares (56.65%)
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- - The Tocqueville International Value Fund Tocqueville Asset Management L.P.
held discretion over 2,113,588.838 (95.82%)
- - The Tocqueville Government Fund Tocqueville Asset Management L.P. held
discretion over 924,676.600 shares (57.92%)
The address of Tocqueville Asset Management L.P. is 1675 Broadway, New
York, New York 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, 1996 and for the six months ended April 30, 1996, respectively, are
incorporated by reference from the Annual Report to Shareholders dated October
31, 1996 and the Semi-Annual Report to Shareholders dated April 30, 1996,
respectively.
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Rule 497(c)
Registration No. 33-8746
STATEMENT OF ADDITIONAL INFORMATION - February 28, 1997
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE ASIA-PACIFIC FUND
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus and should be read in conjunction with the Trust's current
Prospectus, copies of which may be obtained by writing The Tocqueville Trust,
c/o Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202
or calling (800) 697-3863.
This Statement of Additional Information relates to Trust's Prospectus
which is dated February 28, 1997.
TABLE OF CONTENTS
PAGE
Investment Policies and Risks.............................................. 2
Investment Restrictions..................................................... 5
Management.................................................................. 7
Investment Advisor and Investment Advisory Agreement....................... 9
Distribution Plan.......................................................... 10
Administrative Services Agreement.......................................... 10
Portfolio Transactions and Brokerage........................................ 11
Allocation of Investments................................................... 11
Computation of Net Asset Value.............................................. 12
Purchase and Redemption of Shares........................................... 12
Tax Matters................................................................. 12
Performance Calculation..................................................... 19
General Information......................................................... 20
Reports ................................................................... 22
Financial Statements........................................................ 22
<PAGE>
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
currently consisting of five separate funds (the "Funds"). Each Fund is an
open-end, diversified management investment company with a different investment
objective. This Statement of Additional Information relates to The Tocqueville
Asia-Pacific Fund (the "Fund") only. The Fund's 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. There is minimal emphasis on current income. Much of the information
contained in this Statement of Additional Information expands on subjects
discussed in the Prospectus. Capitalized terms not defined herein are used as
defined in the Prospectus. No investment in shares of the Fund should be made
without first reading the Fund's Prospectus.
INVESTMENT POLICIES AND RISKS
The following descriptions supplement the investment policies of the Fund set
forth in the Prospectus. The Fund's investments in the following securities and
other financial instruments are subject to the investment policies and
limitations described in the Prospectus and this Statement of Additional
Information.
1. WRITING COVERED CALL OPTIONS ON SECURITIES AND STOCK INDICES
The 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 its Investment Advisor determines is appropriate in seeking to attain
their objective. A call option written by the Fund give 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 Fund may write only covered call options, which means that, so long
as the 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 Fund will receive a premium for writing a covered call option,
which increases the return of the 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, the 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.
The Fund may terminate an option that it has 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. The 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 the Fund.
2. PURCHASING PUT AND CALL OPTIONS ON SECURITIES AND STOCK INDICES
The 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 the 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
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price to cover the premium and transaction costs. By using put options in this
manner, the 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 Fund may also purchase call options to hedge against an increase in
prices of stock indices or securities that it wants ultimately to buy. Such
hedge protection is provided during the life of the call option since the 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, the 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
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.
4. REPURCHASE AGREEMENTS
The 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 . The
Fund will receive interest from the institution until the time when the
repurchase is to occur.
The Fund 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 the Fund, and the Fund 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, 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 it might incur
disposition costs in liquidating the collateral. The Fund attempts to minimize
such risks by entering into such transactions only with well-capitalized
financial institutions and specifying the required value of the underlying
collateral.
5. FUTURES CONTRACTS
The Fund may enter into futures contracts, options on futures contracts
and stock index futures contracts and options thereon for the purposes of
remaining fully invested and reducing transaction costs. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a specific security, class of securities, currency or an
index at a specified future time and at a specified price. A stock index futures
contract is a bilateral agreement pursuant to which two parties agree to take or
make delivery of an amount of cash equal to a specified dollar amount times the
difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission (the "CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery and
acceptance of the underlying securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery. Closing
out an open futures position is done by taking an opposite position (buying a
contract which has previously been "sold," or "selling" a contract previously
purchased) in an identical contract to terminate the position. A futures
contract on a securities index is an agreement obligating either party to pay,
and entitling the other party to receive, while the contract is outstanding,
cash payments based on the level of a specified
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securities index. The acquisition of put and call options on futures contracts
will, respectively, give the Fund the right (but not the obligation), for a
specified price, to sell or to purchase the underlying futures contract, upon
exercise of the option, at any time during the option period. Brokerage
commissions are incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the contract
is marked-to-market daily. If the futures contract price changes to the extent
that the margin on deposit does not satisfy margin requirements, payment of
additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. The Fund
expects to earn interest income on its margin deposits.
In addition to the margin restrictions discussed above, transactions in
futures contracts may involve the segregation of funds pursuant to requirements
imposed by the CFTC. Under those requirements, where the Fund has a long
position in a futures contract, it may be required to establish a segregated
account (not with a futures commission merchant or broker, except as may be
permitted under CFTC rules) containing cash or certain liquid assets equal to
the purchase price of the contract (less any margin on deposit). For a short
position in futures or forward contracts held by the Fund, those requirements
may mandate the establishment of a segregated account (not with a futures
commission merchant or broker, except as may be permitted under CFTC rules) with
cash or certain liquid assets that, when added to the amounts deposited as
margin, equal the market value of the instruments underlying the futures
contracts (but are not less than the price at which the short positions were
established). However, segregation of assets is not required if the Fund
"covers" a long position. For example, instead of segregating assets, the Fund,
when holding a long position in a futures contract, could purchase a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Fund. In addition, where the Fund takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where the Fund holds a short position
in a futures contract, it may cover by owning the instruments underlying the
contract. The Fund may also cover such a position by holding a call option
permitting it to purchase the same futures contract at a price no higher than
the price at which the short position was established. Where the Fund sells a
call option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. The
Fund could also cover this position by holding a separate call option permitting
it to purchase the same futures contract at a price no higher than the strike
price of the call option sold by the Fund.
When interest rates are expected to rise or market values of portfolio
securities are expected to fall, the Fund can seek through the sale of futures
contracts to offset a decline in the value of its portfolio securities. When
interest rates are expected to fall or market values are expected to rise, the
Fund, through the purchase of such contracts, can attempt to secure better rates
or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
The Fund will only sell futures contracts to protect securities and
currencies it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase.
The Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock
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<PAGE>
index. Second, it is possible that a lack of liquidity for futures contracts
could exist in the secondary market, resulting in an inability to close a
futures position prior to its maturity date. Third, the purchase of a futures
contract involves the risk that the Fund could lose more than the original
margin deposit required to initiate a futures transaction.
RISK FACTORS IN FUTURES TRANSACTIONS
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, the Fund would continue to be
required to make daily cash payments to maintain the required margin. In such
situations, if the Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to make delivery
of the instruments underlying futures contracts it holds. The inability to close
options and futures positions also could have an adverse impact on the ability
to effectively hedge them. The Fund will minimize the risk that it will be
unable to close out a futures contract by only entering into futures contracts
which are traded on national futures exchanges and for which there appears to be
a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can be
substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Fund are only for hedging purposes, the
Investment Advisor does not believe that the Fund is subject to the risks of
loss frequently associated with futures transactions. The Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Fund does involve the risk
of imperfect or no correlation where the securities underlying futures contract
have different maturities than the portfolio securities being hedged. It is also
possible that the Fund could both lose money on futures contracts and also
experience a decline in value of its portfolio securities. There is also the
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.
CONCLUSION
Unlike the fundamental investment objective of the Fund set forth above
and the investment restrictions set forth below which may not be changed without
shareholder approval, the Fund has 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 Fund and except as noted, such policies and restrictions
cannot be changed without approval by the vote of a majority of the outstanding
voting shares of the Fund which, as defined by the Investment Company Act of
1940, as
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<PAGE>
amended (the "1940 Act"), means the affirmative vote of the lesser of (a) 67% or
more of the shares of the Fund present at a meeting at which the holders of more
than 50% of the outstanding shares of the Fund are represented in person or by
proxy, or (b) more than 50% of the outstanding shares of the Fund.
The Fund may not:
(1) issue senior securities;
(2) concentrate its investments in particular industries. No more
than 25% of the value of the Fund's assets will be invested in any one
industry;
(3) with respect to 75% of the value of the 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 the 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 the Fund may purchase or sell futures or options on futures;
(7) underwrite securities;
(8) invest in precious metals other than in accordance with the
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; and
(9) participate in a joint investment account.
The following restrictions are non-fundamental and may be changed by
the Trust's Board of Trustees. Pursuant to such restrictions, the Fund 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,
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 the Fund;
(2) purchase the securities of any other investment company, if ,
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; and
(3) 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
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<PAGE>
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.
MANAGEMENT
The overall management of the business and affairs of the Fund is
vested with the Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust or the Fund and persons or companies
furnishing services to the Fund, including the Fund's agreement with an
investment advisor, custodian and transfer agent. The day-to-day operations of
the Fund are delegated to the Fund's officers subject always to the investment
objectives and policies of the 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.
- --------
* Interested person of the Funds as defined in the 1940 Act.
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<PAGE>
(investment bank) from 1988 to present; Managing Director, Lepercq Capital
Partners (real estate investment firm), from 1974 to present.
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 Fund
may indemnify any person who was or is a Trustee, officer or employee of the
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 Fund 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 the Fund to
any Trustee or officer of the Fund for any liability to the 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 Fund does not pay direct remuneration to any officer of the Fund.
As of January 31, 1997, the Trustees and officers as a group owned beneficially
2.80% of the 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 Fund ,
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, 1996, the Trust paid the "disinterested" Trustees an aggregate of
$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.
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 Compensation
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
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<PAGE>
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 AGREEMENT
Tocqueville Asset Management L.P. (the "Investment Advisor"), 1675
Broadway, New York, New York 10019, acts as the Investment Advisor to the Fund
under a separate investment advisory agreement (the "Agreement"). The Agreement
provides that the Investment Advisor identify and analyze possible investments
for the Fund, determine the amount and timing of such investments, and the form
of investment. The Investment Advisor has the responsibility of monitoring and
reviewing the 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 the 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 Fund.
The Investment Advisor receives a fee from the Fund, calculated daily
and 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 the Fund, .75%
of 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. The
fee is accrued daily for the purposes of determining the offering and redemption
price of the Fund's shares. The advisory fee is higher than that paid by most
investment companies but the Board of Trustees believes it to be reasonable in
light of the services the Fund receives thereunder. For the years ended October
31, 1994, 1995, and 1996, the Investment Advisor earned advisory fees of $0, $0
and $46,714, respectively after waivers of $44,646, $48,530, and $56,680,
respectively.
Under the terms of the Agreement, the Fund pays all of its expenses
(other than those expenses specifically assumed by the Investment Advisor and
the 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.
The 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 the Fund's outstanding
shares. The 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 the 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.
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<PAGE>
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 of the
1940 Act (the "Plan"). The Plan provides that the Fund may incur distribution
expenses related to the sale of shares of up to .25% per annum of the average
daily net assets.
The Plan provides that the 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") who enter into
agreements with the Fund or its distributor. The Fund accrued after waiver $37,
$0 and $18,319, respectively, in distribution expenses for the years ended
October 31, 1994, 1995, and 1996, respectively.
As of October 31, 1996 , the Fund had $66,730 (0.37% as a percentage
net assets) of unreimbursed distribution expenses.
In approving the Plan in accordance with the requirements of Rule 12b-1
under the 1940 Act, the Trustees (including the "disinterested" Trustees, as
defined in the 1940 Act) considered various factors and determined that there is
a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan will continue in effect from year to year if specifically
approved annually (a) by the majority of the Fund's outstanding voting shares or
by the Board of Trustees and (b) by the vote of a majority of the disinterested
Trustees. While the Plan remains in effect, the Fund's Principal Financial
Officer shall prepare and furnish to the Board of Trustees a written report
setting forth the amounts spent by the Fund under the Plan and the purposes for
which such expenditures were made. The Plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and all material amendments to the Plan must be approved by the Board of
Trustees and by the disinterested Trustees cast in person at a meeting called
specifically for that purpose. While the Plan is in effect, the selection and
nomination of the disinterested Trustees shall be made by those disinterested
Trustees then in office.
ADMINISTRATIVE SERVICES AGREEMENT
Tocqueville Asset Management L.P., supervises administration of the
Fund pursuant to an Administrative Services Agreement with the Fund. Under the
Administrative Services Agreement, Tocqueville Asset Management L.P. 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 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 Funds may include)
Tocqueville Asset Management L.P. and its affiliates. For these services and
facilities, Tocqueville Asset Management L.P. receives with a fee computed and
paid monthly at an annual rate of 0.15% of average daily net assets .
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<PAGE>
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the Fund are made by the Investment Advisor. The
Investment Advisor is authorized to allocate the orders placed by it on behalf
of the 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 the 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 the
Fund, subject to the requirements of best execution. The Trustees have
authorized the allocation of brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions. The Trustees have adopted procedures
incorporating the standards of Rule 17e-1 of the 1940 Act, which require that
the commission paid to affiliated broker-dealers must be "reasonable and fair
compared to the commission, fee or other remuneration received, or to be
received, by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." At times, the Fund may
also purchase portfolio securities directly from dealers acting as principals,
underwriters or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.
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 Fund on
a continuing basis. Accordingly, the cost of the brokerage commissions to the
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 the Fund to pay an unaffiliated broker that provides research services to
the Investment Advisor for the 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 Fund. For the fiscal years ended
October 31, 1994, 1995 and 1996, the Fund paid total brokerage commissions on
portfolio transactions in the amount of $83,423, $26,286 and $158,625,
respectively. Commissions earned by Tocqueville Securities L.P., the Fund's
distributor for services rendered as a registered broker-dealer in securities
transactions for the fiscal year ended October 31, 1994, 1995 and 1996,
respectively; $83,423, $0 and $175, respectively. For the fiscal year ended
October 31, 1996, the percentage of the Fund's brokerage commissions paid, and
the aggregate dollar amount of transactions involving the payment of such
commissions, to Tocqueville Securities L.P. were 0.14% and $225, respectively.
ALLOCATION OF INVESTMENTS
The Investment Advisor has other advisory clients which include
individuals, trusts, pension and profit sharing funds and the other funds of the
Trust, some of which have similar investment objectives to the Fund. As such,
there will be times when the Investment Advisor may recommend purchases and/or
sales of the
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<PAGE>
same portfolio securities for the Fund and its other clients. In such
circumstances, it will be the policy of the Investment Advisor to allocate
purchases and sales among the Fund 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 the Fund.
COMPUTATION OF NET ASSET VALUE
The Fund will determine the net asset value of its shares once daily as
of the close of trading on the New York Stock Exchange (the "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. The 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 the Fund from the immediately preceding determination of
net asset value. The net asset value is determined by dividing the market value
of the 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 the 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 the Fund's shares may
be purchased and redeemed, including discussions concerning the front-end sales
load 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 the 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 the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
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<PAGE>
Qualification as a Regulated Investment Company
The 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, the 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 the 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.
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, the 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 the 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 the 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 the 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 the 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 the 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 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
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<PAGE>
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 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 Fund on the lapse of, or any gain or loss
recognized by the 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 the 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, the 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 Fund (such as regulated
futures contracts, certain foreign currency contracts, and options on stock
indexes and futures 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. The 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. 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 Fund may purchase securities of certain foreign investment funds or
trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the 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
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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 proposed Treasury Regulations the 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 the 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, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the 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 the 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.
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<PAGE>
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).
The 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 the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
The 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 Fund generally should not qualify for
the 70% dividends-received deduction for corporate shareholders.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The 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 the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% of the capital gain recognized upon the Fund's disposition of domestic
"small business" stock will be subject to tax.
Conversely, if the 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 the 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.
Since an insignificant portion of the 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. For purposes of the corporate AMT, 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.
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<PAGE>
However, a corporate shareholder 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 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 the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the 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 the
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 the 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 the 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 the 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 the 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 the 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.
The 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
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<PAGE>
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 the 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 the 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 the 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 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 shares of the
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
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the 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
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 the Fund, capital gain dividends and amounts
retained by the Fund that are designated as undistributed capital gains.
If the income from the 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.
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<PAGE>
In the case of foreign noncorporate shareholders, the 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
their 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 the 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. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of the 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 the 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 the
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 the Fund would
be included at that time.
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<PAGE>
In addition to the total return quotations discussed above, the 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:
a-b
YIELD = 2[( ----- +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
"a" 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 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 total return for the Fund
for the 1 year, 3 year and since inception periods ended October 31, 1996 was
(3.92%), (1.42%) and 2.97%.
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
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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 International Value 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, 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.
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 of January 31, 1997, the following shareholders owned 5% or more of
the Fund's shares:
- - Tocqueville Asset Management L.P. held discretion over 2,122,962.740 shares
(94.58%)
The address of Tocqueville Asset Management L.P. is 1675 Broadway, New York, New
York 10019.
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<PAGE>
REPORTS
Shareholders receive reports at least semi-annually showing the 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 the Fund for the fiscal year ended October
31, 1996 and for the six months ended April 30, 1996, respectively, are
incorporated by reference from the Annual Report to Shareholders dated October
31, 1996 and the Semi-Annual Report to Shareholders dated April 30, 1996,
respectively.
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