Rule 497(b)
Registration No. 333-23331
[Tocqueville Trust letterhead]
April 15, 1997
Dear Valued Shareholder:
At a recent Board of Trustees meeting of the Tocqueville Trust, the
Board unanimously recommended to rename the former Tocqueville Europe Fund and
merge the assets of the Tocqueville Asia-Pacific Fund into what is now called
the Tocqueville International Value Fund. The reasons for combining the two
funds are several:
First, there will be the potential to realize substantial benefits from
the economies of scale that are associated with a larger asset base. In
addition, the Trustees believe that there will be substantial benefits to the
combined fund through a wider diversification of its assets across a broader
country base, thereby increasing investment opportunities for the Fund with the
potential of spreading investment risks among a greater number of issues. We
have evaluated the risk profile of both funds separately, and informed the Board
of our belief that, as a general matter, long-term capital appreciation may more
likely be realized through investments in a more diversified international
investment portfolio such as that of the International Value Fund.
We realize that certain shareholders originally invested in either the
Europe Fund or Asia-Pacific Fund for regional specialization purposes. We now
believe, however, that combining these funds will enhance long-term performance
while reducing the overall risk exposure of the combined fund. Furthermore, our
goal will be to invest in more than sixty companies, while adhering to our
traditional value/contrarian philosophy, without regard to country or regional
specialization. We will continue to provide superior in-house research on a
bottom-up, company basis and seek value where others do not.
As portfolio manager to both original funds and now to the Tocqueville
International Value Fund, I remain committed to providing international
diversification for our clients and, in turn, solid investment results, based on
a clear investment strategy. Please carefully read through the enclosed proxy
statement and return the ballot at your earliest convenience. If you have any
questions or comments, I would be delighted to speak with each of you
personally.
With kind regards, I am
Sincerely
/s/Francois Sicart
------------------
Francois Sicart
Chairman
<PAGE>
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE ASIA-PACIFIC FUND
1675 BROADWAY
NEW YORK, NEW YORK 10019
(800) 697-3863
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
APRIL 29 , 1997
A Special Meeting of Shareholders (the "Meeting") of The Tocqueville
Asia-Pacific Fund (the "Asia-Pacific Fund") will be held on April 29, 1997 at
10:00 a.m. Eastern time, at the offices of The Tocqueville Trust (the "Trust"),
1675 Broadway, New York, New York 10019, for the following purposes, which are
more fully described in the accompanying Combined Prospectus/Proxy Statement
dated April 14, 1997:
1. To approve a Plan of Reorganization and Liquidation providing
for the transfer of the assets of the Asia-Pacific Fund to The
Tocqueville International Value Fund, another portfolio of the
Trust (the "International Value Fund"), in exchange for shares
of the International Value Fund and the distribution of such
shares to shareholders of the Asia-Pacific Fund in liquidation
of the Asia-Pacific Fund; and
2. To transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS OF THE ASIA-PACIFIC FUND VOTE TO APPROVE THE PLAN OF REORGANIZATION
AND LIQUIDATION.
The Board of Trustees has fixed the close of business on April 9, 1997
as the record date for determination of shareholders entitled to notice of, and
to vote at, the Meeting or any adjournment thereof. The enclosed proxy is being
solicited on behalf of the Board of Trustees of the Trust.
Each shareholder who does not expect to attend in person is requested
to complete, date, sign and promptly return the enclosed form of proxy.
By order of the Board of
Trustees,
Francois D. Sicart
Principal Executive Officer
Dated: April 15, 1997
YOUR VOTE IS IMPORTANT
Please indicate your voting instructions on the enclosed proxy card, sign and
date it, and return it in the envelope provided, which needs no postage if
mailed in the United States. In order to save any additional expense of further
solicitation, please mail your proxy promptly.
<PAGE>
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE ASIA-PACIFIC FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
COMBINED PROSPECTUS/PROXY STATEMENT
April 14, 1997
This Combined Prospectus/Proxy Statement is sent to you in connection
with the solicitation of proxies by the Board of Trustees (the "Board") of The
Tocqueville Trust (the "Trust") on behalf of The Tocqueville Asia-Pacific Fund
(the "Asia-Pacific Fund") for a Special Meeting of Shareholders (the "Meeting")
to be held at the offices of the Trust, 1675 Broadway, New York, New York 10019
on April 29, 1997, at 10:00 a.m. Eastern time, at which shareholders of the
Asia-Pacific Fund will be asked to consider and approve a proposed Plan of
Reorganization and Liquidation (the "Plan").
The Plan provides for the transfer of the assets of the Asia-Pacific Fund to The
Tocqueville International Value Fund, another portfolio of the Trust (the
"International Value Fund"), in exchange for shares of the International Value
Fund. Following such transfer, shares of the International Value Fund will be
distributed to the existing shareholders of the Asia-Pacific Fund in liquidation
of the Asia-Pacific Fund. As a result of the proposed transactions, each
shareholder of the Asia-Pacific Fund will receive that number of full and
fractional shares of the International Value Fund equal in value at the close of
business on the date of the exxchange to the value of that shareholder's shares
of the Asia-Pacific Fund. These transactions are referred to as the
"Reorganization." (The International Value Fund and the Asia-Pacific Fund are
sometimes referred to as a "Fund" and together as the "Funds").
The Trust is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act"). The Trust is
organized as a Massachusetts business trust, and issues its shares of beneficial
interest in separate portfolios, each with its own investment objective and
policies. The investment objective of the International Value Fund is long-term
capital appreciation consistent with preservation of capital primarily through
investments in securities of non-U.S. issuers. The investment objective of the
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.
Tocqueville Asset Management L.P. provides each Fund with investment
advisory and certain administrative services.
This Combined Prospectus/Proxy Statement, which you should keep for
future reference, sets forth concisely the information about the International
Value Fund that a prospective investor should know before voting. THIS COMBINED
PROSPECTUS/PROXY STATEMENT IS ACCOMPANIED BY THE PROSPECTUS OF THE INTERNATIONAL
VALUE FUND DATED FEBRUARY 28, 1997, WHICH IS INCORPORATED BY REFERENCE IN ITS
ENTIRETY. A Statement of Additional Information dated April 14, 1997 relating to
this Combined Prospectus/Proxy Statement (the "Related Statement of Additional
Information") has been filed with the Securities and Exchange Commission (the
"Commission"); it accompanies and is incorporated by reference into this
Combined Prospectus/Proxy Statement. Information about the Asia-Pacific Fund is
incorporated by reference to the Prospectus for the Asia- Pacific Fund dated
February 28, 1997, which has also been filed with the Commission. A Statement of
Additional Information dated February 28, 1997 for the International Value Fund
has been filed with the Commission and is incorporated into the Related
Statement of Additional Information. Copies of the current Prospectus and
Statement of Additional Information of the Asia-Pacific Fund may be obtained
without charge by calling 1-800-697-3863 or writing the Trust at c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701.
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<PAGE>
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THE SECURITIES OF THE TOCQUEVILLE INTERNATIONAL VALUE FUND 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
COMBINED PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE TOCQUEVILLE INTERNATIONAL VALUE FUND OR
THE TOCQUEVILLE ASIA-PACIFIC FUND.
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TABLE OF CONTENTS
Synopsis......................................................................1
Risk Factors..................................................................3
Comparison of Fees and Expenses...............................................4
Information About the Transaction.............................................5
Reasons for the Transaction...................................................8
Comparison of the Funds' Investment Objectives and Policies...................9
Information About the Funds..................................................10
Additional Information.......................................................11
Information Relating to Voting Matters.......................................12
Miscellaneous................................................................13
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<PAGE>
SYNOPSIS
This Synopsis provides a concise summary of the information contained
in this Combined Prospectus/Proxy Statement.
REASONS FOR THE TRANSACTION
The Board of Trustees has unanimously recommended the Reorganization and you are
being asked to vote for the Plan because the Board believes that as shareholders
of the combined fund you have the potential to realize substantial benefits from
the economies of scale that are associated with a larger asset base. In
addition, the Trustees believe that there will be substantial benefits to the
combined fund through a wider diversification of its assets across a broader
country base, thereby increasing investment opportunities for the Fund with the
potential of spreading investment risks among a greater number of issuers. See
"Reasons for the Transaction."
THE PLAN OF REORGANIZATION AND LIQUIDATION
Under the Plan, the Asia-Pacific Fund will transfer its assets to the
International Value Fund in exchange for shares of the International Value Fund
and the assumption by the International Value Fund of the liabilities of the
Asia-Pacific Fund. After the transaction, you will receive that number of shares
of the International Value Fund with a total value equal to the net asset value
of your shares of the Asia-Pacific Fund, as determined at the close of business
on the date of the exchange. You will not be charged a sales charge for this
transaction. See "Reasons for the Transaction" and "Information About the
Transaction," and the copy of the form of the Plan, which is attached as Exhibit
A.
TAX CONSEQUENCES
Each Fund will receive an opinion of counsel to the effect that no gain or loss
will be recognized by the Asia-Pacific Fund, the International Value Fund, or
the shareholders of the Asia-Pacific Fund as a result of the Reorganization. See
"Information about the Transaction."
INVESTMENT OBJECTIVES AND POLICIES
International Value Fund. The International Value Fund 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 adviser 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.
Asia-Pacific Fund. The Asia-Pacific 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.
Each Fund has additional investment policies which are discussed under "Risk
Factors" and "Comparison of the Funds' Investment Objectives and Policies."
MANAGEMENT OF THE FUNDS
Investment Adviser
Tocqueville Asset Management L.P. (the "Adviser") is the investment adviser for
each Fund. See "Information About the Funds."
Administrator
Under an Administrative Services Agreement, the Adviser supervises the
administration of all aspects of each Fund's operations. Firstar Trust Company
has been delegated and performs certain administrative functions. See
"Information About the Funds."
Fees and Expenses
The investment advisory and administrative services fees are identical for each
Fund. Because the investment advisory fees are at breakpoints based on assets,
it is anticipated that due to a larger asset base shareholders will be subject
to lower overall levels of investment advisory fees and total fund expenses for
the foreseeable future as a result of the Reorganization. See "Comparison of
Fees and Expenses."
DISTRIBUTION AND PURCHASE PROCEDURES; EXCHANGE RIGHTS; REDEMPTION PROCEDURES
The procedures for purchasing and redeeming shares are identical for each Fund,
and each Fund has identical exchange privileges. See "Information About the
Funds."
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<PAGE>
OTHER CONSIDERATIONS
In the event the shareholders of the Asia-Pacific Fund do not approve the
Reorganization, the Board will consider possible alternatives to the proposed
Reorganization. Shareholders have no right of appraisal, but may continue to
redeem their shares in accordance with normal Fund policies.
This Synopsis is qualified by reference to the more complete
information contained elsewhere in this Combined Prospectus/Proxy Statement,
including information incorporated by reference herein from the accompanying
Prospectus for the International Value Fund dated February 28, 1997, and in the
Plan of Reorganization and Liquidation attached to this Combined
Prospectus/Proxy Statement as Exhibit A.
RISK FACTORS
As described more fully below under "Comparison of the Funds'
Investment Objectives and Policies," the principal difference in the investment
objectives and policies of the two Funds is that the International Value Fund
has a broader range of permissible foreign countries in which to invest than the
Asia-Pacific Fund.
The Adviser informed the Board that it had evaluated the risk profile
of the Asia-Pacific Fund and believed that, due to its narrower scope of
permissible investments, the Asia-Pacific Fund is akin to a "sector" fund and
has a greater risk exposure than the International Value Fund due to the
mandatory concentration of investments within certain Asian and Pacific Basin
countries. Although the International Value Fund may invest in a broader range
of foreign countries than the Asia-Pacific Fund, which may tend to decrease the
risks undertaken by a shareholder to some extent, shareholders should bear in
mind that investments in foreign securities generally involve certain risks not
ordinarily associated with investments in securities of domestic issuers. All
such risks are risks that have been undertaken by investing in the Asia-Pacific
Fund.
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 International Value Fund's foreign investments will present
less risk than a portfolio of domestic securities.
The value of the International Value 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. This risk also is present with respect to an investment in
the Asia-Pacific 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 International Value Fund and the Asia-Pacific Fund each 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
each Fund invests or in the leadership or policies of any other government which
exercises a significant influence over
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<PAGE>
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.
COMPARISON OF FEES AND EXPENSES
The following tables summarize and compare the fees and expenses of the
Funds. These tables are intended to assist shareholders in comparing the various
costs and expenses that shareholders directly and indirectly bear with respect
to an investment in the Asia-Pacific Fund and those that they can expect to bear
directly and indirectly as shareholders of the International Value Fund.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
Maximum Sales
Maximum Sales Load Imposed Maximum
Load on on Reinvested Deferred Sales Redemption Exchange
Purchases Dividends Load Fee Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
International
Value Fund 4.00% None None * **
Asia-Pacific 4.00% None None * **
Fund
</TABLE>
ANNUAL FUND OPERATING EXPENSES
(as a % of average net assets)
Total
Management Rule 12b-1 Other Operating
Fee Distribution Fee (1) Expenses Expenses(2)
- -------------------------------------------------------------------------------
International 1.00% 0.25% 0.75% 2.00%
Value Fund
Asia-Pacific 1.00% 0.25% 0.75% 2.00%
Fund
Pro Forma for 1.00% 0.25% 0.75% 2.00%
Combined Fund
(1) Under each Fund's Distribution Plan, the Adviser 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. Any Rule 12b-1 expenses not already reimbursed
with respect to the Asia-Pacific Fund will not be carried forward after
the Reorganization. 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.
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<PAGE>
(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: International Value Fund: 1.28% and 2.53%, respectively;
and Asia-Pacific Fund 2.04% and 3.29%, respectively. Other Expenses and
Total Operating Expenses for the Combined Fund, absent any voluntary
waiver and/or reimbursement, are estimated to be 1.23% and 2.48%,
respectively. The Adviser 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% for either Fund. Should the
Adviser 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
Using the above expenses, you would pay the following expense on a
$1000 investment, assuming (1) five percent annual return and (2) full
redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
International Value Fund $59 $100 $143 $263
Asia-Pacific Fund 59 100 143 263
Pro Forma for Combined Funds 59 100 143 263
The purpose of the table is to assist you in understanding the various costs and
expenses that an investor in each Fund will bear directly or indirectly. See
"Information About the Funds" for a more complete discussion of annual operating
expenses of the Funds. THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
FINANCIAL HIGHLIGHTS. Financial highlights with respect to the Funds is
incorporated by reference herein and is included in the Prospectuses and
Statements of Additional Information dated February 28, 1997 and in the annual
report to shareholders.
INFORMATION ABOUT THE TRANSACTION
PLAN OF REORGANIZATION AND LIQUIDATION. The Plan provides that on the
Closing Date (as defined below) of the Reorganization, substantially all of the
assets of the Asia-Pacific Fund will be transferred to the International Value
Fund.
In exchange for the transfer of the assets of the Asia-Pacific Fund,
the International Value Fund will assume the liabilities of the Asia-Pacific
Fund and will issue to the Asia-Pacific Fund full and fractional shares of the
International Value Fund. The Asia-Pacific Fund will distribute the shares of
the International Value Fund so received to shareholders of the Asia-Pacific
Fund, whose shares of the Asia-Pacific Fund will become void. Shareholders of
the Asia-Pacific Fund at the time of the Reorganization will become shareholders
of the International Value Fund and will receive the same dollar amount in
International Value Fund shares as the shareholder had held in shares of the
Asia-Pacific Fund.
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<PAGE>
For purposes of the Reorganization, the number of shares of the
International Value Fund to be issued to the Asia-Pacific Fund will have an
aggregate net asset value equal to the aggregate net asset value of the
Asia-Pacific Fund as of the close of business on the business day preceding the
Closing Date (the "Valuation Date"). Asset value determinations will be made in
accordance with the valuation procedures set forth in the Funds' then current
Prospectuses and Statements of Additional Information.
On, or as soon as practicable after, the Closing Date, the Asia-Pacific
Fund will liquidate and distribute pro rata the shares of the International
Value Fund received in the Reorganization to its shareholders of record.
Shareholders of record will be determined as of the close of business on the
Valuation Date. The liquidation and distribution will be accomplished by
establishing accounts on the share records of the International Value Fund in
the name of the Asia-Pacific Fund shareholders, each account reflecting
ownership of the respective number of shares of the International Value Fund due
to each shareholder of the Asia-Pacific Fund.
The consummation of the Reorganization is subject to certain conditions
set forth in the Plan. The Board of Trustees of the Trust may terminate the Plan
at any time prior to the closing of the Reorganization without liability on the
part of either Fund. Assuming satisfaction of the conditions of the Plan, the
closing date for the Reorganization will be on May 1, 1997, or such other date
as is agreed to by the parties (the "Closing Date").
If the Reorganization is approved by shareholders, the Asia-Pacific
Fund reserves the right to sell portfolio securities and/or purchase other
securities, to the extent necessary so that the asset composition of the
Asia-Pacific Fund is consistent with the investment policies and restrictions of
the International Value Fund. Purchase and sale transactions would entail
transaction costs borne by the Asia-Pacific Fund. As of the date of this
Combined Prospectus/Proxy Statement, however, the Trust anticipates that the
Asia-Pacific Fund's portfolio securities will be retained by the International
Value Fund after the Reorganization.
DESCRIPTION OF SHARES OF THE INTERNATIONAL VALUE FUND. Full and
fractional shares of the International Value Fund will be issued to the
shareholders of the Asia-Pacific Fund in accordance with the procedures under
the Plan as described above. Each share will be fully paid and nonassessable
when issued and transferrable without restriction and will have no preemptive or
conversion rights.
EXPENSES. The Reorganization will be effected for each Asia-Pacific
Fund shareholder at net asset value without the imposition of any sales charges.
Expenses otherwise incurred by the Funds in connection with the transactions
will be borne by each Fund.
SHAREHOLDER APPROVAL. Approval of the Plan requires the affirmative
vote of a "majority of the outstanding voting securities," within the meaning of
the 1940 Act, of the Asia-Pacific Fund. The term "majority of the outstanding
voting securities" is defined under the 1940 Act to mean: (a) 67% or more of the
outstanding Shares present at the Meeting, if the holders of more than 50% of
the outstanding Shares are present or represented by proxy, or (b) more than 50%
of the outstanding Shares of the Asia-Pacific Fund, whichever is less.
The Board may terminate the Plan at any time prior to the closing of
the transaction.
FEDERAL INCOME TAX CONSEQUENCES. At the closing of the Reorganization
the Trust will receive an opinion from counsel to the effect that, on the basis
of then current law and certain assumptions and representations, for federal
income tax purposes: (1) the Asia-Pacific Fund and the International Value Fund
will each be treated as a separate corporation for federal income tax purposes;
(2) the exchange by the Asia- Pacific Fund of substantially all of its assets in
exchange for shares of the International Value Fund and the assumption by the
International Value Fund of the liabilities of the Asia-Pacific Fund, and the
subsequent liquidation of the Asia-Pacific Fund pursuant to the Plan will
constitute a reorganization within the meaning of
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<PAGE>
section 368(a)(l)(C) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that the Asia-Pacific Fund and the International Value Fund will
each be "a party to a reorganization" within the meaning of Code section 368(b);
(3) the Asia-Pacific Fund will not recognize any gain or loss as a result of the
Reorganization; (4) the International Value Fund will not recognize any gain or
loss on the receipt of the assets of the Asia- Pacific Fund in exchange for
shares of the International Value Fund; (5) the shareholders of the Asia-Pacific
Fund will not recognize any gain or loss on the exchange of their shares of the
Asia-Pacific Fund for shares of the International Value Fund; (6) the aggregate
tax basis of shares of the International Value Fund received by each shareholder
of the Asia-Pacific Fund will be the same as the aggregate tax basis of the
shares of the Asia- Pacific Fund exchanged therefor; (7) the International Value
Fund's adjusted tax basis in the assets received from the Asia-Pacific Fund in
the Reorganization will be the same as the adjusted tax basis of such assets in
the hands of the Asia-Pacific Fund immediately prior to the Reorganization; (8)
the holding period of each former shareholder of the Asia-Pacific Fund in the
shares of the International Value Fund received in the Reorganization will
include the period during which such shareholder held his shares of the
Asia-Pacific Fund as a capital asset; and (9) the International Value Fund's
holding periods in the assets received from the Asia- Pacific Fund in the
Reorganization will include the holding periods of such assets in the hands of
the Asia- Pacific Fund immediately prior to the Reorganization.
The Asia-Pacific Fund and the International Value Fund have not sought
a tax ruling from the Internal Revenue Service ("IRS") with respect to the tax
aspects of the Reorganization, but will act in reliance upon the opinion of
counsel discussed in the preceding paragraph. Such opinion is not binding on the
IRS and does not preclude the IRS from adopting a contrary position. If for any
reason the Reorganization of the Asia-Pacific Fund did not qualify as a tax-free
reorganization for federal income tax purposes, then (i) the transfer of the
Asia-Pacific Fund's assets to the International Value Fund would be treated as a
taxable sale or exchange of those assets at fair market value, and (ii) the
exchange by the shareholders of the Asia-Pacific Fund of their Asia-Pacific Fund
shares for the International Value Fund shares would be treated as a taxable
exchange of the Asia-Pacific Fund shares, also at fair market value.
Shareholders should consult their own advisers concerning that and other
potential tax consequences of the Reorganization to them, including any
applicable state and local income tax consequences.
CAPITALIZATION. The following table shows the capitalization of the
Asia-Pacific Fund and the International Value Fund as of October 31, 1996, and
on a pro forma basis as of that date giving effect to the proposed acquisition
of assets at net asset value:
Net Assets Net Asset Shares
(As of 10/31/96) Value per Share Outstanding
---------------- --------------- -----------
Asia-Pacific Fund $18,137,658 $9.08 1,997,849
International Value Fund $23,932,334 $12.57 1,903,992
Pro Forma Combined $42,069,992 $12.57 3,346,924
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<PAGE>
REASONS FOR THE TRANSACTION
The Board considered the Reorganization at a meeting on March 6, 1997.
At the meeting, the Adviser recommended to the Trustees that they approve, and
recommend to the shareholders of the Asia-Pacific Fund for their approval, a
tax-free Reorganization of the Asia-Pacific Fund into the International Value
Fund, in accordance with the terms of the Plan.
Management of the Adviser ("Management") has been of the view that both
Funds and the Trust would benefit from a combination of the funds because of the
economies of scale that would come with a larger asset base and the
simplification of marketing the Trust's international value portfolio. In
addition, Management expects the combined fund to benefit from a wider
diversification of its assets across a broader country base, thereby increasing
investment opportunities for the fund with the potential of spreading investment
risks among a greater number of issuers.
Management evaluated the risk profile of the Asia-Pacific Fund and
informed the Board of its belief that, as a general matter, long-term capital
appreciation may more likely be realized through investments in a more
diversified international investment portfolio such as that of the International
Value Fund because the Asia- Pacific Fund may have a greater risk exposure than
the International Value Fund due to the mandatory concentration of investments
within certain Asian and Pacific Basin countries. At the Board meeting,
Management informed the Board of its belief that a reduction in expenses could
potentially be realized as a result of the elimination of duplicative costs
presently incurred for services that are performed for both Funds.
In making its recommendation, Management considered the fact that the
Adviser is the investment adviser to both Funds. In addition, Management
considered the similarities of the investment objectives and policies of the
Funds and the fact that the Funds share the same service providers. Further,
Management considered that the Reorganization would be effected as a tax-free
reorganization.
Given the above factors and the similarity in the investment strategies
of the Asia-Pacific Fund and the International Value Fund, the Adviser concluded
that combining the two Funds would be appropriate and would enable the
shareholders of the combined portfolio to benefit from certain economies of
scale, including a lower gross expense ratio than that currently experienced by
the Asia-Pacific Fund, while also affording shareholders the continuing
opportunity to participate in a portfolio of foreign securities. The Adviser
also believes that by combining the Funds, the Adviser will be able to
concentrate its marketing resources on a single foreign stock fund to attract
investors interested in such a fund.
The Adviser indicated to the Board its belief that the most appropriate
method of combining the Asia- Pacific Fund into the International Value Fund
would be through a tax-free acquisition of the assets of the Asia- Pacific Fund
by the International Value Fund. The Adviser also stated that the Reorganization
is a better alternative than a taxable redemption of Asia-Pacific Fund shares or
an outright liquidation and dissolution of the Asia-Pacific Fund.
In considering the Adviser's proposal, the Board considered other
alternatives that are available to shareholders, including the ability to redeem
shares of the Asia-Pacific Fund prior to the Reorganization.
In reaching its decision to recommend shareholder approval of the
Reorganization, the Board made inquiries into a number of factors. The Board was
informed of the expense ratios of the Funds, and of applicable expense waivers,
as described above. In addition, the Board was advised that the Adviser could
not agree to indefinitely extend its voluntary expense waiver and reimbursement
arrangement. Without giving effect to the Adviser's voluntary
waiver/reimbursement, the total operating expenses of the Asia-Pacific Fund had
been 3.29% as of October 31, 1996. See "Information About the Funds - Expense
Ratios."
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<PAGE>
The Board also considered the following comparative investment
performance information regarding the Funds:
Total Return Information
One Year Period ended
October 31, 1996 Life of the Fund
---------------- ----------------
International Value Fund 11.44% 8.68%
Asia-Pacific Fund -3.92% 2.97%
The factors considered by the Board included, among other things: (1)
recent and anticipated asset and expense levels of the Funds and future
prospects of each Fund; (2) the similarity of the investment advisory,
distribution and administration arrangements, the fact that the Funds have the
same custodian, transfer agent, dividend disbursing agent and independent
accountants, and the fact that the Funds expect the Reorganization to realize
savings in fixed expenses because of resulting efficiencies in administration,
portfolio management, and marketing; (3) alternative options to the
Reorganization; (4) the terms and conditions of the Reorganization; (5) the
similarity of the investment objectives, policies and restrictions of the two
Funds; and (6) the tax consequences expected to result from the Reorganization.
Based upon these factors, the Trustees unanimously determined that the
transaction would not result in dilution of the interests of, and would be in
the best interest of, the shareholders of each of the Funds and recommended that
the shareholders of the Asia-Pacific Fund approve the Reorganization and the
Plan. The Trustees present at the March 6, 1997 Board Meeting constituted a
majority of all of the Trustees and a majority of those Trustees who are not
"interested persons" of the Adviser or the Funds, within the meaning of the 1940
Act.
COMPARISON OF THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
GENERAL. The investment objectives and policies of the Funds are
substantially similar. Both seek long-term capital appreciation consistent with
preservation of capital primarily through investing in a diversified portfolio
of common stocks principally traded in countries outside of North America. While
the Asia-Pacific Fund's principal investments are limited to countries in Asia
and the Pacific Basin, the International Value Fund may invest principally in a
broader range of countries.
INTERNATIONAL VALUE FUND. The investment objective of the 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 Adviser to be out of favor and
undervalued in relation to their potential growth or earning power. Generally,
stocks which have underperformed 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
Adviser to be out of favor. The Adviser 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 Adviser either on the basis
of past growth and profitability, as reflected in their financial statements, or
on the Adviser's conclusion that the company has achieved better results than
similar companies in a depressed industry which the Adviser believes will
improve within the next two years. There is no assurance that the Adviser'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
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<PAGE>
purchase securities of companies located in developing countries. In addition,
the Fund may invest up to 20% of its assets in the United States.
ASIA-PACIFIC FUND. The investment objective of the 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 Adviser 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 Adviser 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.
INFORMATION ABOUT THE FUNDS
INVESTMENT ADVISORY AGREEMENTS. The investment advisory agreement
between the International Value Fund and the Adviser (the "Investment Advisory
Agreement") contains terms that are the same as those set forth in the current
investment advisory agreement between the Asia-Pacific Fund and the Adviser
except for their execution and termination dates.
The Adviser is registered with the Commission as an investment adviser
and, in addition to managing the Funds, is also engaged in the business of
acting as investment adviser to private accounts with combined assets of more
than $600 million.
The Adviser, a limited partnership with it principal offices at 1675
Broadway, New York, New York 10019, acts as Adviser to each Fund under a
separate Investment Advisory Agreement which provides that the Adviser identify
and analyze possible investments for each Fund, and determine the amount,
timing, and form of such investments. The Adviser 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 Adviser'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 Adviser is an affiliate of Tocqueville Securities L.P., each
Fund's distributor.
ADVISORY AND DISTRIBUTION FEES. Under the current investment advisory
agreements of the International Value Fund and Asia-Pacific Fund, the Adviser
receives a fee from each 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 each Fund, 0.75% of average daily net assets
in excess of $50 million but not exceeding $100 million, and 0.65% 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 each Fund's
shares.
Each Fund has adopted a distribution plan (each a "Distribution Plan")
pursuant to Rule 12b-1 of the 1940 Act. Pursuant to the Distribution Plans, a
Fund may incur distribution expenses related to the sale of its shares of up to
0.25% per annum of the Fund's average daily net assets.
The Distribution 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., the Fund's distributor, who enter into
agreements with the Fund or Tocqueville Securities L.P. The Distribution Plans
will only make payments for expenses actually incurred on a first-in, first-out
basis. The Distribution Plans may
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<PAGE>
carry forward for an unlimited number of years any unreimbursed expenses. If a
Distribution Plan is terminated in accordance with its terms, the obligations of
the Fund to make payments pursuant to the Distribution Plan will cease and the
Fund will not be required to make any payments past the date the Distribution
Plan terminates.
ADMINISTRATOR. Under an Administrative Services Agreement, the Adviser
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 each Fund 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) the Adviser and its affiliates. For these services and
facilities, the Adviser receives with respect to the Fund a fee computed and
paid monthly at an annual rate of 0.15% of the average daily net assets of the
Funds. Certain administrative responsibilities have been delegated to and are
being performed by Firstar Trust Company.
EXPENSE RATIOS. As of October 31, 1996, the Asia-Pacific Fund had total
net assets of $18,137,658 the International Value Fund had total net assets of
$23,932,334 As of October 31, 1996, the total expense ratio for the Asia-Pacific
Fund was 2.63% after fee waivers. Without fee waivers, the expense ratio would
have been 3.29% for the Asia-Pacific Fund. For the same period, the total
expense ratio for the International Value Fund was 1.98% after fee waivers.
Without fee waivers, the expense ratio would have been 2.53% for the
International Value Fund.
DIVIDENDS AND DISTRIBUTIONS. 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 Internal Revenue Code of 1986. Distributions to shareholders will be
treated in the same manner for federal income tax purposes whether received in
cash or reinvested in additional shares of a Fund.
PURCHASE PROCEDURES AND EXCHANGE PRIVILEGES. The Funds have identical
purchase procedures and exchange privileges. Shares of both Funds are sold on a
continuous basis at net asset value and an initial sales charge, where
applicable.
REDEMPTION PROCEDURES. The Funds offer identical redemption features
pursuant to which proceeds of a redemption are remitted to shareholders.
GENERAL. Each Fund is a separate series of the Trust and, as such, has
identical rights under the Trust's Declaration of Trust and applicable
Massachusetts law. Each share of a Fund is entitled to one vote for all
purposes. Massachusetts law does not require registered investment companies,
such as the Trust, to hold annual meetings of shareholders and it is anticipated
that shareholder meetings will be held only when specifically required by
federal or state law. Shareholders have available certain procedures for the
removal of Trustees. The Trust indemnifies trustees and officers to the fullest
extent permitted under Massachusetts law.
ADDITIONAL INFORMATION
This Combined Prospectus/Proxy Statement and the Related Statement of
Additional Information do not contain all of the information set forth in the
registration statement and the exhibits relating thereto filed by the Trust with
the Commission under the Securities Act of 1933 and the 1940 Act, to which
reference is hereby made.
Information about the International Value Fund is included in its
Prospectus dated February 28, 1997, copies of which are included herewith and
incorporated by reference herein. Additional information about the
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<PAGE>
International Value Fund is included in the Statement of Additional Information
dated February 28, 1997, which has been filed as part of the Related Statement
of Additional Information of this Combined Prospectus/Proxy Statement, dated
April 14, 1997 and is included herein.
Both Funds file proxy materials, reports and other information with the
Commission. These documents and other information can be inspected and copied at
the Public Reference Facilities maintained by the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies of such material can also be
obtained from the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission, Washington, D.C. 20549
at prescribed rates.
INFORMATION RELATING TO VOTING MATTERS
GENERAL INFORMATION. This Combined Prospectus/Proxy Statement is being
furnished in connection with the solicitation of proxies by the Board for the
Meeting. It is expected that the solicitation of proxies will be primarily by
mail. Representatives of the Adviser and the Trust and service contractors
retained by the Trust may contact shareholders directly to discuss voting on the
proposal set forth herein, and may also solicit proxies by telephone, telegraph
or personal interview. The International Value Fund and the Asia-Pacific Fund
will bear the cost of solicitation of proxies. It is anticipated that banks,
broker-dealers and other institutions will be requested to forward proxy
materials to beneficial owners and to obtain authorization for the execution of
proxies. The International Value Fund and the Asia-Pacific Fund may, upon
request, reimburse banks, broker-dealers and other institutions for their
expenses in forwarding proxy materials to beneficial owners.
Only shareholders of record of the Asia-Pacific Fund at the close of
business on April 9, 1997 (the "Record Date"), will be entitled to vote at the
Meeting. As of the Record Date, there were 2,058,852.213 shares of the
Asia-Pacific Fund issued and outstanding and 2,645,030.487 shares of the
International Value Fund issued and outstanding.
As of April 9, 1997, Trustees and officers of the Trust owned 2.23% of
the outstanding shares of the International Value Fund. As of April 9, 1997, the
Adviser was believed to possess voting power with respect to 1,927,147.226
(93.60%) of the outstanding shares of the Asia-Pacific Fund, in view of which
such shares could be deemed to be beneficially owned by Tocqueville Asset
Management, L.P. as of such date. However, the Adviser and its affiliates have
advised the Trust that they intend to vote any shares over which they have
voting power at the Meeting (i) in the manner instructed by the customers for
which such shares are held, or (ii) in the event that such instructions are not
received, in the same proportion as the votes cast by other shareholders
(including advisory customers who furnish voting instructions).
If the accompanying proxy is executed and returned in time for the
Meeting, the shares covered thereby will be voted in accordance with the
instructions thereon. In the absence of any instructions, such proxy will be
voted to approve the Reorganization. Any shareholder giving a proxy may revoke
it at any time before the Meeting by submitting to the Asia-Pacific Fund a
written notice of revocation or a subsequently executed proxy, or by attending
the Meeting and voting in person.
If a proxy represents a broker "non-vote" (that is, a proxy from a
broker or nominee indicating that such person has not received instructions from
the beneficial owner or other person entitled to vote shares on a particular
matter with respect to which the broker or nominee does have discretionary
power) or marked with an abstention (collectively, "abstentions"), the shares
represented thereby will be considered to be present at the meeting for purposes
of determining the existence of a quorum for the transaction of business.
QUORUM AND ADJOURNMENTS. The presence of a majority of the outstanding
shares of the Asia-Pacific Fund, in person or by proxy, constitutes a quorum. If
at the time any session of the Meeting is called to order a quorum is not
present, in person or by proxy, the persons named as proxies may vote those
proxies which
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<PAGE>
have been received to adjourn the Meeting to a later date. In the event that a
quorum is present but sufficient votes in favor of one or more of the proposals
have not been received, the persons named as proxies may propose one or more
adjournments of the Meeting to permit further solicitation of proxies with
respect to any such proposal. All such adjournments will require the affirmative
vote of a majority of the shares present in person or by proxy at the session of
the Meeting to be adjourned. The persons named as proxies will vote those
proxies which they are entitled to vote in favor of the proposal, in favor of
such an adjournment, and will vote those proxies required to be voted against
the proposal, against any such adjournment. A vote may be taken on one or more
of the proposals in this proxy statement prior to any such adjournment if
sufficient votes for its approval have been received and it is otherwise
appropriate.
APPRAISAL RIGHTS. The Trust's Declaration of Trust does not grant
shareholders any rights of share appraisal. Shareholders have the right to
redeem their shares of the Asia-Pacific Fund at net asset value at any time
until the close of business on the business day prior to the Closing Date of the
Reorganization and, thereafter, shareholders may redeem from the International
Value Fund the International Value Fund shares acquired by them in the
Reorganization.
OTHER BUSINESS. The Board of Trustees knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, proxies that do not contain specific restrictions to the contrary will
be voted on such matters in accordance with the judgment of the persons named as
Proxies.
FUTURE SHAREHOLDER PROPOSALS. Pursuant to rules adopted by the
Commission under the Securities Exchange Act of 1934, as amended (the "1934
Act"), shareholders may request inclusion in the Asia-Pacific Fund's proxy
statement for an annual meeting of shareholders proposals that they intend to
introduce at such meeting. Any such proposals must be presented a reasonable
time before the proxy materials for the next meeting are sent to shareholders.
The submission of a proposal does not guarantee its inclusion in the proxy
statement and is subject to limitations under the 1934 Act. The Asia-Pacific
Fund does not hold annual meetings of shareholders. For this reason, no
anticipated date of the next meeting, if any, can be provided.
THE BOARD OF TRUSTEES RECOMMENDS APPROVAL OF THE PLAN.
MISCELLANEOUS
FINANCIAL STATEMENTS. The financial statements of the Funds, which have
been incorporated by reference into the Related Statement of Additional
Information relating to this Combined Prospectus/Proxy Statement, have been
audited by McGladrey & Pullen, independent accountants, for the periods
indicated in their report thereon, which is included in the annual report to
shareholders for the year ended October 31, 1996.
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<PAGE>
EXHIBIT A
FORM OF
PLAN OF REORGANIZATION AND LIQUIDATION
THIS PLAN OF REORGANIZATION AND LIQUIDATION (the "Plan") is adopted by
The Tocqueville Trust, a Massachusetts business trust (the "Trust"), on behalf
of two of its portfolios, The Tocqueville Asia-Pacific Fund (the "Asia-Pacific
Fund") and The Tocqueville International Value Fund (the "International Value
Fund") as of March 6, 1997. (The Asia-Pacific Fund and International Value Fund
are sometimes referred to as a "Fund" and together as the "Funds.")
W I T N E S S E T H :
WHEREAS, the Trust is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, this Plan is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended, such reorganization to consist of the
transfer of all of the assets of the Asia-Pacific Fund in exchange for shares of
beneficial interest, no par value, of the International Value Fund
("International Value Fund Shares"), the assumption by the International Value
Fund of the liabilities of the Asia-Pacific Fund, and the distribution, after
the Closing (as defined in Section 5) of International Value Fund Shares to the
shareholders of the Asia-Pacific Fund in liquidation of the Asia-Pacific Fund,
all upon the terms and conditions hereinafter set forth in this Plan; and
WHEREAS, the Board of Trustees of the Trust, including a majority of
the Trustees who are not interested persons of the Trust, within the meaning of
the 1940 Act, has determined with regard to each Fund that participating in the
transactions contemplated by this Plan is in the best interests of the Funds and
that the interests of shareholders of the Funds will not be diluted as a result
of such transactions.
NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts and
declares the following Plan:
1. TRANSFER OF ASSETS. Subject to the terms and conditions set forth
herein, at the Closing the Trust shall transfer all of the assets of the
Asia-Pacific Fund to the International Value Fund, and in consideration
therefor, the International Value Fund shall assume all of the Liabilities (as
defined herein), and issue to the Trust, on behalf of the Asia-Pacific Fund,
International Value Fund Shares (the "New Shares") having an aggregate net asset
value equal to the value of the assets of the Asia-Pacific Fund transferred less
the Liabilities assumed. "Liabilities" shall mean the liabilities and
obligations reflected in an unaudited statement of assets and liabilities of the
Asia-Pacific Fund as of the close of business on the Valuation Date (as
hereinafter defined), determined in accordance with generally accepted
accounting principles consistently applied from the Asia-Pacific Fund's most
recently completed audit period. The net asset value of the New Shares and the
value of the net assets of the Asia-Pacific Fund to be transferred shall be
determined as of the close of regular trading on the New York Stock Exchange on
the business day next preceding the Closing (the "Valuation Date") using the
valuation procedures set forth in the then current prospectus and statement of
additional information of the International Value Fund.
The International Value Fund shall assume only the Liabilities, and no
other liabilities or obligations, whether absolute or contingent, known or
unknown, accrued or unaccrued. All Liabilities that exist at or after the
Closing shall, after the Closing, attach to the International Value Fund and may
be enforced against the International Value Fund to the same extent as if the
same had been incurred by the International Value Fund.
<PAGE>
2. LIQUIDATION OF THE ASIA-PACIFIC FUND. Upon the consummation of the
transactions referred to in Section 1, the New Shares will be issued to the
Trust, to be credited to the accounts of shareholders of record of the
Asia-Pacific Fund at the close of business on the Valuation Date. At or as soon
as practicable after the Closing, the New Shares will be distributed to such
shareholders in exchange for and in liquidation and cancellation of the shares
of the Asia-Pacific Fund, each such shareholder to receive the number of New
Shares that is equal in dollar amount to the value of shares of beneficial
interest of the Asia-Pacific Fund held by such shareholder as of the close of
business on the Valuation Date. Such distribution will be accomplished by the
establishment of an open account on the share records of the International Value
Fund in the name of each shareholder of the Asia-Pacific Fund and representing
the respective number of New Shares due such shareholder. For these purposes,
the shareholders of record of the Asia-Pacific Fund as of the close of business
on the Valuation Date shall be certified by the transfer agent of the Trust.
The Trust shall file on behalf of the Asia-Pacific Fund such
instruments of dissolution, if any, as are necessary to effect the dissolution
of the Asia-Pacific Fund and shall take all other steps necessary to effect a
complete liquidation and dissolution of the Asia-Pacific Fund.
3. REPRESENTATIONS AND WARRANTIES.
(a) The Trust, on behalf of the Asia-Pacific Fund and International
Value Fund, hereby represents and warrants to the International Value Fund and
Asia-Pacific Fund as follows:
(i) the Trust is duly organized, validly existing and in good
standing under the laws of the Commonwealth of Massachusetts and has full power
and authority to conduct its business as presently conducted;
(ii) the Trust has full power and authority to execute,
deliver and carry out the terms of this Plan on behalf of the Asia-Pacific Fund
and International Value Fund;
(iii) the execution and delivery of this Plan on behalf of the
Asia-Pacific Fund and International Value Fund and the consummation of the
transactions contemplated hereby are duly authorized and no other proceedings on
the part of the Trust, the shareholders of the International Value Fund, or the
shareholders of the Asia-Pacific Fund (other than as contemplated in Section
4(f)) are necessary to authorize this Plan and the transactions contemplated
hereby;
(iv) this Plan has been duly executed by the Trust on behalf
of the Asia-Pacific Fund and the International Value Fund and constitutes its
valid and binding obligation, enforceable in accordance with its terms, subject
to applicable bankruptcy, reorganization, insolvency, moratorium and other
rights affecting creditors' rights generally, and general equitable principles;
(v) neither the execution and delivery of this Plan by the
Trust on behalf of the Asia- Pacific Fund or the International Value Fund, nor
the consummation by the Trust on behalf of the Asia-Pacific Fund or the
International Value Fund of the transactions contemplated hereby will conflict
with, result in a breach or violation of, or constitute (or with notice, lapse
of time or both constitute) a breach of or default under, the Declaration of
Trust or By-Laws of the Trust, or any statute, regulation, order, judgment or
decree, or any instrument, contract or other agreement to which the Trust is a
party or by which the Trust or any of its assets is subject or bound; and
(vi) no authorization, consent or approval of any governmental
or other public body or authority or any other party is necessary for the
execution and delivery of this Plan by the Trust on behalf of the Asia-Pacific
Fund and the International Value Fund or the consummation of any transactions
contemplated hereby, other than as shall be obtained at or prior to the closing.
A-2
<PAGE>
4. CONDITIONS PRECEDENT. The obligations herein of the Trust to
effectuate the Plan shall be subject to the satisfaction of the following
conditions:
(a) At or immediately prior to the Closing, the Trust shall have
declared and paid a dividend or dividends which, together with all
previous such dividends, shall have the effect of distributing to the
shareholders of the Asia-Pacific Fund all of the Fund's investment
company taxable income for taxable years ending at or prior to the
Closing (computed without regard to any deduction for dividends paid)
and all of its net capital gain, if any, realized in taxable years
ending at or prior to the closing (after reduction for any capital loss
carry-forward);
(b) Such authority and orders from the Securities and Exchange
Commission (the "Commission") and state securities commissions as may
be necessary to permit the Trust to carry out the transactions
contemplated by this Plan shall have been received;
(c) A registration statement of the Trust on Form N-14 under the
Securities Act of 1933, as amended (the "Securities Act"), and such
amendment or amendments thereto as are determined by the Board of
Trustees of the Trust to be necessary and appropriate to effect such
registration of the New Shares (the "Registration Statement"), shall
have been filed with the Commission and shall have become effective,
and no stop-order suspending the effectiveness of such Registration
Statement shall have been issued, and no proceeding for that purpose
shall have been initiated or threatened by the Commission (unless
withdrawn or terminated);
(d) The New Shares shall have been duly qualified for offering to the
public in all states in which such qualification required for
consummation of the transactions contemplated hereunder.
(e) The Board of Trustees of the Trust shall have received a legal
opinion from outside counsel, in form and substance reasonably
satisfactory to the Board of Trustees of the Trust, as to tax and
corporate matters related to this Plan, including, without limitation,
that the proposed reorganization will not result in any taxable gain or
loss to the Asia-Pacific Fund or its shareholders; and
(f) This Plan and the proposed reorganization contemplated hereby shall
have been approved by shareholders of the Asia-Pacific Fund in
accordance with the 1940 Act, at a meeting of shareholders of the
Asia-Pacific Fund to be duly called for such purpose.
5. CLOSING. The Closing shall be held at the offices of the Trust and
shall occur as of the commencement of business on (a) May 1, 1997, or (b) if all
regulatory or shareholder approvals shall not have been received by such date,
then on the first Monday following receipt of all necessary regulatory approvals
and the final adjourned meeting of shareholders of the Asia-Pacific Fund at
which this Plan is considered and approved, or (c) such later time as the Trust
may determine, giving consideration to the best interests of the Funds. All acts
taking place at the Closing shall deemed to take place simultaneously unless
otherwise provided.
6. EXPENSES. The expenses of the transactions contemplated by this Plan
shall be borne by the Funds in proportion to their respective net assets, valued
at the Closing, whether or not the transactions contemplated hereby are
consummated.
7. TERMINATION. This Plan and the transactions contemplated hereby may
be terminated and abandoned by resolution of the Board of Trustees of the Trust,
at any time prior to the Closing, if circumstances should develop that, in the
opinion of the Board, in its sole discretion, make proceeding with this Plan
inadvisable for either Fund. In the event of any such termination, there shall
be no liability for damages on the part of either Fund, or its agent or
officers, to the other Fund, or its agents or officers.
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<PAGE>
8. AMENDMENTS. This Plan may be amended, waived or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
the Trust with respect to either Fund; provided, however, that following the
meeting of the Asia-Pacific Fund shareholders called by the Trust pursuant to
Section 4(f) of this Plan, no such amendment, waiver or supplement may have the
effect of changing the provisions for determining the amount of International
Value Fund Shares to be issued to the Asia-Pacific Fund shareholders under this
Plan, or otherwise to the detriment of such shareholders, without their further
approval.
9. GOVERNING LAW. This Plan shall be governed and construed in
accordance with the laws of Massachusetts, without giving effect to the
conflicts of laws provisions thereof.
10. FURTHER ASSURANCES. The Trust, with respect to the Asia-Pacific
Fund and the International Value Fund, shall take such further action, prior to,
at, and after the Closing, as may be necessary or desirable and proper to
consummate the transactions contemplated hereby.
IN WITNESS WHEREOF, the Board of Trustees of the Trust has caused this
Plan to be executed on behalf of each Fund as of the date first set forth above
by their duly authorized representatives.
THE TOCQUEVILLE TRUST
on behalf of The Tocqueville Asia-Pacific Fund
Attest:
- ----------------------
By:
---------------------------------------------
THE TOCQUEVILLE TRUST
on behalf of The Tocqueville International Value
Fund
By:
---------------------------------------------
Attest:
- ------------------
A-4
<PAGE>
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE ASIA-PACIFIC FUND
SPECIAL MEETING OF SHAREHOLDERS -- April 29, 1997
Please refer to the Proxy Statement for a discussion of these matters. THE
UNDERSIGNED HOLDER(S) OF SHARES OF BENEFICIAL INTEREST OF THE TOCQUEVILLE
ASIA-PACIFIC FUND SERIES OF THE TOCQUEVILLE TRUST HEREBY CONSTITUTES AND
APPOINTS KIERAN LYONS AND ROBERT KLEINSCHMIDT, OR EITHER OF THEM, THE ATTORNEYS
AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, TO VOTE THE
SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES ANY PRIOR PROXIES. To vote,
mark an X in blue or black ink on the proxy card below. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF TRUSTEES OF THE TOCQUEVILLE TRUST.
- ------Detach card at perforation and mail in postage paid envelope provided----
1. Vote on Proposal to approve a Plan of Reorganization and
Liquidation with respect to The Tocqueville Asia-Pacific
Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
- -----Detach card at perforation and mail in postage paid envelope provided------
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE ASIA-PACIFIC FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF EACH PROPOSAL.
Please sign exactly as name appears on this card. When
account is joint tenants, all should sign. When signing as
administrator, trustee or guardian, please give title. If a
corporation or partnership, sign in entity's name and by
authorized person.
x________________________________________________________
x________________________________________________________
Dated:______________________________________________, 1997
PART B
Rule 497(b)
Registration No. 333-23331
RELATED STATEMENT OF ADDITIONAL INFORMATION
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
April 13, 1997
This Related Statement of Additional Information is not a prospectus,
but should be read in conjunction with the Combined Prospectus/Proxy Statement
of The Tocqueville Trust relating to The Tocqueville International Value Fund
(the "International Value Fund") dated April 13, 1997, which may be obtained by
writing The Tocqueville Trust, c/o Firstar Trust Company, 615 East Michigan
Street, Milwaukee, Wisconsin 53202 or by calling 800-697-3863. Further
information about the International Value Fund is contained in the Related
Statement of Additional Information of the Fund dated February 28, 1997 and the
audited financial statements of the Fund for the period ended October 31, 1996,
which are both incorporated by reference herein. The audited financial
statements of The Tocqueville Asia-Pacific Fund (the "Asia-Pacific Fund") for
the period ended October 31, 1996 are also incorporated by reference herein.
The pro forma combined statement of assets and liabilities reflects the
financial position of International Value Fund at October 31, 1996 as though the
Reorganization occurred as of that date. The pro forma combined statement of
operations reflects the results of operations of the International Value Fund
and Asia- Pacific Fund for the period ended October 31, 1996 as though the
Reorganization occurred at the beginning of the period presented.
TABLE OF CONTENTS
PAGE
Investment Policies and Risks............................................... 2
Investment Restrictions..................................................... 6
Management.................................................................. 7
Investment Advisor and Investment Advisory Agreements...................... 9
Distribution Plans.......................................................... 10
Administrative Services Agreement.......................................... 10
Portfolio Transactions and Brokerage........................................ 11
Allocation of Investments................................................... 12
Computation of Net Asset Value.............................................. 12
Purchase and Redemption of Shares........................................... 12
Tax Matters................................................................. 12
Performance Calculation..................................................... 19
General Information......................................................... 20
Reports..................................................................... 21
Pro Forma Financial Statements............................................. A-1
<PAGE>
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 Related Statement of Additional Information relates
to The Tocqueville International Value Fund and The Tocqueville Asia-Pacific
Fund. 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 Asia- Pacific Fund's (the "Asia-Pacific Fund")
investment objective is long-term capital appreciation consistent with
preservation of capital primarily through investment in securities of issuers
located in Asia and the Pacific Basin. In each Fund, there is minimal emphasis
on current income. Much of the information contained in this Related Statement
of Additional Information expands on subjects discussed in the Prospectus.
Capitalized terms not defined herein are used as defined in the Prospectus/Proxy
Statement.
INVESTMENT POLICIES AND RISKS
The following descriptions supplement the investment policies of each Fund set
forth in the Prospectus/Proxy Statement/Proxy Statement. Each Fund's investments
in the following securities and other financial instruments are subject to the
investment policies and limitations described in the Prospectus/Proxy Statement
and this Related Statement of Additional Information.
1. WRITING COVERED CALL OPTIONS ON SECURITIES AND STOCK INDICES
Both the International Fund and the Asia-Pacific 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 Funds 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 Funds 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 Funds may terminate an option that they have written prior to the
option's expiration by entering into a closing purchase transaction in which an
option is purchased having the same terms as the option written. A Fund will
realize a profit or loss from such transaction if the cost of such transaction
is less or more than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security or index, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by unrealized appreciation of the underlying security (or securities)
owned by a Fund.
-2-
<PAGE>
2. PURCHASING PUT AND CALL OPTIONS ON SECURITIES AND STOCK INDICES
Each 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 a Fund, as
holder of the put option, is able to sell the underlying security or index at
the put exercise price regardless of any decline in the underlying market price
of the security or index. In order for a put option to be profitable, the market
price of the underlying security or index must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put options
in this manner, a Fund will reduce any profit it might otherwise have realized
in its underlying security or index by the premium paid for the put option and
by transaction costs, but it will retain the ability to benefit from future
increases in market value.
Each 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 a Fund, as
holder of the call option, is able to buy the underlying security or index at
the exercise price regardless of any increase in the underlying market price of
the security or index. In order for a call option to be profitable, the market
price of the underlying security or index must rise sufficiently above the
exercise price to cover the premium and transaction costs. By using call options
in this manner, a Fund will reduce any profit it might have realized had it
bought the underlying security or index at the time it purchased the call option
by the premium paid for the call option and by transaction costs, but it limits
the loss it will suffer if the security or index declines in value to such
premium and transaction costs.
3. BORROWING
Each Fund may, from time to time, borrow up to 10% of the value of
its total assets from banks at prevailing interest rates as a temporary measure
for extraordinary or emergency purposes. A Fund may not purchase securities
while borrowings exceed 5% of the value of its total assets.
4. REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements subject to resale to a
bank or dealer at an agreed upon price which reflects a net interest gain for
the Fund. The Funds will receive interest from the institution until the time
when the repurchase is to occur.
The Funds will always receive as collateral U.S. Government or
short-term money market securities whose market value is equal to at least 100%
of the amount invested by a Fund, and the Funds will make payment for such
securities only upon the physical delivery or evidence by book entry transfer to
the account of its custodian. If the seller institution defaults, a Fund might
incur a loss or delay in the realization of proceeds if the value of the
collateral securing the repurchase agreement declines and it might incur
disposition costs in liquidating the collateral. The Funds attempt to minimize
such risks by entering into such transactions only with well-capitalized
financial institutions and specifying the required value of the underlying
collateral.
5. FUTURES CONTRACTS
Each 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.
-3-
<PAGE>
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.
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.
-4-
<PAGE>
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.
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.
-5-
<PAGE>
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,
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
-6-
<PAGE>
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.
MANAGEMENT
The overall management of the business and affairs of each Fund is
vested with the Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust or each Fund and persons or companies
furnishing services to the Funds, including a Fund's agreement with an
investment advisor, custodian and transfer agent. The day-to-day operations of
the Funds are delegated to each Fund's officers subject always to the investment
objectives and policies of each Fund and to general supervision by the Trust's
Board of Trustees.
The Trustees and officers and their principal occupations are noted
below. Unless otherwise indicated the address of each Trustee and executive
officer is 1675 Broadway, New York, New York 10019.
FRANCOIS DANIEL SICART,* CHAIRMAN, PRINCIPAL EXECUTIVE OFFICER AND TRUSTEE.
Chairman and Chief Executive Officer, Tocqueville Management Corporation, the
General Partner of Tocqueville Asset Management L.P. and Tocqueville Securities
L.P. from January, 1990 to present; Chairman and Chief Executive Officer,
Tocqueville Asset Management Corp. from December, 1985 to January, 1990; Vice
Chairman of Tucker Anthony Management Corporation, from 1981 to October 1986;
Vice President (formerly general partner) and other positions with Tucker
Anthony, Inc. from 1969 to January, 1990.
JAMES B. FLAHERTY, TRUSTEE. President and Partner, Troutbeck Conference Center
and Country Inn from October, 1979 to present; Vice President, Leedsville Realty
and Construction Corp. from 1980 to present; Associate Creative Director, Young
and Rubicam Advertising, and Dentsu, Young and Rubicam from March, 1983 to
February, 1985; Creative Director and Senior Vice President, Tinker Campbell
Ewald from October, 1977 to November, 1980; Partner/owner of Freshfields
Restaurant, W. Cornell, CT; President/Creative Director of JBF Ltd., an
advertising company.
INGE HECKEL, TRUSTEE. Management Consultant, 1988 to present; Executive
Director, Princess Grace Foundation U.S.A. from June, 1986 to September, 1988;
Vice President and Assistant Secretary, The Asia Society from September, 1984 to
June, 1986; Executive Director, Metropolitan Boston Zoos from September, 1982 to
July, 1984; President, Bradford College, Bradford, Massachusetts from September,
1979 to June, 1982; Trustee of Bradford College; Former Director and Chairman,
Public Relations Committee, International Counsel of Museums (UNESCO); Former
Director, BayBank/Merrimack Valley; Member, Art Advisory Board, Mount Holyoke
College Art Museum.
- --------
* Interested person of the Funds as defined in the 1940 Act.
-7-
<PAGE>
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 April 9, 1997, the Trustees and officers as a group owned beneficially 2.23%
of the International Fund's outstanding shares, and 2.62% of the Asia-Pacific
Fund's outstanding shares all of which were acquired for investment purposes.
Certain of the Trustees and officers may have investment discretion for
institutional and private accounts which own shares of the Funds, however the
Trustees and officers do not have the power to vote such shares and have
disclaimed beneficial ownership of such shares. For the fiscal year ended
October 31, 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.
-8-
<PAGE>
The table below illustrates the compensation paid to each Trustee for
the Trust's most recently completed fiscal year:
<TABLE>
<CAPTION>
Pension or Total
Retirement 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 each 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 each 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.
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 in light of the services each Fund receives thereunder. 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 years ended October 31,
1994, 1995 and 1996, with respect to the Asia-Pacific Fund, 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 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.
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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 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 Asia-Pacific 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, International Fund, and Asia-Pacific Fund had
$71,716, and $66,730 respectively, (0.30% and 0.37%, 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 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
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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 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 or transaction of the Investment Advisor's
ongoing responsibilities with respect to the Funds. For the fiscal year ended
October 31, 1994, the International Fund and the Asia-Pacific Fund paid total
brokerage commissions on portfolio transactions in the amount of $1,116 and
$83,423 respectively, and for the fiscal year ended October 31, 1995, the
International Fund and the Asia-Pacific Fund paid total brokerage commissions on
portfolio transactions in the amount of $39,142, and $26,286, respectively. For
the fiscal year ended October 31, 1996, the International Fund and Asia-Pacific
Fund paid total brokerage commissions on portfolio transactions in the amount of
$130,401, and $158,625, 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 International Fund: $1,116, $0 and
$1,509 respectively; and the Asia-Pacific Fund: $83,423, $0 and $175
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 International Fund: 1.15% and $1,509, respectively;
and the Asia- Pacific Fund: 0.14% and $225, respectively.
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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 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/Proxy Statement 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/Proxy Statement. 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/Proxy Statement are not intended as
substitutes for careful tax planning.
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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 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 a 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
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clause (1) above. In addition, the Government Fund, and 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 a Fund on the lapse of, or any gain or loss
recognized by 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 a 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.
A Fund may purchase securities of certain foreign investment funds
or trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If a Fund invests in a PFIC, it may elect to treat
the PFIC as a qualifying electing fund (a "QEF") in which event the Fund will
each year have ordinary income equal to its pro rata share of the PFIC's
ordinary earnings for the year and long-term capital gain equal to its pro rata
share of the PFIC's net capital gain for the year, regardless of whether the
Fund receives distributions of any such ordinary earning or capital gain from
the PFIC. If a 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 a 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
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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.
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.
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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 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.
Since an insignificant portion of each Fund will be invested in stock
of domestic corporations, the ordinary dividends distributed by a 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
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received from a Fund representing income derived from foreign sources. No
deduction for foreign taxes could be claimed by an individual shareholder who
does not itemize deductions. Each shareholder should consult his own tax adviser
regarding the potential application of foreign tax credits.
Distributions by a Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by a Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the IRS for failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of a Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) (discussed above in connection with the dividends-received
deduction for corporations) generally will apply in determining the holding
period of 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.
-17-
<PAGE>
Foreign Shareholders
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
a Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower treaty rate) upon the gross amount of the dividend.
Furthermore, such a foreign shareholder may be subject to U.S. withholding tax
at the rate of 30% (or lower treaty rate) on the gross income resulting from the
a 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 Related 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.
-18-
<PAGE>
PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of each Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return. Under rules promulgated by the Securities and Exchange
Commission ("SEC"), a fund's advertising performance must include total return
quotations calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of the 1, 5 or 10 year
period, at the end of such period (or fractional
portion thereof)
Under the foregoing formula, the time periods used in advertising
will be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover 1, 5 and 10 year periods of a Fund's existence or such shorter period
dating from the effectiveness of the Fund's Registration Statement. In
calculating the ending redeemable value, all dividends and distributions by a
Fund are assumed to have been reinvested at net asset value as described in the
Prospectus/Proxy Statement 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,
-19-
<PAGE>
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
International Fund for the 1 year and since inception periods ended October 31,
1996 was 11.44% and 8.68%; and the total return for the Asia-Pacific 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 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
-20-
<PAGE>
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 April 9, 1997, the following shareholders owned 5% or more of
the International Fund's shares: Tocqueville Asset Management L.P. held
discretion over 2,485,123.502 shares (93.95%).
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.
-21-
<PAGE>
<TABLE>
<CAPTION>
The Tocqueville International Value Fund
Pro Forma Portfolio of Investments
As of October 31, 1996
(Unaudited)
===================================================================================================================================
Shares Market Value
====================================================================================
International Asia- Pro Forma International Pro Forma
Value Pacific Combined Value Asia - Pacific Combined
-------------- -------- ------------ --------------------------- --------------
Common Stocks and Warrants - 77.6%
<S> <C> <C> <C> <C> <C> <C>
Australia - 1.8 %
Crown Limited* 75,000 75,000 $162,862 162,862
Normandy Mining Limited 78,500 78,500 107,006 107,006
QNI Limited 35,000 35,000 70,455 70,455
Resolute Samantha Limited 58,571 58,571 118,832 118,832
Woodside Petroleum Limited 40,000 40,000 282,137 282,137
--------- ----------- ------------
-- 741,292 741,292
--------- ----------- ------------
France -20.2%
Andre Trigano 2,000 2,000 62,600 62,600
APEM 4,000 4,000 168,630 168,630
Carbone Lorraine 4,000 4,000 594,702 594,702
Cie Europenne de Telesecurite C.E.T. 2,000 2,000 160,413 160,413
Credit National 2,000 2,000 105,638 105,638
Distriborg Distributes 8,000 8,000 522,556 522,556
Ducros Services Rapides SA rights* 10 10 6 6
Ducros Services Rapides SA* 10 10 117 117
Eaux (Cie Generale) 2,000 2,000 239,055 239,055
Emin Leydier 5,400 5,400 411,988 411,988
Europeene de Propulsion 1,800 1,800 169,725 169,725
Europeenne d'Extincteurs 12,000 12,000 706,600 706,600
Faiveley SA 9,700 9,700 573,066 573,066
Faiveley warrants 7/99* 700 700 5,560 5,560
Fraikin 8,000 8,000 424,117 424,117
GFI Industries 1,500 1,500 199,538 199,538
Infra Plus 6,210 6,210 410,615 410,615
JAJ Distribution SA 3,750 3,750 173,129 173,129
Lapeyre SA 6,500 6,500 318,146 318,146
Mediascience SA 1,900 1,900 185,845 185,845
Musee Grevin* 20,000 20,000 342,345 342,345
Societe Anonyme Francaise de Reassurances 2,600 2,600 407,410 407,410
Roberter SA 1,130 1,130 218,847 218,847
Rubis et Cie 12,500 12,500 379,270 379,270
SGS Thomson Microelectronics NV* 3,000 3,000 158,985 158,985
Sidergie SA 300 300 29,168 29,168
Societe Industrielle D'Aviations Latecoere SA 4,415 4,415 403,774 403,774
Sport Elec SA 4,220 4,220 296,369 296,369
Thompson CSF 20,000 20,000 624,046 624,046
Vilmorin et Cie 2,200 2,200 207,872 207,872
------------ ----------- ------------
8,500,132 -- 8,500,132
------------ ----------- ------------
----------- ----------- -----------
<PAGE>
<CAPTION>
Shares Market Value
====================================================================================
International Asia- Pro Forma International Pro Forma
Value Pacific Combined Value Asia - Pacific Combined
-------------- -------- ------------ --------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Hong Kong - 2.2%
ASM Pacific Technology 450,000 450,000 337,550 337,550
Guangdong Investments 610,000 610,000 437,844 437,844
Manhattan Card Company, Ltd. 340,000 340,000 168,193 168,193
------------ ----------- ------------
-- 943,587 943,587
------------ ----------- ------------
Indonesia - 9.2%
Astra International 500,000 500,000 1,041,085 1,041,085
Bukaka Teknik Utam 882,000 882,000 681,578 681,578
Chareon Pokhand Indonesia * 180,000 180,000 200,919 200,919
Citra Marga Nusaphala Persada 900,000 900,000 656,850 656,850
Hero Supermarket 330,000 330,000 205,426 205,426
Japfa Comfeed Indonesia 800,000 800,000 532,349 532,349
Pabrik Kertas Tjiwi Kimia 84,700 84,700 87,271 87,271
Steady Safe 455,267 455,267 444,654 444,654
------------ ------------- ------------
-- 3,850,132 3,850,132
------------ ------------- ------------
Japan - 6.8%
Bank of Tokyo - Mitsubishi 15,250 15,250 310,951 310,951
FCC Company Limited 8,000 8,000 235,542 235,542
H.I.S. Company Limited 3,300 3,300 175,180 175,180
Honda Motor Company, Ltd. 15,000 15,000 358,587 358,587
Meitec Corp. 5,000 5,000 102,830 102,830
Mitsui O.S.K. Lines* 33,000 33,000 92,231 92,231
Oiles Corp. 14,400 14,400 485,990 485,990
Paramount Bed 10,000 10,000 690,807 690,807
Rohm Company 7,000 7,000 415,275 415,275
------------ ------------- ------------
-- 2,867,393 2,867,393
------------ ------------- ------------
Malaysia - 3.8%
ACP Industries 54,000 54,000 354,799 354,799
Commerce Asset Holdings Bhd 40,000 40,000 261,231 261,231
Cycle & Carriage Ltd. 30,000 30,000 173,363 173,363
Ekran Berhad 65,000 65,000 272,709 272,709
Road Builder (m) Holding Bhd 105,000 105,000 540,273 540,273
------------ ------------- ------------
-- 1,602,375 1,602,375
------------ ------------- ------------
Netherlands - 6.3%
ABN Amro Holdings NV 5,300 5,300 299,599 299,599
Draka Holdings NV 10,000 10,000 330,091 330,091
Elsevier NV 20,000 20,000 332,449 332,449
IHC Caland NV 2,500 2,500 139,552 139,552
Kon PTT Nederland 5,000 5,000 180,961 180,961
Royal Dutch Petroleum Company 3,700 3,700 611,105 611,105
Volker Stevin 8,150 8,150 748,465 748,465
------------ ------------- ------------
2,642,222 -- 2,642,222
------------ ------------- ------------
----------- ----------- -----------
<PAGE>
<CAPTION>
Shares Market Value
====================================================================================
International Asia- Pro Forma International Pro Forma
Value Pacific Combined Value Asia - Pacific Combined
-------------- -------- ------------ --------------------------- --------------
<S> <C> <C> <C> <C> <C> <C>
New Zealand - 0.6%
Carter Holt Harvey Limited 50,000 50,000 112,495 112,495
Telecom Corporation of New Zealand Limited 25,000 25,000 130,005 130,005
------------ ------------- ------------
-- 242,500 242,500
------------ ------------- ------------
Philippines - 4.1%
DMCI Holdings, Inc.* 600,000 600,000 433,625 433,625
House of Investments Inc. 1,200,000 1,200,000 168,885 168,885
Ionics Circuit Inc.* 300,000 300,000 193,990 193,990
Universal Rightfield Properties Holding Inc.* 5,500,000 5,500,000 543,933 543,933
Universal Robina Corporation 460,000 460,000 209,966 209,966
Vitarich Corporation* 2,015,000 2,015,000 164,021 164,021
------------ ------------- ------------
-- 1,714,420 1,714,420
------------ ------------- ------------
Singapore - 6.2%
Development Bank of Singapore 33,000 33,000 395,869 395,869
Clipsal Industries, Ltd. 160,000 160,000 512,000 512,000
Crompton Greaves Ltd.* 41,500 41,500 186,542 186,542
Elec & Eltek International Company Ltd. 220,000 220,000 664,400 664,400
GPE Industries Limited 953,000 953,000 481,265 481,265
United Overseas Bank Ltd. 40,000 40,000 388,984 388,984
------------ ------------- ------------
-- 2,629,060 2,629,060
------------ ------------- ------------
South Korea - 2.5%
Samsung Disposal Devices Company 6,000 6,000 377,609 377,609
Samsung Electronic 9,420 9,420 662,393 662,393
------------ ------------- ------------
-- 1,040,002 1,040,002
------------ ------------- ------------
Spain - 4.1%
Aumar - Autopistas del Mare Nostrum SA 28,000 28,000 399,550 399,550
Centros Com Pryca 8,220 8,220 188,834 188,834
Const. Y Aux Ferr 8,400 8,400 329,299 329,299
Europistas CE SA 47,000 47,000 399,824 399,824
Gupo Anaya SA 15,000 15,000 296,958 296,958
OMSA Alimentacion 30,000 30,000 129,368 129,368
------------ ------------- ------------
1,743,833 -- 1,743,833
------------ ------------- ------------
Thailand - 2.7%
Krung Thai Bank Public Company Limited 120,000 120,000 324,770 324,770
Siam City Bank Public Company Limited 300,000 300,000 344,185 344,185
Thai Farmers Bank Public Company Limited 59,000 59,000 451,265 451,265
Thai Farmers Bank warrants 9/02* 800 800 784 784
------------ ------------- ------------
-- 1,121,004 1,121,004
------------ ------------- ------------
United Kingdom - 7.1%
British Telecom 31,000 31,000 179,254 179,254
Cairn Energy PLC * 38,000 38,000 224,984 224,984
Cairn Energy Rights* 12,666 12,666 412 412
Glaxo Wellcome 14,000 14,000 219,746 219,746
Hardy Oil & Gas PLC 80,000 80,000 345,478 345,478
Hays PLC 10,000 10,000 83,767 83,767
Jarvis PLC* 150,000 150,000 280,579 280,579
Linx Printing Tech 100,000 100,000 182,173 182,173
SEMA Group 59,090 59,090 856,363 856,363
Shanks & McEwan GP 200,000 200,000 374,106 374,106
Williams Holdings 40,000 40,000 236,174 236,174
------------ ----------- ------------
2,983,036 -- 2,983,036
----------- ----------- -----------
Total Common Stocks and Warrants (Cost $31,937,023 ) 15,869,223 16,751,765 32,620,988
----------- ----------- -----------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of contracts Market Value
================================== ===========================================
Asia- Pro Forma Asia- Pro Forma
International Pacific Combined International Pacific Combined
Foreign Currency Options - 0.0%
<S> <C> <C> <C> <C>
Put 250 French Franc 10 10 400 400
December 96 18.00
Put 250 German Mark 22 22 14,988 14,988
---------- --------- ------------
December 96 67.00
Total Foreign Currency Options 15,388 -- 15,388
---------- --------- ------------
</TABLE>
<TABLE>
<CAPTION>
Principal Amount Market Value
================================= ===========================================
Asia- Pro Forma Pro Forma
International Pacific Combined International Asia-Pacific Combined
Short-Term Investments - 22.3%
<S> <C> <C> <C> <C> <C>
Repurchase Agreement with State Street
Bank & Trust Company,4.0%, dated 10/31/96,
due 11/01/96, collateralized by U.S. Treasury
Notes valued at $1,454,048. Repurchase
proceeds of $1,419,158 (Cost $ 1,419,000) $1,419,00 1,419,000 1,419,000
Repurchase Agreement with State Street
Bank & Trust Company,4.0%, dated 10/31/96,
due 11/01/96, collateralized by U.S. Treasury
Notes valued at $2,084,656. Repurchase $2,042,000 2,042,000 2,042,000
proceeds of $2,042,227. (Cost $2,042,000)
U.S. Treasury Bills, 5.30%, 1/23/97 3,000,000 2,965,278 2,965,278
U.S. Treasury Bills, 5.06%, 2/20/97 3,000,000 2,953,750 2,953,750
------------ ------------ ------------
Total Short-Term Investments (Cost $9,377,603) 7,961,028 1,419,000 9,380,028
------------ ------------ ------------
Total Investments (Cost $41,340,209 ) - 99.9% 23,845,639 18,170,765 42,016,404
Other Assets & Liabilities, Net - 0.1% 86,695 (33,107) 53,588
============ ============ ============
Total Net Assets - 100.0% $23,932,334 $18,137,658 $42,069,992
============ ============ ============
* non-income producing security
See Notes to Pro Forma Financial Statements.
</TABLE>
<PAGE>
The Tocqueville International Value Fund
Pro Forma Statement of Assets and Liabilities
As of October 31, 1996
(unaudited)
<TABLE>
<CAPTION>
International Pro Forma Note Pro Forma
Value Asia - Pacific Adjustments Ref. Combined
============== ================ ================= ========= ============
Assets
<S> <C> <C> <C> <C> <C>
Investments, at value* 23,845,639 18,170,765 42,016,404
Foreign currency** 0 2,528 2,528
Cash 686 274 960
Receivable for investments sold 150,511 0 150,511
Dividends, interest & other receivable 85,592 16,741 102,333
Other assets 16,409 119 16,528
------------ ------------ -------------
24,098,837 18,190,427 42,289,264
------------ ------------ -------------
Liabilities
Payable for investments purchased 99,561 0 99,561
Accrued distribution fee 4,995 3,915 8,910
Accrued expenses and other liabilities 61,947 48,854 110,801
------------ ------------ -------------
------------
166,503 52,769 219,272
------------ ------------ -------------
Net Assets 23,932,334 18,137,658 42,069,992
============ ============ =============
Net assets consisted of:
Paid in capital 20,962,113 19,588,802 40,550,915
Undistributed net investment income 242,163 0 242,163
Accumulated net realized gain (loss) 1,013,931 (413,294) 600,637
Net unrealized appreciation (depreciation) 1,714,127 (1,037,850) 676,277
------------ ------------ -------------
Net assets 23,932,334 18,137,658 42,069,992
============ ============ =============
Shares outstanding (unlimited shares of
$0.01 par value authorized) 1,903,992 1,997,849 1,442,932 3f 3,346,924
Net asset value and redemption price per share 12.57 9.08 12.57
============ ============ ============== =============
* Cost of investments 22,131,708 19,208,501
** Cost of foreign currency 0 2,528
See Notes to Pro Forma Financial Statements.
</TABLE>
<PAGE>
The Tocqueville International Value Fund
Pro Forma Statement of Operations
Year Ended October 31, 1996
(unaudited)
<TABLE>
<CAPTION>
International Pro Forma Pro Forma
Value Asia - Pacific Adjustments Combined
============== ============== ========== =============
(Note 3)
<S> <C> <C> <C> <C>
Investment Income:
Dividends* 421,555 176,468 598,023
Interest 151,909 89,292 241,201
----------- ---------------- ----------- -----------
573,464 265,760 839,224
----------- ---------------- ----------- -----------
Expenses:
Investment adviser's fee 167,277 103,394 270,671
Custodian and fund accounting 78,690 84,180 (52,500) 3a 110,370
Transfer agent and shareholder services 31,110 31,110 (18,000) 3b 44,220
Professional fees 49,825 53,545 (18,000) 3c 85,370
Distribution 41,820 25,850 67,670
Administration fee 25,092 15,509 40,601
Printing 3,660 3,660 7,320
Registration 12,810 12,810 25,620
Trustee fee 1,830 1,830 3,660
Fidelity bond 1,830 1,830 3,660
Amortization of organization costs 5,375 2,804 ( 2,804) 3d 5,375
Other 3,660 3,660 7,320
----------- ---------------- ----------- -----------
Total expenses 422,979 340,182 (91,304) 671,857
Less: Fees waived (91,678) (68,727) 29,890 3e (130,515)
----------- ---------------- ----------- -----------
Net expenses 331,301 271,455 (61,414) 541,342
----------- ---------------- ----------- -----------
0
Net investment income (loss) 242,163 (5,695) 61,414 297,882
----------- ---------------- ----------- -----------
Realized and Unrealized Gain (Loss):
Net realized gain (loss):
Investments 1,116,998 (61,664) 1,055,334
Foreign currency translation (111,649) (27,035) (138,684)
Net change in unrealized appreciation
(depreciation) 1,432,158 (996,841) 435,317
----------- ---------------- ----------- -----------
Net gain(loss) 2,437,507 (1,085,540) 1,351,967
----------- ---------------- ----------- -----------
Net Increase (decrease) in Net Assets
Resulting from Operations 2,679,670 (1,091,235) 61,414 1,649,849
=========== ================ =========== ===========
* Net of Foreign Taxes Withheld 73,945 19,839
See Notes to Pro Forma Financial Statements.
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1. BASIS OF PRESENTATION
(a) The pro forma financial statements give effect to the proposed combination
of The Tocqueville International Value Fund (TIVF) formerly The Tocqueville
Europe Fund and The Tocqueville Asia-Pacific Fund (TAPF), pursuant to a Plan of
Reorganization, under which all the assets of TAPF will be transferred to TIVF
in exchange solely for TIVF shares and the assumption of all the liabilities of
TAPF as of the "closing date".
The Reorganization will be accounted for as a tax free business combination. In
accordance with the method of accounting for such combinations of investment
companies, the historical cost basis of the investment securities acquired from
TAPF will be carried forward to TIVF, and the statements of operations, changes
in net assets and the financial highlights are not restated. The number of TIVF
shares to be issued in the combination will be determined by dividing the value
of the total net assets of TAPF on the closing date by the net asset value per
share of TIVF.
(b) The pro forma statement of operations excludes by adjustment certain
expenses which would have been eliminated upon the effectiveness of the proposed
combination; and reflects adjustment for expense waiver and/or reimbursement
provisions effective following the Reorganization. The pro forma statement of
operations does not necessarily reflect the result of operations as they would
have been had TIVF and TAPF constituted a singe entity during the 12 months
ended October 31, 1996.
(c) The pro forma portfolio of investments, the pro forma statement of
operations and the pro forma statement of assets and liabilities should be read
in conjunction with the historical financial statements of TIVF and TAPF.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) SECURITY VALUATION - Investments in securities, including foreign
securities, traded on an exchange or quoted on the over-the-counter market are
valued at the last sale price or, if no sale occurred during the day, at the
mean between closing bid and asked prices, as last reported by a pricing service
approved by the Trustees. When market quotations are not readily available, or
when restricted securities or other assets are being valued, such assets are
valued at fair value as determined in good faith by or under procedures
established by the Trustees. Short-term investments are stated at cost which,
together with accrued interest, approximates market value.
(b) FEDERAL INCOME TAX - It is the Trust's policy to comply with the provisions
of the Internal Revenue Code ("Code") applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders. It is
also the Trust's intention to distribute amounts sufficient to avoid imposition
of any excise tax under Section 4982 of the Code. Therefore, no federal income
or excise tax provision is required.
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(c) FOREIGN CURRENCY TRANSLATION - Investments and other assets and liabilities
in foreign currencies are translated to U.S. dollars at the prevailing rates of
exchange. The Tocqueville Asia-Pacific Fund and The Tocqueville International
Value Fund are engaged in transactions in securities denominated in foreign
currencies and, as a result, enter into foreign exchange contracts. The
Tocqueville Asia-Pacific Fund and The Tocqueville International Value Fund are
exposed to additional market risk as a result of changes in the value of the
underlying currency in relation to the U.S. dollar. The value of the foreign
currency contracts are "marked to market" on a daily basis, which reflects the
changes in the market value of the contract at the close of each day's trading,
resulting in daily unrealized gains and/or losses. When the contracts are
closed, the Fund recognizes a realized gain or loss.
The Funds do not isolate that portion of results of operations resulting from
changes in foreign exchange rates on investments from the fluctuations arising
from changes in market prices of securities held. Such fluctuations are included
with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of
foreign currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the differences between the amounts
of dividends, interest and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains or losses arise from changes in the value
of assets and liabilities other than investments in securities at the end of the
fiscal period, resulting from changes in the exchange rates.
(d) USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of increases and decreases in
net assets from operations during the reporting period. Actual results could
differ from those estimates.
(e) OTHER - Investment and shareowner transactions are recorded no later than
the first business day after the trade date. Dividend income is recognized on
the ex-dividend date or at the time the Fund becomes aware. Interest income is
recognized on the accrual basis and market discount is accounted for on a
straight-line basis from settlement date. The Trust uses the first-in, first-out
method for determining realized gain or loss on investments sold for both
financial reporting and federal tax purposes. Distributions to shareholders are
recorded on the ex-dividend date. Expenses incurred by the Trust not
specifically identified to a Fund are allocated on a basis relative to the size
of each fund's daily net asset value. It is the trust's policy to take
possession of securities as collateral under repurchase agreements and to
determine on a daily basis that the value of such securities are sufficient to
cover the value of the repurchase agreements.
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3. DETAILS OF PROFORMA ADJUSTMENTS
(a) CUSTODIAN AND FUND ACCOUNTING - Elimination of duplicative costs.
(b) TRANSFER AGENT AND SHAREHOLDER SERVICES - Elimination of duplicative costs.
(c) PROFESSIONAL FEES - Elimination of duplicative costs.
(d) AMORTIZATION OF ORGANIZATION COSTS - Elimination of Amortization of
Organization Costs of TAPF which will be fully amortized prior to the
Reorganization
(e) FEES WAIVED - To reflect a pro forma expense ratio of 2% of average net
assets, as provided in the Merger Agreement.
(f) SHARES OUTSTANDING - Shares of TIVF to be issued in exchange for the net
assets of TAPF.
4. CAPITAL LOSS CARRYFORWARD - Included in the pro forma combined financial
statements as of October 31, 1996 are tax basis capital losses of TAPF of
approximately $410,000 which are available to offset future capital gains of
TIVF through October 31, 2004.
