Rule 497(c)
Registration No. 33-8746
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE GOLD FUND
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
that consists of separate series. By this Prospectus, the Trust offers shares of
The Tocqueville Gold Fund (the "Fund"), an open-end, diversified management
investment company.
The Fund's investment objective is to provide long-term capital
appreciation through investments in gold and securities of companies located
throughout the world that are engaged in mining or processing gold ("gold
related securities"), and through investments in other precious metals and
securities of companies located throughout the world that are engaged in mining
or processing such other precious metals ("other precious metal securities").
The Fund will invest no less than 65% of its total assets in a portfolio of gold
and gold related securities.
Tocqueville Asset Management L.P. (the "Investment Advisor") provides
the Fund with investment advisory and certain administrative services.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in shares of the Fund and should be read
and retained for future reference. A Statement of Additional Information, dated
June 29, 1998, containing additional information about the Fund has been filed
with the Securities and Exchange Commission and is hereby incorporated by
reference into this Prospectus. A copy of the Statement of Additional
Information can be obtained without charge by calling 1-800-697-3863 or writing
the Trust c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. Additional information, including this Prospectus and the Statement
of Additional Information, may be obtained by accessing the Internet Web site
maintained by the Securities and Exchange Commission (http://www.sec.gov).
INVESTMENTS IN THE FUND ARE SUBJECT TO RISK -- INCLUDING POSSIBLE LOSS
OF PRINCIPAL -- AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUND ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY A BANK AND ARE NOT
INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June 29, 1998.
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TABLE OF CONTENTS
Highlights....................................................................3
Fee Table.....................................................................4
Investment Objective, Policies and Risks......................................5
Additional Investment Policies and Risk
Considerations............................................................. 6
Investment Advisor and Investment
Advisory Agreement..........................................................10
Distribution Plan............................................................11
Administrative Services Agreement............................................11
Brokerage Allocation.........................................................12
Purchase of Shares...........................................................12
Redemption of Shares.........................................................16
Shareholder Privileges.......................................................18
Retirement Plans.............................................................19
Dividends, Distributions and Tax Matters.....................................21
Organization and Description of Shares of
the Trust..................................................................22
Custodian, Transfer Agent and Dividend
Paying Agent................................................................23
Counsel and Independent Accountants..........................................23
Shareholder Inquiries........................................................23
Other Information............................................................23
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HIGHLIGHTS
WHAT IS THE TOCQUEVILLE TRUST?
The Tocqueville Trust is a business trust formed under the laws of the
Commonwealth of Massachusetts. The Tocqueville Gold Fund, a series of the
Tocqueville Trust, is an open-end, diversified management investment company, as
defined by the Investment Company Act of 1940, as amended (the "1940 Act").
Shares of the Fund may be purchased at a price equal to the next determined net
asset value per share plus a charge which may be imposed at the time of
purchase. As an open-end investment company, the Fund has an obligation to
redeem its shares held by an investor at the net asset value of the shares next
determined after receipt of a redemption request in proper form. (See
"Organization and Description of Shares of the Trust.")
WHAT IS THE TOCQUEVILLE GOLD FUND AND HOW IS ITS INVESTMENT OBJECTIVE ACHIEVED?
The Tocqueville Gold Fund is an open-end, diversified management
investment company whose investment objective is to provide long-term capital
appreciation through investments in gold and securities of companies located
throughout the world that are engaged in mining or processing gold ("gold
related securities"), and through investments in other precious metals and
securities of companies located throughout the world that are engaged in mining
or processing such other precious metals ("other precious metal securities").
The Fund will invest no less than 65% of its total assets in a portfolio of gold
and gold related securities. (See "Investment Objective, Policies and Risks.")
WHO MANAGES THE FUND?
Tocqueville Asset Management L.P. (the "Investment Advisor") serves as
the Fund's investment advisor pursuant to an Investment Advisory Agreement.
Under the terms of each Agreement, the Investment Advisor supervises all aspects
of the Fund's operations and provides investment advisory services. As
compensation, the Investment Advisor receives a fee based on the Fund's average
daily net assets. The Investment Advisor also is engaged in the business of
acting as investment advisor to private accounts with combined assets of more
than $600 million. (See "Investment Advisor and Investment Advisory
Agreements.")
DISTRIBUTION PLAN
The Fund has adopted a distribution plan, pursuant to Rule 12b-1 of the
1940 Act, that allows the Fund to incur distribution expenses related to the
sale of its shares of up to .25% per annum of the Fund's average daily net
assets. (See "Distribution Plan").
SPECIAL RISK CONSIDERATIONS
An investor should be aware that there are special risks inherent in
investing in gold and gold related securities, including fluctuations in the
price of gold and concentration of supply in the gold market. There also are
similar special risks inherent in investing in other precious metals and other
precious metal securities. (See "Investment Objective, Policies and Risks" and
"Additional Investment Policies and Risk Considerations.")
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FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases.................... 4.00%
Maximum Sales Load Imposed on
Reinvested Dividends............................... None
Maximum Deferred Sales Load........................ None
Redemption Fee *
Exchange Fee **
ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee..................................... 1.00%
12b-1 Fee (1)...................................... .25%
Other Expenses (after fee waivers)................. .73%
Total Operating Expenses (after fee waivers)................ 1.98%(2)
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(1) Under the Fund's Distribution Plan, the Advisor is permitted to carry
forward expenses not reimbursed by the distribution fee to subsequent
fiscal years for submission by the Fund for payment, subject to the
continuation of the Plan. Such amounts are not recognized in the Fund's
financial statements as expenses and liabilities, since the Distribution
Plan can be terminated on an annual basis without further liability to the
Fund. The Rule 12b-1 fee may represent the equivalent of an annual
asset-based sales charge to an investor. As a result of distribution fees,
a long-term shareholder in the Fund may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the Rules of
the National Association of Securities Dealers, Inc.
(2) Total Operating Expenses reflect the voluntary waiver and/or the
reimbursement of certain expenses. Absent such voluntary waiver and/or
reimbursement. Other Expenses and Total Operating Expenses for the Fund
would be: 3.00% and 4.25%, respectively. The Advisor has voluntarily
undertaken to waive and/or reimburse expenses during the current fiscal
year so that Total Fund Operating Expenses do not exceed those stated in
the Fee Table. Should the Advisor decide during the current fiscal year
that such waiver and/or reimbursement cannot be maintained, shareholders
will receive 30 days notice of the change.
* The Transfer Agent charges a $12 service fee for each payment of redemption
proceeds made by wire.
** The Transfer Agent charges a $5 fee for each telephone exchange.
EXAMPLE: You would pay the following expenses on a $1000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period.
1 Year..................................... $59
3 Years.................................... $100
The purpose of the expense summary provided above is to assist
investors in understanding the various costs and expenses that a shareholder in
the Fund will bear directly or indirectly. The "Annual Fund Operating Expenses"
summary shows the management fee, Rule 12b-1 fee, and other operating expenses
expected to be incurred by the Fund during the current fiscal year. The
"Example" set forth above assumes all dividends and other distributions are
reinvested and that the percentages under "Annual Fund Operating Expenses"
remain the same in the years shown. The example includes the initial sales
charge.
THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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PERFORMANCE CALCULATION
The Fund calculates performance on a total return basis for various
periods. The total return basis combines changes in principal and dividends and
distributions for the periods shown, as well as the deduction of all charges and
expenses. The total return basis reflects the deduction of the maximum initial
sales charge at the time of purchase. Principal changes are based on the
difference between the beginning and closing net asset value for the period.
Calculations assume reinvestment of all dividends and distributions paid by the
Fund. Dividends and distributions are comprised of net investment income and net
realized capital gains, respectively. In addition, the Fund may calculate
performance on a total return basis at net asset value.
Performance will vary from time to time and past results are not
necessarily representative of future results. A shareholder should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Comparative performance information may be used from time to time in
the advertising or marketing of the Fund's shares, including data from Lipper
Analytical Services, Inc. and Morningstar Mutual Funds. Such comparative
performance information will be stated in the same terms in which the
comparative data and indices are stated. All advertisements of the Fund will
disclose the maximum sales charge to which investments in shares of the Fund may
be subject.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund's investment objective is fundamental and may not be changed
without a vote of the holders of a majority of its outstanding voting securities
(as defined in the Statement of Additional Information). There can be no
assurance that the Fund will achieve its investment objective.
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide long-term capital
appreciation through investments in gold and securities of companies located
throughout the world that are engaged in mining or processing gold ("gold
related securities"), and through investments in other precious metals and
securities of companies located throughout the world that are engaged in mining
or processing such other precious metals ("other precious metal securities"). As
a matter of fundamental policy, the Fund will invest no less than 65% of its
total assets in a portfolio of gold and gold related securities. Other precious
metals include, but are not limited to, platinum, palladium and silver.
Investments directly in gold and other precious metals may be made through
certificates representing ownership in such metals.
The Investment Advisor is of the belief that gold and other precious
metals, as investments, have fallen out of favor and are undervalued in relation
to their historic valuations and inherent worth during times of adverse monetary
and political turmoil. Throughout history, gold and other precious metals have
been used as basic monetary standards. As an investment medium, gold and other
precious metals, over the long term, have protected capital from adverse
monetary and political developments of a national or international nature and,
in the face of what appears to be continuous worldwide inflation, may offer a
better opportunity for capital growth than many other forms of investment. In
addition, investments in gold and other precious metals may provide more of a
hedge against currencies with declining buying power, devaluation, and inflation
than other types of investments. Notwithstanding these inherent qualities, the
selling prices of gold and other precious metals have fallen to historic lows.
For example, as of the date of the commencement of operations of the Fund, gold
bullion per an ounce was selling at one of its lowest prices since 1985, and if
such price is adjusted for inflation, then gold bullion per an ounce was selling
at one of its lowest prices since 1972. In recent years, gold has shown a
negative correlation with stocks (relative to the S&P 500), real interest rates,
and the trade- weighted dollar. Accordingly, the Investment Advisor believes
that gold, gold securities, other precious metals and other precious metal
securities possess good value and the potential for long-term capital
appreciation. Of
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course, there can be no assurance that the Investment Advisor's beliefs are
accurate or that the investment objective will be achieved. If the metals and
stocks in which the Fund invests never attain their perceived potential or the
valuation of such metals and stocks in the marketplace do not in fact reflect
significant undervaluation, there may be little or no appreciation or a
depreciation in the value of such metals and stocks.
To achieve its investment objective, the Fund may invest in all types
of securities. Since opportunities for long-term growth are primarily expected
from equity securities, the Fund will normally invest substantially all of its
assets in such securities, including common stock, investment grade debt
convertible into common stock, depository receipts for these securities and
warrants. The Fund may, however, invest in preferred stock and investment grade
debt securities if the Investment Advisor believes that the capital appreciation
available from an investment in such securities will equal or exceed the capital
appreciation available from an investment in equity securities. The Fund is not
subject to any limitations or guidelines concerning location (i.e., U.S. or
non-U.S.) or market capitalization (i.e., small cap, mid cap or large cap) of
the issuer.
With regard to the Fund's direct investments in precious metals, the
Fund may invest up to 10% of its total assets in gold bullion and other precious
metals. In addition, the Fund may invest up to 5% of its net assets in
repurchase agreements which are fully collateralized by obligations of the U.S.
Government or U.S. Government agencies. The Fund may, from time to time, borrow
up to 10% of the value of its total assets from banks at prevailing interest
rates as a temporary measure for extraordinary or emergency purposes. The Fund
may not purchase securities while borrowings exceed 5% of the value of its total
assets.
Special Considerations. The Investment Advisor will manage the Fund's
portfolio to assure that the Fund will not acquire or dispose of gold bullion or
other precious metals if such acquisition or disposition would jeopardize the
Fund's status as a regulated investment company under the Internal Revenue Code
of 1986, as amended (the "Code"). In general, the Fund could fail to qualify as
a regulated investment company if the Fund derived 10% or more of its gross
income from gains from sales or other dispositions of gold bullion or other
precious metals. The Fund may be required to make less than optimal investment
decisions, including foregoing the opportunity to realize gains, if necessary to
permit the Fund to qualify as a regulated investment company. In addition, the
Fund's investments in gold bullion and other precious metals subject the Fund to
the following risks: the price of a metal may be subject to wide fluctuation;
the market for a metal may be relatively limited; the sources of a metal may be
concentrated in countries with potential instability; and currently, the markets
for the metals are unregulated. Investments in gold bullion and other precious
metals will cause the Fund to incur additional costs for insurance, shipping and
storage.
In addition, an investor should be aware that investment in small
capitalization issuers carries more risk than investment in issuers with market
capitalization greater than $1 billion. Generally, small companies rely on
limited product lines, financial resources, and business activities that may
make them more susceptible to setbacks or downturns. In addition, the stock of
such companies may be more thinly traded. Accordingly, the performance of small
capitalization issuers may be more volatile.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following investment strategies and techniques are not fundamental
policies of the Fund and may be changed without prior shareholder approval. The
Fund will notify shareholders in writing and amend the Prospectus accordingly
should any such modifications in investment strategies or techniques occur.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements subject to resale to a
bank or dealer at an agreed upon price which reflects a net interest gain for
the Fund. The Fund will receive interest from the institution until the time
when the repurchase is to occur.
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The Fund will always receive collateral (i.e., U.S. Government
obligations or obligations of its agencies or instrumentalities, or short-term
money market securities) acceptable to it whose market value is equal to at
least 100% of the amount invested by the Fund, and the Fund will make payment
for such securities only upon the physical delivery or evidence of book entry
transfer to the account of its custodian. If the seller institution defaults,
the Fund might incur a loss or delay in the realization of proceeds if the value
of the collateral securing the repurchase agreement declines and the Fund might
incur disposition costs in liquidating the collateral. The Fund attempts to
minimize such risks by specifying the required value of the underlying
collateral.
ILLIQUID SECURITIES
The Fund will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements with maturities in excess of seven
days.
RESTRICTED SECURITIES
The Fund may invest in securities that are subject to restrictions on
resale because they have not been registered under the Securities Act of 1933
(the "1933 Act"). These securities are sometimes referred to as private
placements. Although securities which may be resold only to "qualified
institutional buyers" in accordance with the provisions of Rule 144A under the
1933 Act are technically considered "restricted securities," the Fund may
purchase Rule 144A securities without regard to the limitation on investments in
illiquid securities described above in the "Illiquid Securities" section,
provided that a determination is made that such securities have a readily
available trading market. The Investment Advisor will determine the liquidity of
Rule 144A securities under the supervision of the Board of Trustees. The
liquidity of Rule 144A securities will be monitored by the Investment Advisor,
and if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, the Fund's holdings of illiquid securities will be
reviewed to determine what, if any, action is required to assure that the Fund
does not exceed its applicable percentage limitation for investments in illiquid
securities.
TEMPORARY INVESTMENTS
The Fund does not intend to engage in short-term trading on an ongoing
basis. Current income is not an objective of the Fund, and any current income
derived from the Fund's portfolio will be incidental. For temporary defensive
purposes, when deemed necessary by the Investment Advisor, the Fund may invest
up to 100% of its assets in U.S. Government obligations or "high-quality" debt
obligations of companies incorporated and having principal business activities
in the United States. When the Fund's assets are so invested, they are not
invested so as to meet the Fund's investment objective. "High-quality"
short-term obligations are those obligations which, at the time of purchase, (1)
possess a rating in one of the two highest ratings categories from at least one
nationally recognized statistical ratings organization ("NRSRO") (for example,
commercial paper rated "A-1" or "A-2" by Standard & Poor's Corporation ("S&P")
or "P-1" or "P-2" by Moody's Investors Service, Inc. ("Moody's")) or (2) are
unrated by an NRSRO but are determined by the Investment Advisor to present
minimal credit risks and to be of comparable quality to rated instruments
eligible for purchase by the Fund under guidelines adopted by the Board of
Trustees (the "Trustees").
PORTFOLIO TURNOVER
It is anticipated that the annual turnover rate for the Fund should
not exceed 150%. Portfolio turnover in excess of 100% will result in higher
transaction costs, including brokerage commissions. Also, to the extent that
higher portfolio turnover results in a higher rate of net realized capital gains
to the Fund, the portion of the Fund's distributions constituting taxable
capital gains may increase.
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INVESTMENTS IN DEBT SECURITIES
With respect to investment by the Fund in debt securities, there is no
requirement that all such securities be rated by a recognized rating agency.
However, it is the policy of the Fund that investments in debt securities,
whether rated or unrated, will be made only if they are, in the opinion of the
Investment Advisor, of equivalent quality to "investment grade" securities.
"Investment grade" securities are those rated within the four highest quality
grades as determined by Moody's or S&P . Securities rated Aaa by Moody's and AAA
by S&P are judged to be of the best quality and carry the smallest degree of
risk. Securities rated Baa by Moody's and BBB by S&P lack high quality
investment characteristics and, in fact, have speculative characteristics as
well. Debt securities are interest-rate sensitive; therefore their value will
tend to decrease when interest rates rise and increase when interest rates fall.
Such increase or decrease in value of longer-term debt instruments as a result
of interest rate movement will be larger than the increase or decrease in value
of shorter-term debt instruments.
INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Fund may invest in other investment companies. As a shareholder in
an investment company, the Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. The
Investment Advisor has agreed to waive its management fees with respect to the
portion of the Fund's assets invested in shares of other investment companies.
SHORT SALES
The Fund will not make short sales of securities or maintain a short
position unless, at all times when a short position is open, the Fund owns an
equal amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short. This is a technique known
as selling short "against the box." Any gain realized by the Fund on such sales
will be recognized at the time the Fund enters into the short sales.
OPTIONS TRANSACTIONS
The Fund may purchase put and call options on securities and on stock
indices to attempt to hedge its portfolio and to increase its total return. The
Fund may purchase call options when, in the opinion of the Investment Advisor,
the market price of the underlying security or index will increase above the
exercise price. The Fund may purchase put options when the Investment Advisor
expects the market price of the underlying security or index to decrease below
the exercise price. When the Fund purchases a call option it will pay a premium
to the party writing the option and a commission to the broker selling the
option. If the option is exercised by the Fund, the amount of the premium and
the commission paid may be greater than the amount of the brokerage commission
that would be charged if the security were to be purchased directly.
The Fund may purchase puts and calls on foreign currencies that are
traded on a securities or commodities exchange or quoted by major recognized
dealers in such options for the purpose of protecting against declines in the
dollar value of foreign securities and against increases in the dollar cost of
foreign securities to be acquired. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by purchasing puts on that
foreign currency. If a rise is anticipated in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of such securities may be partially offset by purchasing calls on that foreign
currency. However, in the event of rate fluctuations adverse to the Fund's
position, it would lose the premium it paid and transactions costs.
The Fund also may purchase puts and calls on gold and other precious
metals that are traded on a securities or commodities exchange or quoted by
major recognized dealers in such options for the purpose of protecting against
declines in the dollar value of gold and other precious metals and against
increases in the dollar cost of gold and other precious metals to be acquired.
The discussion, rational and risks of puts and calls
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on foreign currencies described in this section are also applicable to puts and
calls on gold and other precious metals.
This discussion is a general summary. See the Statement of Additional
Information for information concerning the Fund's options transactions and
strategies.
FUTURES AND OPTIONS ON FUTURES TRANSACTIONS
The Fund may enter into contracts for the future delivery of
securities or foreign currencies and futures contracts based on a specific
security, class of securities, foreign currency or an index, purchase or sell
options on any such futures contracts and engage in related closing
transactions. The Fund also may enter into a futures contract based on gold and
other precious metals, purchase or sell options on any such futures contracts
and engage in related closing transactions. A futures contract on a securities
index is an agreement obligating either party to pay, and entitling the other
party to receive, while the contract is outstanding, cash payments based on the
level of a specified securities index.
Although the Fund is permitted to engage in the purchase and sale of
futures contracts and options thereon solely for hedging purposes, the use of
such instruments does involve certain transaction costs and risks. The Fund's
ability to hedge effectively all or a portion of its portfolio through
transactions in futures, options on futures or options on related indexes
depends on the degree to which movements in the value of the currencies,
securities, index, gold or other precious metals underlying such hedging
instrument correlate with movements in the value of the relevant portion of the
Fund's portfolio. The trading of futures and options on indexes involves the
additional risk of imperfect correlation between movements in the futures or
option price and the value of the underlying index. While the Fund will
establish a future or option position only if there appears to be a liquid
secondary market therefor, there can be no assurance that such a market will
exist for any particular futures or option contract at any specific time. In
such event, it may not be possible to close out a position held by the Fund,
which could require the Fund to purchase or sell the instrument underlying the
position, make or receive a cash settlement, or meet ongoing variation margin
requirements. Investments in futures contracts on fixed income securities and
related indexes involve the risk that if the Investment Advisor's judgment
concerning the general direction of interest rates is incorrect, the Fund's
overall performance may be poorer than if it had not entered into any such
contract.
WRITING COVERED CALL OPTION CONTRACTS
The Fund may write covered call options on securities or stock
indices, but will not write such options if immediately after such sale the
aggregate value of the obligations under the outstanding options would exceed
25% of its net assets. A call option is "covered" if the Fund owns the
underlying security covered by the call.
The Fund will not write covered call option contracts for speculative purposes.
When a covered call option expires unexercised, the writer realizes a
gain in the amount of the premium received. If the covered call option is
exercised, the writer realizes either a gain or loss from the sale or purchase
of the underlying security with the proceeds to the writer being increased by
the amount of the premium. Any gain or loss from such transaction will depend on
whether the amount paid is more or less than the premium received for the option
plus related transaction costs.
Risks associated with writing covered call option contracts are
similar to the risks discussed in the section concerning "Futures and Options on
Futures Transactions," above.
RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
GENERAL. Consistent with their respective investment objectives and
policies, the Fund may invest indirectly in foreign assets through ADRs, which
are certificates issued by U.S. banks representing the right to receive
securities of a foreign issuer deposited with that bank or a correspondent bank,
and the Fund may
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directly or indirectly invest in securities of foreign issuers. Direct and
indirect investments in securities of foreign issuers may involve risks that are
not present with domestic investments and there can be no assurance that the
Fund's foreign investments will present less risk than a portfolio of domestic
securities. Compared to United States issuers, there is generally less publicly
available information about foreign issuers and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. Foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. Securities of some foreign
issuers are less liquid and their prices are more volatile than securities of
comparable domestic issuers. Settlement of transactions in some foreign markets
may be delayed or less frequent than in the United States, which could affect
the liquidity of the Fund's portfolio. Fixed brokerage commissions on foreign
securities exchanges are generally higher than in the United States. Income from
foreign securities may be reduced by a withholding tax at the source or other
foreign taxes. In some countries, there may also be the possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of the Fund, political or social instability or revolution, or
diplomatic developments which could affect investments in those countries.
The value of the Fund's investments denominated in foreign currencies
may depend in part on the relative strength of the U.S. dollar, and the Fund may
be affected favorably or unfavorably by exchange control regulations or changes
in the exchange rate between foreign currencies and the U.S. dollar. When the
Fund invests in foreign securities they will usually be denominated in foreign
currency, and the Fund may temporarily hold funds in foreign currencies. Thus,
the Fund's net asset value per share will be affected by changes in currency
exchange rates. Changes in foreign currency exchange rates may also affect the
value of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. The rate of exchange between the U.S. dollar and other
currencies is determined by the forces of supply and demand in the foreign
exchange markets.
YEAR 2000 PROBLEM.
Like other mutual funds, financial and business organizations and
individuals around the world, the Fund could be adversely affected if the
computer systems used by the advisor/administrator and other service providers
do not properly process and calculate date-related information and data from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." The
advisor/administrator is taking steps that it believes are reasonably designed
to address the Year 2000 Problem with respect to computer systems that it uses
and to obtain reasonable assurances that comparable steps are being taken by the
Fund's major service providers.
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
Tocqueville Asset Management L.P., 1675 Broadway, New York, New York
10019, acts as Investment Advisor to the Fund under an investment advisory
agreement (the "Agreement") which provides that the Investment Advisor identify
and analyze possible investments for the Fund, and determine the amount, timing,
and form of such investments. The Investment Advisor has the responsibility of
monitoring and reviewing the Fund's portfolio, on a regular basis, and
recommending the ultimate disposition of such investments. It is the Investment
Advisor's responsibility to cause the purchase and sale of securities in the
Fund's portfolio, subject at all times to the policies set forth by the Board of
Trustees. The Investment Advisor is an affiliate of Tocqueville Securities L.P.,
the Fund's distributor.
John Hathaway serves as the portfolio manager of the Fund. Mr. Hathaway
was a portfolio manager with Hudson Capital Advisors from 1986 through 1989, and
the President, Chief Investment Officer and portfolio manager with Oak Hall
Advisors from 1989 through 1996. Mr. Hathaway has been a portfolio manager with
the Investment Advisor since 1997. Mr. Hathaway received his MBA from the
University of Virginia and his BA from Harvard University.
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Under the terms of the Agreement, the Fund pays the cost of all its
expenses (other than those expenses specifically assumed by the Investment
Advisor or the Fund's distributor), including the pro rata costs incurred in
connection with the Fund's maintenance of its registration under the 1933 Act
and the 1940 Act, printing of prospectuses distributed to shareholders, taxes or
governmental fees, brokerage commissions, custodial, transfer and shareholder
servicing agent costs, expenses of outside counsel and independent accountants,
preparation of shareholder reports, trustees' fees and shareholder meetings.
The Investment Advisor receives a fee from the Fund, calculated daily
and payable monthly, for the performance of its services at an annual rate of
1.00% on the first $500 million of the average daily net assets of the Fund,
.75% of average daily net assets in excess of $500 million but not exceeding $1
billion, and .65% of the average daily net assets in excess of $1 billion. The
fee is accrued daily for the purposes of determining the offering and redemption
price of the Fund's shares.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan (each a "Plan") pursuant to
Rule 12b-1 of the 1940 Act. Pursuant to the Plan, the Fund may incur
distribution expenses related to the sale of its shares of up to .25% per annum
of the Fund's average daily net assets.
The Plan provides that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares, including, but
not limited to, advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature and payments to dealers and shareholder servicing agents
including Tocqueville Securities L.P. ("Tocqueville Securities" or the
"Distributor"), the Fund's distributor, who enter into agreements with the Fund
or Tocqueville Securities. The Plan will only make payments for expenses
actually incurred on a first-in, first-out basis. The Plan may carry forward for
an unlimited number of years any unreimbursed expenses. If the Plan is
terminated in accordance with its terms, the obligations of the Fund to make
payments pursuant to the Plan will cease and the Fund will not be required to
make any payments past the date the Plan terminates. (See the Statement of
Additional Information--"Distribution Plan" for further information about the
Plan.)
ADMINISTRATIVE SERVICES AGREEMENT
Under an Administration Agreement, Tocqueville Asset Management L.P.
supervises the administration of all aspects of the Fund's operations, including
the Fund's receipt of services for which the Fund is obligated to pay, provides
the Fund with general office facilities and provides, at the Fund's expense, the
services of persons necessary to perform such supervisory, administrative and
clerical functions as are needed to effectively operate the Fund. Those persons,
as well as certain employees and Trustees of the Fund, may be directors,
officers or employees of (and persons providing services to the Fund may
include) Tocqueville Asset Management L.P. and its affiliates. For these
services and facilities, Tocqueville Asset Management L.P. receives with respect
to the Fund a fee computed and paid monthly at an annual rate of .15% of the
average daily net assets of the Fund. Certain administrative responsibilities
have been delegated to and are being performed by Firstar Trust Company.
BROKERAGE ALLOCATION
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the Fund are made by the Investment Advisor. The
Investment Advisor, subject to obtaining the best price and execution, may
allocate brokerage transactions in a manner that takes into account the sale of
shares of the Fund. Generally, the primary consideration in placing portfolio
securities transactions with broker-dealers for execution is to obtain, and
maintain the availability of, execution at the best net price available and in
the most
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<PAGE>
effective manner possible. The Fund's brokerage allocation policies may permit
the Fund to pay a broker-dealer which furnishes research services a higher
commission than that which might be charged by another broker-dealer which does
not furnish research services, provided that such commission is deemed
reasonable in relation to the value of the services provided by such
broker-dealer. Subject to the supervision of the Trustees, the Investment
Advisor is authorized to allocate brokerage to affiliated broker-dealers on an
agency basis to effect portfolio transactions. The Trustees have adopted
procedures incorporating the standards of Rule 17e-1 of the 1940 Act, which
require that the commission paid to affiliated broker-dealers must be reasonable
and fair compared to the commission, fee or other remuneration received, or to
be received, by other brokers in connection with comparable transactions
involving similar securities during a comparable period of time. It is expected
that brokerage will be allocated to the Distributor, Tocqueville Securities
L.P., an affiliate of the Investment Advisor. For a complete discussion of
portfolio transactions and brokerage allocation, see "Portfolio Transactions and
Brokerage" in the Statement of Additional Information.
PURCHASE OF SHARES
GENERAL INFORMATION Shares are sold to investors at the net asset value next
determined after a purchase order becomes effective (as described below) plus a
varying initial sales charge.
The minimum initial investment in The Tocqueville Trust is $1,000
which may be allocated among the Fund and other portfolios of the Trust (the
"Funds") so long as at least $250 is invested in each Fund in which you choose
to invest. The minimum initial investment for 401(k), IRA, Keogh and other
pension or profit sharing plan accounts is $250. The minimum subsequent
investment in the Trust is $100. The Distributor may, in its discretion, waive
the minimum investment requirements for purchases including those made via the
Automatic Investment Plan, which is discussed below.
Shares of the Fund may be purchased from the following entities: (a)
the Funds' Distributor, Tocqueville Securities; (b) authorized securities
dealers which have entered into sales agreements with Tocqueville Securities
(the "Selling Brokers") on a best efforts basis and brokers who have entered
into agreements with the Trust to provide distribution and shareholder services;
and (c) the Funds' transfer agent, Firstar Trust Company (the "Transfer Agent").
The Fund reserves the right to cease offering shares for sale at any time or to
reject any order for the purchase of shares.
A purchase order becomes effective upon receipt of the order by
Tocqueville Securities, a Selling Broker or other broker or the Transfer Agent.
Purchase orders received prior to 4:00 p.m. New York time are priced according
to the net asset value per share next determined on that day. Purchase orders
received after 4:00 p.m. New York time are priced according to the net asset
value per share next determined on the following day.
The net asset value per share is determined by dividing the market
value of the Fund's investments as of the close of trading plus any cash or
other assets (including dividends receivable and accrued interest) less all
liabilities (including accrued expenses) by the number of Fund shares
outstanding. The Fund will determine the net asset value of its shares once
daily as of the close of trading on the New York Stock Exchange (the "Exchange")
on each "Fund business day" which is any day on which the Exchange is open for
business.
Investors who already have a brokerage account with Tocqueville
Securities, a Selling Broker or other broker may purchase the Fund's shares
through such broker. Payment for purchase orders through Tocqueville Securities,
the Selling Broker or other broker must be made to Tocqueville Securities, the
Selling Broker or other broker within three business days of the purchase order.
All dealers are responsible for forwarding orders for the purchase of the Fund's
shares on a timely basis.
The Fund's shares normally will be maintained in book entry form and
share certificates will be issued only on request. The Distributor reserves the
right to refuse to sell shares of the Fund to any person.
- 12 -
<PAGE>
INITIAL SALES CHARGES
The initial sales charge, imposed upon a sale of shares, varies
according to the size of the purchase as follows:
<TABLE>
<CAPTION>
INITIAL SALES CHARGE CONCESSION
TO DEALERS
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
------- ---------- ------
<S> <C> <C> <C>
Less than $100,000.......................................................... 4.00 4.16 3.50
$100,000 to $249,999........................................................ 3.50 3.63 3.00
$250,000 to $499,000........................................................ 2.50 2.56 2.00
$500,000 to $999,999........................................................ 1.50 1.52 1.00
$1,000,000 and over......................................................... 1.00 1.01 0.50
</TABLE>
The reduced initial sales charges apply to the aggregate of purchases
of shares of the Fund made at one time by any "person", which term includes an
individual, spouse and children under the age of 21, or a trustee or other
fiduciary of a trust, estate or fiduciary account.
Upon notice to Selling Brokers, Tocqueville Securities may reallow up
to the full applicable initial sales charge and such Selling Broker may
therefore be deemed an "underwriter" under the 1933 Act, as amended, during such
periods. The Distributor may, from time to time, provide promotional incentives
to certain Selling Brokers whose representatives have sold or are expected to
sell significant amounts of one or all of the Funds of the Trust. At various
times the Distributor may implement programs under which a Selling Broker's
sales force may be eligible to win cash or material awards for certain sales
efforts or under which the Distributor will reallow an amount not exceeding the
total applicable initial sales charges generated by the Selling Broker during
such programs to any Selling Broker that sponsors sales contests or recognition
programs conforming to criteria established by the Distributor or participates
in sales programs sponsored by the Distributor. The Distributor may provide
marketing services to Selling Brokers, consisting of written informational
material relating to sales incentive campaigns conducted by such Selling Brokers
for their representatives.
PURCHASES OF SHARES AT NET ASSET VALUE
PURCHASES THROUGH CERTAIN BROKERAGE ACCOUNTS. Shares may be purchased
at net asset value through brokerage accounts with Tocqueville Securities L.P.,
Selling Brokers and other brokers who have entered into agreements with the
Trust to provide distribution and shareholder services.
QUALIFIED PERSONS. There is no initial sales charge for "Qualified
Persons", which are the following (a) active or retired trustees, directors,
officers, partners or employees (their spouses and children under age 21) of (i)
the Investment Advisor and Distributor or any affiliates or subsidiaries thereof
(the directors, officers or employees of which shall also include their parents
and siblings for all purchases of Fund shares), (ii) Selling Brokers or other
brokers who have entered into agreements with the Trust to provide distribution
and shareholder services, or (iii) trade organizations to which the Investment
Advisor belongs and (b) trustees or custodians of any qualified retirement plan
or IRA established for the benefit of a person in (a) above.
PURCHASES THROUGH INVESTMENT ADVISORS. Purchases also may be made with
no initial sales charge through a registered investment adviser who has
registered with the Securities and Exchange Commission or appropriate state
authorities and who (a) clears such Fund share transaction through a
broker/dealer, bank or trust company, (each of whom may impose transaction fees
with respect to such transaction), or (b) purchases
- 13 -
<PAGE>
shares for its own account, or an account for which the investment adviser has
discretion and is authorized to make investment decisions.
QUALIFIED AND OTHER RETIREMENT PLANS. In addition, no initial sales
charge will apply to any purchase of shares by an investor through a 401(k) Plan
or 457 (state deferred compensation) Plan.
RECENTLY REDEEMED SHARES. Shares of the Fund may be purchased at net
asset value by persons who have, within the previous 30 days, redeemed their
shares of the Fund. The amount which may be purchased at net asset value is
limited to an amount up to, but not exceeding, the net amount of redemption
proceeds. Such purchases may also be handled by a securities dealer, who may
charge the shareholder a fee for this service.
SHAREHOLDERS AS OF JANUARY 1, 1994. Shareholders who held shares of a
Fund of the Tocqueville Trust prior to January 1, 1994, may purchase shares of
the Fund at net asset value for as long as they continue to own shares of any
Fund of the Trust, provided that there is no change in the account registration.
However, once a shareholder has closed an account by redeeming all of their Fund
shares for a period of more than thirty days such shareholder will no longer be
able to purchase shares of the Fund at net asset value.
REDUCED INITIAL SALES CHARGES
CUMULATIVE QUANTITY DISCOUNT. Shares of the Fund may be purchased by
any person at a reduced initial sales charge which is determined by (a)
aggregating the dollar amount of the new purchase and the greater of the
purchaser's total (i) net asset value or (ii) cost of all shares of the Fund and
the other Funds of the Trust, acquired by exchange from such other Fund,
provided such Fund charged an initial sales load at the time of the exchange
then held by such person and (b) applying the initial sales charge applicable to
such aggregate. The privilege of the cumulative quantity discount is subject to
modification or discontinuance at any time with respect to all shares purchased
thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group
(as defined below) may also purchase shares of the Fund at the reduced initial
sales charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of shares previously purchased
and still owned by the group plus the securities currently being purchased and
is determined as stated above under "Cumulative Quantity Discount". For example,
if members of the group had previously invested and still held $90,000 of shares
and now were investing $15,000, the initial sales charge would be 3.50%. In
order to obtain such discount, the purchaser or investment dealer must provide
the Transfer Agent with sufficient information, including the purchaser's total
cost, at the time of purchase to permit verification that the purchaser
qualifies for a cumulative quantity discount, and confirmation that the order is
subject to such verification. Information concerning the current initial sales
charge applicable to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which: (a) has been in existence for more
than six months; (b) has a purpose other than acquiring shares at a discount;
and (c) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its costs of distributing shares. A qualified group must
have more than 10 members, must be available to arrange for group meetings
between representatives of the Fund and the members, must agree to include sales
and other materials related to the Fund in its publications and mailings to
members at reduced or no cost to the Distributor, and must seek to arrange for
payroll deduction or other bulk transmission of investments in the Fund. This
privilege is subject to modification or discontinuance at any time with respect
to all shares purchased thereafter.
LETTER OF INTENT. Investors may also qualify for reduced initial sales
charges by signing a Letter of Intent (the "LOI"). This enables the investor to
aggregate purchases of shares of the Fund with purchases of shares of any other
Fund of the Trust acquired by exchange, during a 13-month period. The initial
sales charge is based on the total amount invested in shares during the 13-month
period. Shares of any Fund of the Trust
- 14 -
<PAGE>
currently owned by the investor, if any, will be credited as purchases (at their
current offering prices on the date the LOI is signed) toward completion of the
LOI. A 90-day back-dating period can be used to include earlier purchases at the
investor's cost. The 13-month period would then begin on the date of the first
purchase during the 90-day period. No retroactive adjustment will be made if
purchases exceed the amount indicated in the LOI. A shareholder must notify the
Transfer Agent or Distributor whenever a purchase is being made pursuant to a
LOI.
The LOI is not a binding obligation on the investor to purchase, or on
a Fund to sell, the full amount indicated; however, on the initial purchase (or
subsequent purchases if necessary), 5% of the dollar amount specified in the LOI
will be held in escrow by the Transfer Agent in shares registered in the
shareholder's name in order to assure payment of the proper initial sales
charge. If total purchases pursuant to the LOI (less any dispositions and
exclusive of any distributions on such shares automatically reinvested) are less
than the amount specified, the investor will be requested to remit to the
Transfer Agent an amount equal to the difference between the initial sales
charge paid and the initial sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder. Shareholders will be paid
distributions, either in additional shares or cash, upon such escrowed shares.
METHODS OF PAYMENT
BY CHECK. Investors who wish to purchase shares directly from the
Transfer Agent may do so by sending a completed purchase application (included
with this Prospectus or obtainable from the Trust) to The Tocqueville Trust, c/o
Firstar Trust Company, P.O. Box 701, Milwaukee, WI 53201-0701, accompanied by a
check payable to The Tocqueville Gold Fund. Purchase applications sent to the
Fund will be forwarded to the Transfer Agent, and will not be effective until
received by the Transfer Agent. The price per share is the next determined per
share net asset value (plus a varying initial sales charge) after receipt of an
application by Firstar Trust Company. Purchase applications should be mailed
directly to: The Tocqueville Trust, The Tocqueville Gold Fund, c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service
and other independent delivery services are not agents of the Trust. Therefore,
deposit of purchase applications in the mail or with such services does not
constitute receipt by Firstar Trust Company or the Trust. Please do not mail
letters by overnight courier to the post office box address. To purchase shares
by overnight or express mail, please use the following street address: The
Tocqueville Trust, The Tocqueville Gold Fund, c/o Firstar Trust Company, Mutual
Fund Services, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin
53202. All applications must be accompanied by payment in the form of a check
drawn on a U.S. bank payable to The Tocqueville Gold Fund or by direct wire
transfer. No cash will be accepted. Firstar Trust Company will charge a $20 fee
against a shareholder's account for any payment check returned to the custodian.
The shareholder will also be responsible for any losses suffered by the Fund as
a result.
BY AUTOMATIC INVESTMENT PLAN. The Fund has an Automatic Investment
Plan which permits an existing shareholder to purchase additional shares of the
Fund (minimum $100 per transaction) at regular intervals. Under the Automatic
Investment Plan, shares are purchased by transferring funds from a shareholder's
checking, bank money market, NOW account, or savings account in an amount of
$100 or more designated by the shareholder. At the shareholder's option, the
account designated will be debited and shares will be purchased on the date
selected by the shareholder. There must be a minimum of seven days between
automatic purchases. If the date selected by the shareholder is not a business
day, funds will be transferred the next business day thereafter. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Automatic Investment Account,
complete and sign Section F of the Purchase Application and send it to the
Transfer Agent. Shareholders may cancel this privilege or change the amount of
purchase at any time by calling 1-800-697-3863 or by mailing written
notification to: The Tocqueville Trust, The Tocqueville Gold Fund, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The change will be
effective five business days following receipt
- 15 -
<PAGE>
of notification by the Transfer Agent. The Fund may modify or terminate this
privilege at any time or charge a service fee, although no such fee currently is
contemplated. However, a $20 fee will be imposed by Firstar Trust Company if
sufficient funds are not available in the shareholder's account at the time of
the automatic transaction .
While investors may use this option to purchase shares in their IRA or
other retirement plan accounts, neither the Distributor nor the Transfer Agent
will monitor the amount of contributions to ensure that they do not exceed the
amount allowable for Federal tax purposes. Firstar Trust Company will assume
that all retirement plan contributions are being made for the tax year in which
they are received.
BY WIRE. Investors who purchase shares directly from the Transfer Agent
may also purchase shares by wire. Funds should be wired to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA # 075000022
Credit: Firstar Trust Company
Account # 112952137
Further credit: The Tocqueville Trust -
The Tocqueville Gold Fund
Name of shareholder and account number (if
known) (Wired funds must be received prior
to 4:00 p.m. Eastern time to be eligible
for same day pricing.)
The establishment of a new account or any additional purchases for an
existing account by wire transfer should be preceded by a phone call to Firstar
Trust Company, 1-800-697-3863, to provide information for the account. A
properly signed share purchase application marked "Follow Up" must be sent for
all new accounts opened by wire transfer. Applications are subject to acceptance
by the Fund, and are not binding until so accepted.
REDEMPTION OF SHARES
GENERAL INFORMATION
In order to redeem shares purchased through Tocqueville Securities, a
Selling Broker or other broker, the broker must be notified by telephone or mail
to execute a redemption. A properly completed order to redeem shares received by
the broker's office will be executed at the net asset value next determined
after receipt by the broker of the order. Redemption proceeds will be held in a
shareholder's account with Tocqueville Securities unless the broker is
instructed to remit all proceeds directly to the shareholder.
Shares purchased through the Transfer Agent may be redeemed by the
Transfer Agent at the next determined net asset value upon receipt of a request
in good order. Payment will be made for redeemed shares as soon as practicable,
but in no event later than three business days after receipt of a redemption
notification in good order. If the shares being redeemed were purchased directly
from the Transfer Agent by check, payment may be delayed for the minimum time
needed to verify that the purchase check has been honored. This is not normally
more than 15 days from the time of receipt of the check by the Transfer Agent.
"Good order" means that the request complies with the following: (a) where the
shareholder has not elected to permit telephone redemptions, the request must be
in writing, specifying the number of shares or dollar amount to be redeemed and
sent to the Transfer Agent, Attn.: The Tocqueville Gold Fund at P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other independent
delivery services are not agents of the Trust. Therefore, deposit of redemption
requests in the mail or with such services does not constitute receipt by
Firstar Trust Company or the Trust. Please do not mail letters by overnight
courier to the post office box address.
- 16 -
<PAGE>
Redemption requests sent by overnight or express mail should be directed to: The
Tocqueville Gold Fund, c/o Firstar Trust Company, Mutual Fund Services, Third
Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202. Requests for
redemption by telegram and requests which are subject to any special conditions
or which specify an effective date other than as provided herein cannot be
honored; (b) where share certificates have been issued, a shareholder must
endorse the certificates and include them in the redemption request; (c)
signatures on the redemption request and on endorsed certificates submitted for
redemption must be guaranteed by a commercial bank which is a member of the
Federal Deposit Insurance Corporation, a trust company or a member firm
(broker-dealer) of a national securities exchange (a notary public or a savings
and loan association is not an acceptable guarantor); and, (d) the request must
include any additional legal documents concerning authority and related matters
in the case of estates, trusts, guardianships, custodianships, partnerships and
corporations. Any written requests sent to a Fund will be forwarded to the
Transfer Agent and the effective date of a redemption request will be when the
request is received by the Transfer Agent. Shareholders who purchased shares
through the Transfer Agent may arrange for the proceeds of redemption requests
to be sent by Federal Fund wire to a designated bank account by sending wiring
instructions to Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701. The Transfer Agent charges a $12 service fee for each payment of
redemption proceeds made by Federal Fund wire. Additional information regarding
redemptions may be obtained by calling 1-800-697-3863.
Shares of the Fund purchased through programs of services offered or
administered by processing intermediaries that have entered into agreements with
the Fund ("Processing Intermediaries") may be required to be redeemed through
such programs. Such Processing Intermediaries may become shareholders of record
and may use procedures and impose restrictions in addition to or different from
those applicable to shareholders who redeem shares directly through the Fund.
The Fund may only accept redemption requests for an account in which the
Processing Intermediary is the shareholder of record from the Processing
Intermediary. The Fund may authorize one or more Processing Intermediaries (and
other Processing Intermediaries properly designated thereby) to accept
redemption requests on the Fund's behalf. In such event, the Fund will be deemed
to have received a redemption request when the Processing Intermediary accepts
the customer request, and the redemption price will be the Fund's net asset
value next computed after the customer redemption request is accepted by the
Processing Intermediary.
Redemption of the Fund's shares or payments therefore may be suspended
at such times (a) when the Exchange is closed, (b) when trading on the Exchange
is restricted, (c) when an emergency exists which makes it impractical for the
Fund to either dispose of securities or make a fair determination of net asset
value, or (d) for such other period as the Securities and Exchange Commission
may permit for the protection of the Fund's shareholders. There is no assurance
that the net asset value received upon redemption will be greater than that paid
by a shareholder upon purchase.
The Fund reserves the right to close an account that has dropped below
$500 in value for a period of three months or longer other than as a result of a
decline in the net asset value per share. Shareholders are notified at least 60
days prior to any proposed redemption and are invited to add to their account if
they wish to continue as shareholders of the Fund.
TELEPHONE REDEMPTION
Shareholders of the Fund will also be permitted to redeem fund shares
by telephone. To redeem shares by telephone, call 1-800-697-3863 with your
account name, account number and amount of redemption. Redemption proceeds will
only be sent to a shareholder's address or a pre-authorized bank account of a
commercial bank located within the United States as shown on the Transfer
Agent's records. (Available only if established on the account application and
if there has been no change of address by telephone within the preceding 15
days.)
The Fund reserves the right to refuse a telephone redemption if they
believe it is advisable to do so. Procedures for redeeming shares by telephone
may be modified or terminated by the Fund at any time upon notice to
shareholders. During periods of substantial economic or market change, telephone
redemptions may
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<PAGE>
be difficult to implement. If a shareholder is unable to contact the Transfer
Agent by telephone, shares may also be redeemed by delivering the redemption
request to the Transfer Agent.
In an effort to prevent unauthorized or fraudulent redemption requests
by telephone, the Fund and the Transfer Agent employ reasonable procedures to
confirm that such instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or exchange by telephone
will be required to provide their account number. All such telephone
transactions will be tape recorded. The Fund may implement other procedures from
time to time. If reasonable procedures are not implemented, the Fund and/or the
Transfer Agent may be liable for any loss due to unauthorized or fraudulent
transactions. In all other cases, the shareholder is liable for any loss for
unauthorized transactions.
SHAREHOLDER PRIVILEGES
SYSTEMATIC WITHDRAWAL PLAN. The Fund offers a Systematic Withdrawal
Plan for shareholders who own shares worth at least $10,000 at current net asset
value of the Fund. Under the Systematic Withdrawal Plan, a fixed sum (minimum
$500) will be distributed at regular intervals (on any day, either monthly or
quarterly). In electing to participate in the Systematic Withdrawal Plan,
investors should realize that within any given period the appreciation of their
investment in the Fund may not be as great as the amount withdrawn. A
shareholder may vary the amount of frequency of withdrawal payments or
temporarily discontinue them by notifying Firstar Trust Company at
1-800-697-3863. The Systematic Withdrawal Plan does not apply to shares of the
Fund held in Individual Retirement Accounts or defined contribution retirement
plans. For additional information or to request an application please call
Firstar Trust Company at 1-800-697-3863.
EXCHANGE PRIVILEGE. Subject to certain conditions, shares of the Fund
may be exchanged for the shares of another Fund of The Tocqueville Trust at such
Fund's then current net asset value. No initial sales charge is imposed on the
shares being acquired through an exchange. The dollar amount of the exchange
must be at least equal to the minimum investment applicable to the shares of the
Fund acquired through such exchange. You should note that any such exchange,
which may only be made in states where shares of the Funds of The Tocqueville
Trust are qualified for sale, may create a gain or loss to be recognized for
federal income tax purposes. Exchanges must be made between accounts having
identical registrations and addresses. Exchanges may be authorized by telephone.
In order to protect itself and shareholders from liability for unauthorized or
fraudulent telephone transactions, the Fund will use reasonable procedures in an
attempt to verify the identity of a person making a telephone exchange request.
The Funds reserve the right to refuse a telephone exchange request if they
believe that the person making the request is not the record owner of the shares
being exchanged, or is not authorized by the shareholder to request the
exchange. Shareholders will be promptly notified of any refused request for a
telephone exchange. As long as these normal identification procedures are
followed, neither the Funds nor their agents will be liable for loss, liability
or cost which results from acting upon instructions of a person believed to be a
shareholder with respect to the telephone exchange privilege. You will not
automatically be assigned this privilege unless you check the box on the
Purchase Application which indicates that you wish to have the privilege. The
exchange privilege may be modified or discontinued at any time.
Shareholders may also exchange shares of any or all of an investment
in the Fund for shares of the Firstar Money Market Fund, the Firstar Tax-Exempt
Money Market Fund, or the Firstar U.S. Government Fund (collectively the "Money
Market Funds"). This Exchange Privilege is a convenient way for shareholders to
buy shares in a money market fund in order to respond to changes in their goals
or market conditions. Before exchanging into the Money Market Funds,
shareholders must read the Firstar Money Market Funds' Prospectus. To obtain the
Money Market Funds' Prospectus and the necessary exchange authorization forms,
call the Transfer Agent at 1-800-697-3863. The Transfer Agent charges a $5 fee
for each telephone exchange which will be deducted from the investor's account
from which the funds are being withdrawn prior to effecting the exchange. There
is no charge for exchange transactions that are requested by mail. Use of the
Exchange Privilege is subject to the minimum purchase and redemption amounts set
forth in the Prospectus for the Money
- 18 -
<PAGE>
Market Funds. All accounts opened in a Money Market Fund as a result of using
the Exchange Privilege must be registered in the identical name and taxpayer
identification number as a shareholder's existing account with the Funds.
For purposes of the Exchange Privilege, exchanges into and out of the
Money Market Funds will be treated as shares owned in the Fund. For example, if
an investor who owned shares in the Fund moved an investment from the Fund to
one of the Money Market Funds and then decided at a later date to move the
investment back to the Fund, he or she would be deemed, once again, to own
shares of one of the Fund and may do so without the imposition of any additional
sales charges, so long as the investment has been continuously invested in
shares of the Money Market Fund during the period between withdrawal and
reinvestment.
Remember that each exchange represents the sale of shares of one Fund
and the purchase of shares of another. Therefore, shareholders may realize a
taxable gain or loss on the transaction. Before making an exchange request, an
investor should consult a tax or other financial adviser to determine the tax
consequences of a particular exchange. The Distributor is entitled to receive a
fee from the Money Market Funds for certain support services at the annual rate
of .20 of 1% of the average daily net asset value of the shares for which it is
the holder or dealer of record. Because excessive trading can hurt the Fund's
performance and shareholders, the Fund reserves the right to temporarily or
permanently limit the number of exchanges or to otherwise prohibit or restrict
shareholders from using the Exchange Privilege at any time, without notice to
shareholders. In particular, a pattern of exchanges with a "market timing"
strategy may be disruptive to the Fund and may thus be restricted or refused.
Excessive use of the Exchange Privilege is defined as more than five exchanges
per calendar year. The restriction or termination of the Exchange Privilege does
not affect the rights of shareholders to redeem shares, as discussed in the
Prospectus.
The Money Market Funds are managed by Firstar Investment Research and
Management Company, an affiliate of Firstar Trust Company. The Firstar Funds,
including the Money Market Funds, are unrelated to The Tocqueville Trust.
CHECK REDEMPTION. A shareholder may request on the Purchase
Application or by later written request to establish check redemption privileges
for any of the Money Market Funds. The redemption checks ("Checks") will be
drawn on the Money Market Fund in which the investor has made an investment.
Checks will be sent only to the registered owner(s) and only to the address of
record. Checks may be made payable to the order of any person in the amount of
$250 or more. Dividends are earned until the Check clears the Transfer Agent.
When a Check is presented to the Transfer Agent for payment, the Transfer Agent,
as the investor's agent, will cause the particular Money Market Fund involved to
redeem a sufficient number of the investor's shares to cover the amount of the
Check. Checks will not be returned to shareholders after clearance. The initial
checkbook is free, additional checkbooks are $5. The fee for additional
checkbooks will be deducted from the shareholder's account. There is no charge
to the investor for the use of the Checks; however, the Transfer Agent will
impose a $20 charge for stopping payment of a Check upon the request of the
investor, or if the Transfer Agent cannot honor a Check due to insufficient
funds or other valid reason. Because dividends on each Money Market Fund accrue
daily, Checks may not be used to close an account, as a small balance is likely
to result.
RETIREMENT PLANS
INDIVIDUAL RETIREMENT ACCOUNTS
Individual shareholders may establish their own tax-sheltered
Individual Retirement Accounts ("IRA"). The Fund offers three types of IRA's,
including the Traditional IRA, that can be adopted by executing the appropriate
Internal Revenue Service ("IRS") Form.
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Traditional IRA. In a Traditional IRA, amounts contributed to the IRA
may be tax deductible at the time of contribution depending on whether the
shareholder is an "active participant" in an employer-sponsored retirement plan
and the shareholder's income. Distributions from a Traditional IRA will be taxed
at distribution except to the extent that the distribution represents a return
of the shareholder's own contributions for which the shareholder did not claim
(or was not eligible to claim) a deduction. Distribution prior to age 59-1/2 may
be subject to an additional 10% tax applicable to certain premature
distributions. Distributions must commence by April 1 following the calendar
year in which the shareholder attains age 70-1/2. Failure to begin distributions
by this date (or distributions that do not equal certain minimum thresholds) may
result in adverse tax consequences.
Roth IRA. In a Roth IRA (sometimes known as the American Dream IRA),
amounts contributed to the IRA are taxed at the time of contribution, but
distributions from the IRA are not subject to tax if the shareholder has held
the IRA for certain minimum periods of time (generally, until age 59-1/2).
Shareholders whose incomes exceed certain limits are ineligible to contribute to
a Roth IRA. Distributions that do not satisfy the requirements for tax-free
withdrawals are subject to income taxes (and possibly penalty taxes) to the
extent that the distribution exceeds the shareholder's contributions to the IRA.
The minimum distribution rules applicable to Traditional IRAs do not apply
during the lifetime of the shareholder. Following the death of the shareholder,
certain minimum distribution rules apply.
For Traditional and Roth IRAs, the maximum annual contribution
generally is equal to the lesser of $2,000 or 100% of the shareholder's
compensation (earned income). An individual may also contribute to a Traditional
IRA or Roth IRA on behalf of his or her spouse provided that the individual has
sufficient compensation (earned income). Contributions to a Traditional IRA
reduce the allowable contribution under a Roth IRA, and contributions to a Roth
IRA reduce the allowable contribution to a Traditional IRA.
Education IRA. In an Education IRA, contributions are made to an IRA
maintained on behalf of a beneficiary under age 18. The maximum annual
contribution is $500 per beneficiary. The contributions are not tax deductible
when made. However, if amounts are used for certain educational purposes,
neither the contributor nor the beneficiary of the IRA are taxed upon
distribution. The beneficiary is subject to income (and possible penalty taxes)
on amounts withdrawn from an Education IRA that are not used for qualified
educational purposes. Shareholders whose income exceeds certain limits are
ineligible to contribute to an Education IRA.
Under current IRS regulations, an IRA applicant must be furnished a
disclosure statement containing information specified by the IRS. The applicant
generally has the right to revoke his account within seven days after receiving
the disclosure statement and obtain a full refund of his contributions.
SIMPLIFIED EMPLOYEE PENSION PLAN
A Traditional IRA may also be used in conjunction with a Simplified
Employee Pension Plan ("SEP- IRA"). A SEP-IRA is established through execution
of Form 5305-SEP together with a Traditional IRA established for each eligible
employee. Generally, a SEP-IRA allows an employer (including a self-employed
individual) to purchase shares with tax deducible contributions not exceeding
annually for any one participant 15% of compensation (disregarding for this
purposes compensation in excess of $160,000 per year). The $160,000 compensation
limit applies for 1998 and is adjusted periodically for cost of living
increases. A number of special rules apply to SEP Plans, including a requirement
that contributions generally be made of all employees of the employer (including
for this purpose a sole proprietorship or partnership) who satisfy certain
minimum participation requirements.
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SIMPLE IRA
An IRA may also be used in connection with a SIMPLE Plan established
by the shareholder's employer (or by a self-employed individual). When this is
done, the IRA is known as a SIMPLE IRA, although it is similar to a Traditional
IRA with the exceptions described below. Under a SIMPLE Plan, the shareholder
may elect to have his or her employer make salary reduction contributions of up
to $6,000 per year to the SIMPLE IRA. The $6,000 limit applies for 1998 and is
adjusted periodically for cost of living increases. In addition, the employer
will contribute certain amounts to the shareholder's SIMPLE IRA, either as a
matching contribution to those participants who make salary reduction
contributions or as a non-elective contribution to all eligible participants
whether or not making salary reduction contribution. A number of special rules
apply to SIMPLE Plans, including (1) a SIMPLE Plan generally is available only
to employers with fewer than 100 employees; (2) contributions must be made on
behalf of all employees of the employer (other than bargaining unit employees)
who satisfy certain minimum participation requirements; (3) contributions are
made to a special SIMPLE IRA that is separate and apart from the other IRAs of
employees; (4) the distribution excise tax (if otherwise applicable) is
increased to 25% on withdrawals during the first two years of participation in a
SIMPLE IRA; and (5) amounts withdrawn during the first two years of
participation may be rolled over tax-free only into another SIMPLE IRA (and not
to a Traditional IRA or to a Roth IRA). A SIMPLE IRA is established by executing
Form 5304-SIMPLE together with an IRA established for each eligible employee.
DIVIDENDS, DISTRIBUTIONS, AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. Dividends are paid at least annually by
the Fund. The Fund also distributes net capital gains (if any) at least
annually. Dividends and distributions of shares may be reinvested at net asset
value without an initial sales charge. Shareholders should indicate on the
purchase application whether they wish to receive dividends and distributions in
cash. Otherwise, all income dividends and capital gains distributions are
automatically reinvested in the Fund at the next determined net asset value
unless the Transfer Agent receives written notice from an individual shareholder
prior to the record date, requesting that the distributions and dividends be
distributed to the investor in cash.
TAX MATTERS. The Fund intends to qualify as a regulated investment
company by satisfying the requirements under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"), including the requirements with
respect to diversification of assets, distribution of income and sources of
income. It is the Fund's policy to distribute to its shareholders all of its
investment income (net of expenses) and any capital gains (net of capital
losses) in accordance with the timing requirements imposed by the Code so that
the Fund will satisfy the distribution requirement of Subchapter M and not be
subject to federal income tax or the 4% excise tax. If the Fund fails to satisfy
any of the Code requirements for qualification as a regulated investment
company, it will be taxed at regular corporate tax rates on all of its taxable
income (including capital gains) without any deduction for distributions to
shareholders, and distributions to shareholders will be taxable as ordinary
dividends (even if derived from the Fund's net long-term capital gains) to the
extent of the Fund's current and accumulated earnings and profits.
Distributions by the Fund of its net investment income and the excess,
if any, of its net short-term capital gain over its net long-term capital loss
are generally taxable to shareholders as ordinary income. These distributions
are treated as dividends for federal income tax purposes. Distributions by the
Fund of the excess, if any, of its net long-term capital gain over its net
short-term capital loss are designated as capital gain dividends and are taxable
to shareholders as long-term capital gains, without regard to the length of time
the Fund's shares were held.
Portions of the Fund's investment income may be subject to foreign
income taxes withheld at the source. The economic effect of such withholding
taxes on the total return of the Fund cannot be predicted. The Fund may elect to
"pass through" to its shareholders these foreign taxes, in which event each
shareholder
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will be required to include their pro rata portion thereof in its gross income,
but will be able to deduct or (subject to various limitations) claim a foreign
tax credit for such amount.
Distributions by the Fund to shareholders will be treated in the same
manner for federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund. In general, distributions by the Fund are taken
into account by the shareholders in the year in which they are made. However,
certain distributions made during January will be treated as having been paid by
the Fund and received by the shareholders on December 31 of the preceding year.
A statement setting forth the federal income tax status of all distributions
made or deemed made during the year, including any amount of foreign taxes
"passed through," will be sent to shareholders promptly after the end of each
year. A shareholder who purchases shares of the Fund just prior to the record
date will be taxed on the entire amount of the dividend received, even though
the net asset value per share on the date of such purchase may have reflected
the amount of such dividend.
A shareholder will recognize gain or loss upon the sale (exchange) or
redemption of shares of the Fund in an amount equal to the difference between
the proceeds of the sale or redemption and the shareholder's adjusted tax basis
in the shares. Any loss recognized upon a taxable disposition of shares within
six months from the date of their purchase will be treated as a long-term
capital loss to the extent of any capital gain dividends received on such
shares. All or a portion of any loss recognized upon a taxable disposition of
shares of the Fund may be disallowed if other shares of the Fund are purchased
within 30 days before or after such disposition.
Ordinary income dividends paid to non-resident alien or foreign entity
shareholders generally will be subject to United States withholding tax at a
rate of 30% (or lower rate under an applicable treaty). Foreign shareholders are
urged to consult their own tax advisers concerning the applicability of United
States withholding taxes.
Under the backup withholding rules of the Code, certain shareholders
may be subject to 31% backup withholding tax on ordinary income dividends,
capital gain dividends and redemption payments made by the Fund. In order to
avoid this backup withholding, a shareholder must provide the Fund with a
correct taxpayer identification number (which for an individual is usually his
Social Security number) or certify that the shareholder is a corporation or
otherwise exempt from or not subject to backup withholding.
The foregoing discussion of federal income tax consequences is based
on tax laws and regulations in effect on the date of this Prospectus, and is
subject to change by legislative or administrative action. As the foregoing
discussion is for general information only, a prospective shareholder should
also review the more detailed discussion of federal income tax considerations
relevant to the Fund that is contained in the Statement of Additional
Information. In addition, each prospective shareholder should consult with his
own tax adviser as to the tax consequences of investments in the Fund, including
the application of state and local taxes which may differ from the federal
income tax consequences described above.
ORGANIZATION AND DESCRIPTION OF SHARES OF THE TRUST
The Trust was organized as a Massachusetts business trust under the
laws of the Commonwealth of Massachusetts. The Trust's Declaration of Trust
filed September 17, 1986, permits the Trustees to issue an unlimited number of
shares of beneficial interest with a par value of $0.01 per share in an
unlimited number of series of shares. On August 19, 1991, the Declaration of
Trust was amended to change the name of the Trust to "The Tocqueville Trust,"
and on August 4, 1995, the Declaration of Trust was amended to permit the
division of a series into classes of shares. Each share of beneficial interest
has one vote and shares equally in dividends and distributions when and if
declared by a Fund and in a Fund's net assets upon liquidation. All shares, when
issued, are fully paid and nonassessable. There are no preemptive or conversion
rights. Fund shares do not have cumulative voting rights and, therefore, holders
of at least 50% of the shares voting for trustees can elect all trustees and the
remaining shareholders would not be able to elect any trustees. The Board
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<PAGE>
of Trustees may classify or reclassify any unissued shares of the Trust into
shares of any series by setting or changing in any one or more respects, from
time to time, prior to the issuance of such shares, the preference, conversion
or other rights, voting powers, restrictions, limitations as to dividends, or
qualifications of such shares. Any such classification or reclassification will
comply with the provisions of the 1940 Act.
There will not normally be annual shareholder meetings. Shareholders
may remove Trustees from office by votes cast at a meeting of shareholders or by
written consent.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT
Firstar Trust Company and The Chase Manhattan Bank serve as custodian
for the portfolio securities and cash of the Fund. Firstar Trust Company serves
as the Fund's Transfer and Dividend Paying Agent, and in those capacities
maintains certain financial and accounting books and records pursuant to
agreements with the Trust. Its mailing address is 615 East Michigan Street,
Milwaukee, WI 53202.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, N.Y.
10022, is counsel for the Trust. McGladrey & Pullen, LLP, 555 Fifth Avenue, New
York, N.Y. 10017-2416, has been appointed independent accountants for the Trust.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to The Tocqueville Trust c/o
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202,
Attention: The Tocqueville Gold Fund, or may be made by calling 1- 800-697-3863.
OTHER INFORMATION
This Prospectus omits certain information contained in the
registration statement filed with the Securities and Exchange Commission. Copies
of the registration statement, including items omitted herein, may be obtained
from the Commission by paying the charges prescribed under its rules and
regulations. The Statement of Additional Information included in such
registration statement may be obtained without charge from the Trust.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and information
or representations not herein contained, if given or made, must not be relied
upon as having been authorized by the Trust. This Prospectus does not constitute
an offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.
The Code of Ethics of the Investment Advisor and the Funds prohibits
all affiliated personnel from engaging in personal investment activities which
compete with or attempt to take advantage of a Fund's planned portfolio
transactions. Both organizations maintain careful monitoring of compliance with
the Code of Ethics.
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<PAGE>
PROSPECTUS
June 29, 1998
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE GOLD FUND
INVESTMENT ADVISOR
Tocqueville Asset Management L.P.
1675 Broadway
New York, New York 10019
Telephone: (212) 698-0800
DISTRIBUTOR
Tocqueville Securities L.P.
1675 Broadway
New York, New York 10019
Telephone: (800) 697-3863
SHAREHOLDERS' SERVICING,
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone: (800) 697-3863
BOARD OF TRUSTEES
Francois Sicart -- Chairman
Lucille G. Bono
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Robert W. Kleinschmidt
Francois Letaconnoux
Larry M. Senderhauf
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<PAGE>
Rule 497(c)
Registration No. 33-8746
STATEMENT OF ADDITIONAL INFORMATION - June 29, 1998
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE GOLD FUND
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus and should be read in conjunction with the Fund's current
Prospectus, copies of which may be obtained by writing The Tocqueville Trust,
c/o Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202
or calling (800) 697-3863.
This Statement of Additional Information relates to the Fund's
Prospectus which is dated June 29, 1998.
TABLE OF CONTENTS PAGE
Investment Policies and Risks................................................ 2
Investment Restrictions...................................................... 6
Management................................................................... 7
Investment Advisor and Investment Advisory Agreement......................... 9
Distribution Plan............................................................ 10
Administration Agreement.................................................... 10
Portfolio Transactions and Brokerage......................................... 11
Allocation of Investments.................................................... 11
Computation of Net Asset Value............................................... 12
Purchase and Redemption of Shares............................................ 12
Tax Matters.................................................................. 12
Performance Calculation...................................................... 19
General Information.......................................................... 19
Reports .................................................................... 20
<PAGE>
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
currently consisting of separate funds. This Statement of Additional Information
relates to The Tocqueville Gold Fund (the "Fund"), an open-end, diversified
management investment company. The Fund's investment objective is to provide
long-term capital appreciation through investments in gold and securities of
companies located throughout the world that are engaged in mining or processing
gold ("gold related securities"), and through investments in other precious
metals and securities of companies located throughout the world that are engaged
in mining or processing such other precious metals ("other precious metal
securities"). Much of the information contained in this Statement of Additional
Information expands on subjects discussed in the Prospectus. Capitalized terms
not defined herein are used as defined in the Prospectus. No investment in
shares of the Fund should be made without first reading the Fund's Prospectus.
INVESTMENT POLICIES AND RISKS
The following descriptions supplement the investment policies of the Fund set
forth in the Prospectus. The Fund's investments in the following securities and
other financial instruments are subject to the investment policies and
limitations described in the Prospectus and this Statement of Additional
Information.
1. WRITING COVERED CALL OPTIONS ON SECURITIES AND STOCK INDICES
The Fund may write covered call options on optionable securities or
stock indices from time to time as the Investment Advisor determines is
appropriate in seeking to attain the Fund's objective. A call option written by
the Fund gives the holder the right to buy the underlying securities or index
from the Fund at a stated exercise price. Options on stock indices are settled
in cash.
The Fund may write only covered call options, which means that, so
long as the Fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option (or comparable securities or cash
satisfying the cover requirements of securities exchanges).
The Fund will receive a premium for writing a covered call option,
which increases the return of the Fund in the event the option expires
unexercised or is closed out at a profit. The amount of the premium will
reflect, among other things, the relationship of the market price of the
underlying security or index to the exercise price of the option, the term of
the option and the volatility of the market price of the underlying security or
index. By writing a covered call option, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security or index
above the exercise price of the option.
The Fund may terminate an option that it has written prior to the
option's expiration by entering into a closing purchase transaction in which an
option is purchased having the same terms as the option written. The Fund will
realize a profit or loss from such transaction if the cost of such transaction
is less or more than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security or index, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by unrealized appreciation of the underlying security (or securities)
owned by the Fund.
2. PURCHASING PUT AND CALL OPTIONS ON SECURITIES AND STOCK INDICES
The Fund may purchase put options to protect its portfolio holdings
in an underlying stock index or security against a decline in market value. Such
hedge protection is provided during the life of the put option since the Fund,
as holder of the put option, is able to sell the underlying security or index at
the put exercise price regardless of any decline in the underlying market price
of the security or index. In order for a put option to be profitable, the market
price of the underlying security or index must decline sufficiently below the
exercise
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<PAGE>
price to cover the premium and transaction costs. By using put options in this
manner, the Fund will reduce any profit it might otherwise have realized in its
underlying security or index by the premium paid for the put option and by
transaction costs, but it will retain the ability to benefit from future
increases in market value.
The Fund may also purchase call options to hedge against an increase
in prices of stock indices or securities that it ultimately wants to buy. Such
hedge protection is provided during the life of the call option since the Fund,
as holder of the call option, is able to buy the underlying security or index at
the exercise price regardless of any increase in the underlying market price of
the security or index. In order for a call option to be profitable, the market
price of the underlying security or index must rise sufficiently above the
exercise price to cover the premium and transaction costs. By using call options
in this manner, the Fund will reduce any profit it might have realized had it
bought the underlying security or index at the time it purchased the call option
by the premium paid for the call option and by transaction costs, but it limits
the loss it will suffer if the security or index declines in value to such
premium and transaction costs.
3. BORROWING
The Fund may, from time to time, borrow up to 10% of the value of its
total assets from banks at prevailing interest rates as a temporary measure for
extraordinary or emergency purposes. The Fund may not purchase securities while
borrowings exceed 5% of the value of its total assets.
4. REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements subject to resale to a
bank or dealer at an agreed upon price which reflects a net interest gain for
the Fund. The Fund will receive interest from the institution until the time
when the repurchase is to occur.
The Fund will always receive as collateral (i.e., U.S. Government
obligations or obligations of its agencies or instrumentalities, or short-term
money market securities) whose market value is equal to at least 100% of the
amount invested by the Fund, and the Fund will make payment for such securities
only upon the physical delivery or evidence by book entry transfer to the
account of its custodian. If the seller institution defaults, the Fund might
incur a loss or delay in the realization of proceeds if the value of the
collateral securing the repurchase agreement declines and it might incur
disposition costs in liquidating the collateral. The Fund will attempt to
minimize such risks by entering into such transactions only with
well-capitalized financial institutions and specifying the required value of the
underlying collateral.
5. FUTURES CONTRACTS
The 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. The Fund also may
enter into futures contracts based on gold and other precious metals, options on
such 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, index, gold or other
precious metal at a specified future time and at a specified price. A stock
index futures contract is a bilateral agreement pursuant to which two parties
agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contracts and the price at which the futures contract is
originally struck. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission (the "CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery
and acceptance of the underlying securities, in most cases the contracts are
closed out before the settlement date without the making or taking of
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<PAGE>
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. The Fund
expects to earn interest income on its margin deposits.
In addition to the margin restrictions discussed above, transactions
in futures contracts may involve the segregation of funds pursuant to
requirements imposed by the CFTC. Under those requirements, where the Fund has a
long position in a futures contract, it may be required to establish a
segregated account (not with a futures commission merchant or broker, except as
may be permitted under CFTC rules) containing cash or certain liquid assets
equal to the purchase price of the contract (less any margin on deposit). For a
short position in futures or forward contracts held by the Fund, those
requirements may mandate the establishment of a segregated account (not with a
futures commission merchant or broker, except as may be permitted under CFTC
rules) with cash or certain liquid assets that, when added to the amounts
deposited as margin, equal the market value of the instruments underlying the
futures contracts (but are not less than the price at which the short positions
were established). However, segregation of assets is not required if the Fund
"covers" a long position. For example, instead of segregating assets, the Fund,
when holding a long position in a futures contract, could purchase a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Fund. In addition, where the Fund takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where the Fund holds a short position
in a futures contract, it may cover by owning the instruments underlying the
contract. The Fund may also cover such a position by holding a call option
permitting it to purchase the same futures contract at a price no higher than
the price at which the short position was established. Where the Fund sells a
call option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. The
Fund could also cover this position by holding a separate call option permitting
it to purchase the same futures contract at a price no higher than the strike
price of the call option sold by the Fund.
When interest rates are expected to rise or market values of
portfolio securities are expected to fall, the Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
the Fund, through the purchase of such contracts, can attempt to secure better
rates or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
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<PAGE>
The Fund will only sell futures contracts to protect securities and
currencies it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase. The Fund
also will only sell futures contracts or purchase futures contracts based on
gold or other precious metals for protection against decreases or increases in
the price of gold or other precious metals, as applicable.
The Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that the Fund could lose more than the original margin deposit
required to initiate a futures transaction.
RISK FACTORS IN FUTURES TRANSACTIONS
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, the Fund would continue to be
required to make daily cash payments to maintain the required margin. In such
situations, if the Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to make delivery
of the instruments underlying futures contracts it holds. The inability to close
options and futures positions also could have an adverse impact on the ability
to effectively hedge them. The Fund will minimize the risk that it will be
unable to close out a futures contract by only entering into futures contracts
which are traded on national futures exchanges and for which there appears to be
a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Fund are only for hedging purposes, the
Investment Advisor does not believe that the Fund is subject to the risks of
loss frequently associated with futures transactions. The Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Fund does involve the risk
of imperfect or no correlation where the securities underlying the futures
contract have different maturities than the portfolio securities being hedged.
It is also possible that the Fund could both lose money on futures contracts and
also experience a decline in value of its portfolio securities. There is also
the risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.
CONCLUSION
Unlike the fundamental investment objective of the Fund set forth
above and the noted investment restrictions set forth below which may not be
changed without shareholder approval, the Fund has the right to modify the
investment policies, other than the policy concerning borrowing, described above
under the heading
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<PAGE>
"Investment Policies and Risks" without shareholder approval. The policy
concerning borrowing is fundamental and only may be changed by shareholder
approval.
INVESTMENT RESTRICTIONS
The following fundamental policies and investment restrictions have
been adopted by the Fund and except as noted, such policies and restrictions
cannot be changed without approval by the vote of a majority of the outstanding
voting shares of the Fund which, as defined by the Investment Company Act of
1940, as amended (the "1940 Act"), means the affirmative vote of the lesser of
(a) 67% or more of the shares of the Fund present at a meeting at which the
holders of more than 50% of the outstanding shares of the Fund are represented
in person or by proxy, or (b) more than 50% of the outstanding shares of the
Fund.
The Fund may not:
(1) issue senior securities;
(2) invest 25% or more of its assets in the securities of
issuers in any one industry, with the exception of gold, gold related
securities, other precious metals, and other precious metal
securities;
(3) with respect to 75% of the value of the Fund's assets,
purchase any securities (other than obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the
Fund's total assets would be invested in securities of any one
issuer, or more than 10% of the outstanding voting securities of any
one issuer would be owned by the Fund;
(4) make loans of money or securities other than (a) through the
purchase of publicly distributed bonds, debentures or other corporate
or governmental obligations, (b) by investing in repurchase
agreements, and (c) by lending its portfolio securities, provided the
value of such loaned securities does not exceed 33-1/3% of its total
assets;
(5) borrow money in excess of 10% of the value of the Fund's
total assets from banks. The Fund may not purchase securities while
borrowings exceed 5% of the value of its total assets;
(6) buy or sell real estate, commodities, or commodity
contracts, except the Fund may purchase or sell futures or options on
futures;
(7) underwrite securities;
(8) invest in precious metals other than in accordance with the
Fund's investment objective and policy, if as a result the Fund would
then have more than 10% of its total assets (taken at current value)
invested in such precious metals; and
(9) participate in a joint investment account.
The following restrictions are non-fundamental and may be changed by
the Fund's Board of Trustees. Pursuant to such restrictions, the Fund will not:
(1) make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use
of options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and
investment program of the Fund;
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<PAGE>
(2) purchase the securities of any other investment company, if
the Fund, immediately after such purchase or acquisition, owns in the
aggregate, (i) more than 3% of the total outstanding voting stock of
such investment company, (ii) securities issued by such investment
company having an aggregate value in excess of 5% of the value of the
total assets of the Fund, or (iii) securities issued by such
investment company and all other investment companies having an
aggregate value in excess of 10% of the value of the total assets of
the Fund; and
(3) invest more than 10% of its total net assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced
price. Such securities include, but are not limited to, time deposits
and repurchase agreements with maturities longer than seven days.
Securities that may be resold under Rule 144A or securities offered
pursuant to Section 4(2) of the Securities Act of 1933, as amended,
shall not be deemed illiquid solely by reason of being unregistered.
The Investment Advisor shall determine whether a particular security
is deemed to be liquid based on the trading markets for the specific
security and other factors.
MANAGEMENT
The overall management of the business and affairs of the Fund is
vested with the Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust or the Fund and persons or companies
furnishing services to the Fund, including the Fund's agreement with an
investment advisor, custodian and transfer agent. The day-to-day operations of
the Fund are delegated to the Fund's officers subject always to the investment
objectives and policies of the Fund and to general supervision by the Trust's
Board of Trustees.
The Trustees and officers and their principal occupations are noted
below. Unless otherwise indicated the address of each Trustee and executive
officer is 1675 Broadway, New York, New York 10019.
FRANCOIS DANIEL SICART,* CHAIRMAN, PRINCIPAL EXECUTIVE OFFICER AND TRUSTEE.
Chairman and Chief Executive Officer, Tocqueville Management Corporation, the
General Partner of Tocqueville Asset Management L.P. and Tocqueville Securities
L.P. from January, 1990 to present; Chairman and Chief Executive Officer,
Tocqueville Asset Management Corp. from December, 1985 to January, 1990; Vice
Chairman of Tucker Anthony Management Corporation, from 1981 to October 1986;
Vice President (formerly general partner) and other positions with Tucker
Anthony, Inc. from 1969 to January, 1990.
LUCILLE G. BONO, TRUSTEE. Financial services consultant, 1997 to present;
Operations and administrative manager, Tocqueville Asset Management L.P. and
Tocqueville Securities L.P. from January 1990 to November 1997; similar
responsibilities, Tocqueville Asset Management Corp., December 1985 to January
1990; operations and administration staff, Tucker Anthony Inc. (and
predecessors), April 1954 to January 1990.
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.
- --------
* Interested person of the Fund as defined in the 1940 Act.
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<PAGE>
JAMES B. FLAHERTY, TRUSTEE. President and Partner, Troutbeck Conference Center
and Country Inn from October, 1979 to present; Vice President, Leedsville Realty
and Construction Corp. from 1980 to present; Associate Creative Director, Young
and Rubicam Advertising, and Dentsu, Young and Rubicam from March, 1983 to
February, 1985; Creative Director and Senior Vice President, Tinker Campbell
Ewald from October, 1977 to November, 1980; Partner/owner of Freshfields
Restaurant, W. Cornell, CT; President/Creative Director of JBF Ltd., an
advertising company.
INGE HECKEL, TRUSTEE. Management Consultant, 1988 to present; Executive
Director, Princess Grace Foundation U.S.A. from June, 1986 to September, 1988;
Vice President and Assistant Secretary, The Asia Society from September, 1984 to
June, 1986; Executive Director, Metropolitan Boston Zoos from September, 1982 to
July, 1984; President, Bradford College, Bradford, Massachusetts from September,
1979 to June, 1982; Trustee of Bradford College; Former Director and Chairman,
Public Relations Committee, International Counsel of Museums (UNESCO); Former
Director, BayBank/Merrimack Valley; Member, Art Advisory Board, Mount Holyoke
College Art Museum.
ROBERT KLEINSCHMIDT,* PRESIDENT, PRINCIPAL OPERATING OFFICER AND TRUSTEE.
President, Tocqueville Asset Management L.P. from January, 1994 to present and
Managing Director from July, 1991 to January, 1994. Partner, David J. Greene &
Co., May, 1978 to July, 1991. Assistant Vice President, Irving Trust Co., July,
1976 to May, 1978.
FRANCOIS LETACONNOUX, TRUSTEE. President, Lepercq de Neuflize & Co. from July,
1993 to present; Director, Lepercq 99 First Management Inc. from 1988 to
present; Director, Lepercq de Neuflize & Co., Inc. (investment bank) from 1988
to present; Managing Director, Lepercq Capital Partners (real estate investment
firm), from 1974 to present.
LARRY M. SENDERHAUF, TRUSTEE. President, LMS 33 Corp., 1983 to present; Vice
President, NCCI Corp. 1985 to present; President, Cash Unlimited, 1980-1986;
President, Financial Exchange Corp., 1981-1986; President, LMS Development
Corp., 1986-1995; Vice President, Pacific Ring Enterprises, 1982-1995.
JOSEPH COOPER, SECRETARY AND TREASURER. Vice President and Treasurer,
Tocqueville Management Corporation, the General Partner of Tocqueville Asset
Management L.P. and Tocqueville Securities L.P. from January, 1990 to present.
Vice President, Treasurer and Chief Financial Officer, Tocqueville Asset
Management Corporation from December, 1985 to February, 1990. Self-employed as a
public accountant.
KIERAN LYONS, VICE PRESIDENT AND PRINCIPAL FINANCIAL OFFICER. Chief Financial
Officer, Tocqueville Management Corporation, the General Partner of Tocqueville
Asset Management L.P. and Tocqueville Securities L.P. from January, 1992 to
present. Certified Public Accountant, Pegg & Pegg, February, 1985 to January,
1992.
Under the terms of the Massachusetts General Corporation Law, the
Fund may indemnify any person who was or is a Trustee, officer or employee of
the Fund to the maximum extent permitted by the Massachusetts General
Corporation Law; provided, however, that any such indemnification (unless
ordered by a court) shall be made by the Fund only as authorized in the specific
case upon a determination that indemnification of such persons is proper in the
circumstances. Such determination shall be made (i) by the Board of Trustees, by
a majority vote of a quorum which consists of Trustees who are neither
"interested persons" of the Trust, as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding, or (ii) if the required quorum is not
obtained or if a quorum of such Trustees so directs, by independent legal
counsel in a written opinion. No indemnification will be provided by the Fund to
any Trustee or officer of the Fund for any liability to the Fund or it
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Fund does not pay direct remuneration to any officer of the Fund.
As of January 31, 1998, the Trustees and officers as a group owned beneficially
3.99% of The Tocqueville Fund's outstanding shares,
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<PAGE>
2.26% of The Tocqueville International Fund's outstanding shares, 5.49% of The
Tocqueville Small Cap Fund's outstanding shares, and 18.96% of The Tocqueville
Government 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, 1997, the Trust paid the "disinterested" Trustees an aggregate of
$18,000; each disinterested Trustee received $750 per meeting. "Interested"
Trustees do not receive Trustees' fees. The Trust did not reimburse Trustee
expenses.
The table below illustrates the compensation paid to each Trustee for
the Trust's most recently completed fiscal year:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation
Aggregate Benefits Accrued Estimated Annual from Fund and
Name of Person, Compensation as Part of Fund Benefits Upon Fund Complex
Position from Fund Expenses Retirement Paid to Trustees
- -------- --------- -------- ---------- ----------------
<S> <C> <C> <C> <C>
Francois Sicart $0 $0 $0 $0
Bernard F. Combemale $4,500 $0 $0 $4,500
James B. Flaherty $4,500 $0 $0 $4,500
Inge Heckel $4,500 $0 $0 $4,500
Robert Kleinschmidt $0 $0 $0 $0
Francois Letaconnoux $4,500 $0 $0 $4,500
Lucille Bono $0 $0 $0 $0
Larry Senderhauf $0 $0 $0 $0
</TABLE>
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENT
Tocqueville Asset Management L.P. (the "Investment Advisor"), 1675
Broadway, New York, New York 10019, acts as the Investment Advisor to the Fund
under a separate investment advisory agreement (the "Agreement" or
"Agreements"). The Agreement provides that the Investment Advisor identify and
analyze possible investments for the Fund, determine the amount and timing of
such investments, and the form of investment. The Investment Advisor has the
responsibility of monitoring and reviewing the Fund's portfolio, and, on a
regular basis, to recommend the ultimate disposition of such investments. It is
the Investment Advisor's responsibility to cause the purchase and sale of
securities in the Fund's portfolio, subject at all times to the policies set
forth by the Trust's Board of Trustees. In addition, the Investment Advisor also
provides certain administrative and managerial services to the Fund.
The Investment Advisor receives a fee from the Fund, calculated daily
and payable monthly, for the performance of its services at an annual rate of
1.00% on the first $500 million of the average daily net assets of the Fund,
.75% of average daily net assets in excess of $500 million but not exceeding $1
billion, and .65% of the average daily net assets in excess of $1 billion. The
fee is accrued daily for the purposes of determining the offering and redemption
price of the Fund's shares. The advisory fee is higher than that paid by most
investment companies but the Board of Trustees believes them to be reasonable in
light of the services the Fund receives thereunder.
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<PAGE>
Under the terms of the Agreement, the Fund pays all of its expenses
(other than those expenses specifically assumed by the Investment Advisor and
the Fund's distributor) including the costs incurred in connection with the
maintenance of its registration under the Securities Act of 1933, as amended,
and the 1940 Act, printing of prospectuses distributed to shareholders, taxes or
governmental fees, brokerage commissions, custodial, transfer and shareholder
servicing agents, expenses of outside counsel and independent accountants,
preparation of shareholder reports, and expenses of Trustee and shareholder
meetings.
The Agreement may be terminated without penalty on 60 days' written
notice by a vote of the majority of the Trust's Board of Trustees or by the
Investment Advisor, or by holders of a majority of the Fund's outstanding
shares. The Fund's Agreement will continue for two years from its effective date
and from year-to-year thereafter provided it is approved, at least annually, in
the manner stipulated in the 1940 Act. This requires that the Agreement and any
renewal thereof be approved by a vote of the majority of the Fund's Trustees who
are not parties thereto or interested persons of any such party, cast in person
at a meeting specifically called for the purpose of voting on such approval.
DISTRIBUTION PLAN
The Fund has adopted a distribution plan pursuant to Rule 12b-1 of
the 1940 Act (the "Plan"). The Plan provides that the Fund may incur
distribution expenses related to the sale of shares of up to .25% per annum of
the Fund's average daily net assets.
The Plan provides that the Fund may finance activities which are
primarily intended to result in the sale of the Fund's shares, including, but
not limited to, advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature and payments to dealers and shareholder servicing agents
including Tocqueville Securities L.P. ("Tocqueville Securities") who enter into
agreements with the Fund or its distributor.
In approving the Plan in accordance with the requirements of Rule
12b-1 under the 1940 Act, the Trustees (including the "disinterested" Trustees,
as defined in the 1940 Act) considered various factors and determined that there
is a reasonable likelihood that the Plan will benefit the Fund and its
shareholders. The Plan will continue in effect from year to year if specifically
approved annually (a) by the majority of the Fund's outstanding voting shares or
by the Board of Trustees and (b) by the vote of a majority of the disinterested
Trustees. While the Plan remains in effect, the Fund's Principal Financial
Officer shall prepare and furnish to the Board of Trustees a written report
setting forth the amounts spent by the Fund under the Plan and the purposes for
which such expenditures were made. The Plan may not be amended to increase
materially the amount to be spent for distribution without shareholder approval
and all material amendments to the Plan must be approved by the Board of
Trustees and by the disinterested Trustees cast in person at a meeting called
specifically for that purpose. While the Plan is in effect, the selection and
nomination of the disinterested Trustees shall be made by those disinterested
Trustees then in office.
ADMINISTRATION AGREEMENT
Tocqueville Asset Management L.P., supervises administration of the
Fund pursuant to an Administration Agreement with the Fund. Under the
Administration Agreement, Tocqueville Asset Management L.P. supervises the
administration of all aspects of the Fund's operations, including the Fund's
receipt of services for which the Fund is obligated to pay, provides the Fund
with general office facilities and provides, at the Fund's expense, the services
of persons necessary to perform such supervisory, administrative and clerical
functions as are needed to effectively operate the Fund. Those persons, as well
as certain employees and Trustees of the Fund, may be directors, officers or
employees of (and persons providing services to the Fund may include)
Tocqueville Asset Management L.P. and its affiliates. For these services and
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<PAGE>
facilities, Tocqueville Asset Management L.P. receives with respect to the Fund
a fee computed and paid monthly at an annual rate of 0.15% of the average daily
net assets of the Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for the Fund are made by the Investment Advisor. The
Investment Advisor is authorized to allocate the orders placed by it on behalf
of the Fund to such unaffiliated brokers who also provide research or
statistical material, or other services to the Fund or the Investment Advisor
for the Fund's use. Such allocation shall be in such amounts and proportions as
the Investment Advisor shall determine and the Investment Advisor will report on
said allocations regularly to the Board of Trustees indicating the unaffiliated
brokers to whom such allocations have been made and the basis therefor. In
addition, the Investment Advisor may consider sales of shares of the Fund and of
any other funds advised or managed by the Investment Advisor as a factor in the
selection of unaffiliated brokers to execute portfolio transactions for the
Fund, subject to the requirements of best execution. The Trustees have
authorized the allocation of brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions. The Trustees have adopted procedures
incorporating the standards of Rule 17e-1 of the 1940 Act, which require that
the commission paid to affiliated broker-dealers must be "reasonable and fair
compared to the commission, fee or other remuneration received, or to be
received, by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." At times, the Fund may
also purchase portfolio securities directly from dealers acting as principals,
underwriters or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.
In selecting a broker to execute each particular transaction, the
Investment Advisor will take the following into consideration: the best net
price available; the reliability, integrity and financial condition of the
broker; the size and difficulty in executing the order; and, the value of the
expected contribution of the broker to the investment performance of the Fund on
a continuing basis. Accordingly, the cost of the brokerage commissions to the
Fund in any transaction may be greater than that available from other brokers if
the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies and procedures as the Board
of Trustees may determine, the Investment Advisor shall not be deemed to have
acted unlawfully or to have breached any duty solely by reason of its having
caused the Fund to pay an unaffiliated broker that provides research services to
the Investment Advisor for the Fund's use an amount of commission for effecting
a portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting the transaction, if the Investment
Advisor determines in good faith that such amount of commission was reasonable
in relation to the value of the research service provided by such broker viewed
in terms of either that particular transaction of the Investment Advisor's
ongoing responsibilities with respect to the Fund.
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 Fund. As such, there will be times when the
Investment Advisor may recommend purchases and/or sales of the same portfolio
securities for the Fund and its other clients. In such circumstances, it will be
the policy of the Investment Advisor to allocate purchases and sales among the
Fund and its other clients in a manner which the Investment Advisor deems
equitable, taking into consideration such factors as size of account,
concentration of holdings, investment objectives, tax status, cash availability,
purchase cost, holding period and other pertinent factors relative to each
account. Simultaneous transactions may have an adverse effect upon the price or
volume of a security purchased by the Fund.
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<PAGE>
COMPUTATION OF NET ASSET VALUE
The Fund will determine the net asset value of its shares once daily
as of the close of trading on the New York Stock Exchange (the "Exchange") on
each day that the Exchange is open for business. It is expected that the
Exchange will be closed on Saturdays and Sundays and on New Year's Day, Martin
Luther King Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day. The Fund may make or cause to be
made a more frequent determination of the net asset value and offering price,
which determination shall reasonably reflect any material changes in the value
of securities and other assets held by the Fund from the immediately preceding
determination of net asset value. The net asset value is determined by dividing
the market value of the Fund's investments as of the close of trading plus any
cash or other assets (including dividends receivable and accrued interest) less
all liabilities (including accrued expenses) by the number of the Fund's shares
outstanding. Securities traded on the New York Stock Exchange or the American
Stock Exchange will be valued at the last sale price, or if no sale, at the mean
between the latest bid and asked price. Securities traded in any other U.S. or
foreign market shall be valued in a manner as similar as possible to the above,
or if not so traded, on the basis of the latest available price. Securities sold
short "against the box" will be valued at market as determined above; however,
in instances where the Fund has sold securities short against a long position in
the issuer's convertible securities, for the purpose of valuation, the
securities in the short position will be valued at the "asked" price rather than
the mean of the last "bid" and "asked" prices. Investments in gold bullion will
be valued at their respective fair market values determined on the basis of the
mean between the last current bid and asked prices based on dealer or exchanges
quotations. Where there are no readily available quotations for securities they
will be valued at a fair value as determined by the Board of Trustees acting in
good faith.
PURCHASE AND REDEMPTION OF SHARES
A complete description of the manner by a which the Fund's shares may
be purchased and redeemed, including discussions concerning the front-end sales
load appears in the Prospectus under the headings "Purchase of Shares" and
"Redemption of Shares" respectively.
TAX MATTERS
The following is only a summary of certain additional federal income
tax considerations generally affecting the Fund and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
The Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, the Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and will, therefore, count towards the satisfaction of the
Distribution Requirement.
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<PAGE>
In addition to satisfying the Distribution Requirement, a regulated
investment company must 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").
In general, gain or loss recognized by the Fund on the disposition of
an asset will be a capital gain or loss. In addition, gain will be recognized as
a result of certain constructive sales, including short sales "against the box".
However, gain recognized on the disposition of a debt obligation purchased by
the Fund at a market discount (generally, at a price less than its principal
amount) will be treated as ordinary income to the extent of the portion of the
market discount which accrued during the period of time the Fund held the debt
obligation. In addition, under the rules of Code section 988, gain or loss
recognized on the disposition of a debt obligation denominated in a foreign
currency or an option with respect thereto (but only to the extent attributable
to changes in foreign currency exchange rates), and gain or loss recognized on
the disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code section 1256
(unless the Fund elects otherwise), will generally be treated as ordinary income
or loss.
Further, the Code also treats as ordinary income a portion of the
capital gain attributable to a transaction where substantially all of the return
realized is attributable to the time value of the Fund's net investment in the
transaction and: (1) the transaction consists of the acquisition of property by
the Fund and a contemporaneous contract to sell substantially identical property
in the future; (2) the transaction is a straddle within the meaning of section
1092 of the Code; (3) the transaction is one that was marketed or sold to the
Fund on the basis that it would have the economic characteristics of a loan but
the interest-like return would be taxed as capital gain; or (4) the transaction
is described as a conversion transaction in the Treasury Regulations. The amount
of the gain recharacterized generally will not exceed the amount of the interest
that would have accrued on the net investment for the relevant period at a yield
equal to 120% of the federal long-term, mid-term, or short-term rate, depending
upon the type of instrument at issue, reduced by an amount equal to: (1) prior
inclusions of ordinary income items from the conversion transaction and (2) the
capital interest on acquisition indebtedness under Code section 263(g). Built-in
losses will be preserved where the Fund has a built-in loss with respect to
property that becomes a part of a conversion transaction. No authority exists
that indicates that the converted character of the income will not be passed
through to the Fund's shareholders.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (1) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is 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. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss.
Certain transactions that may be engaged in by the Fund (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
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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.
The Fund may purchase securities of certain foreign investment funds
or trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If the Fund invests in a PFIC, it has three
separate options. First, it may elect to treat the PFIC as a qualifying electing
fund (a "QEF"), in which case it 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
earnings or capital gains from the PFIC. Second, for tax years beginning after
December 31, 1997, the Fund may make a mark-to-market election with respect to
its PFIC stock. Pursuant to such an election, the Fund will include as ordinary
income any excess of the fair market value of such stock at the close of any
taxable year over its adjusted tax basis in the stock. If the adjusted tax basis
of the PFIC stock exceeds the fair market value of such stock at the end of a
given taxable year, such excess will be deductible as ordinary loss in the
amount equal to the lesser of the amount of such excess or the net
mark-to-market gains on the stock that the Fund included in income in previous
years. The Fund's holding period with respect to its PFIC stock subject to the
election will commence on the first day of the following taxable year. If the
Fund makes the mark-to-market election in the first taxable year it holds PFIC
stock, it will not incur the tax described below under the third option.
Finally, if the Fund does not elect to treat the PFIC as a QEF and
does not make a mark-to-market election, then, in general, (1) any gain
recognized by the Fund upon a sale or other disposition of its interest in the
PFIC or any "excess distribution" (as defined) received by the Fund from the
PFIC will be allocated ratably over the Fund's holding period in the PFIC stock,
(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, as
the case may be) 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.
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
(including, to the extent provided in Treasury Regulations, losses recognized
pursuant to the PFIC mark-to-market election) incurred after October 31 as if it
had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of the Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and does not hold more than 10% of the outstanding voting
securities of such issuer), and no
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more than 25% of the value of its total assets may be invested in the securities
of any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Fund
controls and which are engaged in the same or similar trades or businesses.
Generally, an option (call or put) with respect to a security is treated as
issued by the issuer of the security not the issuer of the option.
If for any taxable year the Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
its ordinary income for such 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 and ordinary gains or losses arising as a
result of a PFIC mark-to-market election (or upon an actual disposition of the
PFIC stock subject to such election) incurred after October 31 of any year (or
after the end of its taxable year if it has made a taxable year election) in
determining the amount of ordinary taxable income for the current calendar year
(and, instead, include such gains and losses in determining ordinary taxable
income for the succeeding calendar year).
The Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that the Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
The Fund anticipates distributing substantially all of its investment
company taxable income for each taxable year. Such distributions will be taxable
to shareholders as ordinary income and treated as dividends for federal income
tax purposes. Such dividends paid by the Fund will qualify for the 70%
dividends-received deduction for corporate shareholders only to the extent
discussed below.
The Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. The Fund currently intends to distribute any
such amounts. Net capital gain that is distributed and designated as a capital
gain dividend will be taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder has held his shares or whether
such gain was recognized by the Fund prior to the date on which the shareholder
acquired his shares. The Code provides, however, that under certain conditions
only 50% (58% for alternative minimum tax purposes) of the capital gain
recognized upon the Fund's disposition of domestic "small business" stock will
be subject to tax.
Conversely, if the Fund elects to retain its net capital gain, the
Fund will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If the Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
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shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain, will receive a refundable tax credit for
his pro rata share of tax paid by the Fund on the gain, and will increase the
tax basis for his shares by an amount equal to the deemed distribution less the
tax credit.
Ordinary income dividends paid by the Fund with respect to a taxable
year will qualify for the 70% dividends-received deduction generally available
to corporations (other than corporations, such as S corporations, which are not
eligible for the deduction because of their special characteristics and other
than for purposes of special taxes such as the accumulated earnings tax and the
personal holding company tax) to the extent of the amount of qualifying
dividends received by the Fund from domestic corporations for the taxable year.
Generally, a dividend received by the Fund will not be treated as a qualifying
dividend (1) if it has been received with respect to any share of stock that the
Fund has held for less than 46 days (91 days in the case of certain preferred
stock), excluding for this purpose under the rules of Code section 246(c)(3) and
(4) any period during which the Fund has an option to sell, is under a
contractual obligation to sell, has made and not closed a short sale of, is the
grantor of a deep-in-the-money or otherwise nonqualified option to buy, or has
otherwise diminished its risk of loss by holding other positions with respect
to, such (or substantially identical) stock; (2) to the extent that the Fund is
under an obligation (pursuant to a short sale or otherwise) to make related
payments with respect to positions in substantially similar or related property;
or (3) to the extent that the stock on which the dividend is paid is treated as
debt-financed under the rules of Code Section 246A. The 46-day holding period
must be satisfied during the 90-day period beginning 45 days prior to each
applicable ex-dividend date; the 91-day holding period must be satisfied during
the 180-day period beginning 90 days before each applicable ex-dividend date.
Moreover, the dividends-received deduction for a corporate shareholder may be
disallowed or reduced (1) if the corporate shareholder fails to satisfy the
foregoing requirements with respect to its shares of the Fund or (2) by
application of Code section 246(b) which in general limits the
dividends-received deduction to 70% of the shareholder's taxable income
(determined without regard to the dividends-received deduction and certain other
items). Since a large portion of the Fund may be invested in stock of non- U.S.
corporations, the ordinary dividends distributed by the Fund generally may 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 Fund from sources
within foreign countries may be subject to foreign taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which entitle the Fund to a reduced rate of, or exemption from, taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of the Fund's assets to be invested in various
countries is not known. If more than 50% of the value of the Fund's total assets
at the close of its taxable year consist of the stock or securities of foreign
corporations, the Fund may elect to "pass through" to the Fund's shareholders
the amount of foreign taxes paid by the Fund. If the Fund so elects, each
shareholder would be required to include in gross income, even though not
actually received, his pro rata share of the foreign taxes paid by the Fund, but
would be treated as having paid his pro rata share of such foreign taxes and
would therefore be allowed to either deduct such amount in computing taxable
income or use such amount (subject to various Code limitations) as a foreign tax
credit against federal income tax (but not both). For purposes of the foreign
tax credit limitation rules of the Code, each shareholder would treat as foreign
source income his pro rata share of such foreign taxes plus the portion of
dividends received from the Fund representing income derived from foreign
sources. No deduction for foreign taxes could be claimed by an
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individual shareholder who does not itemize deductions. Each shareholder should
consult his own tax adviser regarding the potential application of foreign tax
credits.
Distributions by the Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by the Fund will be treated in the manner described
above regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by the
Fund into account in the year in which the distributions are made. However,
dividends declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by the Fund) on December 31 of
such calendar year if such dividends are actually paid in January of the
following year. Shareholders will be advised annually as to the U.S. federal
income tax consequences of distributions made (or deemed made) during the year.
The Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
failed to provide a correct taxpayer identification number, (2) who is subject
to backup withholding for failure to properly report the receipt of interest or
dividend income, or (3) who has failed to certify to the Fund that it is not
subject to backup withholding or that it is a corporation or other "exempt
recipient."
Sale or Redemption of Shares
A shareholder will recognize gain or loss on the sale or redemption
of shares of the Fund in an amount equal to the difference between the proceeds
of the sale or redemption and the shareholder's adjusted tax basis in the
shares. All or a portion of any loss so recognized may be disallowed if the
shareholder purchases other shares of the Fund within 30 days before or after
the sale or redemption. In general, any gain or loss arising from (or treated as
arising from) the sale or redemption of shares of the Fund will be considered
capital gain or loss and will be long-term capital gain or loss if the shares
were held for longer than one year. Long- term capital gain recognized by an
individual shareholder will be taxed at the lowest rate applicable to capital
gains if the holder has held such shares for more than 18 months at the time of
the sale. 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 at least 11.6% lower than the maximum rate applicable to ordinary
income. Capital losses in any year are deductible only to the extent of capital
gains plus, in the case of a noncorporate taxpayer, $3,000 of ordinary income.
If a shareholder (1) incurs a sales load in acquiring shares of the
Fund, (2) disposes of such shares less than 91 days after they are acquired and
(3) subsequently acquires shares of the Fund or another fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
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<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
the Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from the Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower applicable treaty rate) upon the gross amount of the
dividend. Furthermore, such foreign shareholder may be subject to U.S.
withholding tax at the rate of 30% (or lower applicable treaty rate) on the
gross income resulting from the Fund's election to treat any foreign taxes paid
by it as paid by its shareholders, but may not be allowed a deduction against
this gross income or a credit against this U.S. withholding tax for the foreign
shareholder's pro rata share of such foreign taxes which it is treated as having
paid. Such a foreign shareholder would generally be exempt from U.S. federal
income tax on gains realized on the sale of shares of the Fund, capital gain
dividends and amounts retained by the Fund that are designated as undistributed
capital gains.
If the income from the Fund is effectively connected with a U.S.
trade or business carried on by a foreign shareholder, then ordinary income
dividends, capital gain dividends, and any gains realized upon the sale of
shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of a foreign shareholder other than a corporation, the
Fund may be required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such shareholder furnishes the Fund with proper
notification of his foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may be different from those described
herein. Foreign shareholders are urged to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund,
including the applicability of foreign taxes.
Effect of Future Legislation; State and Local Tax Considerations
The foregoing general discussion of U.S. federal income tax
consequences is based on the Code and the Treasury Regulations issued thereunder
as in effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect.
Rules of state and local taxation of ordinary income dividends and
capital gain dividends from regulated investment companies often differ from the
rules for U.S. federal income taxation described above. Shareholders are urged
to consult their tax advisers as to the consequences of these and other state
and local tax rules affecting investment in the Fund.
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PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of the Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return. Under rules promulgated by the Securities and Exchange
Commission ("SEC"), a fund's advertising performance must include total return
quotations calculated according to the following formula:
P(1 + T)^n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000
payment, made at the beginning of the 1,5 or 10 year
period, at the end of such period (or fractional
portion thereof.)
Under the foregoing formula, the time periods used in advertising
will be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover 1, 5 and 10 year periods of the Fund's existence or such shorter period
dating from the effectiveness of the Fund's Registration Statement. In
calculating the ending redeemable value, all dividends and distributions by the
Fund are assumed to have been reinvested at net asset value as described in the
Prospectus on the reinvestment dates during the period. Total return, or "T" in
the formula above, is computed by finding the average annual compounded rates of
return over the 1, 5 and 10 year periods (or fractional portion thereof) that
would equate the initial amount invested to the ending redeemable value. Any
recurring account charges that might in the future be imposed by the Fund would
be included at that time.
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.
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 5 series, The
Tocqueville Fund, The Tocqueville Small Cap Value Fund, The Tocqueville
Asia-Pacific Fund, The Tocqueville International Value Fund, The Tocqueville
Government Fund and The Tocqueville Gold 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 the 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
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change, among other things, a fundamental policy of each Fund and to approve the
Investment Advisory Agreement and Distribution Plan.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances, the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Trustees. Shareholders also have, in certain
circumstances, the right to remove one or more Trustees without a meeting. No
material amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of each
series affected by the amendment.
Under Massachusetts law, shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable as partners
for its obligations. However, the Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of the Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of wilful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office.
REPORTS
Shareholders with receive reports at least semi-annually showing the
Fund's holdings and other information. In addition, shareholders receive
financial statements examined by the Trust's independent accountants.
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