File No. 33-8746
ICA No. 811-4840
As filed with the Securities and Exchange Commission on February 27, 1998
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
Post-Effective Amendment No. 18
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 20
THE TOCQUEVILLE TRUST
(Exact Name of Registrant as Specified in Charter)
1675 Broadway
New York, New York 10019
(Address of Principal Executive Office) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 698-0800
Francois D. Sicart
President
The Tocqueville Trust
1675 Broadway
New York, New York 10019
(Name and Address of Agent for Service)
Copies to:
Susan J. Penry-Williams, Esq.
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
It is proposed that this filing will become effective (check appropriate box)
(X) immediately upon filing pursuant to paragraph (b)
( ) on (date ) pursuant to paragraph (b)
( ) 60 days after filing pursuant to paragraph (a)(1)
( ) on (date) pursuant to paragraph (a)(1)
( ) 75 days after filing pursuant to paragraph (a)(2)
( ) on (date) pursuant to paragraph (a)(2) of rule 485.
If appropriate, check the following box:
( ) this post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
<PAGE>
THE TOCQUEVILLE TRUST
Registration Statement on Form N-1A
CROSS REFERENCE SHEET
Form N-1A
Item Number
Part A Prospectus Caption
- ------ ------------------
1. Cover Page
2. Highlights; Fee Table
3. *
4. Organization and Description of Shares of the Trust;
Investment Objective, Policy and Risks; Additional
Investment Policies and Risk Considerations
5.(a)(b)(c) Investment Advisor and Investment Advisory Agreement(s)
(d) Distribution Plans
(e) Custodian, Transfer Agent and Dividend Paying Agent
(f) Investment Advisor and Investment Advisory Agreement(s)
(g) Brokerage Allocation
5A Performance Calculation
6.(a) Organization and Description of Shares of the Trust
(b) Investment Advisor and Investment Advisory Agreement(s)
(c) Organization and Description of Shares of the Trust
(d) Purchase of Shares; Redemption of Shares
(e) Cover Page
(f)(g) Dividends, Distributions and Tax Matters
7.(a)(b) Purchase of Shares
(c) Purchase of Shares
(d) Purchase of Shares
(e) *
(f) Distribution Plan
8. Redemption of Shares
9. *
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<PAGE>
Part B Statement of Additional Information Caption
- ------ -------------------------------------------
10. Cover Page
11. Table of Contents
12. *
13. Investment Policies and Risks; Investment
Restrictions
14. Management
15. General Information
16.(a)(b) Investment Advisor and Investment Advisory Agreements
(c) *
(d) *
(e) *
(f) Distribution Plans
(g) *
(h) See Prospectus
(i) *
17.(a) Portfolio Transactions and Brokerage
(b) *
(c) Portfolio Transactions and Brokerage
(d) *
(e) *
18. General Information
19.(a) Purchase and Redemption of Shares
(b) Computation of Net Asset Value
(c) *
20. Tax Matters
21. Distribution Plans
22. Performance Calculation
23. Financial Statements
Part C Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this Registration
Statement.
- --------------------------
* Not Applicable
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<PAGE>
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Trust (the "Trust") is a Massachusetts business trust that
consists of separate series (each, a "Fund," and collectively, the "Funds"). The
following Funds are open-end, diversified management investment companies with
the following investment objectives:
THE TOCQUEVILLE FUND -- This Fund's investment objective is long-term
capital appreciation primarily through investments in securities of United
States issuers. There is minimal emphasis on current income.
THE TOCQUEVILLE SMALL CAP VALUE FUND -- This Fund's investment objective is
long-term capital appreciation primarily through investments in securities
of small capitalization United States issuers. For purposes of this
prospectus, a small capitalization issuer is a company with market
capitalization of less than $1 billion. There is minimal emphasis on
current income.
THE TOCQUEVILLE INTERNATIONAL VALUE FUND -- This Fund's investment
objective is long-term capital appreciation consistent with preservation of
capital primarily through investments in securities of non-U.S. issuers.
THE TOCQUEVILLE GOVERNMENT FUND - This Fund's investment objective is to
provide high current income consistent with the maintenance of principal
and liquidity through investments in obligations issued or guaranteed by
the U.S. Treasury, agencies of the U.S. Government or instrumentalities
that have been established or sponsored by the U.S. Government.
Tocqueville Asset Management L.P. provides each Fund with investment
advisory and certain administrative services.
This Prospectus sets forth concisely the information that a prospective
investor should know before investing in shares of each Fund and should be read
and retained for future reference. A Statement of Additional Information, dated
February 27, 1998, containing additional information about each Fund has been
filed with the Securities and Exchange Commission and is hereby incorporated by
reference into this Prospectus. A copy of the Statement of Additional
Information can be obtained without charge by calling 1-800-697-3863 or writing
the Trust c/o Firstar Trust Company, P.O. Box 701, Milwaukee, Wisconsin
53201-0701.
----------
INVESTMENTS IN THE FUNDS ARE SUBJECT TO RISK -- INCLUDING POSSIBLE LOSS OF
PRINCIPAL -- AND WILL FLUCTUATE IN VALUE. SHARES OF THE FUNDS ARE NOT BANK
DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY A BANK AND ARE NOT
INSURED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT, THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER
AGENCY.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is February 27, 1998.
<PAGE>
TABLE OF CONTENTS
Highlights..............................................3
Fee Table...............................................5
Financial Highlights....................................6
Performance Calculation.................................9
Investment Objective, Policies and Risks...............10
Additional Investment Policies and Risk
Considerations.......................................14
Investment Advisor and Investment
Advisory Agreements...................................18
Distribution Plans.....................................19
Administrative Services Agreement......................19
Brokerage Allocation...................................20
Purchase of Shares.....................................20
Redemption of Shares...................................24
Shareholder Privileges.................................25
Retirement Plans.......................................27
Dividends, Distributions and Tax Matters...............28
Organization and Description of Shares of
the Trust............................................30
Custodian, Transfer Agent and Dividend
Paying Agent..........................................30
Counsel and Independent Accountants....................30
Shareholder Inquiries..................................30
Other Information......................................30
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<PAGE>
HIGHLIGHTS
WHAT IS THE TOCQUEVILLE TRUST?
The Tocqueville Trust is a business trust formed under the laws of the
Commonwealth of Massachusetts. Each series is an open-end, diversified
management investment company, as defined by the Investment Company Act of 1940,
as amended (the "1940 Act"). Shares of each Fund may be purchased at a price
equal to the next determined net asset value per share plus a charge which may
be imposed at the time of purchase. As open-end investment companies, the Funds
have an obligation to redeem their respective shares held by an investor at the
net asset value of the shares next determined after receipt of a redemption
request in proper form. (See "Organization and Description of Shares of the
Trust.")
WHAT IS THE TOCQUEVILLE FUND AND HOW IS ITS INVESTMENT OBJECTIVE ACHIEVED?
The Tocqueville Fund is an open-end, diversified management investment
company whose investment objective is long-term capital appreciation primarily
through investments in securities of United States issuers. The Fund will invest
in common stocks of companies that are considered by its investment advisor to
be out of favor and undervalued in relation to their potential growth or earning
power. The Fund does not intend to engage on an ongoing basis in short-term
trading. (See "Investment Objective, Policies and Risks.")
WHAT IS THE TOCQUEVILLE SMALL CAP VALUE FUND AND HOW IS ITS INVESTMENT OBJECTIVE
ACHIEVED?
The Tocqueville Small Cap Value Fund is an open-end, diversified management
investment company whose investment objective is long-term capital appreciation
primarily through investments in securities of small capitalization United
States issuers. The Fund will invest substantially all and normally no less than
65% of its total assets in a diversified portfolio consisting of common stocks
of small capitalization United States companies that are considered by the
Investment Advisor to be strong proprietary businesses, to be either out of
favor or less well known in the financial community, or to be undervalued in
relation to either their potential long-term growth or earning power. The Fund
does not intend to engage on an ongoing basis in short-term trading. A small
capitalization issuer is a company with market capitalization of less than $1
billion. (See "Investment Objective, Policies and Risks.")
WHAT IS THE TOCQUEVILLE INTERNATIONAL VALUE FUND AND HOW IS ITS INVESTMENT
OBJECTIVE ACHIEVED?
The Tocqueville International Value Fund is an open-end, diversified
management investment company which seeks long-term capital appreciation
consistent with preservation of capital primarily through investments in
securities of non-U.S. issuers. The Fund will invest in securities of companies
that are considered by its investment advisor to be out of favor and undervalued
in relation to their potential growth or earning power. The Fund will invest at
least 65% of its total assets in securities of issuers located in at least three
different countries outside the United States, including common stock,
investment grade debt convertible into common stock, depository receipts for
these securities and warrants. The Fund does not intend to engage on an ongoing
basis in short-term trading. (See "Investment Objective, Policies and Risks.")
WHAT IS THE TOCQUEVILLE GOVERNMENT FUND AND HOW IS ITS INVESTMENT OBJECTIVE
ACHIEVED?
The Tocqueville Government Fund is an open-end, diversified management
investment company whose investment objective is to provide high current income
consistent with the maintenance of principal and liquidity through investments
in obligations issued or guaranteed by the U.S. Treasury, agencies of the U.S.
Government or instrumentalities that have been established or sponsored by the
U.S. Government.
The Fund will invest at least 65% of its assets in short and
intermediate-term securities backed by the full faith and credit of the U.S.
Government, as well as in repurchase agreements collateralized by such
securities. Also, at least 50% of the Fund's assets will be invested in
U.S. Treasury bills, notes and bonds, as
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<PAGE>
well as in repurchase agreements collateralized by such securities. The
dollar-weighted average maturity of the Fund is expected to range from 0 to 12
years.
The balance of the Fund's assets may be invested in obligations issued or
guaranteed by the U.S. Treasury, agencies of the U.S. Government or
instrumentalities that have been established or sponsored by the U.S.
Government, as well as in repurchase agreements collateralized by such
securities. The Fund may also invest in bond (interest rate) futures and options
to a limited extent. (See "Investment Objective, Policies and Risks.")
WHO MANAGES THE FUNDS?
Tocqueville Asset Management L.P. (the "Investment Advisor") serves as each
Fund's investment advisor pursuant to an Investment Advisory Agreement. Under
the terms of each Agreement, the Investment Advisor supervises all aspects of a
Fund's operations and provides investment advisory services. As compensation,
the Investment Advisor receives a fee based on each Fund's average daily net
assets. The Investment Advisor also is engaged in the business of acting as
investment advisor to private accounts with combined assets of more than $600
million. (See "Investment Advisor and Investment Advisory Agreements.")
DISTRIBUTION PLANS
Each Fund has adopted a distribution plan, pursuant to Rule 12b-1 of the
1940 Act, that allows a Fund to incur distribution expenses related to the sale
of its shares of up to .25% per annum of the Fund's average daily net assets.
(See "Distribution Plans").
SPECIAL RISK CONSIDERATIONS
An investor should be aware that there are risks associated with certain
investment techniques and strategies employed by the Funds, including those
relating to investments in foreign securities and option transactions. In
addition, an investor in The Tocqueville Small Cap Value Fund should be aware
that investments in small capitalization issuers may be more volatile than
investments in issuers with market capitalization greater than $1 billion due to
the lack of diversification in the business activities, and corresponding
greater susceptibility to changes in the business cycle of small capitalization
issuers. An investor in The Tocqueville Government Fund should be aware that the
net asset value of the Fund will fluctuate as general levels of interest rates
fluctuate. When interest rates decline, the net asset value of the Fund can be
expected to rise, and, conversely, when interest rates rise, the net asset value
of the Fund can be expected to fall. (See "Investment Objective, Policies and
Risks" and "Additional Investment Policies and Risk Considerations.")
-4-
<PAGE>
FEE TABLE
<TABLE>
<CAPTION>
Tocqueville Small Cap International Gov't
Fund Fund Value Fund Fund
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load on Purchases.................... 4.00% 4.00% 4.00% 4.00%
Maximum Sales Load Imposed on Reinvested
Dividends...................................... None None None None
Maximum Deferred Sales Load...................... None None None None
Redemption Fee * * * *
Exchange Fee ** ** ** **
ANNUAL FUND OPERATING EXPENSES:
(as a % of average net assets)
Management Fee................................... .75% .75% .97% .50%
12b-1 Fee (1).................................... .25% .25% .25% .25%
Other Expenses (after fee waivers)............... .40% .75% .78% .25%
----- ----- ----- -----
Total Operating Expenses (after fee waivers)............ 1.40%(2) 1.75%(2) 2.00%(2) 1.00%(3)
</TABLE>
- ----------------------
(1) Under each Fund's Distribution Plan, the Advisor is permitted to carry
forward expenses not reimbursed by the distribution fee to subsequent
fiscal years for submission by the Fund for payment, subject to the
continuation of the Plan. Such amounts are not recognized in the Fund's
financial statements as expenses and liabilities, since the Distribution
Plan can be terminated on an annual basis without further liability to the
Fund. The Rule 12b-1 fee may represent the equivalent of an annual
asset-based sales charge to an investor. As a result of distribution fees,
a long-term shareholder in the Funds may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the Rules of
the National Association of Securities Dealers, Inc.
(2) Total Operating Expenses reflect the voluntary waiver and/or the
reimbursement of certain expenses. Absent such voluntary waiver and/or
reimbursement. Other Expenses and Total Operating Expenses for each Fund
would be: Tocqueville Fund: .65% and 1.65%, respectively; Tocqueville Small
Cap Value Fund: 1.10% and 2.10%, respectively; and Tocqueville
International Value Fund: 0.88% and 2.10%, respectively. The Advisor has
voluntarily undertaken to waive and/or reimburse expenses during the
current fiscal year so that Total Fund Operating Expenses do not exceed
those stated in the Fee Table. Should the Advisor decide during the current
fiscal year that such waiver and/or reimbursement cannot be maintained,
shareholders will receive 30 days notice of the change.
(3) Tocqueville Government Fund's operating expenses will be capped at 1%
through November 29, 1999. Without voluntary fee waivers, deferrals and/or
expense reimbursements, Other Expenses would be 1.16% and Total Operating
Expenses would be 1.91%.
* 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.
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
<S> <C> <C> <C> <C>
Tocqueville Fund.............................. $54 $ 83 $114 $201
Tocqueville Small Cap Value Fund ............. $57 $ 93 $131 $238
Tocqueville International Value Fund.......... $59 $100 $143 $263
Tocqueville Government Fund................... $50 $ 71 $ 93 $158
</TABLE>
The purpose of the expense summary provided above is to assist investors in
understanding the various costs and expenses that a shareholder in a Fund will
bear directly or indirectly. The "Annual Fund Operating Expenses" summary shows
the management fee, Rule 12b-1 fee, and other operating expenses expected to be
incurred by each Fund during the current fiscal year. The "Example" set forth
above assumes all dividends and other distributions are reinvested and that the
percentages under "Annual Fund Operating Expenses" remain the same in the years
shown. The example includes the initial sales charge.
These examples should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown.
-5-
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below set forth certain financial information with respect to
the financial highlights for the Funds for the periods indicated. The
information below has been derived from financial statements audited by
McGladrey & Pullen, LLP as independent accountants for the Trust, whose reports
thereon, together with the financial statements of the Funds, are incorporated
by reference into the Statement of Additional Information. The information set
forth below is for a share outstanding of each Fund for each period indicated.
THE TOCQUEVILLE FUND
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per share operating performance
(For a share outstanding
through out the period)
Net asset value, beginning
of period ...................... $15.85 $14.07 $13.74 $13.67 $11.83 $11.33 $10.21 $11.33 $9.98 $8.63
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Income from investment
operations:
Net investment income ....... 0.06 0.07 0.15 0.12 0.11 0.17 0.33 0.56 0.33 0.08
Net realized and unrealized
gain (loss).............. 5.15 2.92 1.70 0.88 2.55 1.33 1.41 (0.90) 1.29 1.68
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Total from investment
operations ........... 5.21 2.99 1.85 1.00 2.66 1.50 1.74 (0.34) 1.62 1.76
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Less distributions:
Dividends from net
investment income........ (0.06) (0.15) (0.11) (0.14) (0.16) (0.36) (0.51) (0.37) (0.06) (0.02)
Distributions from net
realized gains........... (0.79) (1.06) (1.41) (0.79) (0.66) (0.64) (0.11) (0.41) (0.21) (0.39)
Total distributions... (0.85) (1.21) (1.52) (0.93) (0.82) (1.00) (0.62) (0.78) (0.27) (0.41)
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Change in net asset value for the
period.......................... 4.36 1.78 0.33 0.07 1.84 0.50 1.12 (1.12) 1.35 1.35
------ ------ ------ ------ ------ ------ ------ ------ ------ -----
Net asset value, end of period...... $20.21 $15.85 $14.07 $13.74 $13.67 $11.83 $11.33 $10.21 $11.33 $9.98
====== ====== ====== ====== ====== ====== ====== ====== ====== =====
Total Return(a)..................... 34.5% 22.7% 16.0% 7.7% 23.7% 14.9% 17.7% (3.4)% 16.7% 21.1%
Ratios/supplemental data:
Net assets, end of period (000)..... $64,998 $42,414 $33,438 $29,140 $27,745 $19,496 $17,388 $13,377 $17,014 $15,515
Ratio to average net assets:
Expenses (b).................... 1.40% 1.49% 1.54% 1.54% 1.56% 1.74% 1.96% 1.61% 1.70% 2.09%
Net investment income (b)....... 0.34% 0.44% 1.07% 0.87% 0.96% 1.44% 3.38% 4.71% 2.86% 0.85%
Portfolio turnover rate............. 48% 48% 47% 52% 64% 89% 97% 125% 34% 65%
Average commission rate paid (c).... $.0599 $.0596
</TABLE>
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(a) Does not include maximum initial sales charge of 4.00%.
(b) Net of fees waived amounting to 0.25%, 0.16%, 0.02%, 0.61% and 0.16% of
average net assets, for periods ended October 31, 1997, 1996, 1995, 1988
and 1987, respectively.
(c) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
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<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
PERIOD FROM
YEAR ENDED OCTOBER 31, AUGUST 1, 1994
--------------------- TO OCTOBER 31,
1997 1996 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period................... $13.37 $ 11.91 $10.22 $10.00
------ ------- ------ ------
Income (loss) from investment operations:
Net investment income (loss)....................... (0.05) (0.10) (0.05) 0.02
------ ------- ------ ------
Net realized and unrealized gain................... 4.44 2.33 1.96 0.20
------ ------- ------ ------
Total from investment operations............ 4.39 2.23 1.91 0.22
------ ------- ------ ------
Less distributions:
Dividends from net investment income............... --- --- (0.03) ---
Distributions from net realized gains.............. (1.46) (0.77) (0.19) ---
------ ------- ------ ------
Total distributions......................... (1.46) (0.77) (0.22) ---
------ ------- ------ ------
Change in net asset value for the period............... 2.93 1.46 1.69 0.22
------ ------- ------ ------
Net asset value, end of period......................... $16.30 $ 13.37 $11.91 $10.22
====== ======= ====== ======
Total Return(a)........................................ 36.0% 19.7% 19.2% 2.2%
Ratios/supplemental data:
Net assets, end of period (000)........................ $20,587 $11,545 $9,383 $6,755
Ratio to average net assets:
Expenses (b)....................................... 1.75% 2.36% 2.50% 2.08%*
Net investment income (loss) (b)................... (0.81)% (1.18)% (0.53)% 0.85%*
Portfolio turnover rate................................ 95% 107% 88% 9%
Average commission rate paid (c)....................... $.0600 $.0599
</TABLE>
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(a) Does not include maximum initial sales charge of 4.00%. For the period ended
October 31, 1994, not annualized.
(b) Net of fees waived amounting to 0.35%, 0.33%, 0.33% and 0.75% of average net
assets for the periods ended October 31, 1997, 1996, 1995, and 1994,
respectively.
(c) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
* Annualized.
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<PAGE>
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, PERIOD FROM
--------------------- AUGUST 1, 1994
1997 1996 1995 TO OCTOBER 31, 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period............. $12.57 $10.83 $10.02 $10.00
------ ------ ------ ------
Income (loss) from investment operations:
Net investment income (loss)................. (0.03) 0.16 (0.01) (0.04)
Net realized and unrealized gain (loss)...... (1.67) 1.58 0.82 0.06
------ ------ ------ ------
Total from investment operations.......... (1.70) 1.74 0.81 0.02
------ ------ ------ ------
Less distributions:
Dividends from net investment income......... (0.06) --- --- ---
------ ------ ------ ------
Distributions from net realized gains........ (0.62) --- --- ---
------ ------ ------ ------
Total distributions....................... (0.68) --- --- ---
------ ------ ------ ------
Change in net asset value for the period......... (2.38) 1.74 0.81 0.02
------ ------ ------ ------
Net asset value, end of period................... $10.19 $12.57 $10.83 $10.02
====== ====== ====== ======
Total Return (a)................................. (14.3)% 16.1% 8.1% 0.2%
Ratios/supplemental data:
Net assets, end of period (000).................. $60,963 $23,932 $6,270 $2,516
Ratio to average net assets:
Expenses (b)................................. 1.99% 1.98% 4.43% 6.18%(d)
Net investment income (loss) (b)............. .16% 1.45% (0.53)% (2.47)%(d)
Portfolio turnover rate 70% 135% 109% 0%
Average commission rate paid (c)................. $.0052 $.0040
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</TABLE>
(a) Does not include maximum initial sales charge of 4.00%. For the period
ended October 31, 1994, not annualized.
(b) Net of fees waived amounting to 0.11%, 0.55%, 1.28% and 1.00% of average
net assets for the periods ended October 31, 1997, 1996, 1995, and 1994,
respectively.
(c) Average per share amounts of brokerage commissions on portfolio
transactions. Required by regulations issued in 1995.
(d) Annualized.
-8-
<PAGE>
THE TOCQUEVILLE GOVERNMENT FUND
<TABLE>
<CAPTION>
PERIOD FROM
SEPTEMBER 4, 1995
YEAR ENDED OCTOBER 31, TO OCTOBER 31,
--------------------------------------- -------------------
1997 1996 1995
----------------- ------------------ -------------------
<S> <C> <C> <C>
Per share operating performance
(For a share outstanding throughout the period)
Net asset value, beginning of period................ $10.13 $10.05 $10.00
Income from investment operations:
Net investment income .......................... 0.52 0.49 0.05
Net realized and unrealized gain................ 0.01 0.08 0.05
------ ------ ------
Total from investment operations......... 0.53 0.57 0.10
------ ------ ------
Less Distributions:
Dividends from net investment income......... (0.52) (0.49) (0.05)
Distributions from net realized gains........ (0.03) -- --
------ ------ ------
Total distributions...................... (0.55) (0.49) (0.05)
------ ------ ------
Change in net asset value for the period............ (0.02) 0.08 0.05
------ ------ ------
Net asset value, end of period...................... $10.11 $10.13 $10.05
====== ====== ======
Total Return(a)..................................... 5.4% 5.9% 6.3%(c)
Ratios/supplemental data:
Net assets, end of period........................... $16,808 $9,788 $6,506
Ratio to average net assets:
Expenses (b).................................... 1.00% 1.47% 2.74%(c)
Net investment income (b)....................... 5.17% 4.94% 3.08%(c)
Portfolio turnover rate(d).......................... 339% 85% 0%
</TABLE>
- ------------
(a) Does not include maximum initial sales charge of 4.00%.
(b) Net of fees waived amounting to 0.91%, 1.25% and 0.77% of average net
assets for the periods ended October 31, 1997, 1996 and 1995, respectively.
(c) Annualized.
(d) Portfolio turnover does not include securities acquired from Ivy Short Term
Bond Fund on November 29, 1996.
PERFORMANCE CALCULATION
Each Fund calculates performance on a total return basis for various
periods. The total return basis combines changes in principal and dividends and
distributions for the periods shown, as well as the deduction of all charges and
expenses. The total return basis reflects the deduction of the maximum initial
sales charge at the time of purchase. Principal changes are based on the
difference between the beginning and closing net asset value for the period.
Calculations assume reinvestment of all dividends and distributions paid by each
Fund. Dividends and distributions are comprised of net investment income and net
realized capital gains, respectively. In addition, each Fund may calculate
performance on a total return basis at net asset value.
Performance will vary from time to time and past results are not
necessarily representative of future results. A shareholder should remember that
performance is a function of portfolio management in selecting the type and
quality of portfolio securities and is affected by operating expenses.
Comparative performance information may be used from time to time in the
advertising or marketing of each Fund's shares, including data from Lipper
Analytical Services, Inc. and Morningstar Mutual Funds. Such comparative
performance
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information will be stated in the same terms in which the comparative data and
indices are stated. All advertisements of a Fund will disclose the maximum sales
charge to which investments in shares of the Fund may be subject.
The Tocqueville Government Fund will provide 30-day "yield" quotations. The
"yield" quotations of the Fund will be based upon net investment income earned
by the Fund over a thirty day or one month period (which period shall be stated
in any advertisement or communication with a shareholder). The "yield" is then
"annualized" by assuming that the income generated over the period will be
generated over a one year period. A "yield" quotation, unlike a total rate of
return quotation, does not reflect changes in net asset value.
INVESTMENT OBJECTIVE, POLICIES AND RISKS
Each Fund's investment objective is fundamental and may not be changed
without a vote of the holders of a majority of its outstanding voting securities
(as defined in the Statement of Additional Information). There can be no
assurance that a Fund will achieve its investment objective.
THE TOCQUEVILLE FUND
The investment objective of The Tocqueville Fund is long-term capital
appreciation. Toward this end the Fund invests in a diversified portfolio
consisting of common stocks of United States companies that are considered by
the Investment Advisor to be out of favor and undervalued in relation to their
potential growth or earning power. Generally, stocks which have under performed
market indices such as Standard & Poor's Composite Index for at least one year
and companies which have a historically low stock price in relation to such
factors as sales, potential earnings or underlying assets will be considered by
the Investment Advisor to be out of favor. The Investment Advisor searches for
companies based on its judgment of relative value and growth potential. The
potential growth and earning power of a company will be evaluated by the
Investment Advisor either on the basis of past growth and profitability, as
reflected in their financial statements, or on the Investment Advisor's
conclusion that the company has achieved better results than similar companies
in a depressed industry which the Investment Advisor believes will improve
within the next two years. There is no assurance that the Investment Advisor's
evaluation will be accurate in its selection of stocks for the Fund's portfolio
or that the Fund's objective will be achieved. If the stocks in which the Fund
invests never attain their perceived potential or the valuation of such stocks
in the marketplace does not in fact reflect significant undervaluation, there
may be little or no appreciation or a depreciation in the value of such stocks.
The Fund may invest up to 25% of its total assets in common stock of
foreign companies which are traded in the United States or purchase American
Depository Receipts (ADRs). The Fund also may invest up to 10% of its total
assets in gold bullion from U.S. institutions. Gold bullion assists the Fund in
its goal of capital appreciation because the price of gold bullion tends to rise
during periods of economic or political instability. In addition, the Fund may
invest up to 5% of its net assets in repurchase agreements which are fully
collateralized by obligations of the U.S. Government or U.S. Government
agencies. The Fund may also invest up to 5% of its total assets in debt
instruments convertible into common stock. The Fund may, from time to time,
borrow up to 10% of the value of its total assets from banks at prevailing
interest rates as a temporary measure for extraordinary or emergency purposes.
The Fund may not purchase securities while borrowings exceed 5% of the value of
its total assets.
Special Considerations. The Investment Advisor will manage the Fund's
portfolio to assure that the Fund will not acquire or dispose of gold bullion if
such acquisition or disposition would 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. The Fund may be required
to make less than optimal investment decisions, including foregoing the
opportunity to realize gains, if necessary to permit the Fund to qualify as a
regulated investment company. In addition, the Fund's investments in gold
bullion subject the Fund to the following risks: the price of gold bullion may
be subject to wide fluctuation; the market for gold bullion is relatively
limited; the sources of gold bullion are concentrated in countries with
potential instability; and currently the market for gold bullion is unregulated.
Investments in gold bullion will cause the Fund to incur additional costs for
insurance, shipping and storage.
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THE TOCQUEVILLE SMALL CAP VALUE FUND
The Tocqueville Small Cap Value Fund's investment objective is long-term
capital appreciation primarily through investments in securities of small
capitalization United States issuers. While the Fund expects to receive some
dividends and interest from its portfolio investments, income generation is only
an incidental objective of the Fund. In the pursuit of its objective, the Fund
intends to invest substantially all and normally no less than 65% of its total
assets in a diversified portfolio consisting of common stocks of small
capitalization United States companies that are considered by the Investment
Advisor to be strong proprietary businesses, to be either out of favor or less
well known in the financial community, or to be undervalued in relation to
either their potential long-term growth or earning power. Companies with market
capitalizations of less than $1 billion are deemed to have a small
capitalization and to be generally less well known. Generally, stocks which have
under performed market indices such as the Standard & Poor's Composite Index for
at least one year and companies which have a historically low stock price in
relation to such factors as sales, potential earnings or underlying assets will
be considered by the Investment Advisor to be out of favor. Strong proprietary
businesses generally have some but not necessarily all of the following
characteristics: capable management; good finances; strong manufacturing; broad
distribution; and, lastly, products which are somewhat differentiated from their
competitors.
The Investment Advisor will identify companies that are undervalued based
on its judgment of relative value and growth potential. The growth potential and
earning power of a company will be evaluated by the Investment Advisor on the
basis of past growth and profitability, as reflected in its financial
statements, on the basis of potential new products resulting from research and
development spending, or on the Investment Advisor's conclusion that the company
has achieved better results than similar companies in a depressed industry which
the Investment Advisor believes will improve within the next two years. There is
no assurance that the Investment Advisor's evaluation will be accurate in its
selection of stocks for the Fund's portfolio or that the Fund's objective will
be achieved. If the stocks in which the Fund invests never attain their
perceived potential or if the valuation of such stocks in the marketplace does
not in fact reflect significant undervaluation, there may be little or no
appreciation or, instead, a depreciation in the value of such stocks.
In addition, the Fund may invest up to 25% of its total assets in common
stock of small capitalization companies located in developed countries in Europe
and Asia. Such securities will be denominated in foreign currencies and will be
listed on a foreign stock exchange. See "Additional Investment Policies and Risk
Considerations - Risks Associated with Foreign Investments."
The Fund may invest up to 25% of its total assets in common stock of
foreign companies which are traded in the United States or purchase ADRs. The
Fund also may invest: (1) up to 5% of its net assets in repurchase agreements
which are fully collateralized by U.S. Government obligations or obligations of
its agencies or instrumentalities, or short-term money market securities; and
(2) up to 10% of its total assets in investment grade debt instruments
convertible into common stock. The Fund may, from time to time, borrow up to 10%
of the value of its total assets from banks at prevailing interest rates as a
temporary measure for extraordinary or emergency purposes. The Fund, however,
may not purchase securities while borrowings exceed 5% of the value of its total
assets.
Special Considerations. An investor should be aware that investment in
small capitalization issuers 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.
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
The investment objective of The Tocqueville International Value Fund is
long-term capital appreciation consistent with preservation of capital primarily
through investments in securities of non-U.S. issuers. Toward this end the Fund
invests in a diversified portfolio consisting of common stocks of companies that
are considered by the Investment Advisor to be out of favor and undervalued in
relation to their potential growth or earning power. Generally, stocks which
have under performed market indices for at least one year and companies which
have a historically low stock price in relation to such factors as sales,
potential earnings or underlying assets will be considered by the Investment
Advisor to be out of favor. The
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Investment Advisor searches for companies based on its judgment of relative
value and growth potential. The potential growth and earning power of a company
will be evaluated by the Investment Advisor either on the basis of past growth
and profitability, as reflected in their financial statements, or on the
Investment Advisor's conclusion that the company has achieved better results
than similar companies in a depressed industry which the Investment Advisor
believes will improve within the next two years. There is no assurance that the
Investment Advisor's evaluation will be accurate in its selection of stocks for
the Fund's portfolio or that the Fund's objective will be achieved. If the
stocks in which the Fund invests never attain their perceived potential or the
valuation of such stocks in the marketplace does not in fact reflect significant
undervaluation, there may be little or no appreciation or a depreciation in the
value of such stocks. Under normal conditions, at least 65% of the Fund's total
assets will be invested in at least three different countries outside the United
States. The Fund will invest its assets in developed countries, as well as
companies located in developing countries. In addition, the Fund may invest up
to 20% of its assets in the United States.
The Fund may, from time to time, borrow up to 10% of the value of its total
assets from banks at prevailing interest rates as a temporary measure for
extraordinary or emergency purposes. The Fund may not purchase securities while
borrowings exceed 5% of the value of its total assets.
Special Considerations. The Tocqueville International Value Fund may invest
in all types of securities, most of which will be denominated in foreign
currencies. Since opportunities for long-term growth are primarily expected from
equity securities, the Fund will normally invest substantially all of its assets
in such securities, including common stock, investment grade debt convertible
into common stock, depository receipts for these securities and warrants. Each
Fund may, however, invest in preferred stock and investment grade debt
securities if the Investment Advisor believes that the capital appreciation
available from an investment in such securities will equal or exceed the capital
appreciation available from an investment in equity securities. The Fund's
objective is capital appreciation, placing emphasis on dividends or interest
income only when it believes that such income will have a favorable influence on
the market value of a security.
All common stock in which the Fund will invest will be listed on a foreign
stock exchange or traded in an over-the-counter market. There is no minimum
capitalization requirement for a security to be eligible for inclusion in the
Fund's portfolio. The Fund will generally purchase securities of medium to large
size companies in the principal international markets, although it may purchase
securities of companies which have a lower market capitalization on the smaller
regional markets.
By investing in foreign securities, the Investment Advisor will attempt to
take advantage of differences between economic trends and performance of
securities markets in various countries. When allocating investments among
individual countries, the Investment Advisor will consider various criteria that
in its view are deemed relevant based on its experience, such as the relative
economic growth potential of the various economies and the performance of
securities markets in the region, expected levels of inflation, government
policies influencing business conditions, and the outlook for currency
relationships. To date, the market values of securities of issuers located in
different countries have moved relatively independently of each other and during
certain periods the return on equity investments in some countries has exceeded
the return on similar investments in the United States. The Investment Advisor
believes that, in comparison with investment companies investing solely in
domestic securities, it may be possible to obtain significant appreciation from
a portfolio of foreign investments and also achieve increased diversification.
The Fund will gain increased diversification by combining securities from
various markets that offer different investment opportunities and are affected
by different economic trends. International diversification reduces the effect
that events in any one country will have on the Fund's entire investment
holdings. Of course, a decline in the value of the Fund's investments in one
country may offset potential gains from investments in another country.
THE TOCQUEVILLE GOVERNMENT FUND
The Tocqueville Government Fund's investment objective is to provide high
current income consistent with the maintenance of principal and liquidity
through investments in obligations issued or guaranteed by the U.S. Treasury,
agencies of the U.S. Government or instrumentalities that have been established
or sponsored by the U.S. Government.
In pursuit of its objective, the Fund intends to invest at least 65% of its
assets in short and intermediate term securities
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backed by the full faith and credit of the U.S. Government, as well as in
repurchase agreements collateralized by such securities. Also, at least 50% of
the Fund's assets will be invested in U.S. Treasury bills, notes and bonds, as
well as in repurchase agreements collateralized by such securities. The
dollar-weighted average maturity of the Fund is expected to range from 0 to 12
years.
The balance of the Fund's assets may be invested in obligations issued or
guaranteed by the U.S. Treasury, agencies of the U.S. Government or
instrumentalities that have been established or sponsored by the U.S.
Government, as well as in repurchase agreements collateralized by such
securities. The Fund may also invest in bond (interest rate) futures and options
to a limited extent.
The Fund may invest up to 35% of its assets in Government National Mortgage
Association ("GNMA") pass-through certificates. GNMA pass-through certificates
are mortgage-backed securities representing part ownership of a pool of mortgage
loans. Monthly mortgage payments of both interest and principal "pass through"
from homeowners to certificate investors, such as the Fund. The Fund reinvests
the principal portion in additional securities and distributes the interest
portion as income to the Fund's shareholders. Under normal circumstances, GNMA
pass-through certificates are expected to provide higher yields than U.S.
Treasury securities of comparable maturity.
The mortgage loans underlying GNMA pass-through certificates--issued by
lenders such as mortgage bankers, commercial banks, and savings and loan
associations--are either insured by the Federal Housing Administration (FHA) or
guaranteed by the Veterans Administration (VA). Each pool of mortgage loans must
also be approved by GNMA, a U.S. Government corporation within the U.S.
Department of Housing and Urban Development. Once GNMA approval is obtained, the
timely payment of interest and principal on each underlying mortgage loan is
guaranteed by the "full faith and credit" of the U.S. Government.
Although stated maturities on GNMA pass-through certificates generally
range from 25 to 30 years, effective maturities are usually shorter due to the
prepayment of the underlying mortgages by homeowners. On average, GNMA
pass-through certificates are repaid within 12 years and so are classified as
intermediate-term securities.
The Fund also may invest up to 35% of its assets in: (a) agencies or
instrumentalities of the U.S. Government, including but not limited to: (i)
fixed rate or adjustable rate mortgage-backed securities issued or guaranteed by
the Federal National Mortgage Association ("FNMA") and the Federal Home Loan
Mortgage Corporation ("FHLMC") and (ii) securities issued by the Student Loan
Marketing Association ("SLMA") and the Federal Home Loan Bank System ("FHLB");
and (b) collateralized mortgage obligations ("CMOs"). The Fund will limit its
investments in CMOs to 10% of its portfolio.
FNMA mortgage securities are pass-through mortgage-backed securities that
are issued by FNMA, a U.S. Government sponsored corporation owned by private
stockholders. FNMA mortgage securities are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government.
FHLMC mortgage securities are mortgage-backed securities representing
interests in residential mortgage loans pooled by FHLMC, a U.S. Government
sponsored corporation. FHLMC mortgage securities are guaranteed as to timely
payment of interest and ultimate collection of principal but are not backed by
the full faith and credit of the U.S. Government.
SLMA securities consist of debt obligations including nonguaranteed
discount notes, short-term floating rate notes, long-term floating rate
securities and fixed-rate securities. SLMA securities are supported by the
ability of SLMA to borrow from the U.S. Government, but are not backed by the
full faith and credit of the U.S. Government.
FHLB securities are debt securities issued in the form of consolidated
bonds and discount notes. FHLB securities are supported by the ability of FHLB
to borrow from the U.S. Government, but are not backed by the full faith and
credit of the U.S. Government.
CMOs are mortgage securities that are collateralized by the original
mortgage loan or mortgage pass-through security and redirect the cash flow of
such loan or pass-through security to the individual bond holders. The cash
flows may show very different market characteristics than the original loan
depending on how the CMO is structured. The Fund may only invest in CMOs that
are backed by the full faith and credit of the U.S. Government, FNMA or FHLMC
and are determined not to
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be "high-risk" under guidelines issued by the Federal Financial Institutions
Examination Council ("FFIEC"). The test established by FFIEC determines whether
additional capital is required by the institution to cover potential market
risk. In order to qualify as an eligible investment, a CMO must meet each of the
following criteria: (i) the weighted average life ("WAL") is under 10 years;
(ii) the WAL cannot shorten more than 6 years or lengthen more than 4 years in a
300 basis point interest rate movement; and (iii) the price cannot move more
than 17% in a 300 basis point interest rate movement. FFIEC requires independent
verification of this test.
Special Considerations. Shares of the Fund are neither insured nor
guaranteed by the U.S. Government or its agencies or instrumentalities.
Moreover, the net asset value of the shares of an open-end investment company
such as the Fund, which invests in fixed income securities, changes as the
general levels of interest rates fluctuate. When interest rates decline, the net
asset value of the Fund can be expected to rise. Conversely, when interest rates
rise, the net asset value of the Fund can be expected to decline and the
expected maturity of its mortgaged backed securities may increase, which will
have the effect of increasing the duration of the Fund's portfolio, resulting in
greater price volatility and investment risk.
Unlike other government securities, mortgage-backed securities are subject
to "prepayment risk" and "extension risk". Prepayment risk is the possibility
that, as interest rates fall, homeowners are more likely to refinance their home
mortgages, thereby repaying the principal prior to the scheduled payment date to
the holders of the securities. The Fund must then reinvest the unanticipated
principal in government or agency securities, at a time when interest rates are
falling. Prepayment risk has two important effects on the Fund:
o When interest rates fall and additional mortgage payments must be
reinvested at lower interest rates, the income of the Fund will be
reduced; and
o When interest rates fall, prices on mortgage-backed securities will
not rise as much as comparable Treasury bonds, as bond market
investors anticipate an increase in mortgage prepayments and a likely
decline in income. Extension risk is the possibility that, as interest
rates rise, prepayments of mortgages will decrease, thereby increasing
the expected duration of the Fund's mortgage-backed securities. As the
duration of a mortgage security increases, its market value decreases
at an accelerating rate. Accordingly, in an upwardly moving interest
rate environment, mortgage-backed securities may depreciate more
quickly than other types of debt instruments.
An investor in the Fund should carefully consider the affects of prepayment
risk and extension risk created by large exposures to mortgage-backed securities
when comparing this Fund to other government funds.
ADDITIONAL INVESTMENT POLICIES AND RISK CONSIDERATIONS
The following investment strategies and techniques are not fundamental
policies of the Funds and may be changed without prior shareholder approval.
Each Fund will notify shareholders in writing and amend the Prospectus
accordingly should any such modifications in investment strategies or techniques
occur.
REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements subject to resale to a bank
or dealer at an agreed upon price which reflects a net interest gain for the
Fund. Each Fund will receive interest from the institution until the time when
the repurchase is to occur.
A Fund will always receive collateral (i.e., U.S. Government obligations or
obligations of its agencies or instrumentalities, or short-term money market
securities) acceptable to it whose market value is equal to at least 100% of the
amount invested by the Fund, and the Fund will make payment for such securities
only upon the physical delivery or evidence of book entry transfer to the
account of its custodian. If the seller institution defaults, the Fund might
incur a loss or delay in the realization of proceeds if the value of the
collateral securing the repurchase agreement declines and the Fund might incur
disposition costs in liquidating the collateral. Each Fund attempts to minimize
such risks by specifying the required value of the underlying collateral.
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ILLIQUID SECURITIES
Each Fund will not invest more than 10% of its net assets in illiquid
securities, including repurchase agreements with maturities in excess of seven
days.
RESTRICTED SECURITIES
Each Fund may invest in securities that are subject to restrictions on
resale because they have not been registered under the Securities Act of 1933
(the "1933 Act"). These securities are sometimes referred to as private
placements. Although securities which may be resold only to "qualified
institutional buyers" in accordance with the provisions of Rule 144A under the
1933 Act are technically considered "restricted securities," the Funds may each
purchase Rule 144A securities without regard to the limitation on investments in
illiquid securities described above in the "Illiquid Securities" section,
provided that a determination is made that such securities have a readily
available trading market. The Investment Advisor will determine the liquidity of
Rule 144A securities under the supervision of the Board of Trustees. The
liquidity of Rule 144A securities will be monitored by the Investment Advisor,
and if as a result of changed conditions, it is determined that a Rule 144A
security is no longer liquid, a Fund's holdings of illiquid securities will be
reviewed to determine what, if any, action is required to assure that the Fund
does not exceed its applicable percentage limitation for investments in illiquid
securities.
TEMPORARY INVESTMENTS
The Tocqueville Fund, The Tocqueville Small Cap Value Fund, and The
Tocqueville International Value Fund do not intend to engage in short-term
trading on an ongoing basis. Current income is not an objective of the Funds,
and any current income derived from a Fund's portfolio will be incidental. For
temporary defensive purposes, when deemed necessary by the Investment Advisor,
each Fund may invest up to 100% of its assets in U.S. Government obligations or
"high-quality" debt obligations of companies incorporated and having principal
business activities in the United States. When a Fund's assets are so invested,
they are not invested so as to meet the Fund's investment objective.
"High-quality" short-term obligations are those obligations which, at the time
of purchase, (1) possess a rating in one of the two highest ratings categories
from at least one nationally recognized statistical ratings organization
("NRSRO") (for example, commercial paper rated "A-1" or "A-2" by Standard &
Poor's Corporation ("S&P") or "P-1" or "P-2" by Moody's Investors Service, Inc.
("Moody's")) or (2) are unrated by an NRSRO but are determined by the Investment
Advisor to present minimal credit risks and to be of comparable quality to rated
instruments eligible for purchase by the Fund under guidelines adopted by the
Board of Trustees (the "Trustees").
PORTFOLIO TURNOVER
It is anticipated that the annual turnover rate for each Fund should not
exceed 150%. A higher rate of portfolio turnover will result in higher
transaction costs, including brokerage commissions. Also, to the extent that
higher portfolio turnover results in a higher rate of net realized capital gains
to a Fund, the portion of the Fund's distributions constituting taxable capital
gains may increase.
INVESTMENTS IN DEBT SECURITIES
With respect to investment by The Tocqueville Small Cap Value Fund and The
Tocqueville International Value Fund in debt securities, there is no requirement
that all such securities be rated by a recognized rating agency. However, it is
the policy of each Fund that investments in debt securities, whether rated or
unrated, will be made only if they are, in the opinion of the Investment
Advisor, of equivalent quality 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.
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INVESTMENTS IN OTHER INVESTMENT COMPANIES
The Tocqueville Small Cap Value Fund and The Tocqueville International Value
Fund may invest in other investment companies. As a shareholder in an investment
company, a Fund would bear its ratable share of that investment company's
expenses, including its advisory and administration fees. The Investment Advisor
has agreed to waive its management fees with respect to the portion of a Fund's
assets invested in shares of other investment companies.
SHORT SALES
The Tocqueville Fund and The Tocqueville Small Cap Value Fund will not make
short sales of securities or maintain a short position unless, at all times when
a short position is open, the Fund owns an equal amount of such securities or
securities convertible into or exchangeable, without payment of any further
consideration, for securities of the same issue as, and equal in amount to, the
securities sold short. This is a technique known as selling short "against the
box." Any gain realized by a Fund on such sales will be recognized at the time
the Fund enters into the short sales.
OPTIONS TRANSACTIONS
The Tocqueville International Value Fund may purchase put and call options
on securities and on stock indices to attempt to hedge its portfolio and to
increase its total return. The Fund may purchase call options when, in the
opinion of the Investment Advisor, the market price of the underlying security
or index will increase above the exercise price. The Fund may purchase put
options when the Investment Advisor expects the market price of the underlying
security or index to decrease below the exercise price. When the Fund purchases
a call option it will pay a premium to the party writing the option and a
commission to the broker selling the option. If the option is exercised by the
Fund, the amount of the premium and the commission paid may be greater than the
amount of the brokerage commission that would be charged if the security were to
be purchased directly.
The Fund may purchase puts and calls on foreign currencies that are traded
on a securities or commodities exchange or quoted by major recognized dealers in
such options for the purpose of protecting against declines in the dollar value
of foreign securities and against increases in the dollar cost of foreign
securities to be acquired. If a decline in the dollar value of a foreign
currency is anticipated, the decline in value of portfolio securities
denominated in that currency may be partially offset by purchasing puts on that
foreign currency. If a rise is anticipated in the dollar value of a foreign
currency in which securities to be acquired are denominated, the increased cost
of such securities may be partially offset by purchasing calls on that foreign
currency. However, in the event of rate fluctuations adverse to the Fund's
position, it would lose the premium it paid and transactions costs. This
discussion is a general summary. See the Statement of Additional Information for
information concerning the Fund's options transactions and strategies.
FUTURES AND OPTIONS ON FUTURES TRANSACTIONS
The Tocqueville Government Fund may enter into futures contracts which
provide for the future acquisition or delivery of fixed income securities or
which are based on indexes of fixed income securities. This investment technique
is designed only to hedge against anticipated future changes in interest rates
which otherwise might either adversely affect the value of the Fund's portfolio
securities or adversely affect the prices of long-term bonds which are intended
to be purchased at a later date. If interest rates move in an unexpected manner,
the Fund will not achieve the full anticipated benefits of futures contracts or
may realize a loss. The Fund may also purchase options on futures contracts for
hedging purposes.
The Tocqueville International Value Fund may enter into contracts for the
future delivery of securities or foreign currencies and futures contracts based
on a specific security, class of securities, foreign currency or an index,
purchase or sell options on any such futures contracts and engage in related
closing transactions. A futures contract on a securities index is an agreement
obligating either party to pay, and entitling the other party to receive, while
the contract is outstanding, cash payments based on the level of a specified
securities index.
Although the Fund is permitted to engage in the purchase and sale of
futures contracts and options thereon solely for hedging purposes, the use of
such instruments does involve certain transaction costs and risks. The Fund's
ability to hedge
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effectively all or a portion of its portfolio through transactions in futures,
options on futures or options on related indexes depends on the degree to which
movements in the value of the currencies, securities or index underlying such
hedging instrument correlate with movements in the value of the relevant portion
of the Fund's portfolio. The trading of futures and options on indexes involves
the additional risk of imperfect correlation between movements in the futures or
option price and the value of the underlying index. While the Fund will
establish a future or option position only if there appears to be a liquid
secondary market therefor, there can be no assurance that such a market will
exist for any particular futures or option contract at any specific time. In
such event, it may not be possible to close out a position held by the Fund,
which could require the Fund to purchase or sell the instrument underlying the
position, make or receive a cash settlement, or meet ongoing variation margin
requirements. Investments in futures contracts on fixed income securities and
related indexes involve the risk that if the Investment Advisor's judgment
concerning the general direction of interest rates is incorrect, the Fund's
overall performance may be poorer than if it had not entered into any such
contract.
WRITING COVERED CALL OPTION CONTRACTS
The Tocqueville Government Fund may write (sell) covered call options in
order to hedge against changes in the market value of the Fund's securities
caused by fluctuating interest rates. The Tocqueville International Value Fund
may write covered call options on securities or stock indices, but will not
write such options if immediately after such sale the aggregate value of the
obligations under the outstanding options would exceed 25% of its net assets. A
call option is "covered" if the Fund owns the underlying security covered by the
call. The Fund will not write covered call option contracts for speculative
purposes.
When a covered call option expires unexercised, the writer realizes a gain
in the amount of the premium received. If the covered call option is exercised,
the writer realizes either a gain or loss from the sale or purchase of the
underlying security with the proceeds to the writer being increased by the
amount of the premium. Any gain or loss from such transaction will depend on
whether the amount paid is more or less than the premium received for the option
plus related transaction costs.
Risks associated with writing covered call option contracts are similar to
the risks discussed in the section concerning "Futures and Options on Futures
Transactions," above.
RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
GENERAL. Consistent with their respective investment objectives and
policies, The Tocqueville Fund and The Tocqueville Small Cap Value Fund may
invest indirectly in foreign assets through ADRs, which are certificates issued
by U.S. banks representing the right to receive securities of a foreign issuer
deposited with that bank or a correspondent bank, and The Tocqueville Small Cap
Value Fund and The Tocqueville International Value Fund may directly or
indirectly invest in securities of foreign issuers. Direct and indirect
investments in securities of foreign issuers may involve risks that are not
present with domestic investments and there can be no assurance that a Fund's
foreign investments will present less risk than a portfolio of domestic
securities. Compared to United States issuers, there is generally less publicly
available information about foreign issuers and there may be less governmental
regulation and supervision of foreign stock exchanges, brokers and listed
companies. Foreign issuers are not generally subject to uniform accounting,
auditing and financial reporting standards, practices and requirements
comparable to those applicable to domestic issuers. Securities of some foreign
issuers are less liquid and their prices are more volatile than securities of
comparable domestic issuers. Settlement of transactions in some foreign markets
may be delayed or less frequent than in the United States, which could affect
the liquidity of each Fund's portfolio. Fixed brokerage commissions on foreign
securities exchanges are generally higher than in the United States. Income from
foreign securities may be reduced by a withholding tax at the source or other
foreign taxes. In some countries, there may also be the possibility of
expropriation or confiscatory taxation, limitations on the removal of funds or
other assets of a Fund, political or social instability or revolution, or
diplomatic developments which could affect investments in those countries.
The value of each Fund's investments denominated in foreign currencies may
depend in part on the relative strength of the U.S. dollar, and a Fund may be
affected favorably or unfavorably by exchange control regulations or changes in
the exchange rate between foreign currencies and the U.S. dollar. When a Fund
invests in foreign securities they will usually be denominated in foreign
currency, and the Fund may temporarily hold funds in foreign currencies. Thus,
each Fund's net
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asset value per share will be affected by changes in currency exchange rates.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by each Fund. The rate of exchange between the U.S. dollar and
other currencies is determined by the forces of supply and demand in the foreign
exchange markets.
SPECIAL RISKS ASSOCIATED WITH THE TOCQUEVILLE INTERNATIONAL VALUE FUND.
In addition to the risks described above, the economies of other countries
may differ unfavorably from the United States economy in such respects as growth
of domestic product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Further, such economies
generally are heavily dependent upon international trade and, accordingly, have
been and may continue to be adversely affected by any trade barriers, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by countries with which they trade. These economies also have been
and may continue to be adversely affected by economic conditions in countries
with which they trade.
The Fund may invest, without limit, in companies located in emerging
markets. An emerging market is any country that the World Bank has determined to
have a low or middle income economy and may include every country in the world
except the United States, Australia, Canada, Japan, New Zealand and most
countries in Western Europe such as Belgium, Denmark, France, Germany, Great
Britain, Italy, the Netherlands, Norway, Spain, Sweden and Switzerland.
Specifically, any change in the leadership or policies of the governments of
emerging market countries in which the Funds invest or in the leadership or
policies of any other government which exercises a significant influence over
those countries, may halt the expansion of or reverse certain beneficial
economic policies of such countries and thereby eliminate any investment
opportunities which may currently exist.
YEAR 2000 PROBLEM.
Like other mutual funds, financial and business organizations and
individuals around the world, the Funds 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
each Fund's major service providers.
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENTS
Tocqueville Asset Management L.P., 1675 Broadway, New York, New York 10019,
acts as Investment Advisor to each Fund under a separate investment advisory
agreement (the "Agreements") which provides that the Investment Advisor identify
and analyze possible investments for each Fund, and determine the amount,
timing, and form of such investments. The Investment Advisor has the
responsibility of monitoring and reviewing each Fund's portfolio, on a regular
basis, and recommending the ultimate disposition of such investments. It is the
Investment Advisor's responsibility to cause the purchase and sale of securities
in each Fund's portfolio, subject at all times to the policies set forth by the
Board of Trustees. The Investment Advisor is an affiliate of Tocqueville
Securities L.P., each Fund's distributor.
Francois Sicart serves the Investment Advisor as the co-manager of The
Tocqueville Fund, and as the portfolio manager of The Tocqueville International
Value Fund . Mr. Sicart, the Chairman of Tocqueville Management Corporation, the
general partner of the Investment Advisor, has been a principal manager of The
Tocqueville Fund since its inception in 1987. Prior to forming the Investment
Advisor, and for the 18 year period from 1969 to 1986, he held various senior
positions within Tucker Anthony, Incorporated, where he managed private
accounts.
Robert W. Kleinschmidt serves the Investment Advisor as the co-manager of
The Tocqueville Fund, and the portfolio manager of The Tocqueville Government
Fund. Mr. Kleinschmidt is the President of Tocqueville Management Corporation.
He previously held executive positions at the investment management firm David
J. Greene & Co. since
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1978, resigning as a partner in 1991.
Jean-Pierre Conreur is the portfolio manager of The Tocqueville Small Cap
Value Fund. Mr. Conreur, a graduate of Lycee Chanzy in 1954, was employed as a
research analyst at Tucker Anthony, Incorporated from April 1976 to December
1983. From December 1983 to March of 1990, he held the position of Vice
President--Foreign Department at Tucker Anthony. Since the formation of the
Investment Advisor, Mr. Conreur has held the title of Executive Vice President
and Director of Tocqueville Management Corporation. He is also a trustee of the
Investment Advisor's retirement plan.
Under the terms of the Agreements, each Fund pays the cost of all its
expenses (other than those expenses specifically assumed by the Investment
Advisor or the Fund's distributor), including the pro rata costs incurred in
connection with each Fund's maintenance of its registration under the 1933 Act
and the 1940 Act, printing of prospectuses distributed to shareholders, taxes or
governmental fees, brokerage commissions, custodial, transfer and shareholder
servicing agent costs, expenses of outside counsel and independent accountants,
preparation of shareholder reports, trustees' fees and shareholder meetings.
The Investment Advisor receives a fee from: (1) both The Tocqueville Fund
and The Tocqueville Small Cap Value Fund, calculated daily and payable monthly,
for the performance of its services at an annual rate of .75% on the first $100
million of the average daily net assets of each Fund, .70% of average daily net
assets in excess of $100 million but not exceeding $500 million, and .65% of
average daily net assets in excess of $500 million; (2) The Tocqueville
International Value Fund, calculated daily and payable monthly, for the
performance of its services at an annual rate of 1.00% on the first $50 million
of the average daily net assets of the Fund, .75% of average daily net assets in
excess of $50 million but not exceeding $100 million, and .65% of the average
daily net assets in excess of $100 million; and (3) The Tocqueville Government
Fund, calculated daily and payable monthly, for the performance of its services
at an annual rate of .50% on the first $500 million of the average daily net
assets of the Fund, .40% of average daily net assets in excess of $500 million
but not exceeding $1 billion, and .30% of average daily net assets in excess of
$1 billion. Each fee is accrued daily for the purposes of determining the
offering and redemption price of such Fund's shares.
DISTRIBUTION PLANS
Each Fund has adopted a distribution plan (each a "Plan") pursuant to Rule
12b-1 of the 1940 Act. Pursuant to the Plans, a Fund may incur distribution
expenses related to the sale of its shares of up to .25% per annum of the Fund's
average daily net assets.
The Plans provide that a Fund may finance activities which are primarily
intended to result in the sale of the Fund's shares, including, but not limited
to, advertising, printing of prospectuses and reports for other than existing
shareholders, preparation and distribution of advertising material and sales
literature and payments to dealers and shareholder servicing agents including
Tocqueville Securities L.P. ("Tocqueville Securities" or the "Distributor"), the
Fund's distributor, who enter into agreements with the Fund or Tocqueville
Securities. The Plans will only make payments for expenses actually incurred on
a first-in, first-out basis. The Plans may carry forward for an unlimited number
of years any unreimbursed expenses. If a Plan is terminated in accordance with
its terms, the obligations of the Fund to make payments pursuant to the Plan
will cease and the Fund will not be required to make any payments past the date
the Plan terminates. (See the Statement of Additional Information--"Distribution
Plan" for further information about the Plan.)
As of October 31, 1997, The Tocqueville Fund, The Tocqueville Small Cap
Value Fund, The Tocqueville International Value Fund, and The Tocqueville
Government Fund had $156,715, $81,751, $72,512 and $33,063, respectively, of
unreimbursed distribution expenses (0.24%, 0.40%, 0.12% and 0.20%, respectively,
as a percentage of each Fund's net assets). (See the Statement of Additional
Information--"Distribution Plans" for further information about the Plans.)
ADMINISTRATIVE SERVICES AGREEMENTS
Under an Administrative Services Agreement, Tocqueville Asset Management
L.P. supervises the administration of all aspects of a Fund's operations,
including the Fund's receipt of services for which the Fund is obligated to pay,
provides the Fund with general office facilities and provides, at the Fund's
expense, the services of persons necessary to perform such
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supervisory, administrative and clerical functions as are needed to effectively
operate the Fund. Those persons, as well as certain employees and Trustees of
the Funds, may be directors, officers or employees of (and persons providing
services to a Fund may include) Tocqueville Asset Management L.P. and its
affiliates. For these services and facilities, Tocqueville Asset Management L.P.
receives with respect to each Fund a fee computed and paid monthly at an annual
rate of .15% of the average daily net assets of the Fund. Certain administrative
responsibilities have been delegated to and are being performed by Firstar Trust
Company.
BROKERAGE ALLOCATION
Subject to the supervision of the Board of Trustees, decisions to buy and
sell securities for each Fund are made by the Investment Advisor. The Investment
Advisor, subject to obtaining the best price and execution, may allocate
brokerage transactions in a manner that takes into account the sale of shares of
each Fund. Generally, the primary consideration in placing portfolio securities
transactions with broker-dealers for execution is to obtain, and maintain the
availability of, execution at the best net price available and in the most
effective manner possible. The Funds' brokerage allocation policies may permit
each Fund to pay a broker-dealer which furnishes research services a higher
commission than that which might be charged by another broker-dealer which does
not furnish research services, provided that such commission is deemed
reasonable in relation to 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 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 a Fund may be purchased from the following entities: (a) the
Funds' Distributor, Tocqueville Securities; (b) authorized securities dealers
which have entered into sales agreements with Tocqueville Securities (the
"Selling Brokers") on a best efforts basis and brokers who have entered into
agreements with the Trust to provide distribution and shareholder services; and
(c) the Funds' transfer agent, Firstar Trust Company (the "Transfer Agent").
Each Fund reserves the right to cease offering shares for sale at any time or to
reject any order for the purchase of shares.
A purchase order becomes effective upon receipt of the order by Tocqueville
Securities, a Selling Broker or other broker or the Transfer Agent. Purchase
orders received prior to 4:00 p.m. New York time are priced according to the net
asset value per share next determined on that day. Purchase orders received
after 4:00 p.m. New York time are priced according to the net asset value per
share next determined on the following day.
The net asset value per share is determined by dividing the market value of
a Fund's investments as of the close of trading plus any cash or other assets
(including dividends receivable and accrued interest) less all liabilities
(including accrued expenses) by the number of Fund shares outstanding. Each Fund
will determine the net asset value of its shares once daily as of the close of
trading on the New York Stock Exchange (the "Exchange") on each "Fund business
day" which is any day on which the Exchange is open for business.
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Investors who already have a brokerage account with Tocqueville Securities,
a Selling Broker or other broker may purchase a Fund's shares through such
broker. Payment for purchase orders through Tocqueville Securities, the Selling
Broker or other broker must be made to Tocqueville Securities, the Selling
Broker or other broker within three business days of the purchase order. All
dealers are responsible for forwarding orders for the purchase of a Fund's
shares on a timely basis.
Each Fund's shares normally will be maintained in book entry form and share
certificates will be issued only on request. The Distributor reserves the right
to refuse to sell shares of the Funds to any person.
INITIAL SALES CHARGES
The initial sales charge, imposed upon a sale of shares, varies according
to the size of the purchase as follows:
CONCESSION
INITIAL SALES CHARGE TO DEALERS
% OF % OF NET % OF
OFFERING AMOUNT OFFERING
AMOUNT OF PURCHASE PRICE INVESTED PRICE
------- ---------- ------
Less than $100,000.......... 4.00 4.16 3.50
$100,000 to $249,999........ 3.50 3.63 3.00
$250,000 to $499,000........ 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
The reduced initial sales charges apply to the aggregate of purchases of
shares of a Fund made at one time by any "person", which term includes an
individual, spouse and children under the age of 21, or a trustee or other
fiduciary of a trust, estate or fiduciary account.
Upon notice to Selling Brokers, Tocqueville Securities may reallow up to
the full applicable initial sales charge and such Selling Broker may therefore
be deemed an "underwriter" under the 1933 Act, as amended, during such periods.
The Distributor may, from time to time, provide promotional incentives to
certain Selling Brokers whose representatives have sold or are expected to sell
significant amounts of one or all of the funds of the Trust. At various times
the Distributor may implement programs under which a Selling Broker's sales
force may be eligible to win cash or material awards for certain sales efforts
or under which the Distributor will reallow an amount not exceeding the total
applicable initial sales charges generated by the Selling Broker during such
programs to any Selling Broker that sponsors sales contests or recognition
programs conforming to criteria established by the Distributor or participates
in sales programs sponsored by the Distributor. The Distributor may provide
marketing services to Selling Brokers, consisting of written informational
material relating to sales incentive campaigns conducted by such Selling Brokers
for their representatives.
PURCHASES OF SHARES AT NET ASSET VALUE
PURCHASES THROUGH CERTAIN BROKERAGE ACCOUNTS. Shares may be purchased at
net asset value through brokerage accounts with Tocqueville Securities L.P.,
Selling Brokers and other brokers who have entered into agreements with the
Trust to provide distribution and shareholder services.
QUALIFIED PERSONS. There is no initial sales charge for "Qualified
Persons", which are the following (a) active or retired trustees, directors,
officers, partners or employees (their spouses and children under age 21) of (i)
the Investment Advisor and Distributor or any affiliates or subsidiaries thereof
(the directors, officers or employees of which shall also include their parents
and siblings for all purchases of Fund shares), (ii) Selling Brokers or other
brokers who have entered into agreements with the Trust to provide distribution
and shareholder services, or (iii) trade organizations to which the Investment
Advisor belongs and (b) trustees or custodians of any qualified retirement plan
or IRA established for the benefit of a person in (a) above.
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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 shares for its own account, or an account for
which the investment adviser has discretion and is authorized to make investment
decisions.
QUALIFIED AND OTHER RETIREMENT PLANS. In addition, no initial sales charge
will apply to any purchase of shares by an investor through a 401(k) Plan or 457
(state deferred compensation) Plan.
RECENTLY REDEEMED SHARES. Shares of a Fund may be purchased at net asset
value by persons who have, within the previous 30 days, redeemed their shares of
the Fund. The amount which may be purchased at net asset value is limited to an
amount up to, but not exceeding, the net amount of redemption proceeds. Such
purchases may also be handled by a securities dealer, who may charge the
shareholder a fee for this service.
SHAREHOLDERS AS OF JANUARY 1, 1994. Shareholders who held shares of a Fund
of the Tocqueville Trust prior to January 1, 1994, may purchase shares of any
Fund of the Trust at net asset value for as long as they continue to own shares
of any Fund of the Trust, provided that there is no change in the account
registration. However, once a shareholder has closed an account by redeeming all
of their Fund shares for a period of more than thirty days such shareholder will
no longer be able to purchase shares of the Fund at net asset value.
REDUCED INITIAL SALES CHARGES
CUMULATIVE QUANTITY DISCOUNT. Shares of a Fund may be purchased by any
person at a reduced initial sales charge which is determined by (a) aggregating
the dollar amount of the new purchase and the greater of the purchaser's total
(i) net asset value or (ii) cost of all shares of such Fund and the other Funds
of the Trust, acquired by exchange from such other Fund, provided such Fund
charged an initial sales load at the time of the exchange then held by such
person and (b) applying the initial sales charge applicable to such aggregate.
The privilege of the cumulative quantity discount is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
GROUP PURCHASES. An individual who is a member of a qualified group (as
defined below) may also purchase shares of a Fund at the reduced initial sales
charge applicable to the group taken as a whole. The reduced initial sales
charge is based upon the aggregate dollar value of shares previously purchased
and still owned by the group plus the securities currently being purchased and
is determined as stated above under "Cumulative Quantity Discount". For example,
if members of the group had previously invested and still held $90,000 of shares
and now were investing $15,000, the initial sales charge would be 3.50%. In
order to obtain such discount, the purchaser or investment dealer must provide
the Transfer Agent with sufficient information, including the purchaser's total
cost, at the time of purchase to permit verification that the purchaser
qualifies for a cumulative quantity discount, and confirmation that the order is
subject to such verification. Information concerning the current initial sales
charge applicable to a group may be obtained by contacting the Transfer Agent.
A "qualified group" is one which: (a) has been in existence for more than
six months; (b) has a purpose other than acquiring shares at a discount; and (c)
satisfies uniform criteria which enables the Distributor to realize economies of
scale in its costs of distributing shares. A qualified group must have more than
10 members, must be available to arrange for group meetings between
representatives of the Funds and the members, must agree to include sales and
other materials related to the Funds in its publications and mailings to members
at reduced or no cost to the Distributor, and must seek to arrange for payroll
deduction or other bulk transmission of investments in the Funds. This privilege
is subject to modification or discontinuance at any time with respect to all
shares purchased thereafter.
LETTER OF INTENT. Investors may also qualify for reduced initial sales
charges by signing a Letter of Intent (the "LOI"). This enables the investor to
aggregate purchases of shares of a Fund with purchases of shares of any other
Fund of the Trust acquired by exchange, during a 13-month period. The initial
sales charge is based on the total amount invested in shares during the 13-month
period. Shares of the Funds currently owned by the investor including such Fund,
if any, will be credited as purchases (at their current offering prices on the
date the LOI is signed) toward completion of the LOI. A 90-day back-dating
period can be used to include earlier purchases at the investor's cost. The
13-month period would then
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begin on the date of the first purchase during the 90-day period. No retroactive
adjustment will be made if purchases exceed the amount indicated in the LOI. A
shareholder must notify the Transfer Agent or Distributor whenever a purchase is
being made pursuant to a LOI.
The LOI is not a binding obligation on the investor to purchase, or on the
Fund to sell, the full amount indicated; however, on the initial purchase (or
subsequent purchases if necessary), 5% of the dollar amount specified in the LOI
will be held in escrow by the Transfer Agent in shares registered in the
shareholder's name in order to assure payment of the proper initial sales
charge. If total purchases pursuant to the LOI (less any dispositions and
exclusive of any distributions on such shares automatically reinvested) are less
than the amount specified, the investor will be requested to remit to the
Transfer Agent an amount equal to the difference between the initial sales
charge paid and the initial sales charge applicable to the aggregate purchases
actually made. If not remitted within 20 days after written request, an
appropriate number of escrowed shares will be redeemed in order to realize the
difference. This privilege is subject to modification or discontinuance at any
time with respect to all shares purchased thereunder. Shareholders will be paid
distributions, either in additional shares or cash, upon such escrowed shares.
METHODS OF PAYMENT
BY CHECK. Investors who wish to purchase shares directly from the Transfer
Agent may do so by sending a completed purchase application (included with this
Prospectus or obtainable from the Trust) to The Tocqueville Trust, c/o Firstar
Trust Company, P.O. Box 701, Milwaukee, WI 53201-0701, accompanied by a check
payable to the Fund whose shares are being purchased. Purchase applications sent
to the Funds will be forwarded to the Transfer Agent, and will not be effective
until received by the Transfer Agent. The price per share is the next determined
per share net asset value (plus a varying initial sales charge) after receipt of
an application by Firstar Trust Company. Purchase applications should be mailed
directly to: The Tocqueville Trust [name of fund], c/o Firstar Trust Company,
P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The U.S. Postal Service and other
independent delivery services are not agents of the Trust. Therefore, deposit of
purchase applications in the mail or with such services does not constitute
receipt by Firstar Trust Company or the Trust. Please do not mail letters by
overnight courier to the post office box address. To purchase shares by
overnight or express mail, please use the following street address: The
Tocqueville Trust [name of fund], c/o Firstar Trust Company, Mutual Fund
Services, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202. All
applications must be accompanied by payment in the form of a check drawn on a
U.S. bank payable to The Tocqueville Trust or by direct wire transfer. No cash
will be accepted. Firstar Trust Company will charge a $20 fee against a
shareholder's account for any payment check returned to the custodian. The
shareholder will also be responsible for any losses suffered by the Fund as a
result.
BY AUTOMATIC INVESTMENT PLAN. The Funds have an Automatic Investment Plan
which permits an existing shareholder to purchase additional shares of any Fund
(minimum $100 per transaction) at regular intervals. Under the Automatic
Investment Plan, shares are purchased by transferring funds from a shareholder's
checking, bank money market, NOW account, or savings account in an amount of
$100 or more designated by the shareholder. At the shareholder's option, the
account designated will be debited and shares will be purchased on the date
selected by the shareholder. There must be a minimum of seven days between
automatic purchases. If the date selected by the shareholder is not a business
day, funds will be transferred the next business day thereafter. Only an account
maintained at a domestic financial institution which is an Automated Clearing
House member may be so designated. To establish an Automatic Investment Account,
complete and sign Section F of the Purchase Application and send it to the
Transfer Agent. Shareholders may cancel this privilege or change the amount of
purchase at any time by calling 1-800-697-3863 or by mailing written
notification to: The Tocqueville Trust [name of fund], c/o Firstar Trust
Company, P.O. Box 701, Milwaukee, Wisconsin 53201-0701. The change will be
effective five business days following receipt of notification by the Transfer
Agent. A Fund may modify or terminate this privilege at any time or charge a
service fee, although no such fee currently is contemplated. However, a $20 fee
will be imposed by Firstar Trust Company if sufficient funds are not available
in the shareholder's account at the time of the automatic transaction .
While investors may use this option to purchase shares in their IRA or
other retirement plan accounts, neither the Distributor nor the Transfer Agent
will monitor the amount of contributions to ensure that they do not exceed the
amount allowable for Federal tax purposes. Firstar Trust Company will assume
that all retirement plan contributions are being made for the tax year in which
they are received.
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<PAGE>
BY WIRE. Investors who purchase shares directly from the Transfer Agent may
also purchase shares by wire. Funds should be wired to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
ABA # 075000022
Credit: Firstar Trust Company
Account # 112952137
Further credit: The Tocqueville Trust
Name of shareholder and account number (if known)
(Wired funds must be received prior to 4:00 p.m. Eastern time to be
eligible for same day pricing.)
The establishment of a new account or any additional purchases for an
existing account by wire transfer should be preceded by a phone call to Firstar
Trust Company, 1-800-697-3863, to provide information for the account. A
properly signed share purchase application marked "Follow Up" must be sent for
all new accounts opened by wire transfer. Applications are subject to acceptance
by the Fund, and are not binding until so accepted.
REDEMPTION OF SHARES
GENERAL INFORMATION
In order to redeem shares purchased through Tocqueville Securities, a
Selling Broker or other broker, the broker must be notified by telephone or mail
to execute a redemption. A properly completed order to redeem shares received by
the broker's office will be executed at the net asset value next determined
after receipt by the broker of the order. Redemption proceeds will be held in a
shareholder's account with Tocqueville Securities unless the broker is
instructed to remit all proceeds directly to the shareholder.
Shares purchased through the Transfer Agent may be redeemed by the Transfer
Agent at the next determined net asset value upon receipt of a request in good
order. Payment will be made for redeemed shares as soon as practicable, but in
no event later than three business days after receipt of a redemption
notification in good order. If the shares being redeemed were purchased directly
from the Transfer Agent by check, payment may be delayed for the minimum time
needed to verify that the purchase check has been honored. This is not normally
more than 15 days from the time of receipt of the check by the Transfer Agent.
"Good order" means that the request complies with the following: (a) where the
shareholder has not elected to permit telephone redemptions, the request must be
in writing, specifying the number of shares or dollar amount to be redeemed and
sent to the Transfer Agent, Attn. [name of fund] at P.O. Box 701, Milwaukee,
Wisconsin 53201-0701. The U.S. Postal Service and other independent delivery
services are not agents of the Trust. Therefore, deposit of redemption requests
in the mail or with such services does not constitute receipt by Firstar Trust
Company or the Trust. Please do not mail letters by overnight courier to the
post office box address. Redemption requests sent by overnight or express mail
should be directed to: [name of fund] c/o Firstar Trust Company, Mutual Fund
Services, Third Floor, 615 East Michigan Street, Milwaukee, Wisconsin 53202.
Requests for redemption by telegram and requests which are subject to any
special conditions or which specify an effective date other than as provided
herein cannot be honored; (b) where share certificates have been issued, a
shareholder must endorse the certificates and include them in the redemption
request; (c) signatures on the redemption request and on endorsed certificates
submitted for redemption must be guaranteed by a commercial bank which is a
member of the Federal Deposit Insurance Corporation, a trust company or a member
firm (broker-dealer) of a national securities exchange (a notary public or a
savings and loan association is not an acceptable guarantor); and, (d) the
request must include any additional legal documents concerning authority and
related matters in the case of estates, trusts, guardianships, custodianships,
partnerships and corporations. Any written requests sent to a Fund will be
forwarded to the Transfer Agent and the effective date of a redemption request
will be when the request is received by the Transfer Agent. Shareholders who
purchased shares through the Transfer Agent may arrange for the proceeds of
redemption requests to be sent by Federal Fund wire to a designated bank account
by sending wiring instructions to Firstar Trust Company, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701. The Transfer Agent charges a $12 service fee
for each
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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 Funds purchased through programs of services offered or
administered by processing intermediaries that have entered into agreements with
the Funds ("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 Funds.
The Funds may only accept redemption requests for an account in which the
Processing Intermediary is the shareholder of record from the Processing
Intermediary. Each 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, a 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 Funds' shares or payments therefore may be suspended at
such times (a) when the Exchange is closed, (b) when trading on the Exchange is
restricted, (c) when an emergency exists which makes it impractical for a Fund
to either dispose of securities or make a fair determination of net asset value,
or (d) for such other period as the Securities and Exchange Commission may
permit for the protection of a Fund's shareholders. There is no assurance that
the net asset value received upon redemption will be greater than that paid by a
shareholder upon purchase.
The Funds reserve the right to close an account that has dropped below $500
in value for a period of three months or longer other than as a result of a
decline in the net asset value per share. Shareholders are notified at least 60
days prior to any proposed redemption and are invited to add to their account if
they wish to continue as shareholders of the Fund.
TELEPHONE REDEMPTION
Shareholders of the Funds will also be permitted to redeem fund shares by
telephone. To redeem shares by telephone, call 1-800-697-3863 with your account
name, account number and amount of redemption. Redemption proceeds will only be
sent to a shareholder's address or a pre-authorized bank account of a commercial
bank located within the United States as shown on the Transfer Agent's records.
(Available only if established on the account application and if there has been
no change of address by telephone within the preceding 15 days.)
The Funds reserve the right to refuse a telephone redemption if they
believe it is advisable to do so. Procedures for redeeming shares by telephone
may be modified or terminated by the Funds at any time upon notice to
shareholders. During periods of substantial economic or market change, telephone
redemptions may be difficult to implement. If a shareholder is unable to contact
the Transfer Agent by telephone, shares may also be redeemed by delivering the
redemption request to the Transfer Agent.
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, the Funds and the Transfer Agent employ reasonable procedures to
confirm that such instructions are genuine. Among the procedures used to
determine authenticity, investors electing to redeem or exchange by telephone
will be required to provide their account number. All such telephone
transactions will be tape recorded. The Tocqueville Funds may implement other
procedures from time to time. If reasonable procedures are not implemented, the
Funds and/or the Transfer Agent may be liable for any loss due to unauthorized
or fraudulent transactions. In all other cases, the shareholder is liable for
any loss for unauthorized transactions.
SHAREHOLDER PRIVILEGES
SYSTEMATIC WITHDRAWAL PLAN. The funds offer a Systematic Withdrawal Plan
for shareholders who own shares worth at least $10,000 at current net asset
value of any Fund. Under the Systematic Withdrawal Plan, a fixed sum (minimum
$500) will be distributed at regular intervals (on any day, either monthly or
quarterly). In electing to participate in the Systematic Withdrawal Plan,
investors should realize that within any given period the appreciation of their
investment in a particular
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Fund may not be as great as the amount withdrawn. A shareholder may vary the
amount of frequency of withdrawal payments or temporarily discontinue them by
notifying Firstar Trust Company at 1-800-697-3863. The Systematic Withdrawal
Plan does not apply to shares of any Fund held in Individual Retirement Accounts
or defined contribution retirement plans. For additional information or to
request an application please call Firstar Trust Company at 1-800-697-3863.
EXCHANGE PRIVILEGE. Subject to certain conditions, shares of a Fund may be
exchanged for the shares of another Fund of The Tocqueville Trust at such Fund's
then current net asset value. No initial sales charge is imposed on the shares
being acquired through an exchange. The dollar amount of the exchange must be at
least equal to the minimum investment applicable to the shares of the Fund
acquired through such exchange. You should note that any such exchange, which
may only be made in states where shares of the Funds of The Tocqueville Trust
are qualified for sale, may create a gain or loss to be recognized for federal
income tax purposes. Exchanges must be made between accounts having identical
registrations and addresses. Exchanges may be authorized by telephone. In order
to protect itself and shareholders from liability for unauthorized or fraudulent
telephone transactions, each Fund will use reasonable procedures in an attempt
to verify the identity of a person making a telephone exchange request. Each
Fund reserves the right to refuse a telephone exchange request if it believes
that the person making the request is not the record owner of the shares being
exchanged, or is not authorized by the shareholder to request the exchange.
Shareholders will be promptly notified of any refused request for a telephone
exchange. As long as these normal identification procedures are followed,
neither the Funds nor their agents will be liable for loss, liability or cost
which results from acting upon instructions of a person believed to be a
shareholder with respect to the telephone exchange privilege. You will not
automatically be assigned this privilege unless you check the box on the
Purchase Application which indicates that you wish to have the privilege. The
exchange privilege may be modified or discontinued at any time.
Shareholders may also exchange shares of any or all of an investment in the
Funds for shares of the 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 Market Funds. All accounts opened in a Money Market
Fund as a result of using the Exchange Privilege must be registered in the
identical name and taxpayer identification number as a shareholder's existing
account with the Funds.
For purposes of the Exchange Privilege, exchanges into and out of the Money
Market Funds will be treated as shares owned in the Funds. For example, if an
investor who owned shares in any one of the Funds moved an investment from one
of the Funds to one of the Money Market Funds and then decided at a later date
to move the investment back to one of the Funds, he or she would be deemed, once
again, to own shares of one of the Funds and may do so without the imposition of
any additional sales charges, so long as the investment has been continuously
invested in shares of the Money Market Fund during the period between withdrawal
and reinvestment.
Remember that each exchange represents the sale of shares of one fund and
the purchase of shares of another. Therefore, shareholders may realize a taxable
gain or loss on the transaction. Before making an exchange request, an investor
should consult a tax or other financial adviser to determine the tax
consequences of a particular exchange. The Distributor is entitled to receive a
fee from the Money Market Funds for certain support services at the annual rate
of .20 of 1% of the average daily net asset value of the shares for which it is
the holder or dealer of record. Because excessive trading can hurt the Funds'
performance and shareholders, the Funds reserve the right to temporarily or
permanently limit the number of exchanges or to otherwise prohibit or restrict
shareholders from using the Exchange Privilege at any time, without notice to
shareholders. In particular, a pattern of exchanges with a "market timing"
strategy may be disruptive to the Funds and may thus be restricted or refused.
Excessive use of the Exchange Privilege is defined as more than five exchanges
per calendar year. The restriction or termination of the Exchange Privilege does
not affect the rights of shareholders to redeem shares, as discussed in the
Prospectus.
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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 Funds offer three types of IRA's, including the
Traditional IRA, that can be adopted by executing the appropriate Internal
Revenue Service ("IRS") Form.
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 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.
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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. The
custodian may, in its discretion, hold the initial contribution uninvested until
the expiration of the seven-day revocation period. The custodian does not
anticipate that it will exercise its discretion but reserves the right to do so.
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.
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 from net investment income are
declared daily and paid monthly by The Tocqueville Government Fund . Dividends
are paid at least annually by The Tocqueville Fund, The Tocqueville Small Cap
Value Fund, and The Tocqueville International Value Fund . The Funds also
distribute net capital gains (if any) at least annually. Dividends and
distributions of shares may be reinvested at net asset value without an initial
sales charge. Shareholders should indicate on the purchase application whether
they wish to receive dividends and distributions in cash. Otherwise, all income
dividends and capital gains distributions are automatically reinvested in the
Fund making the distribution at the next determined net asset value unless the
Transfer Agent receives written notice from an individual shareholder prior to
the record date, requesting that the distributions and dividends be distributed
to the investor in cash.
TAX MATTERS. Each Fund intends to qualify as a regulated investment company
by satisfying the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), including the requirements with respect to
diversification of assets, distribution of income and sources of income. It is
each 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
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be subject to federal income tax or the 4% excise tax. If a Fund fails to
satisfy any of the Code requirements for qualification as a regulated investment
company, it will be taxed at regular corporate tax rates on all of its taxable
income (including capital gains) without any deduction for distributions to
shareholders, and distributions to shareholders will be taxable as ordinary
dividends (even if derived from a Fund's net long-term capital gains) to the
extent of that Fund's current and accumulated earnings and profits.
Distributions by a Fund of its net investment income and the excess, if
any, of its net short-term capital gain over its net long-term capital loss are
generally taxable to shareholders as ordinary income. These distributions are
treated as dividends for federal income tax purposes. Because it is anticipated
that the investment income of The Tocqueville International Value Fund and The
Tocqueville Government Fund will not include dividends from domestic
corporations, none of the ordinary income dividends paid by such Funds should
qualify for the 70% dividends-received deduction for corporate shareholders.
Distributions by a Fund of the excess, if any, of its net long-term capital gain
over its net short-term capital loss are designated as capital gain dividends
and are taxable to shareholders as long-term capital gains, without regard to
the length of time the Fund's shares were held.
Portions of each Fund's investment income may be subject to foreign income
taxes withheld at the source. The economic effect of such withholding taxes on
the total return of each Fund cannot be predicted. The Tocqueville International
Value Fund may elect to "pass through" to its shareholders these foreign taxes,
in which event each shareholder will be required to include their pro rata
portion thereof in its gross income, but will be able to deduct or (subject to
various limitations) claim a foreign tax credit for such amount.
Distributions by a Fund to shareholders will be treated in the same manner
for federal income tax purposes whether received in cash or reinvested in
additional shares of the Fund. In general, distributions by a Fund are taken
into account by the shareholders in the year in which they are made. However,
certain distributions made during January will be treated as having been paid by
the Fund and received by the shareholders on December 31 of the preceding year.
A statement setting forth the federal income tax status of all distributions
made or deemed made during the year, including any amount of foreign taxes
"passed through," will be sent to shareholders promptly after the end of each
year. A shareholder who purchases shares of a Fund just prior to the record date
will be taxed on the entire amount of the dividend received, even though the net
asset value per share on the date of such purchase may have reflected the amount
of such dividend.
A shareholder will recognize gain or loss upon the sale (exchange) or
redemption of shares of a Fund in an amount equal to the difference between the
proceeds of the sale or redemption and the shareholder's adjusted tax basis in
the shares. Any loss recognized upon a taxable disposition of shares within six
months from the date of their purchase will be treated as a long-term capital
loss to the extent of any capital gain dividends received on such shares. All or
a portion of any loss recognized upon a taxable disposition of shares of a Fund
may be disallowed if other shares of the Fund are purchased within 30 days
before or after such disposition.
Ordinary income dividends paid to non-resident alien or foreign entity
shareholders generally will be subject to United States withholding tax at a
rate of 30% (or lower rate under an applicable treaty). Foreign shareholders are
urged to consult their own tax advisers concerning the applicability of United
States withholding taxes.
Under the backup withholding rules of the Code, certain shareholders may be
subject to 31% backup withholding tax on ordinary income dividends, capital gain
dividends and redemption payments made by the Funds. In order to avoid this
backup withholding, a shareholder must provide the Funds with a correct taxpayer
identification number (which for 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
Funds that is contained in the Statement of Additional Information. In addition,
each prospective shareholder should consult with his own tax adviser as to the
tax consequences of investments in the Funds, including the application of state
and local taxes which may differ from the federal income tax consequences
described above.
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ORGANIZATION AND DESCRIPTION OF SHARES OF THE TRUST
The Trust was organized as a Massachusetts business trust under the laws of
the Commonwealth of Massachusetts. The Trust's Declaration of Trust filed
September 17, 1986, permits the Trustees to issue an unlimited number of shares
of beneficial interest with a par value of $0.01 per share in an unlimited
number of series of shares. On August 19, 1991, the Declaration of Trust was
amended to change the name of the Trust to "The Tocqueville Trust," and on
August 4, 1995, the Declaration of Trust was amended to permit the division of a
series into classes of shares. Each share of beneficial interest has one vote
and shares equally in dividends and distributions when and if declared by a Fund
and in a Fund's net assets upon liquidation. All shares, when issued, are fully
paid and nonassessable. There are no preemptive or conversion rights. Fund
shares do not have cumulative voting rights and, therefore, holders of at least
50% of the shares voting for trustees can elect all trustees and the remaining
shareholders would not be able to elect any trustees. The Board of Trustees may
classify or reclassify any unissued shares of the Trust into shares of any
series by setting or changing in any one or more respects, from time to time,
prior to the issuance of such shares, the preference, conversion or other
rights, voting powers, restrictions, limitations as to dividends, or
qualifications of such shares. Any such classification or reclassification will
comply with the provisions of the 1940 Act.
There will not normally be annual shareholder meetings. Shareholders may
remove Trustees from office by votes cast at a meeting of shareholders or by
written consent.
CUSTODIAN, TRANSFER AGENT AND DIVIDEND PAYING AGENT
Firstar Trust Company serves as custodian for the portfolio securities and
cash of The Tocqueville Fund, The Tocqueville Small Cap Value Fund and The
Tocqueville Government Fund, and as each Fund's Transfer and Dividend Paying
Agent, and in those capacities maintains certain financial and accounting books
and records pursuant to agreements with the Trust. Its mailing address is 615
East Michigan Street, Milwaukee, WI 53202. Firstar Trust Company and The Chase
Manhattan Bank serve as custodian for the portfolio securities and cash of The
Tocqueville International Value Fund.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Kramer, Levin, Naftalis & Frankel, 919 Third Avenue, New York, N.Y. 10022,
is counsel for the Trust. McGladrey & Pullen, LLP, 555 Fifth Avenue, New York,
N.Y. 10017-2416, has been appointed independent accountants for the Trust.
SHAREHOLDER INQUIRIES
Shareholder inquiries should be directed to The Tocqueville Trust c/o
Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202,
Attention: [name of Fund], or may be made by calling 1- 800-697-3863.
OTHER INFORMATION
This Prospectus omits certain information contained in the registration
statement filed with the Securities and Exchange Commission. Copies of the
registration statement, including items omitted herein, may be obtained from the
Commission by paying the charges prescribed under its rules and regulations. The
Statement of Additional Information included in such registration statement may
be obtained without charge from the Trust.
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus, and information
or representations not herein contained, if given or made, must not be relied
upon as having been authorized by the Trust. This Prospectus does not constitute
an offer or solicitation in any jurisdiction in which such offering may not
lawfully be made.
The Code of Ethics of the Investment Advisor and the Funds prohibits all
affiliated personnel from engaging in personal
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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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PROSPECTUS
FEBRUARY 27, 1998
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOVERNMENT FUND
INVESTMENT ADVISOR
Tocqueville Asset Management L.P.
1675 Broadway
New York, New York 10019
Telephone: (212) 698-0800
DISTRIBUTOR
Tocqueville Securities L.P.
1675 Broadway
New York, New York 10019
Telephone: (800) 697-3863
SHAREHOLDERS' SERVICING,
CUSTODIAN AND TRANSFER AGENT
Firstar Trust Company
P.O. Box 701
Milwaukee, Wisconsin 53201-0701
Telephone: (800) 697-3863
BOARD OF TRUSTEES
Francois Sicart -- Chairman
Bernard F. Combemale
James B. Flaherty
Inge Heckel
Robert W. Kleinschmidt
Francois Letaconnoux
Lucille G. Bono
Larry M. Senderhauf
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STATEMENT OF ADDITIONAL INFORMATION - February 27, 1998
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOVERNMENT FUND
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus and should be read in conjunction with the Trust's current
Prospectus, copies of which may be obtained by writing The Tocqueville Trust,
c/o Firstar Trust Company, 615 East Michigan Street, Milwaukee, Wisconsin 53202
or calling (800) 697-3863.
This Statement of Additional Information relates to the Trust's
Prospectus which is dated February 27, 1998.
TABLE OF CONTENTS
PAGE
----
Investment Policies and Risks.............................................. 2
Investment Restrictions.................................................... 6
Management................................................................. 7
Investment Advisor and Investment Advisory Agreements..................... 9
Distribution Plans......................................................... 10
Administrative Services Agreement......................................... 11
Portfolio Transactions and Brokerage....................................... 11
Allocation of Investments.................................................. 12
Computation of Net Asset Value............................................. 12
Purchase and Redemption of Shares.......................................... 13
Tax Matters................................................................ 13
Performance Calculation................................................... 20
General Information........................................................ 21
Reports .................................................................. 22
Financial Statements....................................................... 22
<PAGE>
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
currently consisting of separate funds (the "Fund" or the "Funds"). Each Fund is
an open-end, diversified management investment company with a different
investment objective. This Statement of Additional Information relates to the
following funds : The Tocqueville Fund, The Tocqueville Small Cap Value Fund,
The Tocqueville International Value Fund and The Tocqueville Government Fund.
The Tocqueville Fund's investment objective is long-term capital appreciation
primarily through investments in securities of United States issuers. The
Tocqueville Small Cap Value Fund's (the "Small Cap Fund") investment objective
is long-term capital appreciation primarily through investments in securities of
small-capitalization United States issuers. The Tocqueville International Value
Fund's (the "International Fund") investment objective is long-term capital
appreciation consistent with preservation of capital primarily through
investments in securities of non-U.S. issuers. The Tocqueville Government Fund's
(the "Government Fund") investment objective is to provide high current income
consistent with the maintenance of principal and liquidity through investments
in obligations issued or guaranteed by the U.S. Treasury, agencies of the U.S.
Government or instrumentalities that have been established or sponsored by the
U.S. Government. In each Fund, there is minimal emphasis on current income. Much
of the information contained in this Statement of Additional Information expands
on subjects discussed in the Prospectus. Capitalized terms not defined herein
are used as defined in the Prospectus. No investment in shares of the Funds
should be made without first reading the Funds' Prospectus.
INVESTMENT POLICIES AND RISKS
The following descriptions supplement the investment policies of each Fund set
forth in the Prospectus. Each Fund's investments in the following securities and
other financial instruments are subject to the investment policies and
limitations described in the Prospectus and this Statement of Additional
Information.
1. WRITING COVERED CALL OPTIONS ON SECURITIES AND STOCK INDICES
The International Fund and the Government Fund may write covered call
options on optionable securities or stock indices of the types in which they are
permitted to invest from time to time as their Investment Advisor determines is
appropriate in seeking to attain their objective. A call option written by a
Fund 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 International Fund and the Government Fund may write only covered
call options, which means that, so long as a Fund is obligated as the writer of
a call option, it will own the underlying securities subject to the option (or
comparable securities or cash satisfying the cover requirements of securities
exchanges).
The International Fund and the Government Fund will receive a premium
for writing a covered call option, which increases the return of a Fund in the
event the option expires unexercised or is closed out at a profit. The amount of
the premium will reflect, among other things, the relationship of the market
price of the underlying security or index to the exercise price of the option,
the term of the option and the volatility of the market price of the underlying
security or index. By writing a covered call option, a Fund limits its
opportunity to profit from any increase in the market value of the underlying
security or index above the exercise price of the option.
The International Fund and the Government Fund may terminate an
option that they have written prior to the option's expiration by entering into
a closing purchase transaction in which an option is purchased having the same
terms as the option written. A Fund will realize a profit or loss from such
transaction if the cost of such transaction is less or more than the premium
received from the writing of the option. Because increases in the market price
of a call option will generally reflect increases in the market price of the
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<PAGE>
underlying security or index, any loss resulting from the repurchase of a call
option is likely to be offset in whole or in part by unrealized appreciation of
the underlying security (or securities) owned by a Fund.
2. PURCHASING PUT AND CALL OPTIONS ON SECURITIES AND STOCK INDICES
The International Fund may purchase put options to protect its
portfolio holdings in an underlying stock index or security against a decline in
market value. Such hedge protection is provided during the life of the put
option since the Fund, as holder of the put option, is able to sell the
underlying security or index at the put exercise price regardless of any decline
in the underlying market price of the security or index. In order for a put
option to be profitable, the market price of the underlying security or index
must decline sufficiently below the exercise price to cover the premium and
transaction costs. By using put options in this manner, the Fund will reduce any
profit it might otherwise have realized in its underlying security or index by
the premium paid for the put option and by transaction costs, but it will retain
the ability to benefit from future increases in market value.
The International Fund may also purchase call options to hedge
against an increase in prices of stock indices or securities that it ultimately
wants to buy. Such hedge protection is provided during the life of the call
option since the Fund, as holder of the call option, is able to buy the
underlying security or index at the exercise price regardless of any increase in
the underlying market price of the security or index. In order for a call option
to be profitable, the market price of the underlying security or index must rise
sufficiently above the exercise price to cover the premium and transaction
costs. By using call options in this manner, the Fund will reduce any profit it
might have realized had it bought the underlying security or index at the time
it purchased the call option by the premium paid for the call option and by
transaction costs, but it limits the loss it will suffer if the security or
index declines in value to such premium and transaction costs.
3. BORROWING
Each Fund may, from time to time, borrow up to 10% of the value of
its total assets from banks at prevailing interest rates as a temporary measure
for extraordinary or emergency purposes. A Fund may not purchase securities
while borrowings exceed 5% of the value of its total assets.
4. REPURCHASE AGREEMENTS
Each Fund may enter into repurchase agreements subject to resale to a
bank or dealer at an agreed upon price which reflects a net interest gain for
the Fund. The Funds will receive interest from the institution until the time
when the repurchase is to occur.
The Funds will always receive as collateral U.S. Government or
short-term money market securities whose market value is equal to at least 100%
of the amount invested by a Fund, and the Funds will make payment for such
securities only upon the physical delivery or evidence by book entry transfer to
the account of its custodian. If the seller institution defaults, a Fund might
incur a loss or delay in the realization of proceeds if the value of the
collateral securing the repurchase agreement declines and it might incur
disposition costs in liquidating the collateral. The Funds attempt to minimize
such risks by entering into such transactions only with well-capitalized
financial institutions and specifying the required value of the underlying
collateral.
5. FUTURES CONTRACTS
The Government Fund and the International Fund may enter into futures
contracts, options on futures contracts and stock index futures contracts and
options thereon for the purposes of remaining fully invested and reducing
transaction costs. Futures contracts provide for the future sale by one party
and purchase by another party of a specified amount of a specific security,
class of securities, currency or an index at a specified future time and at a
specified price. A stock index futures contract is a bilateral agreement
pursuant to which two parties agree to take or make delivery of an amount of
cash equal to a specified dollar amount times the
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difference between the stock index value at the close of trading of the
contracts and the price at which the futures contract is originally struck.
Futures contracts which are standardized as to maturity date and underlying
financial instrument are traded on national futures exchanges. Futures exchanges
and trading are regulated under the Commodity Exchange Act by the Commodity
Futures Trading Commission (the "CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery
and acceptance of the underlying securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
(buying a contract which has previously been "sold," or "selling" a contract
previously purchased) in an identical contract to terminate the position. A
futures contract on a securities index is an agreement obligating either party
to pay, and entitling the other party to receive, while the contract is
outstanding, cash payments based on the level of a specified securities index.
The acquisition of put and call options on futures contracts will, respectively,
give the Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period. Brokerage commissions are incurred when a
futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the
contract is marked-to-market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements, payment
of additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. Each Fund
expects to earn interest income on its margin deposits.
In addition to the margin restrictions discussed above, transactions
in futures contracts may involve the segregation of funds pursuant to
requirements imposed by the CFTC. Under those requirements, where a Fund has a
long position in a futures contract, it may be required to establish a
segregated account (not with a futures commission merchant or broker, except as
may be permitted under CFTC rules) containing cash or certain liquid assets
equal to the purchase price of the contract (less any margin on deposit). For a
short position in futures or forward contracts held by a Fund, those
requirements may mandate the establishment of a segregated account (not with a
futures commission merchant or broker, except as may be permitted under CFTC
rules) with cash or certain liquid assets that, when added to the amounts
deposited as margin, equal the market value of the instruments underlying the
futures contracts (but are not less than the price at which the short positions
were established). However, segregation of assets is not required if a Fund
"covers" a long position. For example, instead of segregating assets, a Fund,
when holding a long position in a futures contract, could purchase a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Fund. In addition, where a Fund takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where the Fund holds a short position
in a futures contract, it may cover by owning the instruments underlying the
contract. A Fund may also cover such a position by holding a call option
permitting it to purchase the same futures contract at a price no higher than
the price at which the short position was established. Where the Fund sells a
call option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. A Fund
could also cover this position by holding a separate call option permitting it
to purchase the same futures contract at a price no higher than the strike price
of the call option sold by the Fund.
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<PAGE>
When interest rates are expected to rise or market values of
portfolio securities are expected to fall, a Fund can seek through the sale of
futures contracts to offset a decline in the value of its portfolio securities.
When interest rates are expected to fall or market values are expected to rise,
a Fund, through the purchase of such contracts, can attempt to secure better
rates or prices for the Fund than might later be available in the market when it
effects anticipated purchases.
A Fund will only sell futures contracts to protect securities and
currencies it owns against price declines or purchase contracts to protect
against an increase in the price of securities it intends to purchase.
A Fund's ability to effectively utilize futures trading depends on
several factors. First, it is possible that there will not be a perfect price
correlation between the futures contracts and their underlying stock index.
Second, it is possible that a lack of liquidity for futures contracts could
exist in the secondary market, resulting in an inability to close a futures
position prior to its maturity date. Third, the purchase of a futures contract
involves the risk that the Fund could lose more than the original margin deposit
required to initiate a futures transaction.
RISK FACTORS IN FUTURES TRANSACTIONS
Positions in futures contracts may be closed out only on an exchange
which provides a secondary market for such futures. However, there can be no
assurance that a liquid secondary market will exist for any particular futures
contract at any specific time. Thus, it may not be possible to close a futures
position. In the event of adverse price movements, a Fund would continue to be
required to make daily cash payments to maintain the required margin. In such
situations, if a Fund has insufficient cash, it may have to sell portfolio
securities to meet daily margin requirements at a time when it may be
disadvantageous to do so. In addition, the Fund may be required to make delivery
of the instruments underlying futures contracts it holds. The inability to close
options and futures positions also could have an adverse impact on the ability
to effectively hedge them. The Fund will minimize the risk that it will be
unable to close out a futures contract by only entering into futures contracts
which are traded on national futures exchanges and for which there appears to be
a liquid secondary market.
The risk of loss in trading futures contracts in some strategies can
be substantial, due both to the low margin deposits required, and the extremely
high degree of leverage involved in futures pricing. Because the deposit
requirements in the futures markets are less onerous than margin requirements in
the securities market, there may be increased participation by speculators in
the futures market which may also cause temporary price distortions. A
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit if the contract
were closed out. Thus, a purchase or sale of a futures contract may result in
losses in excess of the amount invested in the contract. However, because the
futures strategies engaged in by the Funds are only for hedging purposes, the
Investment Advisor does not believe that the Funds are subject to the risks of
loss frequently associated with futures transactions. A Fund would presumably
have sustained comparable losses if, instead of the futures contract, it had
invested in the underlying financial instrument and sold it after the decline.
Utilization of futures transactions by the Funds does involve the
risk of imperfect or no correlation where the securities underlying the futures
contract have different maturities than the portfolio securities being hedged.
It is also possible that a Fund could both lose money on futures contracts and
also experience a decline in value of its portfolio securities. There is also
the risk of loss by a Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract or related
option.
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<PAGE>
CONCLUSION
Unlike the fundamental investment objective of each Fund set forth
above and the investment restrictions set forth below which may not be changed
without shareholder approval, the Funds have the right to modify the investment
policies described above without shareholder approval.
INVESTMENT RESTRICTIONS
The following fundamental policies and investment restrictions have
been adopted by the Funds and except as noted, such policies and restrictions
cannot be changed without approval by the vote of a majority of the outstanding
voting shares of a Fund which, as defined by the Investment Company Act of 1940,
as amended (the "1940 Act"), means the affirmative vote of the lesser of (a) 67%
or more of the shares of the Fund present at a meeting at which the holders of
more than 50% of the outstanding shares of the Fund are represented in person or
by proxy, or (b) more than 50% of the outstanding shares of the Fund.
The Funds may not:
(1) issue senior securities;
(2) concentrate their investments in particular industries. No
more than 25% of the value of a Fund's assets will be invested in any
one industry;
(3) with respect to 75% of the value of a Fund's assets,
purchase any securities (other than obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities) if,
immediately after such purchase, more than 5% of the value of the
Fund's total assets would be invested in securities of any one
issuer, or more than 10% of the outstanding voting securities of any
one issuer would be owned by the Fund;
(4) make loans of money or securities other than (a) through the
purchase of publicly distributed bonds, debentures or other corporate
or governmental obligations, (b) by investing in repurchase
agreements, and (c) by lending its portfolio securities, provided the
value of such loaned securities does not exceed 33-1/3% of its total
assets;
(5) borrow money in excess of 10% of the value of a Fund's total
assets from banks. A Fund may not purchase securities while
borrowings exceed 5% of the value of its total assets;
(6) buy or sell real estate, commodities, or commodity
contracts, except a Fund may purchase or sell futures or options on
futures;
(7) underwrite securities;
(8) invest in precious metals other than in accordance with a
Fund's investment objective and policy, if as a result the Fund would
then have more than 10% of its total assets (taken at current value)
invested in such precious metals; and
(9) participate in a joint investment account.
The following restrictions are non-fundamental and may be
changed by the Funds' Board of Trustees. Pursuant to such
restrictions, the Funds will not:
(1) make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
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provided that this restriction will not be applied to limit the use
of options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and
investment program of a Fund;
(2) purchase the securities of any other investment company, if
a purchasing Fund, immediately after such purchase or acquisition,
owns in the aggregate, (i) more than 3% of the total outstanding
voting stock of such investment company, (ii) securities issued by
such investment company having an aggregate value in excess of 5% of
the value of the total assets of the Fund, or (iii) securities issued
by such investment company and all other investment companies having
an aggregate value in excess of 10% of the value of the total assets
of the Fund;
(3) invest more than 10% of its total net assets in illiquid
securities. Illiquid securities are securities that are not readily
marketable or cannot be disposed of promptly within seven days and in
the usual course of business without taking a materially reduced
price. Such securities include, but are not limited to, time deposits
and repurchase agreements with maturities longer than seven days.
Securities that may be resold under Rule 144A or securities offered
pursuant to Section 4(2) of the Securities Act of 1933, as amended,
shall not be deemed illiquid solely by reason of being unregistered.
The Investment Advisor shall determine whether a particular security
is deemed to be liquid based on the trading markets for the specific
security and other factors; and
(4) except for The Tocqueville International Value Fund, invest
in securities of foreign issuers other than in accordance with the
respective Fund's investment objective and policy, if as a result a
Fund would then have more than 25% of its total assets (taken at
current value) invested in such foreign securities.
MANAGEMENT
The overall management of the business and affairs of each Fund is
vested with the Board of Trustees. The Board of Trustees approves all
significant agreements between the Trust or each Fund and persons or companies
furnishing services to the Funds, including a Fund's agreement with an
investment advisor, custodian and transfer agent. The day-to-day operations of
the Funds are delegated to each Fund's officers subject always to the investment
objectives and policies of each Fund and to general supervision by the Trust's
Board of Trustees.
The Trustees and officers and their principal occupations are noted
below. Unless otherwise indicated the address of each Trustee and executive
officer is 1675 Broadway, New York, New York 10019.
FRANCOIS DANIEL SICART,* CHAIRMAN, PRINCIPAL EXECUTIVE OFFICER AND TRUSTEE.
Chairman and Chief Executive Officer, Tocqueville Management Corporation, the
General Partner of Tocqueville Asset Management L.P. and Tocqueville Securities
L.P. from January, 1990 to present; Chairman and Chief Executive Officer,
Tocqueville Asset Management Corp. from December, 1985 to January, 1990; Vice
Chairman of Tucker Anthony Management Corporation, from 1981 to October 1986;
Vice President (formerly general partner) and other positions with Tucker
Anthony, Inc. from 1969 to January, 1990.
JAMES B. FLAHERTY, TRUSTEE. President and Partner, Troutbeck Conference Center
and Country Inn from October, 1979 to present; Vice President, Leedsville Realty
and Construction Corp. from 1980 to present; Associate Creative Director, Young
and Rubicam Advertising, and Dentsu, Young and Rubicam from March, 1983 to
February, 1985; Creative Director and Senior Vice President, Tinker Campbell
Ewald from October,
- --------
* Interested person of the Funds as defined in the 1940 Act.
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<PAGE>
1977 to November, 1980; Partner/owner of Freshfields Restaurant, W. Cornell, CT;
President/Creative Director of JBF Ltd., an advertising company.
INGE HECKEL, TRUSTEE. Management Consultant, 1988 to present; Executive
Director, Princess Grace Foundation U.S.A. from June, 1986 to September, 1988;
Vice President and Assistant Secretary, The Asia Society from September, 1984 to
June, 1986; Executive Director, Metropolitan Boston Zoos from September, 1982 to
July, 1984; President, Bradford College, Bradford, Massachusetts from September,
1979 to June, 1982; Trustee of Bradford College; Former Director and Chairman,
Public Relations Committee, International Counsel of Museums (UNESCO); Former
Director, BayBank/Merrimack Valley; Member, Art Advisory Board, Mount Holyoke
College Art Museum.
ROBERT KLEINSCHMIDT,* PRESIDENT, PRINCIPAL OPERATING OFFICER AND TRUSTEE.
President, Tocqueville Asset Management L.P. from January, 1994 to present and
Managing Director from July, 1991 to January, 1994. Partner, David J. Greene &
Co., May, 1978 to July, 1991. Assistant Vice President, Irving Trust Co., July,
1976 to May, 1978.
FRANCOIS LETACONNOUX, TRUSTEE. President, Lepercq de Neuflize & Co. from July,
1993 to present; Director, Lepercq 99 First Management Inc. from 1988 to
present; Director, Lepercq de Neuflize & Co., Inc. (investment bank) from 1988
to present; Managing Director, Lepercq Capital Partners (real estate investment
firm), from 1974 to present.
BERNARD F. COMBEMALE, TRUSTEE. Investment Management Consultant, 1981 to
present; Chairman and Chief Executive Officer, Trusthouse Forte Inc., 1984 to
1988; Chairman of the Executive Committee & Director, Western World Insurance
Company, 1981 to present; Director, Westco Holding Corporation, 1981 to present;
Director, The French-American Foundation, 1980 to present; Trustee, The Princess
Grace Foundation -U.S.A., 1980 to present.
JOSEPH COOPER, SECRETARY AND TREASURER. Vice President and Treasurer,
Tocqueville Management Corporation, the General Partner of Tocqueville Asset
Management L.P. and Tocqueville Securities L.P. from January, 1990 to present.
Vice President, Treasurer and Chief Financial Officer, Tocqueville Asset
Management Corporation from December, 1985 to February, 1990. Self-employed as a
public accountant.
KIERAN LYONS, VICE PRESIDENT AND PRINCIPAL FINANCIAL OFFICER. Chief Financial
Officer, Tocqueville Management Corporation, the General Partner of Tocqueville
Asset Management L.P. and Tocqueville Securities L.P. from January, 1992 to
present. Certified Public Accountant, Pegg & Pegg, February, 1985 to January,
1992.
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
predeccessors), April 1954 to January 1990.
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.
Under the terms of the Massachusetts General Corporation Law, the
Funds may indemnify any person who was or is a Trustee, officer or employee of
each Fund to the maximum extent permitted by the Massachusetts General
Corporation Law; provided, however, that any such indemnification (unless
ordered by a court) shall be made by the Funds only as authorized in the
specific case upon a determination that indemnification of such persons is
proper in the circumstances. Such determination shall be made (i) by the Board
of Trustees, by a majority vote of a quorum which consists of Trustees who are
neither "interested persons" of the Trust, as defined in Section 2(a)(19) of the
1940 Act, nor parties to the proceeding, or (ii) if the
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required quorum is not obtained or if a quorum of such Trustees so directs, by
independent legal counsel in a written opinion. No indemnification will be
provided by a Fund to any Trustee or officer of the Fund for any liability to a
Fund or it shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.
The Funds do not pay direct remuneration to any officer of a Fund. As
of January 31, 1998, the Trustees and officers as a group owned beneficially
3.99% of The Tocqueville Fund's outstanding shares, 2.26% of the International
Fund's outstanding shares, 5.49 % of the Small Cap Fund's outstanding shares,
and 18.96% of the 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
</TABLE>
INVESTMENT ADVISOR AND INVESTMENT ADVISORY AGREEMENTS
Tocqueville Asset Management L.P. (the "Investment Advisor"), 1675
Broadway, New York, New York 10019, acts as the Investment Advisor to each Fund
under a separate investment advisory agreement (the "Agreement" or
"Agreements"). Each Agreement provides that the Investment Advisor identify and
analyze possible investments for each Fund, determine the amount and timing of
such investments, and the form of investment. The Investment Advisor has the
responsibility of monitoring and reviewing each Fund's portfolio, and, on a
regular basis, to recommend the ultimate disposition of such investments. It is
the Investment Advisor's responsibility to cause the purchase and sale of
securities in each Fund's portfolio, subject at all times to the policies set
forth by the Trust's Board of Trustees. In addition, the Investment Advisor also
provides certain administrative and managerial services to the Funds.
The Investment Advisor receives a fee from: (1) both The Tocqueville
Fund and The Tocqueville Small Cap Value Fund, calculated daily and payable
monthly, for the performance of its services at an annual rate of .75% on the
first $100 million of the average daily net assets of each Fund, .70% of average
daily net
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assets in excess of $100 million but not exceeding $500 million, and .65% of
average daily net assets in excess of $500 million; (2) The Tocqueville
International Value Fund, calculated daily and payable monthly, for the
performance of its services at an annual rate of 1.00% on the first $50 million
of the average daily net assets, .75% of average daily net assets in excess of
$50 million but not exceeding $100 million, and .65% of the average daily net
assets in excess of $100 million; and (3) The Tocqueville Government Fund,
calculated daily and payable monthly, for the performance of its services at an
annual rate of .50% on the first $500 million of the average daily net assets of
the Fund, .40% of average daily net assets in excess of $500 million but not
exceeding $1 billion, and .30% of average daily net assets in excess of $1
billion. Each fee is accrued daily for the purposes of determining the offering
and redemption price of such Fund's shares. The advisory fees are higher than
that paid by most investment companies but the Board of Trustees believes them
to be reasonable in light of the services each Fund receives thereunder. For the
years ended October 31, 1995 , 1996 and 1997, with respect to The Tocqueville
Fund, the Investment Advisor earned advisory fees of $240,219, $256,312 and
$265,262, respectively, after waivers of $0, $36,154 and $133,423, respectively.
For the fiscal years ended October 31, 1995 , 1996 and 1997, with respect to The
Small Cap Fund, the Investment Advisor earned advisory fees of $58,456, $62,717
and $62,294, respectively, after waivers of $4,147, $19,096 and $54,172,
respectively. For the fiscal years ended October 31, 1995 , 1996 and 1997, with
respect to The International Fund, the Investment Advisor earned advisory fees
of $0, $99,116 and $382,042, respectively, after waivers of $35,890, $68,161 and
$51,247, respectively. Finally, for the period August 14, 1995 to October 31,
1995 and the fiscal years ended October 31, 1996 and 1997, with respect to The
Government Fund, the Investment Advisor earned advisory fees of $0, $0 and $0,
respectively, after waivers of $3,453 , $44,692 and $75,162, respectively.
Under the terms of the Agreements, each Fund pays all of its expenses
(other than those expenses specifically assumed by the Investment Advisor and
each Fund's distributor) including the costs incurred in connection with the
maintenance of its registration under the Securities Act of 1933, as amended,
and the 1940 Act, printing of prospectuses distributed to shareholders, taxes or
governmental fees, brokerage commissions, custodial, transfer and shareholder
servicing agents, expenses of outside counsel and independent accountants,
preparation of shareholder reports, and expenses of Trustee and shareholder
meetings.
Each Agreement may be terminated without penalty on 60 days' written
notice by a vote of the majority of the Trust's Board of Trustees or by the
Investment Advisor, or by holders of a majority of each Fund's outstanding
shares. Each Fund's Agreement will continue for two years from its effective
date and from year-to-year thereafter provided it is approved, at least
annually, in the manner stipulated in the 1940 Act. This requires that each
Agreement and any renewal thereof be approved by a vote of the majority of the
Fund's Trustees who are not parties thereto or interested persons of any such
party, cast in person at a meeting specifically called for the purpose of voting
on such approval.
DISTRIBUTION PLANS
Each Fund has adopted a distribution plan pursuant to Rule 12b-1 of
the 1940 Act (each a "Plan"). The Plans provide that a Fund may incur
distribution expenses related to the sale of shares of up to .25% per annum of
such Fund's average daily net assets.
Each plan provides that a Fund may finance activities which are
primarily intended to result in the sale of each Fund's shares, including, but
not limited to, advertising, printing of prospectuses and reports for other than
existing shareholders, preparation and distribution of advertising material and
sales literature and payments to dealers and shareholder servicing agents
including Tocqueville Securities L.P. ("Tocqueville Securities") who enter into
agreements with each Fund or its distributor. The Tocqueville Fund accrued after
waiver $80,011 , $97,578, and $132,895, respectively, in distribution expenses
for the fiscal years ended October 31, 1995, 1996 and 1997, respectively. The
Small Cap Fund accrued after waiver $0, $14,595, and $38,822, respectively, in
distribution expenses for the fiscal years ended October 31, 1995 , 1996 and
1997, respectively. The International Fund accrued after waiver $0, $27,121, and
$111,467,
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respectively, in distribution expenses for the fiscal years ended October 31,
1995 , 1996 and 1997, respectively. The Government Fund accrued after waiver $0
, $8,058, and $37,581, respectively, in distribution expenses for the period
August 14, 1995 to October 31, 1995 and the fiscal years ended October 31, 1996
and 1997, respectively.
As of October 31, 1997, The Tocqueville Fund, Small Cap Fund,
International Fund, and Government Fund had $156,715, $81,751, $72,512 and
$33,063, respectively, (0.24%, 0.40%, 0.12% and 0.20%, respectively, as a
percentage of each Fund's net assets) of unreimbursed distribution expenses.
In approving the Plans in accordance with the requirements of Rule
12b-1 under the 1940 Act, the Trustees (including the "disinterested" Trustees,
as defined in the 1940 Act) considered various factors and determined that there
is a reasonable likelihood that each Plan will benefit its Fund and its
shareholders. Each Plan will continue in effect from year to year if
specifically approved annually (a) by the majority of such Fund's outstanding
voting shares or by the Board of Trustees and (b) by the vote of a majority of
the disinterested Trustees. While the Plans remain in effect, each Fund's
Principal Financial Officer shall prepare and furnish to the Board of Trustees a
written report setting forth the amounts spent by each Fund under the Plan and
the purposes for which such expenditures were made. The Plans may not be amended
to increase materially the amount to be spent for distribution without
shareholder approval and all material amendments to each of the Plans must be
approved by the Board of Trustees and by the disinterested Trustees cast in
person at a meeting called specifically for that purpose. While the Plans are in
effect, the selection and nomination of the disinterested Trustees shall be made
by those disinterested Trustees then in office.
ADMINISTRATIVE SERVICES AGREEMENT
Tocqueville Asset Management L.P., supervises administration of the Funds
pursuant to an Administrative Services Agreement with each Fund. Under the
Administrative Services Agreement, Tocqueville Asset Management L.P. supervises
the administration of all aspects of each Fund's operations, including each
Fund's receipt of services for which the Fund is obligated to pay, provides the
Funds with general office facilities and provides, at each Fund's expense, the
services of persons necessary to perform such supervisory, administrative and
clerical functions as are needed to effectively operate the Funds. Those
persons, as well as certain employees and Trustees of the Funds, may be
directors, officers or employees of (and persons providing services to the Funds
may include) Tocqueville Asset Management L.P. and its affiliates. For these
services and facilities, Tocqueville Asset Management L.P. receives with respect
to each Fund a fee computed and paid monthly at an annual rate of 0.15% of the
average daily net assets of each Fund.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Subject to the supervision of the Board of Trustees, decisions to buy
and sell securities for each Fund are made by the Investment Advisor. The
Investment Advisor is authorized to allocate the orders placed by it on behalf
of a Fund to such unaffiliated brokers who also provide research or statistical
material, or other services to the Fund or the Investment Advisor for the Fund's
use. Such allocation shall be in such amounts and proportions as the Investment
Advisor shall determine and the Investment Advisor will report on said
allocations regularly to the Board of Trustees indicating the unaffiliated
brokers to whom such allocations have been made and the basis therefor. In
addition, the Investment Advisor may consider sales of shares of each Fund and
of any other funds advised or managed by the Investment Advisor as a factor in
the selection of unaffiliated brokers to execute portfolio transactions for each
Fund, subject to the requirements of best execution. The Trustees have
authorized the allocation of brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions. The Trustees have adopted procedures
incorporating the standards of Rule 17e-1 of the 1940 Act, which require that
the commission paid to affiliated broker-dealers must be "reasonable and fair
compared to the commission, fee or other remuneration received, or to be
received, by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." At
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times, a Fund may also purchase portfolio securities directly from dealers
acting as principals, underwriters or market makers. As these transactions are
usually conducted on a net basis, no brokerage commissions are paid by the Fund.
In selecting a broker to execute each particular transaction, the
Investment Advisor will take the following into consideration: the best net
price available; the reliability, integrity and financial condition of the
broker; the size and difficulty in executing the order; and, the value of the
expected contribution of the broker to the investment performance of the Funds
on a continuing basis. Accordingly, the cost of the brokerage commissions to a
Fund in any transaction may be greater than that available from other brokers if
the difference is reasonably justified by other aspects of the portfolio
execution services offered. Subject to such policies and procedures as the Board
of Trustees may determine, the Investment Advisor shall not be deemed to have
acted unlawfully or to have breached any duty solely by reason of its having
caused a Fund to pay an unaffiliated broker that provides research services to
the Investment Advisor for each Fund's use an amount of commission for effecting
a portfolio investment transaction in excess of the amount of commission another
broker would have charged for effecting the transaction, if the Investment
Advisor determines in good faith that such amount of commission was reasonable
in relation to the value of the research service provided by such broker viewed
in terms of either that particular transaction of the Investment Advisor's
ongoing responsibilities with respect to the Funds. For the fiscal year ended
October 31, 1995, the Tocqueville Fund, Small Cap Fund, International Fund, and
Government Fund paid total brokerage commissions on portfolio transactions in
the amount of $71,728, $71,128, $39,142, and $7,913, respectively. For the
fiscal year ended October 31, 1996, the Tocqueville Fund, Small Cap Fund,
International Fund, and Government Fund paid total brokerage commissions on
portfolio transactions in the amount of $103,140, $101,089, $130,401, and
$24,363, respectively. For the fiscal year ended October 31, 1997, the
Tocqueville Fund, Small Cap Fund, International Fund and Government Fund paid
total brokerage commissions on portfolio transactions in the amount of $101,313,
$132,304, $421,839 and $64,977, respectively. Commissions earned by Tocqueville
Securities L.P., the Funds' distributor for services rendered as a registered
broker-dealer in securities transactions for the fiscal year ended October 31,
1995 , 1996 and 1997, respectively, were: the Tocqueville Fund: $39,665 ,
$63,555 and $62,053, respectively; the Small Cap Fund: $23,016 , $47,933 and
$67,534, respectively; the International Fund: $0 , $1,509 and $4,177,
respectively; and the Government Fund: $7,912 , $9,213 and $64,827,
respectively. For the fiscal year ended October 31, 1997, the percentage of each
Fund's brokerage commissions paid, and the aggregate dollar amount of
transactions involving the payment of such commissions, to Tocqueville
Securities L.P. were: The Tocqueville Fund: 61.25% and $36,138,756,
respectively; the Small Cap Fund: 51.04% and $17,334,322, respectively; the
International Fund: 0.99% and $4,531,895, respectively; and the Government Fund:
99.77% and $84,901,063, respectively.
ALLOCATION OF INVESTMENTS
The Investment Advisor has other advisory clients which include
individuals, trusts, pension and profit sharing funds, some of which have
similar investment objectives to the Funds. As such, there will be times when
the Investment Advisor may recommend purchases and/or sales of the same
portfolio securities for each Fund and its other clients. In such circumstances,
it will be the policy of the Investment Advisor to allocate purchases and sales
among the Funds and its other clients in a manner which the Investment Advisor
deems equitable, taking into consideration such factors as size of account,
concentration of holdings, investment objectives, tax status, cash availability,
purchase cost, holding period and other pertinent factors relative to each
account. Simultaneous transactions may have an adverse effect upon the price or
volume of a security purchased by each Fund.
COMPUTATION OF NET ASSET VALUE
Each Fund will determine the net asset value of its shares once daily
as of the close of trading on the New York Stock Exchange (the "Exchange") on
each day that the Exchange is open for business. It is expected
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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. Each Fund may make or cause
to be made a more frequent determination of the net asset value and offering
price, which determination shall reasonably reflect any material changes in the
value of securities and other assets held by a Fund from the immediately
preceding determination of net asset value. The net asset value is determined by
dividing the market value of a Fund's investments as of the close of trading
plus any cash or other assets (including dividends receivable and accrued
interest) less all liabilities (including accrued expenses) by the number of the
Fund's shares outstanding. Securities traded on the New York Stock Exchange or
the American Stock Exchange will be valued at the last sale price, or if no
sale, at the mean between the latest bid and asked price. Securities traded in
any other U.S. or foreign market shall be valued in a manner as similar as
possible to the above, or if not so traded, on the basis of the latest available
price. Securities sold short "against the box" will be valued at market as
determined above; however, in instances where a Fund has sold securities short
against a long position in the issuer's convertible securities, for the purpose
of valuation, the securities in the short position will be valued at the "asked"
price rather than the mean of the last "bid" and "asked" prices. Investments in
gold bullion will be valued at their respective fair market values determined on
the basis of the mean between the last current bid and asked prices based on
dealer or exchanges quotations. Where there are no readily available quotations
for securities they will be valued at a fair value as determined by the Board of
Trustees acting in good faith.
PURCHASE AND REDEMPTION OF SHARES
A complete description of the manner by a which a Fund's shares may
be purchased and redeemed, including discussions concerning the front-end sales
load appears in the Prospectus 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 each Fund and its shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of each Fund or its shareholders, and the
discussions here and in the Prospectus are not intended as substitutes for
careful tax planning.
Qualification as a Regulated Investment Company
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Each Fund has elected to be taxed as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"). As a regulated investment company, a Fund is not subject to federal
income tax on the portion of its net investment income (i.e., taxable interest,
dividends and other taxable ordinary income, net of expenses) and capital gain
net income (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) for the taxable
year (the "Distribution Requirement"), and satisfies certain other requirements
of the Code that are described below. Distributions by a Fund made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year, will be considered distributions of income and gains
of the taxable year and will, therefore , count towards the satisfaction of the
Distribution Requirement.
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)
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derived with respect to its business of investing in such stock, securities or
currencies (the "Income Requirement").
In general, gain or loss recognized by a 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 a
Fund at a market discount (generally, at a price less than its principal amount)
will be treated as ordinary income to the extent of the portion of the market
discount which accrued during the period of time the Fund held the debt
obligation. In addition, under the rules of Code section 988, gain or loss
recognized on the disposition of a debt obligation denominated in a foreign
currency or an option with respect thereto (but only to the extent attributable
to changes in foreign currency exchange rates), and gain or loss recognized on
the disposition of a foreign currency forward contract, futures contract, option
or similar financial instrument, or of foreign currency itself, except for
regulated futures contracts or non-equity options subject to Code section 1256
(unless a Fund elects otherwise), will generally be treated as ordinary income
or loss.
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 a 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 a Fund on the disposition of an asset is long-term or short-term,
the holding period of the asset may be affected if (1) the asset is used to
close a "short sale" (which includes for certain purposes the acquisition of a
put option) or is substantially identical to another asset so used, (2) the
asset is otherwise held by the Fund as part of a "straddle" (which term
generally excludes a situation where the asset is stock and the Fund grants a
qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (3) the asset is stock and the Fund
grants an in-the-money qualified covered call option with respect thereto. In
addition, a Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by a Fund on the lapse of, or any gain or loss
recognized by a 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 Funds (such as
regulated futures contracts, certain foreign currency contracts, and options on
stock indexes and futures contracts) will be subject to special tax treatment as
"Section 1256 contracts." Section 1256 contracts are treated as if they are sold
for their fair market value on the last business day of the taxable year, even
though a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. A Fund, however,
may elect not to have this special tax
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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.
A Fund may purchase securities of certain foreign investment funds
or trusts which constitute passive foreign investment companies ("PFICs") for
federal income tax purposes. If a Fund invests in a PFIC, it 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, each Fund
must satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of a Fund's
taxable year, at least 50% of the value of the Fund's assets must consist of
cash and cash items, U.S. Government securities, securities of other regulated
investment companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in securities
of such issuer and does not hold more than 10% of the outstanding voting
securities of such issuer), and no more than 25% of the value of its total
assets may be invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment companies),
or in two or more issuers which the Fund controls and which are engaged in the
same or similar trades or businesses. Generally, an
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option (call or put) with respect to a security is treated as issued by the
issuer of the security not the issuer of the option.
If for any taxable year a Fund does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable to the
shareholders as ordinary dividends to the extent of the Fund's current and
accumulated earnings and profits. Such distributions generally will be eligible
for the dividends-received deduction in the case of corporate shareholders.
Excise Tax on Regulated Investment Companies
- --------------------------------------------
A 4% non-deductible excise tax is imposed on a regulated investment
company that fails to distribute in each calendar year an amount equal to 98% of
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).
Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
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Each Fund anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes. Such dividends paid by the Tocqueville Fund and the
Small Cap Fund will qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below. Such dividends paid
by the Government and the International Fund generally should not qualify for
the 70% dividends-received deduction for corporate shareholders.
A Fund may either retain or distribute to shareholders its net
capital gain for each taxable year. Each Fund currently intends to distribute
any such amounts. 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 a Fund's disposition of domestic "small business" stock will be
subject to tax.
Conversely, if a Fund elects to retain its net capital gain, the Fund
will be taxed thereon (except to the extent of any available capital loss
carryovers) at the 35% corporate tax rate. If a Fund elects to retain its net
capital gain, it is expected that the Fund also will elect to have shareholders
of record on the last day of its taxable year treated as if each received a
distribution of his pro rata share of such gain, with the result that each
shareholder will be required to report his pro rata share of such gain on his
tax return as long-term capital gain,
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will receive a refundable tax credit for his pro rata share of tax paid by the
Fund on the gain, and will increase the tax basis for his shares by an amount
equal to the deemed distribution less the tax credit.
Ordinary income dividends paid by the Tocqueville Fund and the Small
Cap Fund with respect to a taxable year will qualify for the 70%
dividends-received deduction generally available to corporations (other than
corporations, such as S corporations, which are not eligible for the deduction
because of their special characteristics and other than for purposes of special
taxes such as the accumulated earnings tax and the personal holding company tax)
to the extent of the amount of qualifying dividends received by the Fund from
domestic corporations for the taxable year. 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 an insignificant
portion of the International Fund will be invested in stock of domestic
corporations, the ordinary dividends distributed by the Fund will generally 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 a Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle a Fund to a reduced rate of, or exemption from, taxes on such income. It
is impossible to determine the effective rate of foreign tax in advance since
the amount of a Fund's assets to be invested in various countries is not known.
If more than 50% of the value of a Fund's total assets at the close of its
taxable year consist of the stock or securities of foreign corporations, the
Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If a Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from 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 a Fund that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in reduction of) the shareholder's tax basis in his shares;
any excess will be treated as gain from the sale of his shares, as discussed
below.
Distributions by a Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date. In addition, if the net asset value at
the time a shareholder purchases shares of a Fund reflects undistributed net
investment income or recognized capital gain net income, or unrealized
appreciation in the value of the assets of the Fund, distributions of such
amounts will be taxable to the shareholder in the manner described above,
although such distributions economically constitute a return of capital to the
shareholder.
Ordinarily, shareholders are required to take distributions by a Fund
into account in the year in which the distributions are made. However, dividends
declared in October, November or December of any year and payable to
shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders (and made by 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.
Each Fund will be required in certain cases to withhold and remit to
the U.S. Treasury 31% of ordinary income dividends and capital gain dividends,
and the proceeds of redemption of shares, paid to any shareholder (1) who has
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 a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of a Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of a Fund will be considered capital gain
or loss and will be long-term capital gain or loss if the shares were held for
longer than one year. 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 a
Fund, (2) disposes of such shares less than 91 days after they are acquired and
(3) subsequently acquires shares of the Fund or another fund at a reduced sales
load pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
-18-
<PAGE>
Foreign Shareholders
- --------------------
Taxation of a shareholder who, as to the United States, is a
nonresident alien individual, foreign trust or estate, foreign corporation, or
foreign partnership ("foreign shareholder"), depends on whether the income from
a Fund is "effectively connected" with a U.S. trade or business carried on by
such shareholder.
If the income from a Fund is not effectively connected with a U.S.
trade or business carried on by a foreign shareholder, ordinary income dividends
paid to a foreign shareholder will be subject to U.S. withholding tax at the
rate of 30% (or lower 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 a Fund's election to treat any foreign taxes paid by
it as paid by its shareholders, but may not be allowed a deduction against this
gross income or a credit against this U.S. withholding tax for the foreign
shareholder's pro rata share of such foreign taxes which it is treated as having
paid. Such a foreign shareholder would generally be exempt from U.S. federal
income tax on gains realized on the sale of shares of a Fund, capital gain
dividends and amounts retained by the Fund that are designated as undistributed
capital gains.
If the income from a Fund is effectively connected with a U.S. trade
or business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends, and any gains realized upon the sale of shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of a foreign shareholder other than a corporation, a Fund
may be required to withhold U.S. federal income tax at a rate of 31% on
distributions that are otherwise exempt from withholding tax (or taxable at a
reduced treaty rate) unless such 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 a 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 a Fund.
-19-
<PAGE>
PERFORMANCE CALCULATION
For purposes of quoting and comparing the performance of each Fund to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return. Under rules promulgated by the Securities and Exchange
Commission ("SEC"), a fund's advertising performance must include total return
quotations calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical
$1,000 payment, made at the beginning of the
1,5 or 10 year period, at the end of such
period (or fractional portion thereof.)
Under the foregoing formula, the time periods used in advertising
will be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertising for publication, and will
cover 1, 5 and 10 year periods of a Fund's existence or such shorter period
dating from the effectiveness of the Fund's Registration Statement. In
calculating the ending redeemable value, all dividends and distributions by a
Fund are assumed to have been reinvested at net asset value as described in the
Prospectus on the reinvestment dates during the period. Total return, or "T" in
the formula above, is computed by finding the average annual compounded rates of
return over the 1, 5 and 10 year periods (or fractional portion thereof) that
would equate the initial amount invested to the ending redeemable value. Any
recurring account charges that might in the future be imposed by a Fund would be
included at that time.
In addition to the total return quotations discussed above, a Fund
may advertise its yield based on a 30-day (or one month) period ended on the
date of the most recent balance sheet included in the Fund's Post-Effective
Amendment to its Registration Statement, computed by dividing the net investment
income per share earned during the period by the maximum offering price per
share on the last day of the period, according to the following formula:
a-b 6
YIELD = 2[( ----- +1)-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
Under this formula, interest earned on debt obligations for purposes
of "a" above, is calculated by (1) computing the yield to maturity of each
obligation held by the Fund based on the market value of the obligation
(including actual accrued interest) at the close of business on the last day of
each month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest), (2) dividing that figure by 360
and multiplying the quotient by the market value of the obligation (including
actual accrued interest as referred to above) to determine the interest income
on the obligation for each day of the subsequent month that the obligation is in
the Fund's portfolio (assuming a month of 30 days) and (3) computing the total
of the interest earned on all debt obligations and all dividends accrued on all
equity securities during the 30-day or one month period. In computing dividends
accrued, dividend income is recognized by accruing 1/360 of the stated dividend
rate of a security each day that the security is in the Fund's portfolio. For
purposes of "b" above, Rule 12b-1 expenses are included among the expenses
accrued for the period. Undeclared earned income,
-20-
<PAGE>
computed in accordance with generally accepted accounting principles, may be
subtracted from the maximum offering price calculation required pursuant to "d"
above.
Any quotation of performance stated in terms of yield will be given
no greater prominence than the information prescribed under the SEC's rules. In
addition, all advertisements containing performance data of any kind will
include a legend disclosing that such performance data represents past
performance and that the investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Calculated pursuant to the SEC's formula and assuming an ending
redeemable value of an initial $1,000 investment, The Tocqueville Fund's total
return for the 1 year, 3 year, 5 year and 10 year periods ended October 31, 1997
was 29.08%, 22.48%, 19.61% and 16.29%, respectively; the total return for the
Small Cap Fund for the 1 year, 3 year and since inception periods ended October
31, 1997 was 30.55%, 23.04%, and 21.88%, respectively; the total return for the
International Fund for the 1 year, 3 year and since inception periods ended
October 31, 1997 was (17.73)%, 1.04%, and 1.02%, respectively; and the total
return for the Government Fund for the 1 year and since inception periods ended
October 31, 1997 was 1.22% and 3.68%, respectively. For the 30 day period ended
October 31, 1997, the Government Fund's yield was 4.49%.
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 nine series,
The Tocqueville Fund, The Tocqueville Small Cap Value Fund, The Tocqueville
International Value Fund, The Tocqueville Government Fund, The Tocqueville
California Muni Fund, The Tocqueville High-Yield Municipal Bond Fund, The
Tocquiville New York Muni Fund, The Tocqueville Tax-Free Money Market Fund and
The Tocqueville U.S. Government Strategic Income Fund. On August 19, 1991, the
Declaration of Trust was amended to change the name of the Trust to "The
Tocqueville Trust," and on August 4, 1995, the Declaration of Trust was amended
to permit the division of a series into classes of shares. Each share of
beneficial interest has one vote and shares equally in dividends and
distributions when and if declared by a Fund and in the Fund's net assets upon
liquidation. All shares, when issued, are fully paid and nonassessable. There
are no preemptive, conversion or exchange rights. Fund shares do not have
cumulative voting rights and, as such, holders of at least 50% of the shares
voting for Trustees can elect all Trustees and the remaining shareholders would
not be able to elect any Trustees. The Board of Trustees may classify or
reclassify any unissued shares of the Trust into shares of any series by setting
or changing in any one or more respects, from time to time, prior to the
issuance of such shares, the preference, conversion or other rights, voting
powers, restrictions, limitations as to dividends, or qualifications of such
shares. Any such classification or reclassification will comply with the
provisions of the 1940 Act. Shareholders of each series as created will vote as
a series to change, among other things, a fundamental policy of each Fund and to
approve the Investment Advisory Agreement and Distribution Plan.
The Trust is not required to hold annual meetings of shareholders but
will hold special meetings of shareholders when, in the judgment of the
Trustees, it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances, the right to communicate with
other shareholders in connection with requesting a meeting of shareholders for
the purpose of removing one or more Trustees. Shareholders also have, in certain
circumstances, the right to remove one or more Trustees without a meeting. No
material amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of each
series affected by the amendment.
Under Massachusetts law, shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable as partners
for its obligations. However, the Trust's Declaration of
-21-
<PAGE>
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides for indemnification and reimbursement of
expenses out of the Trust property for any shareholder held personally liable
for the obligations of the Trust. The Trust's Declaration of Trust further
provides that obligations of the Trust are not binding upon the Trustees
individually but only upon the property of the Trust and that the Trustees will
not be liable for any action or failure to act, errors of judgment or mistakes
of fact or law, but nothing in the Declaration of Trust protects a Trustee
against any liability to which he would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office.
PRINCIPAL HOLDERS
- -----------------
As of January 31, 1998, the following shareholders owned 5% or more
of a Fund's shares:
- - The Tocqueville Fund:
--------------------
Tocqueville Asset Management L.P. held discretion over 247,179.295
shares (6.74%).
- - The Tocqueville Small Cap Value Fund:
------------------------------------
Tocqueville Asset Management L.P. held discretion over 106,748.341
shares (7.10%).
- - The Tocqueville International Value Fund:
----------------------------------------
Tocqueville Asset Management L.P. held discretion over 4,340,763.152
shares (63.37%).
- - The Tocqueville Government Fund:
-------------------------------
Tocqueville Asset Management L.P. held discretion over 440,310.808
shares (18.97%)
Prestige Bank FSB held 128,050.149 shares (7.7%).
The address of Tocqueville Asset Management L.P. is 1675 Broadway, New York,
New York 10019.
The address of Prestige Bank FSB is 710 Old Clairton Road, Pittsburgh,
Pennsylvania 15236-4354.
REPORTS
Shareholders receive reports at least semi-annually showing each
Fund's holdings and other information. In addition, shareholders receive
financial statements examined by the Trust's independent accountants.
FINANCIAL STATEMENTS
The Financial Statements for each Fund for the fiscal year ended
October 31, 1997 and for the six months ended April 30, 1997, respectively, are
incorporated by reference from the Annual Report to Shareholders dated October
31, 1997.
-22-
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. Financial Statements and Exhibits
(a) Financial statements.
In Part A: None.
In Part B: Annual Report for the year ended October 31, 1997
are incorporated by reference into the Statement of
Additional Information from the Rule 30-D filing
made by the Registrant on January 5, 1998 (Accession
number 0000950130-98-000020).
In Part C: None.
(b) Exhibits
EX-99.B1(a) Agreement and Declaration of Trust of Registrant.(1)
(b) Amendment to the Agreement and Declaration of Trust
of Registrant dated August 4, 1995.(5)
EX-99.B2 By-laws of Registrant.(1)
EX-99.B3 None.
EX-99.B4 Specimen certificate for shares of beneficial
interest of Registrant.(2)
EX-99.B5(a) Investment Advisory Agreement between Registrant on
behalf of The Tocqueville Fund and Tocqueville Asset
Management L.P.(3)
(b) Investment Advisory Agreement between Registrant on
behalf of The Tocqueville Asia-Pacific Fund and
Tocqueville Asset Management L.P.(5)
(c) Investment Advisory Agreement between Registrant on
behalf of The Tocqueville Europe Fund and The
Tocqueville Asset Management L.P.(5)
(d) Investment Advisory Agreement between Registrant on
behalf of The Tocqueville Small Cap Value Fund and
Tocqueville Asset Management L.P.(5)
(e) Investment Advisory Agreement Between Registrant on
behalf of The Tocqueville Government Fund and
Tocqueville Asset Management L.P.(5)
EX-99.B6 Distribution Agreement between Registrant and
Tocqueville Securities L.P.(5)
EX-99.B7 None.
EX- 99.B8(a) Custodian Agreement between Registrant and Firstar
Trust Company.(6)
-4-
<PAGE>
EX- 99.B8(b) Global Custody Tri-Party Agreement between The
Chase Manhattan Bank, Firstar Trust and the
Registrant on behalf of The
Tocqueville Asia-Pacific Fund.(6)
EX- 99.B8(c) Global Custody Tri-Party Agreement between The
Chase Manhattan Bank, Firstar Trust and the
Registrant on behalf of The Tocqueville
International Value Fund.(6)
EX- 99.B9(a) Administration Agreement between Registrant and
Tocqueville Asset Management L.P.(5)
EX- 99.B9(b) Transfer Agent Agreement between the Registrant
and Firstar Trust Company.(6)
EX- 99.B9(c) Fund Accounting Servicing Agreement between the
Registrant and Firstar Trust Company.(6)
EX-99.B10 None.
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel,
counsel to the Registrant.(7)
EX-99.B11(b) Consent of McGladrey & Pullen, LLP, independent
accountants for the Registrant.(7)
EX-99.B12 None.
EX-99.B13 Certificate re: initial $100,000 capital.(2)
EX-99.B14 None.
EX-99.B15(a) Rule 12b-1 Plan for the Class A shares of The
Tocqueville Fund, as amended.(5)
(b) Rule 12b-1 Plan for the Class B shares of The
Tocqueville Fund.(5)
(c) Rule 12b-1 Plan for the Class A shares of The
Tocqueville Europe Fund (now The Tocqueville
International Value Fund's Rule 12b-1 Plan).(5)
(d) Rule 12b-1 Plan for the Class B shares of The
Tocqueville Europe Fund (now The Tocqueville
International Value Fund's Rule 12b-1 Plan).(5)
(e) Rule 12b-1 Plan for the Class A shares
of The Tocqueville Small Cap Value Fund.(5)
(f) Rule 12b-1 Plan for the Class B shares
of The Tocqueville Small Cap Value Fund.(5)
(g) Rule 12b-1 Plan for the Class A Shares of
The Tocqueville Government Fund.(5)
(h) Rule 12b-1 Plan for the Class B shares of
The Tocqueville Government Fund.(5)
-5-
<PAGE>
EX-99.B16 Schedule for computation of performance
quotation.(4)
EX- 99.B17 Financial Data Schedules filed herewith as
EX-27.1, EX-27.2, EX 27.3, and EX-27.4
EX-99.B18 Rule 18f-3 Plan for The Tocqueville Trust.(4)
EX-27.1 Financial Data Schedule - The Tocqueville
Fund.(7)
EX-27.2 Financial Data Schedule - The Tocqueville Small
Cap Fund.(7)
EX-27.3 Financial Data Schedule - The Tocqueville
International Value Fund.(7)
EX-27.4 Financial Data Schedule - The Tocqueville
Government Fund.(7)
- -----------------
(1) Previously filed in the Fund's Registration Statement on September 15,
1986.
(2) Previously filed in Pre-Effective Amendment No. 1 on December 2, 1986.
(3) Previously filed in Post-Effective Amendment No. 4 on December 29, 1989.
(4) Previously filed in Post-Effective Amendment No. 13 on July 19, 1995.
(5) Previously filed in Post-Effective Amendment No. 14 on February 28, 1996,
accession number 0000922423-96-000107.
(6) Previously filed in Post-Effective Amendment No. 16 on February 28, 1997,
accession number 0000922423-97-000170.
(7) Filed herewith.
ITEM 25. Persons Controlled By or Under Common Control with Registrant
None
ITEM 26. Number of Holders of Securities
Number of Record Holders
Title of Class ($.01 par value) as of January 30, 1998
- ---------------------------------- -------------------------
Shares of beneficial interest:
The Tocqueville Fund 1,059
The Tocqueville International Value Fund 281
The Tocqueville Small Cap Value Fund 351
The Tocqueville Government Fund 235
The Tocqueville California Muni Fund 0
The Tocqueville High-Yield Municipal Bond Fund 0
The Tocqueville New York Muni Fund 0
The Tocqueville Tax-Free Money Market Fund 0
The Tocqueville U.S. Government Strategic Income Fund 0
ITEM 27. Indemnification
Article VIII of the Registrant's Declaration of Trust provides as
follows:
The Trust shall indemnify each of its Trustees, officers (including
persons who serve at its request as directors, officers or trustees of another
organization in which it has any interest, as a shareholder, creditor or
-6-
<PAGE>
otherwise) against all liabilities and expenses (including amounts paid in
satisfaction of judgments, in compromise, as fines and penalties, and as counsel
fees) reasonably incurred by him in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or criminal, in which he
may be involved or with which he may be threatened, while in office or
thereafter, by reason of his being or having been such a trustee, officer,
employee or agent, except with respect to any matter to which he shall have been
adjudicated to have acted in bad faith, willful misfeasance, gross negligence or
reckless disregard of his duties; provided, however, that as to any matter
disposed of by a compromise payment by such person, pursuant to a consent decree
or otherwise, no indemnification either for said payment or for any other
expenses shall be provided unless the Trust shall have received a written
opinion from independent legal counsel approved by the Trustees to the effect
that if the matter of willful misfeasance, gross negligence or reckless
disregard of duty, or the matter of good faith and reasonable belief as to the
best interests of the Trust, had been adjudicated, it would have been
adjudicated in favor of such person. The rights accruing to any Person under
these provisions shall not exclude any other right to which he may be lawfully
entitled; provided that no Person may satisfy any right of indemnity or
reimbursement granted herein or in Section 5.1 or to which he may be otherwise
entitled except out of the property of the Trust, and no Shareholder shall be
personally liable to any Person with respect to any claim for indemnity or
reimbursement or otherwise. The Trustees may make advance payments in connection
with indemnification under this Section 5.3, provided that the indemnified
person shall have given a written undertaking to reimburse the Trust in the
event it is subsequently determined that he is not entitled to such
indemnification.
Insofar as the conditional advancing of indemnification monies for
actions based upon the Investment Company Act of 1940 may be concerned, such
payments will be made only on the following conditions: (1) the advances must be
limited to amounts used, or to be used, for the preparation or presentation of a
defense to the action, including costs connected with the preparation of a
settlement; (ii) advances may be made only upon receipt of a written promise by,
or on behalf of, the recipient to repay that amount of the advance which exceeds
that amount to which it is ultimately determined that he is entitled to receive
from the Registrant by reason of indemnification; and (iii) (a) such promise
must be secured by a surety bond, other suitable insurance or an equivalent form
of security which assures that any repayments may be obtained by the Registrant
without delay or litigation, which bond, insurance or other form of security
must be provided by the recipient of the advance, or (b) a majority of a quorum
of the Registrant's disinterested, non-party Trustees, or an independent legal
counsel in a written opinion, shall determine, based upon a review of readily
available facts, that the recipient of the advance ultimately will be found
entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Trustees, officers and controlling persons of
the Registrant pursuant to the foregoing provisions or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in
connection with the successful defense of any action, suit or proceeding) is
asserted by such Trustee, officer or controlling person in connection with
shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
ITEM 28. Business and Other Connections of Investment Adviser
None.
ITEM 29. Principal Underwriters
(a) None.
-7-
<PAGE>
(b) The following information is furnished with respect to the
officers and Partners of Tocqueville Securities L.P., the Registrant's principal
underwriter. The business address for all persons listed below is 1675 Broadway,
New York, New York 10019.
Positions and Positions
Name and Principal Offices with and Offices
Business Address Principal Underwriters with Registrant
- ---------------- ---------------------- ---------------
Tocqueville Management Corp. General Partner None
1675 Broadway
New York, New York 10019
Tocqueville Asset Management L.P. Limited Partner Investment Adviser
1675 Broadway
New York, New York 10019
(c) Not Applicable. The Registrant's principal underwriter is an
affiliated person of the Registrant.
ITEM 30. Location of Accounts and Records
As required by Section 31(a) of the Investment Company Act of 1940, the
accounts, books or other documents relating to each of The Tocqueville Fund's,
The Tocqueville International Value Fund's, The Tocqueville Small Cap Value
Fund's, and The Tocqueville Government Fund's budget and accruals will be kept
by Firstar Trust Company, 615 East Michigan Street, Milwaukee, WI 53202. The
accounts, books or other documents of each Fund relating to shareholder accounts
and records and dividend disbursements also will be kept by Firstar Trust
Company at the same address.
ITEM 31. Management Services
There are no management-related service contracts not discussed in
Parts A and B.
ITEM 32. Undertakings
(1) Registrant undertakes to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or
trustees if requested to do so by the holders of at least 10% of
the Registrant's outstanding voting securities, and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940, as amended.
(2) Not applicable.
(3) Registrant undertakes to furnish each person to whom a prospectus
is delivered a copy of a Fund's latest annual report to
shareholders which will include the information required by Item
5A, upon request and without charge.
-8-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of New York, and
State of New York on the 27th day of February, 1998.
THE TOCQUEVILLE TRUST
By: /s/Francois D. Sicart
------------------------------
Francois D. Sicart
Principal Executive Officer
As required by the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed by the following persons
in the capacities indicated on the 27th day of February, 1998.
Signatures Title
/s/Francois D. Sicart Principal Executive Officer
- --------------------------- and Trustee
Francois D. Sicart
/s/Bernard F. Combemale
- --------------------------- Trustee
Bernard F. Combemale
/s/James B. Flaherty
- --------------------------- Trustee
James B. Flaherty
/s/Inge Heckel Trustee
- ---------------------------
Inge Heckel
/s/Robert Kleinschmidt President, Principal Operating
- --------------------------- Officer and Trustee
Robert Kleinschmidt
/s/Francois Letaconnoux Trustee
- ---------------------------
Francois Letaconnoux
/s/Kieran Lyons Vice President and
- --------------------------- Principal Financial Officer
Kieran Lyons
/s/Lucille G. Bono Trustee
- ---------------------------
Lucille G. Bono
/s/Larry M. Senderhauf Trustee
- ---------------------------
Larry M. Senderhauf
-9-
<PAGE>
INDEX TO EXHIBITS
Exhibit Caption
EX-99.B11(a) Consent of Kramer, Levin, Naftalis & Frankel, counsel for the
Registrant.
EX-99.B11(b) Consent of McGladrey & Pullen, LLP, independent accountants for
the Registrant
EX-27.1 Financial Data Schedule - The Tocqueville Fund
EX-27.2 Financial Data Schedule - The Tocqueville Small Cap Value Fund
EX-27.3 Financial Data Schedule - The Tocqueville International Value
Fund
EX-27.4 Financial Data Schedule - The Tocqueville Government Fund
-10-
Kramer, Levin, Naftalis & Frankel
919 THIRD AVENUE
NEW YORK, N.Y. 10022 - 3852
(212) 715 - 9100
Arthur H. Aufses III Monica C. Lord Sherwin Kamin
Thomas D. Balliett Richard Marlin Arthur B. Kramer
Jay G. Baris Thomas Moers Mayer Maurice N. Nessen
Philip Bentley Thomas E. Molner Founding Partners
Saul E. Burian Thomas H. Moreland Counsel
Barry Michael Cass Ellen R. Nadler _____
Thomas E. Constance Gary P. Naftalis
Michael J. Dell Michael J. Nassau Martin Balsam
Kenneth H. Eckstein Michael S. Nelson Joshua M. Berman
Charlotte M. Fischman Jay A. Neveloff Jules Buchwald
David S. Frankel Michael S. Oberman Rudolph de Winter
Marvin E. Frankel Paul S. Pearlman Meyer Eisenberg
Alan R. Friedman Susan J. Penry-Williams Arthur D. Emil
Carl Frischling Bruce Rabb Maria T. Jones
Mark J. Headley Allan E. Reznick Maxwell M. Rabb
Robert M. Heller Scott S. Rosenblum James Schreiber
Philip S. Kaufman Michele D. Ross Counsel
Peter S. Kolevzon Howard J. Rothman _____
Kenneth P. Kopelman Max J. Schwartz
Michael Paul Korotkin Mark B. Segall M. Frances Buchinsky
Shari K. Krouner Judith Singer Abbe L. Dienstag
Kevin B. Leblang Howard A. Sobel Ronald S. Greenberg
David P. Levin Jeffrey S. Trachtman Debora K. Grobman
Ezra G. Levin Jonathan M. Wagner Christian S. Herzeca
Randy Lipsitz Harold P. Weinberger Jane Lee
Larry M. Loeb E. Lisk Wyckoff, Jr. Pinchas Mendelson
Lynn R. Saidenberg
Special Counsel
-----
FAX
(212) 715-8000
---
WRITER'S DIRECT NUMBER
(212)715-9100
-------------
February 27, 1998
The Tocqueville Trust
1675 Broadway
New York, New York 10019
Re: The Tocqueville Trust
---------------------
Dear Gentlemen:
We hereby consent to the reference to our firm as Counsel in this
amendment to the Registration Statement on Form N-1A.
Very truly yours,
/s/Kramer, Levin, Naftalis & Frankel
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference of our reports
dated November 25, 1997 on the financial statements of The Tocqueville Fund, The
Tocqueville Small Cap Value Fund, The Tocqueville International Value Fund, and
The Tocqueville Government Fund, series of The Tocqueville Trust, referred to
therein in Post-Effective Amendment No. 18 to the Registration Statement on Form
N-1A File No. 33-8746 as filed with the Securities and Exchange Commission.
We also consent to the reference to our firm in each Prospectus under
the captions "Counsel and Independent Accountants" and "Financial Highlights"
/s/McGladrey & Pullen, LLP
--------------------------
New York, New York
February 24, 1998
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