Rule 497(c)
Registration No. 33-8746
[GRAPHIC]
PROSPECTUS
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOLD FUND
February 28, 1999
This Prospectus covers four different Funds of the Tocqueville Trust. You will
find specific information in this Prospectus about each of the Funds plus
general information on the Funds. You may find additional information in the
Funds' Statement of Additional Information, which is incorporated by reference
into this Prospectus. Please read carefully before you invest or send money.
Tocqueville Asset Management L.P. acts as Investment Advisor to each Fund.
The Securities and Exchange Commission has not approved any of the above listed
Funds. The Securities and Exchange Commission also has not determined whether
this Prospectus is accurate or complete. Any person who tells you otherwise is
committing a crime.
<PAGE>
Table of Contents
-----------------
<TABLE>
<CAPTION>
<S> <C>
The Tocqueville Fund - Risk/Return Summary........................................................................3
The Tocqueville Small Cap Value Fund-Risk/Return Summary..........................................................4
The Tocqueville International Value Fund - Risk/Return Summary....................................................6
The Tocqueville Gold Fund - Risk/Return Summary...................................................................8
Fee Table.........................................................................................................9
Investment Objectives, Principal Investment Strategies and Related Risks.........................................11
Risks of Investing in the Funds..................................................................................13
Management of the Funds..........................................................................................15
Shareholder Information..........................................................................................17
Dividends, Distributions and Tax Matters.........................................................................20
Financial Highlights.............................................................................................21
</TABLE>
2
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THE TOCQUEVILLE FUND
RISK/RETURN SUMMARY
Investment Objective
The Tocqueville Fund's investment objective is long-term capital appreciation.
Investment Strategies
The Tocqueville Fund seeks to achieve its investment objective by investing
primarily in common stocks of United States companies.
The Tocqueville Fund follows a value approach to investing, meaning that it
seeks to invest in companies that the Investment Advisor has identified as out
of favor or undervalued. The Investment Advisor will identify companies that are
undervalued based on its judgment of relative value and growth potential. This
judgment will be primarily based on:
o the company's past growth and profitability; or
o the portfolio manager's belief that the company has
achieved better results than similar companies in a
depressed industry which the portfolio manager
believes will improve within the next two years.
The Investment Advisor will generally consider the following stocks to be out of
favor:
o stocks which have underperformed market indices such
as the Standard & Poor's Composite Index for at least
one year; and
o companies which have a historically low stock price
in relation to the company's sales, potential
earnings or underlying assets.
The Investment Advisor will purchase stocks for the Fund's portfolio when they
meet the above criteria and have a limited risk of further decline. The
Investment Advisor will sell stocks when they are no longer considered to be
good values.
Principal Risks
You may lose money by investing in The Tocqueville Fund. The Fund is subject to
the following risks:
o the stock markets may go down; and
o a stock or stocks selected for the Fund's portfolio may fail to perform
as expected.
Bar Chart and Performance Table
The following chart demonstrates the risks of investing in The Tocqueville Fund
and the volatility of the Fund's returns over time by showing changes in the
Fund's performance from December 31, 1989 through December 31, 1998. Sales loads
are not included in the total returns shown in the chart. If they had been
included, the total returns would be less than those shown.
[OBJECT OMITTED]
The Tocqueville Fund's annual total returns for the calendar years ended
December 31, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997 and 1998 were
17.54%, 1.47%, 12.41%, 16.95%, 22.52%, -0.76%, 28.17%, 23.62%, 25.84% and
- -0.09%, respectively.
During this period, the best performance for a quarter was 13.37% (for the
quarter ended 6/30/97). The worst performance was -16.49% (for the quarter ended
9/30/98).
3
<PAGE>
The following table also demonstrates these risks by showing how the Fund's
average annual returns compare with those of the Standard & Poor's 500 Index.
Sales loads are included in the annual returns shown in the table.
Past performance is not an indication of future performance.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------
Average Annual Returns as of One Year 5 years 10 years
12/31/98
- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------
The Tocqueville Fund -4.09% 13.67% 13.81%
- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------
Standard & Poor's 500 Index 28.58% 24.06% 19.21%
- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------
- ------------------------------------- ----------------------------------- ----------------------------------- ----------------------
</TABLE>
THE TOCQUEVILLE SMALL CAP VALUE FUND
RISK/RETURN SUMMARY
Investment Objective
The Tocqueville Small Cap Value Fund's investment objective is long-term capital
appreciation.
Investment Strategies
The Small Cap Value Fund seeks to achieve its investment objective by investing
at least 65% of its total assets in common stocks of companies located in the
United States that have market values of less than U.S. $1 billion ("small cap
companies").
The Small Cap Value Fund follows a value approach to investing, meaning that it
seeks to invest in companies that the Investment Advisor has identified as out
of favor or undervalued. The Investment Advisor will identify companies that are
undervalued based on its judgment of relative value and growth potential. This
judgment will be primarily based on:
o the company's past growth and profitability; or
o the portfolio manager's belief that the company has
achieved better results than similar companies in a
depressed industry which the portfolio manager
believes will improve within the next two years.
The Investment Advisor will generally consider the following stocks to be out of
favor:
o stocks which have underperformed market indices such
as the Standard & Poor's Composite Index for at least
one year; and
o companies which have a historically low stock price
in relation to the company's sales, potential
earnings or underlying assets.
The Investment Advisor will purchase stocks for the Fund's portfolio when they
meet the above criteria and have a limited risk of further decline. The
Investment Advisor will sell stocks when they are no longer considered to be
good values.
Principal Risks
You may lose money by investing in the Small Cap Value Fund. The Fund is subject
to the following risks:
o the stock markets may go down; and
o a stock or stocks selected for the Fund's portfolio may fail to perform
as expected.
In addition, there are unique risks associated with investing in small cap
stocks, including:
o small companies rely on limited product lines, financial resources and
business activities that may make them more susceptible than larger
companies to setbacks or downturns; and
o small cap stocks are less liquid and more thinly traded which make them
more volatile than stocks of larger companies.
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Bar Chart and Performance Table
The following chart demonstrates the risks of investing in the Small Cap Value
Fund and the volatility of the Fund's returns over time by showing changes in
the Fund's performance from December 31, 1995 through December 31, 1998. Sales
loads are not included in the total returns shown in the chart. If they had been
included, the total returns would be less than those shown. [bar chart]
The Small Cap Value Fund's annual total returns for the calendar years ended
December 31, 1995, 1996, 1997 and 1998 were 23.21%, 25.03%, 23.37% and -5.59%,
respectively.
During this period, the best performance for a quarter was 17.39% (for the
quarter ended 9/30/97). The worst performance was -22.58% (for the quarter ended
9/30/98).
The following table also demonstrates these risks by showing how the Fund's
average annual returns compare with those of the Russell 2000 Index. Sales loads
are included in the annual returns shown in the table. Past performance is not
an indication of future performance.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------- ----------------------------------- -----------------------------------
Average Annual Returns as of One Year Since Inception 8/1/94
12/31/98
- ------------------------------------- ----------------------------------- -----------------------------------
Tocqueville Small Cap Value Fund -9.40% 13.76%
- ------------------------------------- ----------------------------------- -----------------------------------
Russell 2000 Index -2.55% 14.87%
- ------------------------------------- ----------------------------------- -----------------------------------
- ------------------------------------- ----------------------------------- -----------------------------------
</TABLE>
5
<PAGE>
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
RISK/RETURN SUMMARY
Investment Objective
The Tocqueville International Value Fund's investment objective is long-term
capital appreciation consistent with preservation of capital.
Investment Strategies
The International Value Fund seeks to achieve its investment objective by
investing in common stocks of non-U.S. companies. Under normal market
conditions, the Fund will invest at least 65% of its total assets in at least
three different countries, which may include developed and emerging market
countries. The Fund will invest primarily in medium to large size companies
traded on the principal international markets.
The Intermational Value Fund follows a value approach to investing, meaning that
it seeks to invest in companies that the Investment Advisor has identified as
out of favor or undervalued. The Investment Advisor will identify companies that
are undervalued based on its judgment of relative value and growth potential.
This judgment will be primarily based on:
o the company's past growth and profitability; or
o the portfolio manager's belief that the company has
achieved better results than similar companies in a
depressed industry which the portfolio manager
believes will improve within the next two years.
The Investment Advisor will generally consider the following stocks to be out of
favor:
o stocks which have underperformed market indices such
as the Standard & Poor's Composite Index for at least
one year; and
o companies which have a historically low stock price
in relation to the company's sales, potential
earnings or underlying assets.
The Investment Advisor will purchase stocks for the Fund's portfolio when they
meet the above criteria and have a limited risk of further decline. The
Investment Advisor will sell stocks when they are no longer considered to be
good values.
Principal Risks
You may lose money by investing in the International Value Fund. The Fund is
subject to the following risks:
o the stock markets may go down; and
o a stock or stocks selected for the Fund's portfolio may fail to perform
as expected.
In addition, there are special risks associated with investing in foreign
securities, including:
o the value of foreign currencies may decline relative to the US dollar;
o a foreign government may expropriate the Fund's assets; and
o political, social or economic instability in a foreign country in which the
Fund invests may cause the value of the Fund's investments to decline.
Bar Chart and Performance Table
The following chart demonstrates the risks of investing in the International
Value Fund and the volatility of the Fund's returns over time by showing changes
in the Fund's performance from December 31, 1995 through December 31, 1998.
Sales loads are not included in the total returns shown in the chart. If they
had been included, the total returns would be less than those shown.
6
<PAGE>
[OBJECT OMITTED]
The International Value Fund's annual total returns for the calendar years ended
December 31, 1995, 1996, 1997 and 1998 were 6.45%, 24.48%, -30.86% and 6.12%,
respectively.
During this period, the best performance for a quarter was 33.63% (for the
quarter ended 12/31/98). The worst performance was -28.47 (for the quarter ended
6/30/98).
The following table also demonstrates these risks by showing how the Fund's
average annual returns compare with those of the Morgan Stanley EAFE Index.
Sales loads are included in the annual returns shown in the table. Past
performance is not an indication of future performance.
<TABLE>
<CAPTION>
<S> <C> <C>
- ---------------------------------------- -------------------------------------- -------------------------------------
Average Annual Returns as of 12/31/98 1 Year Since Inception 8/1/94
- ---------------------------------------- -------------------------------------- -------------------------------------
The Tocqueville International Value 1.92% -1.71%
Fund
- ---------------------------------------- -------------------------------------- -------------------------------------
Morgan Stanley EAFE Index 20.00% 8.12%
- ---------------------------------------- -------------------------------------- -------------------------------------
</TABLE>
7
<PAGE>
THE TOCQUEVILLE GOLD FUND
RISK/RETURN SUMMARY
Investment Objective
The Tocqueville Gold Fund's investment objective is long-term capital
appreciation.
Investment Strategies
The Gold Fund seeks to achieve its investment objective by investing at least
65% of its total assets in gold and securities of companies located throughout
the world that are engaged in mining or processing gold ("gold related
securities"). The Fund may also invest in other precious metals and securities
of companies that are engaged in mining or processing other precious metals
("other precious metal securities"). However, no more than 10% of the Fund's
total assets may be invested directly in gold bullion and other precious metals.
The Gold Fund follows a value approach to investing, meaning that it seeks to
invest in companies that the Investment Advisor has identified as out of favor
or undervalued. The Investment Advisor will identify companies that are
undervalued based on its judgment of relative value and growth potential. This
judgment will be primarily based on:
o the company's past growth and profitability; or
o the portfolio manager's belief that the company has
achieved better results than similar companies in a
depressed industry which the portfolio manager
believes will improve within the next two years.
The Investment Advisor will generally consider the following stocks to be out of
favor:
o stocks which have underperformed market indices such
as the Standard & Poor's Composite Index for at least
one year; and
o companies which have a historically low stock price
in relation to the company's sales, potential
earnings or underlying assets.
The Investment Advisor will purchase stocks for the Fund's portfolio when they
meet the above criteria and have a limited risk of further decline. The
Investment Advisor will sell stocks when they are no longer considered to be
good values.
Principal Risks
You may lose money by investing in the Gold Fund. The Fund is subject to the
following risks:
o the stock markets may go down; and
o a stock or stocks selected for the Fund's portfolio may fail to perform
as expected.
The Gold Fund is subject to the special risks associated with investing in gold
and other precious metals including:
o the price of gold or other precious metals may be subject to wide
fluctuation;
o the market for gold or other precious metals is relatively limited;
o the sources of gold or other precious metals are concentrated in
countries that have the potential for instability; and
o the market for gold and other precious metals is unregulated.
The Gold Fund is also subject to the risk that it could fail to qualify as a
regulated investment company under the Internal Revenue Code if it derives 10%
or more of its gross income from investment in gold bullion or other precious
metals. Failure to qualify as a regulated investment company would result in
adverse tax consequences to the Fund and its shareholders. In order to ensure
that it qualifies as a regulated investment company, the Fund may be required to
make investment decisions that are less than optimal or forego the opportunity
to realize gains.
In addition, there are special risks associated with investing in foreign
securities, including:
o the value of foreign currencies may decline relative to the US dollar;
o a foreign government may expropriate the Fund's assets; and
o political, social or economic instability in a foreign country in which
the Fund invests may cause the value of the Fund's investments to
decline.
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FEE TABLE
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Funds:
<TABLE>
<CAPTION>
Small Cap
Tocqueville Value International Gold
Fund Fund Value Fund Fund
---- ----- ---------- ----
<S> <C> <C> <C>
Shareholder Fees (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases (as % 4.00% 4.00% 4.00% 4.00%
of offering Price)
Maximum Deferred Sales Charge (Load) None None None None
Maximum Sales Charge (Load) Imposed on Reinvested None None None None
Dividends/Distributions
Redemption Fee * * * *
Exchange Fee ** ** ** **
Annual Fund Operating Expenses (expenses that are
deducted from Fund assets):
(as a % of average net assets)
Advisory Fee .75% .75% .94% 1.00%
Rule 12b-1 Fee (1) .25% .25% .25% .25%
Other Expenses .39% .67% .81% 2.98%(2)
---- ---- ---- --------
Total Annual Fund Operating Expenses 1.39% 1.67% 2.00% 4.23%(2)
</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. These 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
12b-1 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) With respect to the Gold Fund, Other Expenses and Total Annual Fund
Operating Expenses are 0.73% and 1.98%, respectively, after voluntary
waiver and/or reimbursement of expenses by the Investment Advisor. If
the Investment Advisor decides during the current fiscal year that it
cannot continue to waive or reimburse expenses, shareholders will
receive 30 days notice of the change.
* The Transfer Agent charges a $12 service fee for each payment of
redemption proceeds made by wire.
** The Transfer Agent charges a $5 fee for each telephone exchange.
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Example:
This example is to help you compare the cost of investing in the Tocqueville
Funds with the cost of investing in other mutual funds.
The Example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o your investment has a 5% return each year; and
o the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions,
your costs would be:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1 Year 3 Years 5 Years 10 Years
------- ------- ------- --------
Tocqueville Fund $536 $822 $1,130 $2,002
Tocqueville Small Cap Value Fund $563 $905 $1,271 $2,297
Tocqueville International Value Fund $595 $1,002 $1,435 $2,634
Tocqueville Gold Fund* $808 $1,632 $2,470 $4,621
</TABLE>
*With respect to the Gold Fund, your costs of investing in the Fund reflect the
amount you would pay if we did not reimburse the Fund for some or all of the
Other Expenses. If we continue to reimburse the Fund's expenses as we are
currently doing, your actual costs for those periods would be lower than the
amounts shown. These examples should not be considered a representation of past
or future expenses and actual expenses may be greater or less than those shown.
Who may want to invest in the Funds?
o investors who want a diversified portfolio
o long-term investors with a particular goal, like saving for retirement
o investors who want potential growth over time
o investors who can tolerate short-term fluctuations in net asset value
(NAV) per share
Who may want to invest in:
o The Tocqueville Fund? Investors who are willing to assume market risk of
United States securities in the short-term for potentially higher gains in
the long-term.
o The Small Cap Value Fund? Investors who are comfortable with assuming the
added risks associated with small cap stocks in return for the possibility
of long-term rewards.
o The International Value Fund? Investors who want to diversify their
portfolio by investing in different countries and investors who are willing
to accept the additional risks associated with investment in foreign
securities.
o The Gold Fund? Investors who want to diversify their portfolio or investors
who want an investment that may provide protection against inflation or
currency devaluation and are willing to accept the additional risks
associated with investment in gold and gold related securities.
The Funds may not be appropriate for investors who:
- are not willing to take any risk that they may lose money on their
investment
- primarily want stability of their investment principal
- primarily want to invest in a particular sector or in particular
industries, countries, or regions
- require current income
Keep in mind that mutual fund shares:
- are not deposits of any bank
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- are not insured by the Federal Deposit Insurance Corporation (FDIC)
or any other government agency
- are subject to investment risks, including the possibility that you
could lose money.
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND RELATED RISKS
Investment Objectives
Long-term capital appreciation is the investment objective of The Tocqueville
Fund, the Small Cap Value Fund and the Gold Fund. The investment objective of
the International Value Fund is long-term capital appreciation consistent with
preservation of capital.
Principal Investment Strategies
The Tocqueville Fund, the Small Cap Value Fund, the International Value Fund
and the Gold Fund each follow a value approach to investing, meaning that they
seek to invest in companies that the Investment Advisor has identified as out of
favor or undervalued. The Investment Advisor will identify companies that are
undervalued based on its judgment of relative value and growth potential. This
judgment will be primarily based on:
o the company's past growth and profitability; or
o the portfolio manager's belief that the company has
achieved better results than similar companies in a
depressed industry which the portfolio manager
believes will improve within the next two years.
The Investment Advisor will generally consider the following stocks to be out of
favor:
o stocks which have underperformed market indices such
as the Standard & Poor's Composite Index for at least
one year; and
o companies which have a historically low stock price
in relation to the company's sales, potential
earnings or underlying assets.
The Tocqueville Fund will seek to achieve its investment objective by investing
primarily in common stocks of United States companies.
While the Tocqueville Fund will primarily invest in common stocks of
United States companies, the Fund may also invest:
o up to 25% of its total assets in common stocks of foreign companies
traded in the U.S. or American Depository Receipts (ADRs);
o up to 10% of its total assets in gold bullion from U.S. institutions;
o 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; and
o up to 5% of its total assets in debt instruments convertible into
common stock.
The Small Cap Value Fund will seek to achieve its investment objective by
investing at least 65% of its total assets in common stocks of companies located
in the United States that have market values of less than U.S. $1 billion
("small cap companies").
The Small Cap Value Fund looks for companies that are strong
proprietary businesses, either out of favor or less well known in the
financial community, or undervalued in relation to their potential
long-term growth or earning power. Strong proprietary businesses
generally have some but not necessarily all of the
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<PAGE>
following characteristics: capable management; good finances; strong
manufacturing; broad distribution; and products which are somewhat
differentiated from products offered by their competitors.
The Small Cap Value Fund may also invest:
o up to 25% of its total assets in common stock of
small cap companies located in developed countries in
Europe and Asia;
o up to 25% of its total assets in common stock of
foreign companies that are traded in the United
States or American Depository Receipts (ADRs);
o 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 or
short-term money market securities; and
o up to 10% of its total assets in investment grade
debt securities convertible into common stock.
The International Value Fund invests primarily in common stocks of non-U.S.
companies. Under normal market conditions, the Fund will invest at least 65% of
its total assets in at least three different countries located outside the
United States, which may include developed and emerging market countries. The
Fund may also invest up to 20% of its assets in the United States. The Fund will
generally invest in medium to large size companies traded on the principal
international markets, but may also invest in smaller companies traded on
smaller regional markets.
The Investment Advisor will allocate the International Value Fund's
investments among individual countries based on the following criteria:
o the relative economic growth potential of the
economy;
o the performance of markets in the region;
o expected levels of inflation;
o government policies influencing business conditions;
and
o the outlook for currency relationships.
The International Value Fund may invest without limit in companies
located in emerging market countries, which may involve additional
risks such as political instability and currency devaluation. An
emerging market is any country that the World Bank has determined to
have a low or middle income economy and may include any 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.
The International Value Fund will invest primarily in common stock,
investment grade debt convertible into common stock, depository
receipts, and warrants. However, the Fund may also invest in preferred
stock and investment grade debt securities if the Investment Advisor
believes that they will provide greater potential for capital
appreciation than investment in the above-listed securities.
The Gold Fund will invest at least 65% of its total assets in gold and
securities of companies located throughout the world that are engaged in mining
or processing gold ("gold related securities"). The Fund may also invest in
other precious metals and securities of companies that are engaged in mining or
processing other precious metals ("other precious metal securities"). However,
no more than 10% of the Fund's total assets may be invested directly in gold
bullion and other precious metals. The Fund's investments may include foreign
securities and small capitalization issuers.
The Gold Fund will invest primarily in common stock, investment grade
debt convertible into common stock, depository receipts and warrants.
However, the Fund may also invest in preferred stock and investment
grade debt securities if the Investment Advisor believes that they will
provide greater potential for capital appreciation than investment in
the above-listed securities.
Borrowing
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Each Fund may borrow up to 10% of the value of its total assets from banks at
prevailing interest rates for extraordinary or emergency purposes. A Fund may
not purchase additional securities when borrowings exceed 5%.
Temporary Investments
When current market, economic, political or other conditions are unsuitable for
a Fund's investment objective, each Fund may temporarily invest up to 100% of
its assets in cash, cash equivalents or high quality short-term money market
instruments.
Additional Investment Techniques
In addition to the techniques described above, each Fund may employ investment
techniques that are not principal investment strategies of the Fund. Each Fund
may enter into repurchase agreements and invest in illiquid and restricted
securities. The Small Cap Value Fund, the International Value Fund and the Gold
Fund may invest in other investment companies. The Tocqueville Fund, the Small
Cap Value Fund and the Gold Fund may sell securities short. The International
Value Fund and the Gold Fund may invest in futures and options on securities,
indices and currencies. Each of these investment techniques involves additional
risks which are described in more detail in the Statement of Additional
Information.
Risks of Investing in the Funds
As with all mutual funds, investing in our Funds involves certain risks. We
cannot guarantee that a Fund will meet its investment objective or that a Fund
will perform as it has in the past. You may lose money if you invest in one of
our Funds.
Some of the investment techniques we use involve greater amounts of risk. We
discuss these investment techniques in detail in the Statement of Additional
Information. To reduce risk, the Funds are subject to certain limitations and
restrictions, which we also describe in the Statement of Additional Information.
You should consider the risks described below before you decide to invest in any
of our Funds.
Risks of Investing in Mutual Funds The following risks are common to all mutual
funds:
o Market Risk is the risk that the market value of a security a Fund holds
will fluctuate, sometimes rapidly and unpredictably. These fluctuations may
cause a security to be worth less than it was at the time of purchase.
Market risk may affect an individual security, a particular sector or the
entire market.
o Manager Risk is the risk that a Fund's portfolio manager may use an
investment strategy that does not achieve the Fund's objective or may fail
to execute a Fund's investment strategy effectively.
o Portfolio Turnover Risk. Frequent trading by a Fund will result in higher
Fund expenses and higher capital gains distributions, which would increase
your tax liability. We anticipate that the portfolio turnover rate for each
Fund should not exceed 150% in any one year.
o Year 2000 Risk. The operations of the Funds, their ability to use services
provided by third parties, or their portfolio investments could be
disrupted by problems related to the failure of computer systems to
properly process and calculate date-related information starting on January
1, 2000. The Funds or their service providers could have problems
performing various functions such as calculating net asset value, redeeming
shares, delivering account statements and providing other information to
shareholders.
Risks of Investing in Foreign Securities
Each Fund may invest a portion of its assets in foreign securities. The
following risks are common to mutual funds that invest in foreign securities:
o Legal and Regulatory Risk is the risk that the laws and regulations of
foreign countries may provide investors with less protection or may be less
favorable to investors than the U.S. legal system. For example, there may
be less publicly available information about a foreign company than there
would be about a U.S. company. The auditing and reporting requirements that
apply to foreign companies may be less stringent than U.S.
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<PAGE>
requirements. Additionally, government oversight of foreign stock exchanges
and brokerage industries may be less stringent than in the U.S.
o Currency Risk is the risk that the Net Asset Value of a Fund will be
adversely affected by the devaluation of foreign currencies or by a change
in the exchange rate between the U.S. dollar and the currencies in which a
Fund's stocks are denominated. The Funds may also incur transaction costs
associated with exchanging foreign currencies into U.S. dollars.
o Liquidity Risk. Foreign stock exchanges generally have less volume than
U.S. stock exchanges. Therefore, it may be more difficult to buy or sell
shares of foreign securities, which increases the volatility of share
prices on such markets. Additionally, trading on foreign stock markets may
involve longer settlement periods and higher transaction costs.
o Expropriation Risk. Foreign governments may expropriate a Fund's
investments either directly by restricting the Fund's ability to sell a
security or imposing exchange controls that restrict the sale of a
currency, or indirectly by taxing the Fund's investments at such high
levels as to constitute confiscation of the security. There may be
limitations on the ability of a Fund to pursue and collect a legal judgment
against a foreign government.
o Political Risk. Political or social instability or revolution in certain
countries in which a Fund invests, in particular emerging market countries,
may result in the loss of some or all of the Fund's investment in these
countries.
o Euro Risk. The recent conversion of the currency of certain European
countries to the common currency called the "Euro" may subject a Fund to
additional risks to the extent the Fund invests in these countries. The
Euro could fail as a new currency, forcing participating countries to
return to their original currency which could result in increased trade
costs, decreased corporate profits or other adverse effects. The profit
margins of companies in which a Fund invests may decrease due to the
competitive impact of the Euro, failure to modify information technology
systems to accommodate the Euro, or increased currency exchange costs. In
addition, the Funds' service providers could fail to make appropriate
systems modifications to accomodate the conversion to the Euro.
Risks of Investing in Debt Securities
Each Fund may invest a portion of its assets in debt securities. The following
risks are common to mutual funds that invest in debt securities:
o Interest Rate Risk is the risk that an increase in interest rates will
cause the value of a debt security to decline. In general, debt securities
with longer maturities are more sensitive to changes in interest rates.
o Credit (or default) Risk is the risk that the issuer of a debt security may
be unable to make timely payments of principal or interest, or may default
on the debt.
o Inflation Risk is the risk that inflation will erode the purchasing power
of the cash flows generated by debt securities held by a Fund. Fixed-rate
debt securities are more susceptible to this risk than floating rate debt
securities.
o Reinvestment Risk is the risk that when interest income is reinvested,
interest rates will have declined so that income must be reinvested at a
lower interest rate. Generally, interest rate risk and reinvestment risk
have offsetting effects.
14
<PAGE>
Management of the Funds
Investment Advisor
Tocqueville Asset Management L.P., 1675 Broadway, New York, New York 10019, acts
as Investment Advisor to each Fund under separate investment advisory agreements
which provide that the Investment Advisor identify and analyze possible
investments for each Fund, and determine the amount, timing, and form of those
investments. The Investment Advisor has the responsibility of monitoring and
reviewing each Fund's portfolio, on a regular basis, and recommending when to
sell the investments. All purchases and sales of securities in each Fund's
portfolio by the Investment Advisor are subject at all times to the policies set
forth by the Board of Trustees. The Investment Advisor has been in the asset
management business since 1990 and currently has over $800 million in assets
under management.
The Investment Advisor receives a fee from: (1) both The Tocqueville Fund and
The Tocqueville Small Cap Value Fund, calculated daily and payable monthly, 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, 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 Gold Fund, calculated
daily and payable monthly, at an annual rate of 1.00% on the first $500 million
of the average daily net assets of the Fund, .75% of average daily net assets in
excess of $500 million but not exceeding $1 billion, and .65% of average daily
net assets in excess of $1 billion.
Portfolio Management
Francois Sicart is the co-manager of the Tocqueville Fund and the portfolio
manager of the International Value Fund. Mr. Sicart, the Chairman of
Tocqueville Management Corporation and 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 is the co-manager of the Tocqueville Fund. Mr.
Kleinschmidt is the President of Tocqueville Management Corporation. He
previously held executive positions at the investment management firm David J.
Greene & Co. He has been co-manager of The Tocqueville Fund since joining
Tocqueville in 1991.
Jean-Pierre Conreur is the portfolio manager of the 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. Mr. Conreur is a Director of Tocqueville
Management Corporation. He is also a trustee of the Investment Advisor's
retirement plan.
John Hathaway is the portfolio manager of the Gold Fund. Mr. Hathaway was a
portfolio manager with Hudson Capital Advisors from 1986 through 1989, and the
President, Chief Investment Officer and portfolio manager with Oak Hill Advisors
from 1989 through 1996. Mr. Hathaway has been a portfolio manager with
Tocqueville since 1997. He received his MBA from the University of Virginia and
his BA from Harvard University.
15
<PAGE>
HOW THE FUNDS VALUE SHARES
The NAV, multiplied by the number of fund shares you own, gives you the value
of your investment.
Each Fund's share price, called its NAV, is calculated as of the close of the
New York Stock Exchange (normally at 4:00 p.m. Eastern Time) on each day that
the Exchange is open for business. It is expected that the Exchange will be
closed on Saturdays and Sundays and on New Year's Day, Martin Luther King Day,
President's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. The NAV per share is determined by dividing
the market value of a Fund's investments plus any cash or other assets less all
liabilities by the number of Fund shares outstanding. The Fund will process any
shares that you purchase, redeem or exchange at the next share price calculated
after it receives your investment instructions. Purchase orders received prior
to 4:00 p.m. Eastern time are priced according to the NAV per share next
determined on that day. Purchase orders received after 4:00 p.m. are priced
according to the NAV per share next determined on the following day.
Fund securities that are listed primarily on foreign exchanges may trade on
weekends or on other days on which the Funds do not price their shares. In this
case, the NAV of the Fund's shares may change on days when you are not able to
purchase or redeem your shares.
Fund securities that are 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 will be valued in a manner as similar as possible to the above,
or at the latest available price. Investments in gold bullion will be valued at
fair market value determined on the basis of the mean between the latest bid and
asked prices based on dealer or exchange quotations. If there are no readily
available quotations for securities, they will be valued at fair value as
determined by the Board of Trustees acting in good faith.
You can obtain the NAV of the Funds by calling 1-800-697-3863
16
<PAGE>
Shareholder Information
Investment Minimums.
Minimum Initial Investment
Regular (non-retirement) $1,000*
Retirement Account $ 250
*The $1,000 minimum investment may be allocated among the Funds provided that
you invest at least $250 in each Fund you wish to invest in.
Minimum Subsequent Investment $ 100
We may reduce or waive the minimum investment requirements in some cases.
HOW THE FUNDS CALCULATE SALES CHARGES
The initial sales charge, imposed upon a sale of shares, varies according
to the size of the purchase as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
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
</TABLE>
Distribution Plans
Each Fund has adopted a distribution plan (each a "Plan") pursuant to Rule 12b-1
of the Investment Company Act of 1940, as amended. 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
How to Purchase Shares of the Funds You may purchase shares of the Funds
through:
o The Funds' distributor, Tocqueville Securities, L.P.
o Authorized securities dealers
o The Funds' transfer agent, Firstar Mutual Fund Services, LLC
Purchases of Shares without a Sales Charge
The following types of purchases may be made without an initial sales charge:
17
<PAGE>
o Purchases through certain brokerage accounts
o Purchases by "Qualified Persons"
o Purchases through certain investment advisors
o Purchases through 401(k), 403(b) and 457 retirement plans
o Purchases by persons who have redeemed shares of a fund within the
last 30 days
o Purchases by shareholders who held shares of a fund prior to January 1,
1994
Please call the Transfer Agent at 1-800-697-3863 for more information about how
to purchase shares without paying the initial sales charge.
Reduced Initial Sales Charges
You may qualify for a reduced initial sales charge if you:
o qualify for a cumulative quantity discount;
o are a member of a "qualified group"; or
o sign a Letter of Intent.
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.
Please call the Transfer Agent at 1-800-697-3863 for more information about how
to qualify for a reduced initial sales charge.
Methods of Payment
By Check: To purchase by check, you should:
o Complete and sign the account application
o To open a regular account, write a check payable to The Tocqueville
Trust [name of fund]
o To open a retirement account, write a check payable to the custodian
or trustee
o Send your account application and check or exchange request to one
of the following addresses:
Regular Mail:
The Tocqueville Trust - [name of Fund]
c/o Firstar Mutual Fund Services, LLC
P.O. Box 701
Milwaukee, WI 53201-0701
Overnight Mail or Express:
The Tocqueville Trust - [name of Fund]
c/o Firstar Mutual Fund Services, LLC
615 East Michigan Street
Mutual Fund Services, 3rd Floor
Milwaukee, WI 53202
By Wire: To purchase by wire, call the Transfer Agent at 1-800-697-3863 between
9 a.m. and 6 p.m. Eastern Time on any day the New York Stock Exchange is open
for business to get an account number and detailed instructions. For all
accounts opened by wire transfer, you must then provide the Transfer Agent with
a signed purchase application marked "Follow Up". Wired funds must be received
prior to 4:00 p.m. Eastern Time to be eligible for same day pricing. Instruct
your bank to wire funds to:
Firstar Bank Milwaukee, N.A.
777 East Wisconsin Avenue
Milwaukee, WI 53202
ABA #075000022
18
<PAGE>
Credit: Firstar Trust Company
Account #: 112952137
Further credit: The Tocqueville Trust - [name of fund]
Name of shareholder and account number (if known)
By Automatic Investment Plan: With a pre-authorized investment plan, your
personal bank account is automatically debited at regular intervals to purchase
shares of a Fund. The minimum is $100 per transaction and there must be a
minimum of seven days between automatic purchases. You will receive the NAV per
share as of the date the debit is made. To establish an Automatic Investment
Account complete and sign Section F of the Purchase Application and send it to
the Transfer Agent.
How to Redeem Shares. You may redeem shares by mail or telephone. Payment for
shares redeemed by written request will be made within three business days of
receipt of the request provided the request is in "good order." A redemption
request is in "good order" if it complies with the following:
o if you have not elected to permit telephone redemptions, your request
must be in writing and sent to the Transfer Agent as described below;
o if share certificates have been issued, you must endorse the
certificates and include them with the redemption request;
o all signatures on the redemption request and endorsed certificates must
be guaranteed by a commercial bank which is a member of the FDIC, a
trust company, or a member firm of a national securities exchange; and
o your request must include any additional legal documents concerning
authority and related matters in the cases of estates, trusts,
guardianships, custodianships, partnerships and corporations.
If you purchased your shares by check, the payment of your redemption proceeds
may be delayed for up to 15 calendar days or until the check clears, whichever
occurs first. You may receive the proceeds of redemption by wire or through a
systematic withdrawal plan as described below.
By Mail: To redeem by mail, please:
o Provide your name and account number;
o Specify the number of shares or dollar amount and the Fund name;
o Sign the redemption request (the signature must be the same as the
one on your account application).
o Make sure all parties that are required by the account registration
sign the request; and
o Send your request to the appropriate address above under purchasing by
mail.
If the proceeds from a redemption are to be sent to an address of record, a
signature guarantee of all signers is also required.
By Telephone: You may redeem your shares of a Fund by telephone if you
authorized telephone redemption on your account application. To redeem by
telephone, call the Transfer Agent at 1-800-697-3863 and provide your name and
account number, amount of redemption and names of the Fund. For your protection
against fraudulent telephone transactions, we will use reasonable procedures to
verify your identity including requiring you to provide your account number and
recording telephone redemption transactions. As long as we follow these
procedures, we will not be liable for any loss or cost to you if we act on
instructions to redeem your account that we reasonably believe to be authorized
by you. You will be notified if we refuse telephone redemption or exchange.
Telephone exchanges or redemptions may be difficult during periods of extreme
market or economic conditions. If this is the case, please send your exchange or
redemption request my mail or overnight courier.
Additional Shareholder Services
Systematic Withdrawal Plan: You may establish a systematic withdrawal plan if
you own shares of any Fund worth at least $10,000. Under the Systematic
Withdrawal Plan, a fixed sum (minimum $500) will be distributed to you at
regular intervals. For additional information or to request an application for
this Plan, please call Firstar Mutual Fund Services, LLC at 1-800-697-3863.
Exchange Privilege. Subject to certain conditions, you may exchange shares of a
Fund for shares of another Fund of The Tocqueville Trust at that 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 the exchange. You should note that any 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.
You 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, the Firstar Intermediate Bond Market Fund, or the Firstar U.S. Government
Fund (collectively the "Money Market Funds"). This Exchange Privilege is a
convenient way for you to buy shares in a Money Market or Bond
19
<PAGE>
Fund in order to respond to changes in your goals or market conditions. Before
exchanging into the Money Market or Bond Funds, you should read the 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
Firstar 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.
Because excessive trading can hurt the Funds' performance and shareholders, the
Funds reserve the right to temporarily or permanently limit the number of
exchanges you may make or to otherwise prohibit or restrict you from using the
Exchange Privilege at any time, without notice. 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. The Transfer Agent charges a $5 fee for each
telephone exchange.
Check Redemption. You 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 you have 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.
Additional Exchange and Redemption Information
o Small Accounts. The Fund has the right to redeem an account that has
dropped below $500 in value for a period of three months or more due to
redemptions. You will be given at least 60 days prior written notice of any
proposed redemption and you will be given the option to purchase additional
shares to avoid the redemption
o Check Clearance. The proceeds from a redemption request may be delayed up
to 15 calendar days from the date of the receipt of a purchase check until
the check clears. If the check does not clear, you will be responsible for
the loss. This delay can be avoided by purchasing shares by wire or
certified bank checks.
o Exchange Limit. In order to limit expenses, we reserve the right to limit
the total number of exchanges you can make in any year to five.
o Suspension of Redemptions. We may temporarily suspend the right of
redemption or postpone payments under certain emergency circumstances or
when the SEC orders a suspension.
o Verification of Identity. If you redeem or exchange shares by telephone, we
will use reasonable procedures to verify your identity. As long as we
follow these procedures, we will not be liable for any loss or cost to you
if we act on instructions that we reasonably believe to be authorized by
you.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
Dividends and Capital Gains Distributions. All Funds distribute all or most of
their net investment income and net capital gains to shareholders. Dividends
(investment income) for all the Funds are normally declared and paid at least
annually. The Funds also distribute net capital gains (if any) at least
annually.
Any dividends and/or capital gains distributions will be automatically
reinvested at the next determined NAV unless you elect otherwise. These
reinvestments will not be subject to the initial sales charge. You may choose to
have dividends and capital gains distributions paid to you in cash. You may also
choose to reinvest dividends and capital gains distributions in shares of
another Tocqueville Fund. You may authorize either of these options by calling
the Transfer Agent at 1-800-697-3863 and requesting an optional shareholder
services form. You must complete the form and return it to the Transfer Agent
before the record date in order for the change to be effective for that dividend
or capital gains distribution.
20
<PAGE>
Buying Before a Dividend. If you purchased shares of a Fund on or before the
record date, you will receive a dividend or capital gains distribution. The
distribution will lower the NAV per share on that date and represents, in
substance, a return of basis (your cost); however you will be subject to Federal
income taxes on this distribution.
Tax Issues. The following tax information is based on tax laws and regulations
in effect on the date of this prospectus. These laws and regulations are subject
to change. You should consult a tax professional for the tax consequences of
investing in our Funds as well as for information on state and local taxes which
may apply. A statement that provides the Federal income tax status of the Funds'
distributions will be sent to shareholders promptly at the end of each year.
o Distributions to Shareholders. Distributions to shareholders fall into two
tax categories. The first category is ordinary income distributions.
Ordinary income distributions are distributions from the Funds, which
includes dividends, foreign currency gains and short-term capital gains.
Long-term capital losses and foreign currency losses are used to offset
ordinary income. The second category of distribution is capital gains
distributions. Capital gains distributions are distributions of a Fund's
long-term capital gain it receives from selling stocks within its
portfolio. Short-term capital losses are used to offset long-term capital
gain. You have to pay taxes on both distributions even though you have them
automatically reinvested. On some occasions a distribution made in January
will have to be treated for tax purposes as having been distributed on
December 31 of the prior year.
o Gain or Loss on Sale of Shares of a Fund. You will recognize either a gain
or loss when you sell shares of your Fund. The gain or loss is the
difference between the proceeds of the sale (the NAV of the Fund on the
date of sale times the number of shares sold) and your adjusted basis. Any
loss realized on a taxable sale of shares within six months from the date
of their purchase will be treated as a long-term capital loss that can be
used to offset short-tern capital gains on those shares. If you sell shares
of a Fund at a loss and repurchase shares of the same Fund 30 days before
or after the sale, a deduction for the loss is generally disallowed (a wash
sale).
o Foreign Source Income and Withholding Taxes. Some of the Funds' investment
income may be subject to foreign income taxes that are withheld at the
source. If the Funds meet certain legal requirements, they may pass-through
these foreign taxes to shareholders. Shareholders may then claim a foreign
tax credit or a foreign tax deduction for their share of foreign taxes
paid.
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand each Fund's
financial performance for the last five years (or since the Fund's inception if
it has been in existence less than five years). Certain information reflects
financial results for a single Fund share. The total returns in the tables
represent the rate that an investor would have earned (or lost) on an investment
in the Fund, assuming reinvestment of all dividends and distributions. McGladrey
& Pullen, LLP audited this information. McGladrey & Pullen's report along with
further detail on the Fund's financial statements are included in the annual
report, which is available upon your request by calling 1-800-697-3863.
21
<PAGE>
THE TOCQUEVILLE FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Year Ended October 31,
----------------------
Per share operating performance 1998 1997 1996 1995 1994
---- ---- ---- ---- ----
<S> <C> <C> <C> <C>
(For a share outstanding throughout the
period)
Net asset value, beginning of period $20.21 $15.85 $14.07 $13.74 $13.67
------ ------ ------ ------ ------
Income from investment operations:
Net investment income 0.06 0.06 0.07 .015 .012
Net realized and unrealized gain(loss) (0.93) 5.15 2.92 1.70 0.88
------ ---- ---- ---- ----
Total from investment operations (0.87) 5.21 2.99 1.85 1.00
------ ---- ---- ---- ----
Less distributions
Dividends from net investment income (0.06) (0.06) (0.15) (0.11) (0.14)
Distributions from net realized gains (2.28) (0.79) (1.06) (1.41) (0.79)
------ ------ ------ ------ ------
Total distributions (2.34) (0.85) (1.21) (1.52) (0.93)
------ ------ ------ ------ ------
Change in net asset value for the period (3.21) 4.36 1.78 0.33 0.07
------ ---- ---- ---- ----
Net asset value, end of period $17.00 $20.21 $15.85 $14.07 $13.74
------ ------ ------ ------ ------
Total Return (b) (4.6%) 34.5% 22.7% 16.0% 7.7%
Ratios/supplemental data
Net assets, end of period (000) $61,566 $64,998 $42,414 $33,438 $29,140
Ratio to average net assets:
Expenses (a) 1.39% 1.40% 1.49% 1.54% 1.54%
Net investment income (loss) (a) .35% .34% .44% 1.07% 0.87%
Portfolio turnover rate 35% 48% 48% 47% 52%
</TABLE>
- --------------------
(a) Net of fees waived amounting to 0.25%, 0.16% and 0.02% of
average net assets for the periods ended October 31, 1997,
October 31, 1996 and October 31, 1995, respectively.
(b) Does not include maximum sales charge of 4%.
22
<PAGE>
THE TOCQUEVILLE SMALL CAP VALUE FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Period From
Year Ended October 31, August 1, 1994
---------------------- to
Per share operating performance 1998 1997 1996 1995 October 31,
---- ---- ---- ---- -----------
<S> <C> <C> <C> <C>
(For a share outstanding throughout the 1994
----
period)
Net asset value, beginning of period $16.30 $13.37 $11.91 $10.22 $10.00
------ ------ ------ ------ ------
Income from investment operations:
Net investment income (0.15) (0.05) (0.10) (0.05) 0.02
Net realized and unrealized gain(loss) (1.83) 4.44 2.33 1.96 0.20
------ ---- ---- ---- ----
Total from investment operations (1.98) 4.39 2.23 1.91 0.22
------ ---- ---- ---- ----
Less distributions
Dividends from net investment income - - - (0.03) -
Distributions from net realized gains (1.73) (1.46) (0.77) (0.19) -
------ ------ ------ ------ -
Total distributions (1.73) (1.46) (0.77) (0.22) -
------ ------ ------ ------ -
Change in net asset value for the period (3.71) 2.93 1.46 1.69 0.22
------ ---- ---- ---- ----
Net asset value, end of period $12.59 $16.30 $13.37 $11.91 $10.22
------ ------ ------ ------ ------
Total Return (b) (13.4)% 36.0% 19.7% 19.2% 2.2%
Ratios/supplemental data
Net assets, end of period (000) $21,610 $20,587 $11,545 $9,383 $6,755
Ratio to average net assets:
Expenses (a) 1.67% 1.75% 2.36% 2.50% 2.08%(c)
Net investment income (loss) (a) (1.12)% (.81)% (1.18)% (0.53)% 0.85%(c)
Portfolio turnover rate 62% 95% 107% 88% 9%
</TABLE>
- --------------------
(a) 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, October 31,
1996, October 31, 1995, and October 31, 1994, respectively.
(b) Does not include maximum sales charge of 4%. For the period ended
October 31, 1994, not annualized.
(c) Annualized.
23
<PAGE>
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------
Period From
Year Ended October 31, August 1, 1994
---------------------- to
Per share operating performance 1998 1997 1996 1995 October 31,
---- ---- ---- ---- -----------
<S> <C> <C> <C> <C>
(For a share outstanding throughout the 1994
----
period)
Net asset value, beginning of period $10.19 $12.57 $10.83 $10.02 $10.00
------ ------ ------ ------ ------
Income from investment operations
Net investment income (loss) 0.10 (0.03) 0.16 (0.01) (0.04)
Net realized and unrealized gain(loss) (2.07) (1.67) 1.58 0.82 0.06
------ ------ ---- ---- ----
Total from investment operations (1.97) (1.70) 1.74 0.81 0.02
------ ------ ---- ---- ----
Less distributions
Dividends from net investment income (0.11) (0.06) - - -
Distributions from net realized gains - (0.62) - - -
----- ------ ----- ----- -
Total distributions (0.11) (0.68) - - -
------ ------ ----- ----- -
Change in net asset value for the period (2.08) (2.38) 1.74 0.81 0.02
------ ------ ---- ---- ----
Net asset value, end of period $8.11 $10.19 $12.57 $10.83 $10.02
----- ------ ------ ------ ------
Total Return (b) (19.4)% (14.3)% 16.1% 8.1% 0.2%
Ratios/supplemental data
Net assets, end of period (000) $68,415 $60,963 $23,932 $6,270 $2,516
Ratio to average net assets:
Expenses (a) 2.00% 1.99% 1.98% 4.43% 6.18%(c)
Net investment income (loss) (a) .64% .16% 1.45% (0.53)% (2.47)%(c)
Portfolio turnover rate 77% 70% 135% 109% 0%
</TABLE>
- --------------------
(a) 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, October 31,
1996, October 31, 1995, and October 31, 1994, respectively.
(b) Does not include maximum sales charge of 4%. For the period ended
October 31, 1994, not annualized.
(c) Annualized.
24
<PAGE>
[back cover page]
Statement of Additional Information. The Statement of Additional Information
provides a more complete discussion about the Funds and is incorporated by
reference into this prospectus, which means that it is considered a part of this
prospectus.
Annual and Semi-Annual Reports. The annual and semi-annual reports to
shareholders contain additional information about each Fund's investments,
including a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
To Review or Obtain this Information: The Statement of Additional Information
and annual and semi-annual reports are available without charge upon your
request by calling us at (800) 697-3863 or by calling or writing a broker-dealer
or other financial intermediary that sells our Funds. This information may be
reviewed at the Public Reference Room of the Securities and Exchange Commission
or by visiting the SEC's World Wide Website at http://www.sec.gov. In addition,
this information may be obtained for a fee by writing or calling the Public
Reference Room of the Securities and Exchange Commission, Washington, D.C.
20549-6009. You can obtain information about the operation of the SEC's Public
Reference Room by calling (800) SEC-0330.
You are invited to visit our website at www.tocqueville.com
Investment Company Act file no. 811-4840.
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Rule 497(c)
Registration No. 33-8746
STATEMENT OF ADDITIONAL INFORMATION - February 28, 1999
THE TOCQUEVILLE TRUST
THE TOCQUEVILLE FUND
THE TOCQUEVILLE SMALL CAP VALUE FUND
THE TOCQUEVILLE INTERNATIONAL VALUE FUND
THE TOCQUEVILLE GOLD FUND
This Statement of Additional Information is not a prospectus. This
Statement of Additional Information is incorporated by reference in its entirety
into the Prospectus and should be read in conjunction with the Trust's current
Prospectus, copies of which may be obtained by writing The Tocqueville Trust,
c/o Firstar Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin 53202 or calling (800) 697-3863.
This Statement of Additional Information relates to the Trust's
Prospectus which is dated February 28, 1999.
TABLE OF CONTENTS
Page
----
Fund History............................................................... 2
Investment Policies and Risks.............................................. 2
Investment Restrictions.................................................... 8
Management................................................................. 9
Control Persons and Principal Holders of Securities........................11
Investment Advisory and Other Services.....................................11
Portfolio Transactions and Brokerage Allocation............................13
Allocation of Investments..................................................14
Computation of Net Asset Value.............................................14
Purchase and Redemption of Shares..........................................15
Tax Matters................................................................15
Performance Calculation....................................................21
General Information........................................................22
Reports....................................................................23
Financial Statements.......................................................23
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FUND HISTORY
The Tocqueville Trust (the "Trust") is a Massachusetts business trust
organized on September 17, 1986 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 Gold 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 issuers located in the United
States. 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 Gold Fund's (the "Gold Fund") investment objective is
long-term capital appreciation through investments in gold, securities of
companies located throughout the world that are engaged in mining or processing
gold ("gold related securities"), other precious metals and securities of
companies located throughout the world that are engaged in mining or processing
such other precious metals ("other precious metal securities"). 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.
Writing Covered Call Options on Securities and Stock Indices
The International Fund and the Gold 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.
Each 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).
Each 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.
Each Fund may terminate an option it has written prior to the
option's expiration by entering into a closing purchase transaction in which an
option is purchased having the same terms as the option written. A Fund will
realize a profit or loss from such transaction if the cost of such transaction
is less or more than the premium received from the writing of the option.
Because increases in the market price of a call option will generally reflect
increases in the market price of the underlying security or index, any loss
resulting from the repurchase of a call option is likely to be offset in whole
or in part by unrealized appreciation of the underlying security (or securities)
owned by a Fund.
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Purchasing Put and Call Options on Securities and Stock Indices
The International Fund and the Gold Fund may purchase put options on
securities and stock indices 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,
a Fund will reduce any profit it might otherwise have realized in its underlying
security or index by the premium paid for the put option and by transaction
costs, but it will retain the ability to benefit from future increases in Market
value.
The International Fund and the Gold Fund may each 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, a Fund will reduce any
profit it might have realized had it bought the underlying security or index at
the time it purchased the call option by the premium paid for the call option
and by transaction costs, but it limits the loss it will suffer if the security
or index declines in value to such premium and transaction costs.
The Gold Fund may also purchase puts and calls on gold and other
precious metals that are traded on a securities or commodities exchange or
quoted by major recognized dealers in such options for the purpose of protecting
against declines in the dollar value of gold and other precious metals and
against increases in the dollar cost of gold and other precious metals to be
acquired.
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.
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.
Each Fund will always receive as collateral U.S. Government or
short-term money market securities whose market value is equal to at least 100%
of the amount invested by the Fund, and each Fund will make payment for such
securities only upon the physical delivery or evidence by book entry transfer to
the account of its custodian. If the seller institution defaults, 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.
Futures Contracts
The Gold 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
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agree to take or make delivery of an amount of cash equal to a specified dollar
amount times the difference between the stock index value at the close of
trading of the contracts and the price at which the futures contract is
originally struck. Futures contracts which are standardized as to maturity date
and underlying financial instrument are traded on national futures exchanges.
Futures exchanges and trading are regulated under the Commodity Exchange Act by
the Commodity Futures Trading Commission (the "CFTC"), a U.S. Government agency.
Although futures contracts by their terms call for actual delivery
and acceptance of the underlying securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery.
Closing out an open futures position is done by taking an opposite position
(buying a contract which has previously been "sold," or "selling" a contract
previously purchased) in an identical contract to terminate the position. A
futures contract on a securities index is an agreement obligating either party
to pay, and entitling the other party to receive, while the contract is
outstanding, cash payments based on the level of a specified securities index.
The acquisition of put and call options on futures contracts will, respectively,
give the Fund the right (but not the obligation), for a specified price, to sell
or to purchase the underlying futures contract, upon exercise of the option, at
any time during the option period. Brokerage commissions are incurred when a
futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in
cash or government securities with a broker or custodian to initiate and
maintain open positions in futures contracts. A margin deposit is intended to
assure completion of the contract (delivery or acceptance of the underlying
security) if it is not terminated prior to the specified delivery date. Minimal
initial margin requirements are established by the futures exchange and may be
changed. Brokers may establish deposit requirements which are higher than the
exchange minimums. Initial margin deposits on futures contracts are customarily
set at levels much lower than the prices at which the underlying securities are
purchased and sold, typically ranging upward from less than 5% of the value of
the contract being traded.
After a futures contract position is opened, the value of the
contract is marked-to-market daily. If the futures contract price changes to the
extent that the margin on deposit does not satisfy margin requirements, payment
of additional "variation" margin will be required. Conversely, change in the
contract value may reduce the required margin, resulting in a repayment of
excess margin to the contract holder. Variation margin payments are made to and
from the futures broker for as long as the contract remains open. Each Fund
expects to earn interest income on its margin deposits.
In addition to the margin restrictions discussed above, transactions
in futures contracts may involve the segregation of funds pursuant to
requirements imposed by the CFTC. Under those requirements, where a Fund has a
long position in a futures contract, it may be required to establish a
segregated account (not with a futures commission merchant or broker, except as
may be permitted under CFTC rules) containing cash or certain liquid assets
equal to the purchase price of the contract (less any margin on deposit). For a
short position in futures or forward contracts held by a Fund, those
requirements may mandate the establishment of a segregated account (not with a
futures commission merchant or broker, except as may be permitted under CFTC
rules) with cash or certain liquid assets that, when added to the amounts
deposited as margin, equal the market value of the instruments underlying the
futures contracts (but are not less than the price at which the short positions
were established). However, segregation of assets is not required if a Fund
"covers" a long position. For example, instead of segregating assets, a Fund,
when holding a long position in a futures contract, could purchase a put option
on the same futures contract with a strike price as high or higher than the
price of the contract held by the Fund. In addition, where a Fund takes short
positions, or engages in sales of call options, it need not segregate assets if
it "covers" these positions. For example, where the Fund holds a short position
in a futures contract, it may cover by owning the instruments underlying the
contract. A Fund may also cover such a position by holding a call option
permitting it to purchase the same futures contract at a price no higher than
the price at which the short position was established. Where the Fund sells a
call option on a futures contract, it may cover either by entering into a long
position in the same contract at a price no higher than the strike price of the
call option or by owning the instruments underlying the futures contract. A Fund
could also cover this position by holding a separate call option permitting it
to purchase the same futures contract at a price no higher than the strike price
of the call option sold by the Fund.
When interest rates are expected to rise or market values of
portfolio securities are expected to fall, a Fund can seek through the sale of
futures contracts to offset a decline in the
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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.
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 Funds 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 Small Cap Fund, the International
Fund and the Gold 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"
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securities are those rated within the four highest quality grades as determined
by Moody's or S&P . Securities rated Aaa by Moody's and AAA by S&P are judged to
be of the best quality and carry the smallest degree of risk. Securities rated
Baa by Moody's and BBB by S&P lack high quality investment characteristics and,
in fact, have speculative characteristics as well. Debt securities are
interest-rate sensitive; therefore their value will tend to decrease when
interest rates rise and increase when interest rates fall. Such increase or
decrease in value of longer-term debt instruments as a result of interest rate
movement will be larger than the increase or decrease in value of shorter-term
debt instruments.
Investments In Other Investment Companies
The Small Cap Fund, the International Fund and the Gold 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, the Small Cap Fund and the Gold 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.
Risks Associated With Foreign Investments
General. Consistent with their respective investment objectives and
policies, the Tocqueville Fund, the Small Cap Fund and the Gold 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 may directly or indirectly invest in
securities of foreign issuers. Direct and indirect investments in securities of
foreign issuers may involve risks that are not present with domestic investments
and there can be no assurance that a Fund's foreign investments will present
less risk than a portfolio of domestic securities. Compared to United States
issuers, there is generally less publicly available information about foreign
issuers and there may be less governmental regulation and supervision of foreign
stock exchanges, brokers and listed companies. Foreign issuers are not generally
subject to uniform accounting, auditing and financial reporting standards,
practices and requirements comparable to those applicable to domestic issuers.
Securities of some foreign issuers are less liquid and their prices are more
volatile than securities of comparable domestic issuers. Settlement of
transactions in some foreign markets may be delayed or less frequent than in the
United States, which could affect the liquidity of each Fund's portfolio. Fixed
brokerage commissions on foreign securities exchanges are generally higher than
in the United States. Income from foreign securities may be reduced by a
withholding tax at the source or other foreign taxes. In some countries, there
may also be the possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of a Fund, political or
social instability or revolution, or diplomatic developments which could affect
investments in those countries.
The value of each Fund's investments denominated in foreign
currencies may depend in part on the relative strength of the U.S. dollar, and a
Fund may be affected favorably or unfavorably by exchange control regulations or
changes in the exchange rate between foreign currencies and the U.S. dollar.
When a Fund invests in foreign securities they will usually be denominated in
foreign currency, and the Fund may temporarily hold funds in foreign currencies.
Thus, each Fund's net asset value per share will be affected by changes in
currency exchange rates. Changes in foreign currency exchange rates may also
affect the value of dividends and interest earned, gains and losses realized on
the sale of securities and net investment income and gains, if any, to be
distributed to shareholders by each Fund. The rate of exchange between the U.S.
dollar and other currencies is determined by the forces of supply and demand in
the foreign exchange markets.
Special Risks Associated With The Tocqueville International Value Fund.
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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.
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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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. Less
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 except from banks and not in excess of 10% of
the value of a Fund's total assets. A Fund may not purchase
securities while borrowings exceed 5% of the value of its total
assets;
(6) buy or sell real estate, commodities, or commodity
contracts, except a Fund may purchase or sell futures or options on
futures;
(7) underwrite securities;
(8) invest in precious metals other than in accordance with a
Fund's investment objective and policy, if as a result the Fund would
then have more than 10% of its total assets (taken at current value)
invested in such precious metals; and
(9) participate in a joint investment account.
The following restrictions are non-fundamental and may be changed by
the Funds' Board of Trustees. Pursuant to such restrictions, the Funds will not:
(1) make short sales of securities, other than short sales
"against the box," or purchase securities on margin except for
short-term credits necessary for clearance of portfolio transactions,
provided that this restriction will not be applied to limit the use
of options, futures contracts and related options, in the manner
otherwise permitted by the investment restrictions, policies and
investment program of a Fund;
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(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, 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
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(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.
Kieran Lyons, Vice President, Principal Financial Officer, Secretary and
Treasurer. 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
predecessors), 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 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, 1999, the Trustees and officers as a group owned beneficially
3.03% of The Tocqueville Fund's outstanding shares, 0.63% of the International
Fund's outstanding shares, 0.91 % of the Small Cap Fund's outstanding shares,
and 1.14% of the Gold 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, 1998, the Trust paid the "disinterested" Trustees an aggregate of
$32,500; each disinterested Trustee received $1,250 per Board meeting and $250
per Audit Committee meeting. "Interested" Trustees do not receive Trustees'
fees. The Trust did not reimburse Trustee expenses.
10
<PAGE>
The table below illustrates the compensation paid to each Trustee for
the Trust's most recently completed fiscal year:
<TABLE>
<CAPTION>
Name of Person, Aggregate Pension or Estimated Annual Total
Position Compensation Retirement Benefits Upon Compensation
from Fund Benefits Accrued Retirement from Fund and
as Part of Fund Fund Complex
Expenses Paid to Trustees
<S> <C> <C> <C> <C>
Francois Sicart $ 0 $ 0 $ 0 $ 0
Lucille G. Bono $5,500 $ 0 $ 0 $5,500
Bernard F. Combemale $5,500 $ 0 $ 0 $5,500
James B. Flaherty $5,500 $ 0 $ 0 $5,500
Inge Heckel $5,500 $ 0 $ 0 $5,500
Robert Kleinschmidt $ 0 $ 0 $ 0 $ 0
Francois Letaconnoux $5,000 $ 0 $ 0 $5,000
Larry M. Senderhauf $5,500 $ 0 $ 0 $5,500
</TABLE>
Control Persons and Principal Holders of Securities
As of January 31, 1999, the following shareholders owned 5% or more
of a Fund's shares:
- - The Tocqueville Fund:
Tocqueville Asset Management L.P. held discretion over 1,334,176.309
shares (37%).
- - The Tocqueville Small Cap Value Fund:
Tocqueville Asset Management L.P. held discretion over 885,421.834
shares (52%).
- - The Tocqueville International Value Fund:
Tocqueville Asset Management L.P. held discretion over 7,447,219.364
shares (88%).
- - The Tocqueville Gold Fund:
Tocqueville Asset Management L.P. held discretion over 752,480.034
shares (85%)
The address of Tocqueville Asset Management L.P. is 1675 Broadway, New York, New
York 10019.
INVESTMENT ADVISORY AND OTHER SERVICES
Investment Advisory Agreement
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
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<PAGE>
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 is an affiliate of Tocqueville Securities,
L.P., the Funds' distributor.
The Investment Advisor receives a fee from: (1) both the Tocqueville
Fund and the Tocqueville Small Cap Value Fund, calculated daily and payable
monthly, for the performance of its services at an annual rate of .75% on the
first $100 million of the average daily net assets of each Fund, .70% of average
daily net assets in excess of $100 million but not exceeding $500 million, and
.65% of average daily net assets in excess of $500 million; (2) the Tocqueville
International Value Fund, calculated daily and payable monthly, for the
performance of its services at an annual rate of 1.00% on the first $50 million
of the average daily net assets, .75% of average daily net assets in excess of
$50 million but not exceeding $100 million, and .65% of the average daily net
assets in excess of $100 million; and (3) the Tocqueville Gold Fund, calculated
daily and payable monthly, for the performance of its services at an annual rate
of 1.00% on the first $500 million of the average daily net assets of the Fund,
.75% of average daily net assets in excess of $500 million but not exceeding $1
billion, and .65% of 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, 1997 and 1998, with respect to The Tocqueville Fund, the
Investment Advisor earned advisory fees of $240,219, $256,312, $265,262 and
$498,857 respectively, after waivers of $0, $36,154, $133,423 and $0,
respectively. For the fiscal years ended October 31, 1995, 1996, 1997 and 1998,
with respect to the Small Cap Fund, the Investment Advisor earned advisory fees
of $58,456, $62,717, $62,294 and $171,076, respectively, after waivers of
$4,147, $19,096, $54,172 and $0, respectively. For the fiscal years ended
October 31, 1995, 1996, 1997 and 1998, with respect to the International Fund,
the Investment Advisor earned advisory fees of $0, $99,116, $382,042 and
$605,315, respectively, after waivers of $35,890, $68,161, $51,247 and $0,
respectively. Finally, for the period June 29, 1998 (commencement of operations)
to October 31, 1998 with respect to the Gold Fund, the Investment Advisor earned
advisory fees of $0, after waivers of $18,773.
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, $132,895 and $166,286, respectively, in distribution
expenses for the fiscal years
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<PAGE>
ended October 31, 1995, 1996, 1997 and 1998, respectively. The Small Cap Fund
accrued after waiver $0, $14,595, $38,822 and $57,026, respectively, in
distribution expenses for the fiscal years ended October 31, 1995, 1996, 1997
and 1998, respectively. The International Value Fund accrued after waiver $0,
$27,121, $111,467 and $160,106, respectively, in distribution expenses for the
fiscal years ended October 31, 1995, 1996, 1997 and 1998, respectively. The Gold
Fund accrued after waiver $4,693 in distribution expenses for the period June
29, 1998 to October 31, 1998.
As of October 31, 1998, the Tocqueville Fund, Small Cap Value Fund,
International Fund and Gold Fund had $194,956, $85,011, $62,006, and $11,644,
respectively, (0.29%, 0.37%, 0.09%, and 0.21%, 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 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 is authorized to allocate the orders placed by it on behalf
of a Fund to such unaffiliated brokers who also provide research or statistical
material, or other services to the Fund or the Investment Advisor for the Fund's
use. Such allocation shall be in such amounts and proportions as the Investment
Advisor shall determine and the Investment Advisor will report on said
allocations regularly to the Board of Trustees indicating the unaffiliated
brokers to whom such allocations have been made and the basis therefor. In
addition, the Investment Advisor may consider sales of shares of each Fund and
of any other funds advised or managed by the Investment Advisor as a factor in
the selection of unaffiliated brokers to execute portfolio transactions for each
Fund, subject to the requirements of best execution. The Trustees have
authorized the allocation of brokerage to affiliated broker-dealers on an agency
basis to effect portfolio transactions. The Trustees have adopted procedures
incorporating the standards of Rule 17e-1 of the 1940 Act, which require that
the commission paid to affiliated broker-dealers must be "reasonable and fair
compared to the commission, fee or other remuneration received, or to be
received, by other brokers in connection with comparable transactions involving
similar securities during a comparable period of time." At times, a Fund may
also purchase portfolio securities directly from dealers acting as principals,
underwriters or market makers. As these transactions are usually conducted on a
net basis, no brokerage commissions are paid by the Fund.
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<PAGE>
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, 1996, the Tocqueville Fund, Small Cap Fund and International Fund
paid total brokerage commissions on portfolio transactions in the amount of
$103,140, $101,089 and $130,401, respectively. For the fiscal year ended October
31, 1997, the Tocqueville Fund, Small Cap Fund and International Fund paid total
brokerage commissions on portfolio transactions in the amount of $101,313,
$132,304 and $421,839, respectively. For the fiscal year ended October 31, 1998,
the Tocqueville Fund, Small Cap Fund, International Fund and Gold Fund paid
total brokerage commission on portfolio transactions in the amount of $103,729,
$175,638, $622,309 and $44,719, 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 years ended October 31,
1996, 1997 and 1998, respectively, were: the Tocqueville Fund: $39,665, $63,555,
$62,053 and $30,907, respectively; the Small Cap Fund: $23,016, $47,933, $67,534
and $108,144, respectively; the International Fund: $0, $1,509, $4,177 and
$37,427, respectively. For the Gold Fund, commissions earned by Tocqueville
Securities L.P. for the fiscal year ended October 31, 1998 were 6,990. For the
fiscal year ended October 31, 1998, 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: 32.1% and $20,273,792, respectively; the Small Cap Fund: 61.6%
and $28,853,700, respectively; the International Fund: 6.1% and $7,192,629,
respectively; and the Gold Fund: 15.6% and $1,456,093, 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. 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
14
<PAGE>
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
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) 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
15
<PAGE>
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 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.
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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 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
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taxable income for the current calendar year (and, instead, include such gains
and losses in determining ordinary taxable income for the succeeding calendar
year).
Each Fund intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Fund may in certain circumstances be required to
liquidate portfolio investments to make sufficient distributions to avoid excise
tax liability.
Fund Distributions
Each Fund anticipates distributing substantially all of its
investment company taxable income for each taxable year. Such distributions will
be taxable to shareholders as ordinary income and treated as dividends for
federal income tax purposes. Such dividends paid by the Tocqueville Fund and the
Small Cap Fund will qualify for the 70% dividends-received deduction for
corporate shareholders only to the extent discussed below. Such dividends paid
by the Government 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, 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.
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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 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."
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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.
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.
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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.
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
YIELD = 2[( ----- +1)6-1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of
the period.
Under this formula, interest earned on debt obligations for purposes
of "a" above, is calculated by (1) computing the yield to maturity of each
obligation held by the Fund based on the market value of the obligation
(including actual accrued interest) at the close of business on the last day of
each month, or, with respect to obligations purchased during the month, the
purchase price (plus actual accrued interest), (2) dividing that figure by 360
and multiplying
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the quotient by the market value of the obligation (including actual accrued
interest as referred to above) to determine the interest income on the
obligation for each day of the subsequent month that the obligation is in the
Fund's portfolio (assuming a month of 30 days) and (3) computing the total of
the interest earned on all debt obligations and all dividends accrued on all
equity securities during the 30-day or one month period. In computing dividends
accrued, dividend income is recognized by accruing 1/360 of the stated dividend
rate of a security each day that the security is in the Fund's portfolio. For
purposes of "b" above, Rule 12b-1 expenses are included among the expenses
accrued for the period. Undeclared earned income, computed in accordance with
generally accepted accounting principles, may be subtracted from the maximum
offering price calculation required pursuant to "d" above.
Any quotation of performance stated in terms of yield will be given
no greater prominence than the information prescribed under the SEC's rules. In
addition, all advertisements containing performance data of any kind will
include a legend disclosing that such performance data represents past
performance and that the investment return and principal value of an investment
will fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
Calculated pursuant to the SEC's formula and assuming an ending
redeemable value of an initial $1,000 investment, The Tocqueville Fund's total
return for the 1 year, 3 year, 5 year and 10 year periods ended October 31, 1998
was (4.59), 16.32%, 14.48% and 14.01%, respectively; the total return for the
Small Cap Fund for the 1 year, 3 year and since inception periods ended October
31, 1998 was (13.37)%, 12.15%, and 13.57%, respectively; the total return for
the International Fund for the 1 year, 3 year and since inception periods ended
October 31, 1998 was (19.41)%, (7.11)%, and (3.27)%, respectively.
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 four series,
The Tocqueville Fund, The Tocqueville Small Cap Value Fund, The Tocqueville
International Value Fund, The Tocqueville Gold Fund. On August 19, 1991, the
Declaration of Trust was amended to change the name of the Trust to "The
Tocqueville Trust," and on August 4, 1995, the Declaration of Trust was amended
to permit the division of a series into classes of shares. Each share of
beneficial interest has one vote and shares equally in dividends and
distributions when and if declared by 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,
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the Trust's Declaration of Trust contains an express disclaimer of shareholder
liability for acts or obligations of the Trust and provides for indemnification
and reimbursement of expenses out of the Trust property for any shareholder held
personally liable for the obligations of the Trust. The Trust's Declaration of
Trust further provides that obligations of the Trust are not binding upon the
Trustees individually but only upon the property of the Trust and that the
Trustees will not be liable for any action or failure to act, errors of judgment
or mistakes of fact or law, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.
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, 1998 and for the six months ended April 30, 1998, respectively, are
incorporated by reference from the Annual Report to Shareholders dated October
31, 1998.
COUNSEL AND INDEPENDENT ACCOUNTANTS
Kramer Levin Naftalis & Frankel LLP 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 Mutual Fund Services, LLC, 615 East Michigan Street, Milwaukee,
Wisconsin 53202, Attention: [name of Fund], or may be made by calling 1-
800-697-3863.
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