SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a party other than the registrant |_|
Check the appropriate box:
|X| Preliminary proxy statement |_| Confidential, for Use of the
|_| Definitive proxy statement Commission Only |_|
Definitive additional materials (as permitted by Rule 14a-6(e)(2))
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Fundamental Fixed-Income Fund
(Name of Registrant as Specified in Its Charter)
Jules Buchwald
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
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PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES AND
EXCHANGE COMMISSION ONLY
FUNDAMENTAL FIXED-INCOME FUND
(Fundamental U.S. Government Strategic Income Fund)
(High-Yield Municipal Bond Series)
(Tax-Free Money Market Series)
THE CALIFORNIA MUNI FUND
FUNDAMENTAL FUNDS, INC.
(New York Muni Fund)
90 Washington Street
New York, New York 10006
November __, 1997
Dear Shareholder:
A Special Meeting of Shareholders of Fundamental U.S. Government
Strategic Income Fund, High-Yield Municipal Bond Series and Tax-Free Money
Market Series of Fundamental Fixed-Income Fund, The California Muni Fund and the
New York Muni Fund series of Fundamental Funds, Inc. (the "Funds") will be held
at ______________________, at [ a.m.] (Eastern Time) on ______ __, 1997. Because
this transaction affects five Funds and because much of the information required
to be included in the proxy materials for each Fund is substantially identical,
we believe it is more efficient and cost-effective to prepare a single,
"combined" Proxy Statement for use by shareholders of all of the Funds.
By the enclosed proxy materials you are being asked to consider and
approve an Agreement and Plan of Reorganization (the "Plan") providing for the
transfer of the assets of your Fund to a separate newly-created series of The
Tocqueville Trust (the "Tocqueville Trust"). As part of the transaction, each
shareholder of your Fund will receive a certain number of shares of the
corresponding Tocqueville Trust series having the same aggregate value as the
shares you owned in the Fund immediately prior to the reorganization. Details of
the proposed reorganization of your Fund, which is intended to be tax-free, are
described in the Proxy Statement, to which you are asked to give your prompt
attention.
On July 15, 1997 your Fund's Board unanimously approved each Plan and
recommended that shareholders approve the transactions contemplated by them. The
possibility of a transaction reorganizing your Fund into the Tocqueville Trust
series was first presented to your Fund's Board in early 1997 and, after
reviewing a number of alternative courses of action, the Board Members at such
time recommended that your Fund transfer its assets to a corresponding
Tocqueville Trust series, in exchange for shares of the Tocqueville Trust
series, and thereafter liquidate and dissolve.
THE BOARDS' DELIBERATIONS ARE DESCRIBED UNDER "PROPOSAL 1 --
CONSIDERATION OF THE BOARDS -- JULY 15 APPROVAL." BASED ON THE OCCURRENCES
DESCRIBED UNDER "RECENT EVENTS" WHICH BECAME KNOWN AFTER THE BOARDS FIRST
UNANIMOUSLY APPROVED THE PLANS, TWO FORMER INDEPENDENT BOARD MEMBERS HAVE
CONCLUDED THAT THE REORGANIZATION IS NOT IN THE BEST INTEREST OF THE FUNDS AND
THEIR SHAREHOLDERS. THE REORGANIZATION IS PROCEEDING BECAUSE ALL OF THE
REMAINING BOARD MEMBERS, INCLUDING THE TWO OTHER INDEPENDENT BOARD MEMBERS, HAVE
CONCLUDED THAT THE REORGANIZATION PLAN IS IN THE BEST INTEREST OF THE FUNDS AND
THEIR SHAREHOLDERS.
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The remaining Board Members of each Fund believe that the capabilities
and resources of Tocqueville Asset Management L.P., adviser to the Tocqueville
Trust, and Tocqueville Securities L.P., the distributor of shares of the
Tocqueville Trust, may possibly provide greater economies of scale and diversity
of investments if the proposed transaction is approved because your new
Tocqueville Trust series has greater asset potential. Since the investment
objectives and policies of your Fund and the Tocqueville Trust series are
substantially identical, we expect that you will continue to be able to meet
your personal investment objectives as a shareholder of the Tocqueville Trust
series.
If, for any reason, the proposed reorganization is not consummated, the
Board of each Fund will then consider other alternatives, including the
possibility of dissolving the Fund and liquidating its assets otherwise than
through a reorganization into another fund.
WE ASK YOU TO TAKE THE TIME TO CONSIDER THIS IMPORTANT MATTER
AND VOTE NOW. IN ORDER TO MAKE SURE THAT YOUR VOTE IS
REPRESENTED, PLEASE INDICATE YOUR VOTE ON THE ENCLOSED PROXY
CARD AND DATE, SIGN AND RETURN IT IN THE ENCLOSED ENVELOPE.
Your prompt response will ensure that your shares are counted at the
meeting. Every vote counts! If you later find that you are able to attend the
meeting in person, you may revoke your proxy at the meeting and vote in person.
Sincerely,
Vincent J. Malanga
President
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PRELIMINARY PROXY MATERIALS
FOR THE INFORMATION OF THE SECURITIES
AND EXCHANGE COMMISSION ONLY
FUNDAMENTAL FIXED-INCOME FUND
(Fundamental U.S. Government Strategic Income Fund)
(High-Yield Municipal Bond Series)
(Tax-Free Money Market Series)
THE CALIFORNIA MUNI FUND
FUNDAMENTAL FUNDS, INC.
(New York Muni Fund)
90 Washington Street
New York, New York 10006
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ______ __, 1997
A special meeting of the shareholders of Fundamental U.S. Government
Strategic Income Fund, High-Yield Municipal Bond Series and Tax-Free Money
Market Series of Fundamental Fixed-Income Fund, The California Muni Fund and New
York Muni Fund Series of Fundamental Funds, Inc. (each, a "Fund" and,
collectively, the "Funds") will be held at [ ] a.m. (Eastern time) at [ ] on
______ __, 1997, for the purpose indicated below:
1. With respect to each Fund, to approve or disapprove an Agreement and
Plan of Reorganization (the "Plan"), and the transactions contemplated
thereby, providing for (i) the transfer of all the assets of the Fund
into a separate newly-created series of The Tocqueville Trust (the
"New Series") in exchange for shares of the New Series; (ii) the pro
rata distribution of the shares of the New Series to the Shareholders
of the Fund; and (iii) the dissolution of the Fund. A vote for
approval of this proposal will authorize your Fund, as the sole
shareholder of the New Series prior to the reorganization, to approve
(a) the proposed investment advisory agreement for the New Series and
(b) the proposed distribution plan for the shares of the New Series.
In addition, to transact such other business as may properly come before
the meeting or any adjournment thereof.
Shareholders of record as of the close of business on ______ __, 1997 are
entitled to receive notice of, and to vote at, the meeting and any and all
adjournments thereof. Your attention is called to the accompanying Proxy
Statement.
By Order of the Boards of The Fundamental Funds
________________________________
________________
______ __, 1997
YOU CAN HELP AVOID THE NECESSITY AND EXPENSE OF SENDING FOLLOW-UP LETTERS TO
ENSURE A QUORUM BY PROMPTLY RETURNING THE ENCLOSED PROXY. IF YOU ARE UNABLE TO
ATTEND THE MEETING, PLEASE MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY SO
THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE MEETING. THE ENCLOSED
ENVELOPE REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
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FUNDAMENTAL FIXED-INCOME FUND
(Fundamental U.S. Government Strategic Income Fund)
(High-Yield Municipal Bond Series)
(Tax-Free Money Market Series)
THE CALIFORNIA MUNI FUND
FUNDAMENTAL FUNDS, INC.
(New York Muni Fund)
90 Washington Street
New York, New York 10006
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Trustees of Fundamental
Fixed-Income Fund, on behalf of its Fundamental U.S. Government Strategic Income
Fund, High-Yield Municipal Bond Series and Tax-Free Money Market Series, the
Board of Trustees of The California Muni Fund and the Board of Directors of
Fundamental Funds, Inc. on behalf of its New York Muni Fund series (each, a
"Fund" and, collectively, the "Funds"). Fundamental Fixed-Income Fund, The
California Muni Fund and New York Muni Fund (referred to herein collectively as
the "Fundamental Funds") are each registered open-end investment companies
having their executive office at 90 Washington Street, New York, New York 10006.
The proxy is revocable at any time before it is voted by sending written notice
of the revocation to the Fundamental Funds or by appearing personally at the
______ __, 1997 special meeting of shareholders (the "Meeting").
A copy of each Fund's Annual Report (which contains information pertaining
to the Fund) may be obtained, without charge, by calling the Fund's transfer
agent, Fundamental Shareholder Services, Inc., P.O. Box 1013, New York, New York
10274, 1-800-322-6864.
This combined Proxy Statement and notice of meeting and proxy card are
first being mailed to shareholders on or about _____ __, 1997.
INTRODUCTION
The Meeting is being called to approve or disapprove the reorganization of
each Fund into a corresponding new series (each, a "New Series") of The
Tocqueville Trust (the "Tocqueville Trust") by the transfer of substantially all
of the assets of such Fund to the corresponding series of the Tocqueville Trust
in exchange for shares of such and to transact such other business as may
properly come before the Meeting or any adjournment thereof.
DESCRIPTION OF VOTING
Approval of the Proposal requires the affirmative vote of (i) with
respect to the California Muni Fund and New York Muni Fund, a majority of each
Fund's outstanding shares of beneficial interest/common stock ("Shares"), (ii)
with respect to Fundamental U.S. Government Strategic Income Fund, High-Yield
Municipal Bond Series and Tax-Free Money Market Series, a "majority of the
outstanding voting securities," within the meaning of the Investment Company Act
of 1940, as amended (the "1940 Act") of each Fund. The term "majority of the
outstanding voting securities" is defined under the 1940 Act to mean: (a) 67% or
more of the outstanding Shares present at the Meeting, if the holders of more
than 50% of the outstanding Shares are present or represented by proxy, or (b)
more than 50% of the outstanding Shares of a Fund, whichever is less.
Shareholders of record at the close of business on _____ __, 1997 (the
"Record Date"), will be entitled to notice of, and to vote at, the Meeting,
including any adjournment thereof. As of the Record Date, the Fundamental Funds
had the number of Shares outstanding set forth below, each Share being entitled
to one vote:
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Total Shares
Fund Outstanding
---- -----------
Fundamental U.S. Government Strategic Income Fund
High-Yield Municipal Bond Series
Tax-Free Money Market Series
The California Muni Fund
New York Muni Fund
Each shareholder will be entitled to one vote for each share and a
fractional vote for each fractional share held. Shareholders holding a majority
(one-third, with respect to The California Muni Fund) of the outstanding Shares
of a Fund at the close of business on the Record Date present in person or by
proxy will constitute a quorum for the transaction of business with respect to
the Fund at the Meeting. For purposes of determining the presence of a quorum
and counting votes on the matters presented, Shares represented by abstentions
and "broker non-votes" will be counted as present, but not as votes cast, at the
Meeting. The issued and outstanding shares of the New York Muni Fund series
constitute all of the issued and outstanding shares of Fundamental Funds, Inc.
and the reorganization of the New York Muni Fund series into a corresponding
series of the Tocqueville Trust will constitute a reorganization of Fundamental
Funds, Inc. into the Tocqueville Trust.
Any proxy which is properly executed and returned in time to be voted at
the Meeting will be counted in determining whether a quorum is present with
respect to a Fund and will be voted as marked. In the absence of any
instructions, such proxy will be voted to approve the Proposal. If a quorum is
not present at the Meeting with respect to a Fund, or if a quorum is present but
sufficient votes to approve the Proposal are not received, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the nature of the Proposal that is the
subject of the Meeting, the percentage of votes actually cast, the percentage of
negative votes actually cast, the nature of any further solicitation and the
information to be provided to shareholders with respect to the reasons for the
solicitation. Any adjournment will require the affirmative vote of a majority of
those shares of a Fund represented at the Meeting in person or by proxy. A
shareholder vote may be taken for the Proposal in this Proxy Statement prior to
any adjournment if sufficient votes have been received for approval. If a
shareholder abstains from voting as to any matter, then the shares held by such
shareholder shall be deemed present at the Meeting for purposes of determining a
quorum and for purposes of calculating the vote with respect to such matter, but
shall not be deemed to have been voted in favor of such matter. A shareholder
may revoke his or her proxy at any time prior to its exercise by delivering
written notice of revocation or by executing and delivering a later dated proxy
to the address set forth on the cover page of this Proxy Statement, or by
attending and voting at the Meeting.
The cost of preparing and mailing proxy materials will be borne by
Fundamental Portfolio Advisors, Inc. and Tocqueville Asset Management L.P. Proxy
solicitations will be made primarily by mail, but may also be made by telephone,
facsimile or personal interview conducted by certain officers or employees of
the Fundamental Funds or Fundamental Portfolio Advisors, Inc., the Fundamental
Funds' manager (the "Manager"). [ ] has engaged [ ], on behalf of the Funds, to
assist with proxy solicitations, at an estimated cost of [ ].
If the Proposal is approved, it is anticipated that it will become
effective as soon as practical thereafter.
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MATTERS TO BE ACTED ON
PROPOSAL 1
APPROVAL OF THE AGREEMENT AND PLAN OF REORGANIZATION
The Boards of the Fundamental Funds have approved Agreements and Plans of
Reorganization (each a "Plan" and collectively, the "Plans") which provide for
the reorganization (the "Reorganization") of the Fundamental U.S. Governmental
Strategic Income Fund (the "Fundamental Government Fund") into the Tocqueville
U.S. Government Strategic Income Fund Series (the "Tocqueville Government
Series"), the High-Yield Municipal Bond Series (the "Fundamental High-Yield
Fund") into the High-Yield Municipal Bond Fund Series (the "Tocqueville
High-Yield Series"), the Tax-Free Money Market Series (the "Fundamental Money
Market Fund") into the Tocqueville Tax-Free Money Market Fund Series (the
"Tocqueville Money Market Series"), The California Muni Fund (the "Fundamental
California Fund") into the Tocqueville California Muni Fund Series (the
"Tocqueville California Series") and New York Muni Fund (the "Fundamental New
York Fund") into the New York Muni Fund Series (the "Tocqueville New York
Series") of the Tocqueville Trust. The series of the Tocqueville Trust are
referred to, collectively, as the "New Series." The New Series do not currently
have any assets; they are being registered as series of the Tocqueville Trust
for the sole purpose of receiving the assets of the corresponding Fund. Each New
Series has substantially the same investment objectives, policies and
restrictions as its corresponding Fund except as described below in the
subheading "Description of the New Series." However, each New Series will have a
different investment adviser, distributor and transfer agent from its
corresponding Fund. In addition, the Tocqueville Trust has a Board of Trustees
which is different from the Boards of the Fundamental Funds.
Each New Series has been organized and registered for the purpose of
continuing the investment operations of its corresponding Fund. Because of the
continuation of investment operations, and to avoid the need to call another
shareholders' meeting after a Reorganization, shareholders of each Fund are also
being asked to authorize the Fund, as the sole shareholder of the New Series
prior to the Reorganization, to approve the proposed investment advisory
agreement for the New Series and the proposed distribution plan for the New
Series. A vote in favor of the Reorganization is also a vote to authorize the
relevant Fund to take such actions. The issued and outstanding shares of
Fundamental New York Fund constitute all of the issued and outstanding shares of
Fundamental Funds, Inc. and the reorganization of the Fundamental New York Fund
into the Tocqueville New York Series will constitute a reorganization of
Fundamental Funds, Inc. into the Tocqueville Trust.
Each Reorganization is described in the respective Agreement and Plan of
Reorganization pertaining to the Reorganization and includes the transfer by the
Fund (and in the case of Fundamental New York Fund, Fundamental Funds, Inc.) of
substantially all of its assets to the corresponding New Series in exchange for
a number of full and fractional shares of beneficial interest of the New Series
having an aggregate net asset value equal to the aggregate net asset value of
the Fund's shares, the assumption by the New Series of certain identified
liabilities attributable to the Fund, the distribution by the Fund to its
shareholders of the shares of the New Series, and the dissolution of the Fund
(and, in the case of Fundamental New York Fund, Fundamental Funds, Inc.). The
foregoing is a summary of each Reorganization and is subject to and qualified in
its entirety by reference to the relevant Agreement and Plan of Reorganization
pertaining to each Reorganization. A vote in favor of the Reorganization will
constitute approval and authorization of each action and transaction included in
the Reorganization.
In the event the Reorganization is not approved by shareholders of a Fund,
the Boards of the Fundamental Funds will consider what other course of action,
if any, should be taken with respect to such Fund, which could include the
adoption of a plan to liquidate such Fund.
NO COMMISSIONS, SALES LOADS, REDEMPTION FEES OR OTHER SIMILAR CHARGES WILL
BE INCURRED BY SHAREHOLDERS OF A FUND IN CONNECTION WITH THE REORGANIZATION.
FURTHERMORE, SHAREHOLDERS OF THE FUNDAMENTAL FUNDS WILL BE "GRANDFATHERED" BY
THE TOCQUEVILLE TRUST AND GIVEN THE PERMANENT RIGHT TO PURCHASE ADDITIONAL
SHARES OF THE NEW SERIES AND ALL OTHER SERIES OF THE TOCQUEVILLE TRUST AT NET
ASSET VALUE, WITHOUT THE IMPOSITION OF COMMISSIONS, SALES LOADS, REDEMPTION FEES
OR OTHER SIMILAR CHARGES.
BACKGROUND
On July 15, 1997, the Boards of the Fundamental Funds unanimously approved
the Plans and recommended that shareholders of each Fund approve the
transactions contemplated by them. Prior to taking this action, the Board
Members of the Fundamental Funds who are not "interested persons" of the Manager
or the Funds, within the meaning of the 1940 Act (the "Independent Board
Members"), retained an investment banking firm to seek fund organizations
willing to manage the Funds and to submit requests for proposals. The
Independent Board Members had concluded that it was unlikely that a majority of
the Funds' Independent Board Members would approve the continuance of the
current Management Agreements beyond December 31, 1997. The Manager advised the
Independent Board Members that it had already received a proposal from
Tocqueville Asset Management L.P. ("Tocqueville") contemplating investment
company reorganizations pursuant to which Tocqueville would serve as successor
investment adviser to the Funds; therefore, in addition to submitting requests
for proposals to mutual fund organizations recommended by the investment banking
firm, a request for proposal was also submitted to Tocqueville.
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In seeking alternative arrangements for the advisory role, the Independent
Board Members were represented by independent counsel for the purpose of
assisting them in reaching a determination and to review alternative courses of
action available to the Funds.
AS DESCRIBED BELOW, ULTIMATELY, THE BOARDS' RECOMMENDED APPROVAL NOT
UNANIMOUS, WITH TWO FORMER INDEPENDENT BOARD MEMBERS CONCLUDING THAT PROCEEDING
WITH THE REORGANIZATION IS NOT IN THE BEST INTEREST OF THE FUNDS AND THEIR
SHAREHOLDERS.
CONSIDERATIONS OF THE BOARDS
JULY 15 APPROVAL
In determining, on July 15, 1997, to recommend approval of the proposed
reorganization to shareholders of the Fundamental Funds, the Independent Board
Members met separately with their independent counsel numerous times, inquired
into a number of matters, and considered the factors set forth below, among
others. The Boards considered the Reorganization at special meetings held on
July 10 and July 15, 1997. At the special meeting of the Boards held on July 15,
1997 (the "July 15th Meeting"), the Board Members unanimously determined that
the Reorganization and the Plans would not result in the dilution of the
interests of, and would be in the best interest of, the shareholders of each
Fund. Accordingly, the Board Members of the Fundamental Funds approved, and
resolved to recommend to the shareholders of the Funds that they approve, the
Reorganization and the Plans. The Board Members present at the July 15th Meeting
constituted all of the Independent Board Members.
Proposal 1, below, relates to the approval of a reorganization of the Funds
into corresponding series of the Tocqueville Trust. In approving the proposed
transaction, the Board Members, considering the best interest of the
shareholders of the Funds, took into account all such factors as they deemed
relevant, but gave no greater weight to any of the following factors.
The Board Members, assisted by independent counsel and an investment
banking firm, narrowed their review to the consideration of two mutual fund
organizations and interviewed representatives of both organizations. In making
their decision to recommend Tocqueville as the new manager, the Board Members
conducted several interviews with the principals of Tocqueville, as well as with
the proposed portfolio manager. Among the factors considered were the nature and
extent of the services to be furnished by Tocqueville; the advantages and
possible disadvantages of having a manager which also serves other mutual funds
and private accounts; the investment record of Tocqueville; possible economies
of scale; comparative data as to advisory fees; Tocqueville's New York presence
and interest in maintaining the integrity of the Funds; Tocqueville's intention
to continue checkwriting privileges for all Funds, not solely for the Money
Market Fund; Tocqueville's interest in employing certain Fundamental employees
to provide continuity of service to shareholders; the fact that Fund
shareholders will be able to invest in other funds managed by Tocqueville, and
thus will be offered convenient access to a broader range of investment
opportunities; possible benefits to Tocqueville from serving as manager to the
Funds; the financial resources and distribution capabilities of Tocqueville and
the importance of obtaining high quality professional services for the Funds.
The Board Members' decision to recommend approval of the proposed transaction by
shareholders was based on the totality of the facts and circumstances; the Board
Members had determined that Tocqueville would be able to provide superior levels
of support and service to the Funds and their shareholders.
The Board Members also considered the fact that the management services to
be performed under the new investment advisory agreements are substantially
similar to those under the Funds' existing management agreements and that
Tocqueville has voluntarily agreed to waive a portion of its fees or reimburse
the Funds, if necessary, so that the expense ratio (excluding interest,
incremental professional fees, incremental directors'/trustees' expenses and
other extraordinary expenses) of each Fund for a period of two years following
the consummation of the transaction does not exceed 3.36% for the Tocqueville
Government Series, 6.48% for the Tocqueville High-Yield Series, 1.54% for the
Tocqueville Money Market Series, 2.78% for the Tocqueville California Series and
1.77% for the Tocqueville New York Series. Each expense ratio cap is less than
the expense ratio for the most current fiscal year-end for the following
Fundamental Funds: Fundamental Government Fund, Fundamental California Fund and
Fundamental New York Fund and, absent voluntary waiver and/or reimbursement,
less than the most current fiscal year-end expense ratio fo Fundamental
High-Yield and Fundamental Money Market Funds.
The Board Members considered that the Reorganization will be accomplished
by transferring the assets of each Fund to a corresponding New Series having
substantially the same investment policies and objectives as those
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of such Fund and Tocqueville's representation that each New Series will be kept
intact for at least two years following the consummation of the proposed
transaction, subject to the overall direction of the Board of Trustees of the
Tocqueville Trust.
In addition to their attendance at the Board meetings held on July 10 and
July 15, 1997, the Independent Board Members met separately with their counsel
on such dates as well as upon a number of other occasions to consider the
Reorganization. In conducting their evaluation, the Independent Board Members
reviewed and discussed various materials provided pursuant to the requests for
proposals and at the specific request of the Independent Board Members. Included
among these materials were: (i) data concerning historical performance of the
existing series of the Tocqueville Trust; (ii) comparative information with
respect to expenses of the New Series, presented on a pro forma basis, and other
mutual funds with similar investment objectives to those of the Funds; (iii)
biographical information concerning the Trustees of the Tocqueville Trust and
the portfolio managers for the New Series; and (iv) information concerning the
marketing capabilities of Tocqueville.
The Board Members considered that there will be no sales charge imposed in
effecting the Reorganization. In addition, by keeping the Funds together within
the same family of funds, shareholders will benefit from the ability to make
exchanges among the Funds and among the other series of the Tocqueville Trust
without incurring sales charges. Also considered was the fact that the
Reorganization is intended to qualify as a tax-free exchange.
The Board Members were advised that the Manager and/or its affiliates have
agreed to provide certain services as part of the transition to Tocqueville as
well as certain other services to shareholders of the Funds following completion
of the Reorganization, to assist in assuring continuity for the shareholders in
their dealings with the Funds. The Board Members also were advised that the
Manager and/or its affiliates may receive fees from Tocqueville for any
bona fide services rendered to Tocqueville.
Other factors considered by the Boards in recommending shareholder approval
of the Reorganization included, among other things:
(1) the terms and conditions of the Reorganization;
(2) the federal tax consequences to the Funds, the New Series and the
shareholders resulting from the proposed Reorganization, and the likelihood that
no recognition of income, gain or loss for federal income tax purposes to the
Funds, the New Series, or the shareholders will occur as a result thereof; and
(3) that the interests of the shareholders of the Funds will not be diluted
as a result of the proposed Reorganization.
Based upon these factors, the Board Members unanimously determined that the
transaction would not result in dilution of the interests of, and would be in
the best interest of, the shareholders of each Fund and recommended that the
shareholders of each Fund approve the Reorganization and the Plans.
AS DESCRIBED ABOVE, ON JULY 15, 1997, THE BOARDS UNANIMOUSLY APPROVED THE
REORGANIZATION. BASED ON THE OCCURRENCES DESCRIBED UNDER "RECENT EVENTS" WHICH
BECAME KNOWN AFTER THE BOARDS FIRST APPROVED THE PLANS, TWO FORMER INDEPENDENT
BOARD MEMBERS HAVE CONCLUDED THAT THE REORGANIZATION IS NOT IN THE BEST INTEREST
OF THE FUNDS AND THEIR SHAREHOLDERS. THE REORGANIZATION IS PROCEEDING BECAUSE
ALL OF THE REMAINING BOARD MEMBERS, INCLUDING THE TWO OTHER INDEPENDENT BOARD
MEMBERS, HAVE CONCLUDED THAT THE REORGANIZATION PLAN IS IN THE BEST INTEREST OF
THE FUNDS AND THEIR SHAREHOLDERS.
RECENT EVENTS
From February 18, 1997 until August 27, 1997, Mr. Christopher P. Culp, an
employee of Tocqueville, served on the Manager's Investment Advisory Committee
as the principal portfolio manager of the Funds. He did so in his capacity as an
employee of Fundamental, representing to the Boards that he was working without
salary or other compensation. At the same time, he continued to be employed by
Tocqueville.
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<PAGE>
Between April 17, 1997 and July 24, 1997, Mr. Culp engaged Tocqueville
Securities L.P. ("Tocqueville Securities"), an affiliate of Tocqueville, as
agent to effect eight separate over-the-counter purchase transactions of
municipal obligations on behalf of Fundamental New York Fund. Fundamental New
York Fund's Board has concluded that the commissions paid to Tocqueville
Securities in connection with these transactions (a portion of which was paid to
Mr. Culp) were not justified and that Fundamental New York Fund bore unnecessary
expenses as a result of the sale of its securities to another party and the
subsequent repurchase of them through Tocqueville Securities. Based upon a
report initiated by Tocqueville Securities and prepared by Fundamental New York
Fund's independent auditors, and upon the Board's own analysis, the Board
directed that the Manager terminate Mr. Culp's services as a portfolio manager.
At the Board's request and in order to reimburse Fundamental New York Fund for
all of its losses, Tocqueville Securities, on September 15, 1997, voluntarily
paid $260,000 to Fundamental New York Fund, an amount which significantly
exceeds the total commissions ($184,920.60) received by Tocqueville Securities
in connection with these transactions. The staff of the Securities and Exchange
Commission (the "Commission") and the Department of NASD Regulation have been
informed of these events by Tocqueville Securities.
VIEWS OF FORMER BOARD MEMBERS
As a result of the foregoing circumstances, the Board reexamined the
appropriateness of proceeding with the Reorganization. After consideration,
Messrs. James A. Bowers and Clark L. Bullock, Independent Board Members,
determined, for the reasons set forth below, that proceeding with the
Reorganization with Tocqueville was not in the best interest of the Funds and
their shareholders:
o LACK OF EXPERIENCED PORTFOLIO MANAGER. Messrs. Bowers and Bullock's
original determination to vote in favor of the Reorganization was greatly
dependent on the confidence they had had in Mr. Culp's ability to manage the
portfolios of Fundamental New York Fund and Fundamental California Fund. During
the six month period ending August 27, 1997, Mr. Culp had been managing the
portfolios of these Funds and made regular presentations to the Boards at which
he described his investment approach and detailed his trading discipline.
Messrs. Bowers and Bullock believed that Mr. Culp managed the portfolios well
and that, because of his presence, Tocqueville -- which otherwise had no
experience managing investment companies investing in municipal obligations
("Municipal Bond Funds") -- could properly perform its investment advisory
duties on behalf of these Funds after the Reorganization. Mr. Culp is no longer
employed by Tocqueville. Messrs. Bowers and Bullock believe that Tocqueville has
not demonstrated that it now has investment professionals with sufficient
experience managing Municipal Bond Funds to warrant proceeding with the
Reorganization, although representatives of Tocqueville have indicated their
intention to seek to hire such person or persons. Furthermore, while they have
no factual basis to believe other Tocqueville personnel violated any laws in
connection with the actions taken by Mr. Culp, Messrs. Bowers and Bullock are
concerned about transferring responsibility for managing the Fund's assets to
Tocqueville until it has been demonstrated that there were no other violations,
that the staff of the Commission does not intend to investigate Tocqueville in
connection with these matters and that Tocqueville has put in place internal
controls to ensure that its activities on behalf of the New Series would not
violate any laws.
o EXCESSIVE FEES. In connection with the Board Members' approval of the
Reorganization at the July 15th Meeting, representatives of Tocqueville and the
Manager advised the Boards that Tocqueville intended to engage the Manager to
perform shareholder servicing functions in connection with the Funds' existing
shareholders and to pay the Manager a fee at the rate of .25% annually of the
assets of Fund shareholders remaining in the New Series after the
Reorganization. Tocqueville advised the Boards in writing that these fees would
be paid only for bona fide services rendered.
Messrs. Bowers and Bullock believed, at the time of the July 15, 1997
approval, that the Manager intended to maintain its organization with staff to
service Fund shareholders. The Board recently was advised that the Manager
intended only to retain the services of its principal shareholders, Drs. Vincent
J. Malanga and Lance M. Brofman (the Board having determined in December, 1996,
that Dr. Brofman should have nothing to do with the Funds' operations), and two
other employees to perform these functions.
Since _____, 1995, the Manager and the Funds' Board members have cooperated
in an investigation conducted by the Commission concerning the Fundamental
Government Fund, its trustees, the Manager and certain associated persons and
affiliated entities of the Manager. On September 30, 1997, the Commission
instituted administrative proceedings against the Manager, Fundamental Service
Corporation, and Drs. Brofman and Malanga (the "Parties"). The Commission's
Order instituting the proceedings alleges, among other things, certain
violations of the federal securities laws, including the antifraud provisions,
for failing to disclose the risks associated with investments in inverse
floating rate notes made on behalf of the Fundamental Government Fund in 1993
and 1994, marketing the Fundamental Government Fund in a way that was contrary
to the administration of the Fundamental Government Fund, exceeding the
Fundamental Government Fund's portfolio duration of three years or less as
stated in its prospectus, and failing to disclose the Manager's soft dollar
practices to the Fund Boards. A hearing will be scheduled to determine whether
the allegations against the Parties are true, and if so, whether remedial action
is appropriate. Counsel to the Parties have indicated that the Parties intend to
vigorously contest the charges.
Messrs. Bowers and Bullock believe it is inappropriate for Tocqueville to
pay Drs. Brofman and Malanga and two other employees an annual fee of
approximately $500,000 (based on current asset levels) for shareholder servicing
functions and that some portion of that amount should be retained by
shareholders in the form of lower management or other fees. The other Board
Members disagree.
o FAILURE TO CONSIDER ALTERNATIVES. In light of the foregoing, Messrs.
Bowers and Bullock requested that the Boards attempt to determine whether
representatives of another mutual fund complex that had proposed, on or
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<PAGE>
about July 15, 1997, to enter into a transaction with the Funds similar to the
Reorganization were interested in pursuing a transaction. The other Board
Members determined not to do so. Messrs. Bowers and Bullock believe it would
have been in the best interest of shareholders to make this inquiry and seek
alternatives to Tocqueville.
Because of the Board Members' failure to act in a manner which they believe
is consistent with shareholders' interest Messrs. Bowers and Bullock have
tendered their resignations as Board Members and their resignations have been
accepted effective _______ __, 1997.
VIEWS OF THE REMAINING BOARD MEMBERS
The factual assertions that frame the recent conclusion reached by two
former Independent Board Members, that proceeding with the Reorganization is not
in the best interests of the Funds and their shareholders in light of the above
referenced recent events, are that (i) Tocqueville does not now have experienced
municipal bond fund portfolio managers; (ii) the Boards need to further evaluate
Tocqueville's internal compliance control system and personnel; (iii) a portion
of shareholder servicing fees intended to be paid to the principal shareholders
and two other employees of the Manager for any bona fide services to be rendered
are excessive and should be retained by shareholders of the Funds in the form of
lower management or other fees; and (iv) the remaining Board Members failed to
consider pursuing a transaction similar to the Reorganization with another
mutual fund organization. Messrs. James C. Armstrong, L. Greg Ferrone and
Vincent J. Malanga (the "Remaining Board Members") believe the concerns of the
two former Board Members to be both unwarranted and premature and rather believe
that the Reorganization is in the best interest of the Funds and their
shareholders for the reasons set forth below.
O LACK OF EXPERIENCED PORTFOLIO MANAGER. It should be noted that in
evaluating the Tocqueville proposal, the Remaining Board Members placed a great
deal of emphasis upon the depth of Tocqueville's investment staff and the number
and status of its personnel and service providers devoted to legal and
accounting compliance. While the Remaining Board Members were confident that Mr.
Culp had adequate knowledge and experience with respect to managing the
Fundamental Government Fund and the three municipal bond fund portfolios, the
Remaining Board Members considered the ENTIRE Tocqueville organization. Clearly,
the Remaining Board Members did not vote for Mr. Culp's investment acumen alone.
This is why the Fund Boards reviewed the investment performance of every series
of the Tocqueville Trust and not just Tocqueville Government Fund, the one fund
that Mr. Culp co-managed with Mr. Kleinschmidt, Tocqueville's President.
Tocqueville currently manages approximately $875 million in investment
assets. Of such amount, $153 million represents investments in fixed-income
obligations and $160 million represents management of four mutual fund
portfolios. Tocqueville's assets under management in municipal bond obligations
will vary as a function of asset allocation, but usually range between $3
million and $ 10 million. Tocqueville currently has eight investment
professionals on its staff, including portfolio managers, traders and analysts
of whom four have substantial experience managing municipal bond portfolios. At
the September 9, 1997 meeting of the Fund Boards, Mr. Kleinschmidt represented
that Tocqueville, following consummation of the Reorganization, planned to hire
an additional junior research analyst experienced in municipal bond obligations,
a decision that was reached prior to the events leading to Mr. Culp's departure.
At such meeting, Mr. Kleinschmidt also stated that he is willing to personally
co-manage the New Series with Mr. Drew Rankin, a senior investment person with
approximately 17 years of experience in municipal bond portfolios, together with
the additional support of an experienced investment management team, and
research capability; that Tocqueville has adequate capital resources to perform
all of its obligations under the proposed management agreements with the New
Series and the ability to attract and retain investment personnel with proven
ability, including Mr. Culp's replacement. The Remaining Board Members believe
that, while unfortunate and regrettable, Mr. Culp's actions do not taint or
impinge upon the professionalism, advisory or other capabilities of Tocqueville.
In addition, the Remaining Board Members believe, based on the representations
of Mr. Kleinschmidt, that other individuals currently employed by Tocqueville
are eminently capable of managing the New Series, and that Mr. Culp's
termination will not affect the advisory services to be provided to the Funds.
Mr. Rankin has been a portfolio manager with Tocqueville since 1993. From
1986 through 1993, Mr. Rankin served as a portfolio manager for an investment
firm, managing over $100 million for high net worth individuals, of which
approximately 30% was invested in municipal bond obligations. From 1982 through
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<PAGE>
1986, Mr. Rankin managed fixed-income portfolios for high net worth individuals
at the Columbia University Endowment Fund, where he also assisted the
Treasurer's office as a liaison to the New York State Dormitory Authority. From
1972 through 1982, Mr. Rankin was employed at The Bank of New York and Irving
Trust Company managing municipal portfolios for high net worth individuals; he
was also a member of the investment policy committee and managed a national
municipal bond portfolio and a fixed-income portfolio. Ms. Jane Tubis, an
employee of the Manager, is expected to join the Tocqueville Trust as an
assistant portfolio manager. Ms. Tubis was a municipal bond fund trader at The
Bank of New York before joining the Fundamental family of Funds in 1986. Since
1986, she has been active in assisting the portfolio manager of Fundamental's
municipal and government bond funds.
At the September 9, 1997 meeting of the Fund Boards, Mr. Kleinschmidt
recommended that the Independent Board Members meet with Mr. Rankin to determine
for themselves his ability to manage a municipal bond fund. The Remaining Board
Members believe it would have been in the best interest of shareholders for the
Independent Board Members to interview Mr. Rankin, but the former Board Members
declined to do so.
o INTERNAL COMPLIANCE CONTROL. The Remaining Board Members believe that Mr.
Culp's actions represent one isolated incident and are not indicative of a lack
of internal controls. His trading practice, once detected, was promptly and
adequately addressed. The forthrightness of Tocqueville in taking responsibility
and its resolution of the matter is but one indication of the serious attention
that Tocqueville pays to compliance matters. Tocqueville, in its response to the
Funds' Request for Proposal, noted that neither the firm nor any of its
principals or investment professionals has been the subject of any legal,
regulatory or compliance investigations within the last five years. Accordingly,
the Remaining Board Members have reason to believe that Tocqueville has engaged
a compliance officer, who is properly performing his oversight duties.
Furthermore, as part of the Fund Boards' ongoing due diligence review, the
Remaining Board Members and their designees do indeed intend to verify through
Tocqueville's counsel, its independent auditors and its compliance officer that
there are no shortcomings in Tocqueville's internal compliance control systems,
that adequate procedures are in place to monitor investment activity and to
ensure that they are kept fully apprised of any regulatory developments
affecting Tocqueville and its affiliates.
o EXCESSIVE FEES. The Remaining Board Members do not believe that the
advisory fee rates payable under the New Agreement are excessive. Although the
former Board Members believe circumstances have changed, the rates payable under
the New Agreement are the same for each New Series as the advisory fee rates
payable under the current Agreements, Agreements that were unanimously approved
for continuance by each member of the Fund Boards on December 31, 1996. The
trustees of the Tocqueville Trust, including a majority of the independent
trustees, approved the New Agreements, including the reasonableness of the fees,
on July 31, 1997. Upon consummation of the Tocqueville transaction, the
reasonableness of the fees and the nature and quality of Tocqueville's services
to be provided to each New Series under the New Agreements will be factors to be
considered by the trustees of the Tocqueville Trust in light of their fiduciary
duty to the shareholders of the Tocqueville funds. Mr. Kleinschmidt has
represented that Tocqueville's proposal on July 15, 1997 was its best and final
offer with regard to fees and expense caps.
The trustees of the Tocqueville Trust approved the Agreement and Plan of
Reorganization on behalf of each New Series on the basis and understanding that
shareholder servicing payments will not be paid out of the management fees or
distribution plan payments received by Tocqueville and/or its affiliates from
each of the New Series. If the shareholder servicing payments following
consummation of the Reorganization are in accordance with the representations
made to the Fund Boards (comparable to industry fee payments for such services,
derived from sources other than Fund payments to Tocqueville and/or its
affiliates, and are for bona fide services rendered to assist continuity and
service to Fund shareholders in their dealings with the New Series, all at
Tocqueville's expense), the Remaining Board Members believe that such payments
should not be considered to be assets properly belonging to the Funds. Thus, any
payments for services provided by former Fundamental personnel will have no
effect on the fees and expenses of the New Series. Any payments for services
provided will come from Tocqueville. Therefore, payments for such services will
not reduce any New Series' assets or the amounts available to pay dividends to
any New Series' shareholders and will not add to any New Series' net expenses.
o FAILURE TO CONSIDER ALTERNATIVES. The Remaining Board Members determined
not to consider alternatives based on their belief that the other mutual fund
complex did not wish to proceed with the transaction and certain conditions
associated with the other potential proposal that they believed were not
acceptable, such as its lack of a commitment to continue to manage and
distribute the existing Funds and its desire to merge the Funds out of
existence, its inability to continue all of the existing shareholder services
and privileges and its absence of a New York presence, as well as the
extraordinary time and effort expended by all of the Board Members when they had
sought to consider alternatives after Tocqueville was proposed. Moreover, in the
opinion of the Remaining Board Members, any such action would have been
premature. (See "Best Interest of Shareholders" below).
o BEST INTEREST OF SHAREHOLDERS. Finally, and most significantly, it should
be noted that the Agreements and Plans of Reorganization between the Funds and
the Tocqueville Trust permit the Boards of the Funds to terminate the Agreements
and Plans and abandon the Reorganizations contemplated thereby at any time prior
to closing, EVEN IF APPROVED BY SHAREHOLDERS OF THE FUNDS if, in the judgment of
the Fund Boards, proceeding with the Reorganizations would be inadvisable.
Before the Fund Boards consider possible alternatives, the Remaining Board
Members would like to interview Mr. Rankin. The Remaining Board Members believe
that
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<PAGE>
Tocqueville should be given the opportunity between now and the time of the
closing of the Tocqueville transaction to address any of the Boards' concerns as
well as any possible issues that may be raised by the staff of the Commission,
particularly in view of the Fund Boards' unilateral right to abandon the
Reorganizations at any time prior to the closing, currently anticipated to occur
on or about December __, 1997, subject to approval by shareholders.
DESCRIPTION OF THE NEW SERIES
The New Series are series of the Tocqueville Trust which is organized as a
business trust under the laws of The Commonwealth of Massachusetts. The
Tocqueville 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 Tocqueville Trust in an unlimited number of
series of shares. In addition to the New Series, the Tocqueville Trust has four
other series, The Tocqueville Fund, The Tocqueville Small Cap Value Fund, The
Tocqueville International Value Fund and The Tocqueville Government Fund. Each
share of beneficial interest has one vote and shares equally in dividends and
distributions when and if declared by a series and in a series' net assets upon
liquidation. All shares, when issued, are fully paid and nonassessable. There
are no preemptive, conversion or exchange rights. Tocqueville Trust 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 Tocqueville Trust's 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. Shareholders of each series vote as a series to
change, among other things, a fundamental policy and to approve the investment
advisory agreement.
The Tocqueville 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 Tocqueville Trust's
Declaration of Trust without the affirmative vote of the holders of a majority
of the outstanding shares of each series affected by the amendment.
Under Massachusetts law, shareholders of a Massachusetts business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the Tocqueville Trust's Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the
Tocqueville 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 Tocqueville Trust. The Tocqueville Trust's Declaration of
Trust further provides that obligations of the Tocqueville Trust are not binding
upon the trustees individually but only upon the property of the Trust and that
the trustees will not be liable for any action or failure to act, errors of
judgment or mistakes of fact or law, but nothing in the Declaration of Trust
protects a trustee against any liability to which he would otherwise be subject
by reason of wilful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties involved in the conduct of his office.
Each New Series has the same investment objective as its corresponding
Fund. In addition, except as described in this section, each New Series has the
same investment policies and restrictions as its corresponding Fund.
Fundamental California Fund. Currently, as a non-fundamental policy,
Fundamental California Fund may not invest more than 10% of its total assets in
municipal obligations of California issuers which are illiquid or which have
limited marketability. 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 at approximately the price at which the Fund has
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valued them. Tocqueville California Fund will have the ability to invest up to
15% of its net assets (the maximum allowable by the 1940 Act) in illiquid
securities.
Fundamental Money Market Fund. Fundamental Money Market Fund's prospectus
currently states that the Fund "anticipates that it may from time to time invest
a portion of its assets, on a temporary basis, in short-term fixed-income
obligations whose interest is subject to federal income tax," that such
investments will be made only for "defensive measures" and that all such
investments must be (1) rated AA or higher, (2) U.S. Government Securities, or
(3) obligations of banks with at least $1,000,000,000 in assets. No more than
50% of the assets of the Fund may be invested in taxable obligations at any one
time, and the Fund anticipates that on a 12-month average, taxable obligations
will constitute less than 10% of the value of its total investments. These
restrictions will all remain in the New Series, however, the prospectus of the
New Series will also state that "defensive measures" could include situations
where the rates available on tax-exempt obligations that meet all of the credit,
maturity and diversification requirements of the New Series, were such that even
after the application of the highest effective tax rate, the after-tax rate on
taxable investments that meet all of the credit, maturity and diversification
requirements of the New Series would still be more favorable than what could be
obtained on comparable tax-exempt obligations.
Fundamental High Yield Fund. Currently, Fundamental High-Yield Fund must
invest at least 65% of its assets in securities rated BB or lower. The New
Series will, as a non-fundamental policy, invest at least 65% of its assets in
securities rated BBB or lower.
Fundamental Government Fund. Currently, Fundamental Government Fund seeks
high current income and greater price stability than comparable longer term
higher yielding investments by investing in higher yielding U.S. Government
securities and then using derivatives such as treasury bond futures and options
on treasury bond futures to continue to hedge the portfolio so that the average
weighted duration of its investment portfolio is three years or less. It is
intended that the New Series will invest primarily in intermediate-term U.S.
Government Securities and may engage in futures and options transactions for the
purposes of seeking to maintain principal and liquidity, but it will not be
limited to a specific duration number. Experience has shown that being required
to maintain an average weighted portfolio duration of three years or less, when
there are various different methods of calculating duration, can have the effect
of requiring a greater number of derivative positions to be entered into than
might be most advantageous in the opinion of management with regard to
maximizing the total return to shareholders under economic and market conditions
expected. Also a rigid policy of using futures and options positions to hedge to
a three year or less duration can require the portfolio to include a greater
number of derivative collateralized mortgage obligations, in its securities
portfolio than it might otherwise have.
SHAREHOLDERS' RIGHTS
The operations of Fundamental Funds, Inc. are governed by its Articles of
Incorporation ("Articles"), Bylaws and applicable Maryland law. The operations
of Fundamental Fixed-Income Fund, The California Muni Fund and the Tocqueville
Trust are governed by their respective Declaration of Trust, By-laws and
applicable Massachusetts law.
Fundamental Funds, Inc.'s Articles provide for the issuance of one billion
shares of common stock, $.001 par value of which, five hundred million shares
have been classified as New York Muni Fund series. Fundamental Funds, Inc. has
no shares which have been classified as any series other than the "New York Muni
Fund" and no issued and outstanding stock other than shares of the New York Muni
Fund series. Each Declaration of Trust provides for the issuance of an unlimited
number of shares of beneficial interest. Shares of the Tocqueville Trust have a
par value of $.01, shares of Fundamental Fixed-Income Fund and The California
Muni Fund have no par value.
Shares of Fundamental Funds, Inc. have no preemptive, conversion or
exchange rights. Shares of the other Funds [ ]. Shares of the Tocqueville Trust
have no preemptive, conversion or exchange rights. With respect to all shares,
voting rights are not cumulative.
Neither the Funds nor the Tocqueville Trust intend to hold annual meetings
of shareholders. Such meetings may be called, however, at the discretion of
their respective boards, and if requested to do so by the holders of at
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least 10% of the outstanding shares of a fund, a special meeting of shareholders
will be called for the purpose of voting upon the removal of a director or
trustee.
INVESTMENT ADVISERS
Currently, Fundamental Portfolio Advisors, Inc., which was organized in
1986, manages each Fund's investments pursuant to separate management agreements
(the "Agreements"). the Manager is an investment adviser registered with the
Securities and Exchange Commission, and specializes in managing and advising
mutual funds.
Under the terms of the Agreements, the Manager serves as investment adviser
and is responsible for the overall management of the business affairs and assets
of each Fund, subject to the authority of its Board. the Manager manages and
supervises each Fund's investment portfolio and directs the purchase and sale of
its investment securities subject to the right of the Fund's Board Members to
disapprove such purchase or sale.
The Manager pays all of the ordinary operating expenses of each Fund,
including executive salaries and the rental of office space, with the exception
of the following, which are to be paid by the Fund: (1) charges and expenses for
determining from time-to-time the net asset value of the Fund and the keeping of
its books and records, (2) the charges and expenses of any auditors, custodian,
transfer agent, plan agent, dividend disbursing agent and registrar performing
services for the Fund, (3) brokers' commissions, and issue and transfer taxes,
chargeable to the Fund in connection with securities transactions, (4) insurance
premiums, interest charges, dues and fees for membership in trade associations
and all taxes and fees payable by the Fund to federal, state or other
governmental agencies, (5) fees and expenses involved in registering and
maintaining registrations of the shares of the Fund with the Securities and
Exchange Commission and under the securities laws or regulations of states and
other jurisdictions, (6) all expenses of shareholders' and Board meetings, and
of preparing, printing and distributing notices, proxy statements and all
reports to shareholders and to governmental agencies, (7) charges and expenses
of legal counsel to the Fund, (8) compensation of those Board Members of the
Fund as such who are not affiliated with or interested persons of the Manager or
the Fund (other than as Board Members), (9) fees and expenses incurred pursuant
to the distribution and marketing plan and (10) such nonrecurring or
extraordinary expenses as may arise, including litigation affecting the Fund and
any indemnification by the Fund of its Board Members, officers, employees or
agents with respect thereto. To the extent any of the foregoing charges or
expenses are incurred by the Fundamental Funds for the benefit of each of its
series, the Fund is responsible for payment of the portion of such charges or
expenses which are properly allocable to the Fund.
For the services it provides under the terms of the Agreements, the Manager
receives monthly fees as follows:
<TABLE>
<CAPTION>
Fundamental Government Fund:
Average Daily Net Asset Value Annual Fee Payable
----------------------------- ------------------
<S> <C>
Net asset value to $500,000,000 ......................................... .75%
Net asset value of $500,000,000 or more but less than $1,000,000,000 ... .72%
Net asset value of $1,000,000,000 or more ............................... .70%
Fundamental High-Yield Fund:
Average Daily Net Asset Value Annual Fee Payable
----------------------------- ------------------
Net asset value to $100,000,000 ......................................... .80%
Net asset value of $100,000,000 or more but less than $200,000,000 ..... .78%
Net asset value of $200,000,000 or more but less than $300,000,000 ...... .76%
Net asset value of $300,000,000 or more but less than $400,000,000 ...... .74%
Net asset value of $400,000,000 or more but less than $500,000,000 ...... .72%
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Net asset value of $500,000,000 or more .................................. .70%
Fundamental Money Market Fund; Fundamental California Fund; Fundamental New York Fund:
Average Daily Net Asset Value Annual Fee Payable
----------------------------- ------------------
Net asset value to $100,000,000 ............................................ .50%
Net asset value of $100,000,000 or more but less than $200,000,000 ......... .48%
Net asset value of $200,000,000 or more but less than $300,000,000 ......... .46%
Net asset value of $300,000,000 or more but less than $400,000,000 ......... .44%
Net asset value of $400,000,000 or more but less than $500,000,000 ......... .42%
Net asset value of $500,000,000 or more .................................... .40%
</TABLE>
The Manager may, from time to time, voluntarily waive all or a portion of
its fees payable under each Agreement.
If the Reorganization is approved, Tocqueville will manage the investments
and business affairs of each New Series under a new investment advisory
agreement (the "New Agreement"). For each New Series, the advisory fee rate
payable under the New Agreement is the same as the advisory fee rate payable
under the current Agreements.
The New Agreement provides that Tocqueville identify and analyze possible
investments for the New Series, determine the amount and timing of such
investments, and the form of investment. Tocqueville will be responsible for
monitoring and reviewing each Fund's portfolio, and, on a regular basis, to
recommend the ultimate disposition of such investments. Under the terms of the
New Agreement, it is Tocqueville'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 Tocqueville Trust's Board of Trustees. In addition, Tocqueville
will also provide certain administrative and managerial services to the Fund.
Under the terms of the New Agreement, each New Series pays all of its
expenses (other than those expenses specifically assumed by Tocqueville and the
New Series' distributor) including the costs incurred in connection with the
maintenance of its registration under the Securities Act of 1933, as amended,
and the 1940 Act, printing of prospectuses distributed to shareholders, taxes or
governmental fees, brokerage commissions, custodial, transfer and shareholder
servicing agents, expenses of outside counsel and independent accountants,
preparation of shareholder reports, and expenses of Trustee and shareholder
meetings.
The New Agreement may be terminated without penalty on 60 days' written
notice by a vote of the majority of the Tocqueville Trust's Board of Trustees or
by Tocqueville, or by holders of a majority of a New Series' outstanding shares.
The New Agreement will continue for two years from its effective date and from
year-to-year thereafter provided it is approved, at least annually, in the
manner stipulated in the 1940 Act. This requires that the New Agreement and any
renewal thereof be approved by a vote of the majority of a New Series' 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 AGREEMENT AND MARKETING PLAN. FUNDAMENTAL GOVERNMENT,
FUNDAMENTAL HIGH-YIELD AND FUNDAMENTAL MONEY MARKET FUNDS. Fundamental Service
Corporation, 90 Washington Street, New York, New York, a Delaware corporation,
which is an affiliated company of the Manager, acts as principal distributor of
each Fund's shares. FSC has the exclusive right to distribute shares directly or
through other broker-dealers. With respect to Fundamental Government,
Fundamental High-Yield and Fundamental Tax-Free Funds, FSC is reimbursed for
distribution expenses pursuant to Distribution and Marketing Plans (the
"Marketing Plans"), adopted pursuant to Rule 12b-1 under the 1940 Act, which
allows it to finance activities that are primarily intended to result in the
sale of a Fund's shares, including but not limited to advertising, commissions,
and salaries paid to registered representatives and marketing personnel of FSC,
printing of prospectuses and reports for other than existing shareholders,
preparation and distribution of advertising material and sales literature, and
payments to
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dealers, banks and shareholder servicing agents who enter into agreements with
the Manager or FSC for providing administrative and account maintenance
services.
Pursuant to the Marketing Plans, each Fund may incur distribution expenses
not to exceed .50% (.25%, with respect to Fundamental Government Fund) per annum
of its average daily net assets. The Marketing Plans will only permit payments
for expenses actually incurred by the Distributor or the Manager. The Marketing
Plans allow for the carry-over of expenses from year-to-year and, if a Marketing
Plan is terminated or not continued in accordance with its terms, the Fund's
obligation to make payments to the Distributor (or Manager) pursuant to the Plan
will cease and the Fund will not be required to make any payments past the date
the Marketing Plan terminates.
DISTRIBUTION PLAN. FUNDAMENTAL CALIFORNIA AND FUNDAMENTAL NEW YORK FUNDS.
Fundamental California and Fundamental New York Funds, as issuer-dealers,
distribute their own shares directly. The Board of each Fund has approved a plan
of distribution under Rule 12b-1 of the 1940 Act (the "Distribution Plan").
Pursuant to the Distribution Plan, a Fund may pay certain promotional and
advertising expenses and compensate certain registered securities dealers and
financial institutions for services provided in connection with the processing
of orders for purchase or redemption of the shares of the Fund and furnishing
other shareholder services.
Payments by a Fund shall not in the aggregate in any fiscal year of the
Fund exceed 1/2 of 1% of daily net assets of the Fund for expenses incurred in
the distribution and promotion of the Fund's shares. The Distribution Plan will
only make payments for expenses actually incurred by such dealers and financial
institutions. The Distribution Plan will not carry over expenses from
year-to-year and if the Distribution Plan is terminated in accordance with its
terms, the obligations of a Fund to make payments pursuant to the Distribution
Plan will cease and the Fund will not be required to make any payments for
expenses incurred after the date the Distribution Plan terminates. A Fund may
enter into shareholder processing and service agreements (the "Shareholder
Service Agreements") with any securities dealer who is registered under the
Securities Exchange Act of 1934 and a member in good standing of the National
Association of Securities Dealers, Inc., and with banks and other financial
institutions, who may wish to establish accounts or sub-accounts on behalf of
their customers ("Shareholder Service Agents").
The fees payable to Shareholder Service Agents under Shareholder Service
Agreements will be negotiated by the Funds' management. The Funds' management
will report quarterly to the Funds' Boards on the rate to be paid under each
such agreement and the amounts paid or payable under such agreements. It will be
based upon an analysis of (1) the contribution that the Shareholder Service
Agent makes to a Fund by increasing Fund assets and reducing expense ratios; (2)
the nature, quality and scope of services being provided by the Shareholder
Service Agent; (3) the cost to a Fund if shareholder services were provided
directly by the Fund or other authorized persons; (4) the costs incurred by the
Shareholder Service Agent in connection with providing services to the
shareholders; and (5) the need to respond to competitive offers of others which
could result in assets being withdrawn from a Fund and an increase in the
expense ratio for the Fund.
The Board of each Fund, including a majority of the "disinterested" Board
Members who have no direct or indirect financial interest in the operation of
the Distribution Plan or any agreements relating thereto, authorized each Fund
to enter into an agreement with FSC, a Delaware corporation, under the
Distribution Plan. The agreement provides that each Fund may pay the usual and
customary agency's commission to FSC for producing and placing Fund advertising
in newspapers, magazines or other periodicals, or on radio or television. In
addition to the foregoing, each Fund may pay FSC for marketing research and
promotional services specifically relating to the distribution of Fund shares,
including employment expenses of personnel primarily responsible for responding
to inquiries from prospective investors. The following persons own of record 5%
or more of the outstanding shares of voting stock of FSC: Mr. Vincent J. Malanga
(43.71%); Mr. Thomas W. Buckingham (43.71%); and Dr. Lance M. Brofman (9.90%).
DISTRIBUTION PLAN. THE NEW SERIES. The New Series will adopt a plan of
distribution pursuant to Rule 12b-1 of the 1940 Act (the "New Distribution
Plan"), under which each New Series will pay to Tocqueville Securities a fee,
which is accrued daily and paid monthly, at an annual rate of .50% of each New
Series' average
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<PAGE>
daily net assets. Amounts paid under the plan are paid to Tocqueville Securities
to compensate it for services it provides and expenses it bears in distributing
the New Series' shares to investors, including payment of compensation by
Tocqueville Securities to securities dealers and other financial institutions
and organizations, such as banks, trust companies, savings and loan
associations, and investment advisers to obtain various distribution related
and/or administrative services for the New Series. Expenses of Tocqueville
Securities also include expenses of its employees, who engage in or support
distribution of shares or service shareholder accounts, including overhead and
telephone expenses; printing and distributing prospectuses and reports used in
connection with the offering of the New Series' shares; and preparing, printing,
and distributing sales literature and advertising materials. Tocqueville
Securities is an affiliate of Tocqueville.
The New Distribution Plan provides that it will remain in effect for one
year from the date of its adoption and thereafter may continue in effect for
successive annual periods provided it is approved by the shareholders or by the
Board of Trustees, including a majority of Trustees who are not interested
persons of the Tocqueville Trust and who have no direct or indirect interest in
the operation of the New Distribution Plan or in any agreement related to the
New Distribution Plan. The New Distribution Plan further provides that it may
not be amended to increase materially the costs which may be borne by the New
Series for distribution pursuant to the New Distribution Plan without
shareholder approval and that other material amendments of the New Distribution
Plan must be approved by the Trustees in the manner described above. The New
Distribution Plan may be terminated at any time by a vote of the Board of
Trustees or, with respect to the New Series, by the New Series' shareholders.
ADMINISTRATIVE SERVICES AGREEMENT. THE NEW SERIES. Under an Administrative
Services Agreement, Tocqueville will supervise the administration of all aspects
of the New Series' operations, including the New Series' receipt of services for
which it is obligated to pay, provide the New Series with general office
facilities and provide, at the New Series' expense, the services of persons
necessary to perform such supervisory, administrative and clerical functions as
are needed to effectively operate the New Series. Those persons, as well as
certain employees and Trustees of the New Series, may be partners, trustees,
directors, officers or employees of (and persons providing services to the New
Series may include) Tocqueville and its affiliates. For these services and
facilities, Tocqueville receives with respect to the New Series a fee computed
and paid monthly at an annual rate of .15% of the average daily net assets of
each New Series. Certain administrative responsibilities are delegated to, and
performed by, Firstar Trust Company.
PORTFOLIO TRANSACTIONS
Subject to the supervision of the Board of Trustees, decisions to buy and
sell securities for the New Series of the Tocqueville Trust will be made by
Tocqueville. Tocqueville, subject to obtaining the best price and execution, may
allocate brokerage transactions in a manner that takes into account the sale of
shares of a New Series. Generally, the primary consideration in placing
portfolio securities transactions with broker-dealers for execution is to
obtain, and maintain the availability of, execution at the best net price
available and in the most effective manner possible. The brokerage allocation
policies may permit a New Series to pay a broker-dealer which furnishes research
services a higher commission than that which might be charged by another
broker-dealer which does not furnish research services, provided that such
commission is deemed reasonable in relation to the value of the services
provided by such broker-dealer. Subject to the supervision of the Trustees,
Tocqueville is authorized to allocate brokerage to affiliated broker-dealers on
an agency basis to effect portfolio transactions. The Trustees have adopted
procedures incorporating the standards of Rule 17e-1 of the 1940 Act, which
require that the commission paid to affiliated broker-dealers must be reasonable
and fair compared to the commission, fee or other remuneration received, or to
be received, by other brokers in connection with comparable transactions
involving similar securities during a comparable period of time. It is expected
that brokerage will be allocated to Tocqueville Securities, an affiliate of
Tocqueville. (See "Considerations of the Boards - Recent Events.")
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<PAGE>
COMPARISON OF FEES AND EXPENSES
If the Reorganization is approved by shareholders, Tocqueville has
voluntarily undertaken to waive fees and/or reimburse expenses so that the New
Series' expense ratios (excluding interest, incremental professional fees,
incremental directors'/trustees' expenses and other extraordinary expenses) will
not exceed 3.36% for the Tocqueville U.S. Government Series, 6.48% for the
Tocqueville High-Yield Series, 1.54% for the Tocqueville Money Market Series,
2.78% for the Tocqueville California Muni Series and 1.77% for the Tocqueville
New York Muni Series for a period of two years following the Reorganization.
The following tables summarize and compare the fees and expenses of the
Funds and the New Series. These tables are intended to assist shareholders in
comparing the various costs and expenses that shareholders indirectly bear with
respect to an investment in a Fund and those that they can expect to bear
indirectly as shareholders of the corresponding New Series. Fees and expenses
are reflected as of December 31, 1996, the Fundamental Fund's most current
fiscal year end. Actual expenses may be more or less than those set forth below.
In addition, the "Example" set forth below should not be considered a
representation of future expenses, which will vary depending upon actual
investment returns and expenses.
-15-
<PAGE>
<TABLE>
<CAPTION>
Fundamental Tocqueville Fundamental Tocqueville Fundamental Tocqueville
Government Government High Yield High Yield Money Market Money Market
Fund Series Fund Series Fund Series
---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Commission Imposed
on Purchases (as a percentage of
offering price)* NONE 4.00% NONE 4.00% NONE NONE
Maximum Sales Commission Imposed on
Reinvested Dividends (as a
percentage of offering price) NONE NONE NONE NONE NONE NONE
Maximum Contingent Deferred Sales
Commission (as a percentage of
original purchase price or
redemption proceeds, as
applicable) NONE NONE NONE NONE NONE NONE
Redemption Fees (as a percentage of
amount redeemed, if applicable) NONE NONE** NONE NONE** NONE NONE**
Exchange Fee NONE NONE*** NONE NONE*** NONE NONE***
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Advisory Fees .00% .75% .00% .80% .50% .50%
12b-1 Fees(1) .00% .50% .50% .50% .50% .50%
Other Expenses, net of reimbursement
Interest .12% NONE NONE NONE NONE NONE
Other 5.75% 2.11% 2.00% 5.18% .26% .54%
----- ----- ----- ----- ---- ----
Total Fund Operating Expenses (after 5.87%(2) 3.36%(3) 2.50%(2) 6.48%(3) 1.26% 1.54%(3)
waiver and/or reimbursement)
Fundamental Tocqueville Fundamental Tocqueville
California California New York New York
Fund Series Fund Series
---- ------ ---- ------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Commission Imposed
on Purchases (as a percentage of
offering price)* NONE 4.00% NONE 4.00%
Maximum Sales Commission Imposed
on Reinvested Dividends (as a
percentage of offering price) NONE NONE NONE NONE
Maximum Contingent Deferred Sales
Commission (as a percentage of
original purchase price or
redemption proceeds, as applicable) NONE NONE NONE NONE
Redemption Fees (as a percentage of
amount redeemed, if applicable) NONE NONE** NONE NONE*
Exchange Fee NONE NONE*** NONE NONE***
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF NET ASSETS)
Advisory Fees .50% .50% .49% .50%
12b-1 Fees(1) .50% .50% .50% .50%
Other Expenses, net of reimbursement
Interest .45% NONE 2.11% NONE
Other 1.81% 1.78% .67% .77%
----- ----- ---- ----
Total Fund Operating Expenses (after 3.26% 2.78%(3) 3.77%(2) 1.77%(3)
waiver and/or reimbursement)
</TABLE>
- ---------------
* Shareholders of the Fundamental Funds may make additional purchases of the
Successor Series, and all other series of the Tocqueville Trust, at net
asset value, without the imposition of a sales charge.
** 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 redemption.
-16-
<PAGE>
(1) As a result of distribution fees, a long-term shareholder may pay more than
the economic equivalent of the maximum front- end sales charge permitted by
the rules of the National Association of Securities Dealers, Inc.
(2) Total Fund Operating Expenses reflect the voluntary waiver and/or the
reimbursement of certain expenses. Absent such voluntary waiver and/or
reimbursement, Advisory Fees, Other Expenses and Total Fund Operating
Expenses would be: Fundamental Government Fund: __%, __% and 5.55%,
respectively; Fundamental High-Yield Fund: __%, __% and 7.08%,
respectively; and Fundamental New York Fund: __%, __% and 3.77%.
(3) Total Fund Operating Expenses exclude interest, incremental professional
fees, incremental directors'/trustees' expenses and other extraordinary
expenses.
EXAMPLE:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return, (2) reinvestment of all dividends and distributions and (3)
redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Fundamental Government Fund $ 58 $174 $287 $562
Tocqueville Government Series
Fundamental High-Yield Fund 25 78 133 284
Tocqueville High-Yield Series
Fundamental Money Market Fund 13 40 69 152
Tocqueville Money Market Series
Fundamental California Fund 33 100 170 356
Tocqueville California Series
Fundamental New York Fund 38 115 194 401
Tocqueville New York Series
The purpose of the table above is to assist you in understanding the
various costs and expenses a shareholder of a Fund will bear directly or
indirectly. The foregoing example should not be considered a representation of
past or future expenses. Actual expenses may be greater or less than those
shown.
DESCRIPTION OF TRUSTEES OF THE TOCQUEVILLE TRUST
The Tocqueville Trust has a Board of Trustees comprised of the individuals
listed below. These individuals are different from the current Board Members of
the Funds. The operations of each New Series will continue to be subject to
substantially the same investment objectives, restrictions and policies of each
Fund and the New Series will continue to be managed in conformity with such
investment objectives, restrictions and policies by the new investment adviser
subject to the general oversight of the Tocqueville Trust Board.
Principal Occupation During
Name Age the Past Five Years
---- --- -------------------
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.
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.
-17-
<PAGE>
Inge Heckel Trustee. Management Consultant, 1988 to
present; 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.
Francois Letaconnoux** Trustee. President, Lepercq de Neuflize &
Co. from July, 1993 to present; President,
Lepercq, de Neuflize Securities Inc. (a
registered broker-dealer) from May 1995 to
present; Director, Lepercq 99 First
Management Inc. from 1988 to present;
Director from 1988, and President, from May
1995, Lepercq de Neuflize & Co., Inc.
(investment bank) 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 of the Executive
Committee & Director, Western World
Insurance Company, 1981 to present;
Director, Westco Holding Corporation, 1981
to present; Director, The French-American
Foundation, 1980 to present; Trustee, The
Princess Grace Foundation - U.S.A., 1980 to
present.
* Interested person of the Tocqueville Trust, as defined in the 1940 Act as
an affiliated person of Tocqueville.
** Interested person of the Tocqueville Trust as defined in the 1940 Act, as
an affiliated person of Lepercq, de Neuflize Securities Inc., a
broker-dealer registered under the Securities Exchange Act of 1934.
THE AGREEMENT AND PLAN OF REORGANIZATION
Each Plan provides that all of the assets of a Fund will be transferred to
its corresponding New Series in exchange for shares of the New Series and the
assumption by the New Series of certain identified liabilities of the
corresponding Fund. No sales charges will be charged to effect such exchange of
shares. In addition, under the Plans, the Tocqueville Trust has agreed to, under
certain conditions described in the Plans, indemnify and advance expenses to
each person who at the time of execution of the Plan served as an Independent
Board Member of the Funds. Copies of the Plans are included as Exhibits A-C to
this Proxy Statement. (Exhibit A pertains to Fundamental Government, Fundamental
High-Yield and Fundamental Tax-Free Funds, Exhibit B pertains to Fundamental
California Fund and Exhibit C pertains to Fundamental New York Fund.)
As a result of each Reorganization, an account will be established for each
shareholder in the relevant New Series, which will be credited with full and
fractional shares of the New Series equal in value to the value of the shares of
the Fund held by the shareholder immediately prior to the Reorganization.
On the effective date of the Reorganization (the "Closing Date") each of
the Funds will transfer all of its assets to the corresponding New Series in
exchange for the assumption by the New Series of certain identified liabilities
of the current Fund and the issuance of shares of beneficial interest of that
New Series ("New Series Shares") to the current Fund. The New Series Shares
issued with respect to a current Fund will have an aggregate net asset value
equal to the aggregate net asset value of the current Fund's Shares (as
determined by using the procedures set forth in the current Prospectus) on the
Closing Date. It is anticipated that initially, the New Series Shares will have
a net asset value of $_____. Following distribution of the New Series Shares to
each of the current Funds, and as soon as practicable thereafter, the
Fundamental Funds will
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<PAGE>
be liquidated and dissolved. Upon completion of the Reorganization, each
shareholder will be the owner of full and fractional New Series Shares equal in
aggregate net asset value to the shareholder's current Fund Shares. Shares of
the New Series will be represented by book entries and no share certificates
will be issued.
The Reorganization is subject to the satisfaction of a number of conditions
set forth in each Plan, including approval of the Plan and the transactions
contemplated by the Plan by shareholders of the Funds. Each Plan may be
terminated and the Reorganization abandoned at any time, by the Fund or the New
Series, without liability to the other (unless the terminating party is in
default or in breach of the Plan) if certain conditions exist. In addition, a
Fund Board may terminate a Plan and abandon the Reorganization, notwithstanding
approval thereof by shareholders of the Fund if, in the judgment of such Board,
proceeding with the Reorganization would be inadvisable.
Shareholders in the Funds have no dissenters' rights or appraisal rights.
All shareholders have the right at any time up to the business day preceding the
Closing Date to redeem their Fund shares at their then current net asset value.
FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Reorganization is subject to the condition that the
Funds receive an opinion from Kramer, Levin, Naftalis & Frankel, counsel to the
Funds, stating that for federal income tax purposes: (i) the transfer of all of
the assets of a Fund to its New Series in exchange for the assumption of certain
identified liabilities of such Fund by such New Series, the delivery to such
Fund of New Series Shares, the distribution by such Fund pro rata to its
shareholders of such New Series Shares and the termination of such Fund,
pursuant to the Reorganization Plan, will constitute a reorganization within the
meaning of Section 368(a)(1) of the Internal Revenue Code of 1986, as amended;
(ii) a Fund will not recognize any gain or loss as a result of the
Reorganization; (iii) a New Series will not recognize any gain or loss on the
receipt of the assets of a Fund in exchange for New Series Shares; (iv) the
shareholders of a Fund will not recognize any gain or loss on the exchange of
their shares of a Fund for New Series Shares; (v) the aggregate tax basis of the
New Series Shares received by each shareholder of a Fund in the Reorganization
will be the same as the aggregate tax basis of the shares of the Fund exchanged
therefor; (vi) a New Series' adjusted tax bases in the assets received from a
Fund in the Reorganization will be the same as the adjusted tax bases of such
assets in the hands of a Fund immediately prior to the Reorganization; (vii) the
holding period of each former shareholder of a Fund in the New Series Shares
received in the Reorganization will include the period for which such
shareholder held his shares of the Fund as a capital asset; and (viii) the New
Series' holding periods in the assets received from a Fund in the Reorganization
will include the holding periods of such assets in the hands of the
corresponding Fund immediately prior to the Reorganization.
As of December 31, 1996, the Funds have capital loss carry forwards,
expiring through December 31, 2004, as follows: Fundamental High-Yield Fund:
$____; Fundamental New York Fund: $20,655,000; Fundamental California Fund:
$21,892,882; and Fundamental Government Fund: $15,438,000. A capital loss
carryforward can offset capital gain for the eight taxable years succeeding the
year in which the loss arises, after which time the unused portion of the
carryforward will expire. Thus, while generally capital gain is distributed and
currently taxed to shareholders, capital gain realized by a Fund may be offset
by the capital loss carryforwards and not distributed to shareholders.
As a consequence of the Reorganization, each Fund's capital loss
carryforwards will become carryforwards of its corresponding New Series and
their benefits will therefore be shared with the shareholders of its
corresponding New Series. In addition, the Funds' current tax year will
terminate and, as a result, any unused capital loss will expire one year sooner
than they would have if the Reorganization did not take place.
The Reorganization is unlikely to cause an ownership change of a Fund
under Code section 382 because of the overlapping ownership of a Fund and its
corresponding New Series and, therefore, the capital loss carryforwards will not
be subject to limitation under Code section 383. If the Reorganization does
cause an ownership change, Fund capital loss carryforwards available to offset
its corresponding New Series capital gain would be limited for any year after
the Reorganization to an amount equal to the long-term tax-exempt rate
multiplied by the equity value of such Fund. For example, if an ownership change
occurs at a time when the equity value of such Fund is $26,000,000 and the
long-term tax-exempt rate is 5.3%, the capital gain that could be offset by the
New Series capital loss carryforwards would be limited to $1,378,000 per year.
Changes in share ownership in the New Series occurring subsequent to
the Reorganization could cause an ownership change that would limit the ability
of the New Series to use the capital loss carryforwards. The types of owner
shifts that could cause such limitation include the acquisition of another fund
by the New Series and acquisitions of shares of the New Series by persons who
acquire 5% or more of its outstanding shares.
-19-
<PAGE>
The Funds and the New Series have not sought a tax ruling from the
Internal Revenue Service (the "IRS") with respect to the tax aspects of the
Reorganization, but will act in reliance upon the opinion of counsel discussed
above. Such opinion is not binding on the IRS and does not preclude the IRS from
adopting a contrary position. If for any reason the Reorganization did not
qualify as a tax-free Reorganization for federal income tax purposes, then the
Reorganization would be treated as a taxable asset sale and purchase. In such
event, a Fund would recognize gain or loss on the transaction measured by the
difference between the consideration received by a Fund (including liabilities
of the Fund assumed by the New Series) and the tax basis of Fund assets, which
such gain, if any, would likely be offset by the availablity of a dividends paid
deduction; the tax basis of the assets acquired by the New Series would equal
the purchase price plus the amount of any liabilities assumed by the New Series;
and upon distribution of New Series Shares in dissolution of the Fund, the
shareholders of the Fund would recognize gain or loss on the disposition of
their Fund shares measured by the difference between the fair market value of
the New Series Shares received by them and the basis of Fund shares held by
them. Shareholders should consult their own advisers concerning the potential
tax consequences of the Reorganization to them, including state and local income
tax consequences.
REQUIRED VOTE AND RECOMMENDATION OF THE BOARDS
Approval of the Reorganization with respect to a Fund requires the
affirmative vote of (i) with respect to the Fundamental California Fund and
Fundamental New York Fund, a majority of each Fund's outstanding shares of
beneficial interest/common stock ("Shares"), (ii) with respect to Fundamental
Government Fund, Fundamental High-Yield Fund and Fundamental Money Market Fund,
a "majority of the outstanding voting securities," within the meaning of the
1940 Act of each Fund. The term "majority of the outstanding voting securities"
is defined under the 1940 Act to mean: (a) 67% or more of the outstanding Shares
present at the Meeting, if the holders of more than 50% of the outstanding
Shares are present or represented by proxy, or (b) more than 50% of the
outstanding Shares of a Fund, whichever is less. Approval of the Reorganization
by shareholders will constitute approval of the amendment of any investment
restrictions of the Funds which might be deemed to prohibit the transactions
contemplated by the Reorganization. After carefully considering all the issues
involved, the current Boards have unanimously concluded that the proposal is in
the best interests of the Funds and their shareholders and that the interest of
existing shareholders in the Funds will not be diluted as a result of the
Reorganization. If the Reorganization is approved at the Meeting, the Closing
Date is expected to be on or about ______, 1997.
VOTING INFORMATION AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY
While the Meeting is called to act upon any other business that may
properly come before it, at the date of this Proxy Statement the only business
which the management intends to present or knows that others will present is the
business mentioned in the Notice of Meeting. If any other matters lawfully come
before the Meeting, and in all procedural matters at the Meeting, it is the
intention that the enclosed proxy shall be voted in accordance with the best
judgment of the attorneys named therein, or their substitutes, present and
acting at the Meeting.
As of the Record Date, the Fundamental Funds believed that the following
persons beneficially owned more than 5% of Shares of the Funds:
[TO COME]
SUBMISSION OF PROPOSALS FOR THE NEXT MEETING OF SHAREHOLDERS
Under the Funds' Declaration of Trust/Articles of Incorporation and
By-Laws, annual meetings of shareholders are not required to be held unless
necessary under the 1940 Act (for example, when fewer than a majority of the
Board Members have been elected by shareholders). Therefore, the Fundamental
Funds do not hold shareholder meetings on an annual basis. A shareholder
proposal intended to be presented at any meeting hereafter called should be sent
to the Fundamental Funds at 90 Washington Street, New York, New York 10016, and
must be received by the Fundamental Funds within a reasonable time before the
solicitation relating thereto is made in order to be included in the notice or
proxy statement related to such meeting. The submission by a shareholder of a
proposal for inclusion in a proxy statement does not guarantee that it will be
included. Shareholder proposals are subject to certain regulations under federal
securities law.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. IF YOU DO NOT EXPECT TO
ATTEND THE MEETING, PLEASE SIGN YOUR PROXY CARD PROMPTLY AND RETURN IT IN THE
ENCLOSED ENVELOPE TO AVOID UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
NECESSARY.
_________ , 1997
BY ORDER OF THE BOARDS OF THE FUNDAMENTAL FUNDS
--------------, ---------------
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<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
the 15th day of July, 1997, by and between Fundamental Fixed-Income Fund, a
Massachusetts business trust (the "Fundamental Fund") for itself and on behalf
of its Fundamental U.S. Government Strategic Income Fund, High-Yield Municipal
Bond Series and Tax-Free Money Market Series (each, a "Fund") and The
Tocqueville Trust, a Massachusetts business trust (the "Tocqueville Trust"), for
itself and on behalf of its Tocqueville U.S. Government Strategic Income Fund
Series, Tocqueville High-Yield Municipal Bond Fund Series and Tocqueville
Tax-Free Money Market Fund Series (each, a "Successor Series").
This Agreement shall constitute a separate Agreement and Plan of
Reorganization for each Fund and its corresponding Successor Series. It is
expressly agreed that the respective rights and obligations of each Fund and its
corresponding Successor Series, as provided for hereunder, are separate from the
rights and obligations of any other funds managed by Fundamental Portfolio
Advisors, Inc. and successor series of the Tocqueville Trust, and that neither
the rights and obligations of any Fund nor of any Successor Series shall be
construed to be joint rights or obligations of the other funds managed by
Fundamental Portfolio Advisors, Inc. or their corresponding successor series,
respectively, notwithstanding the fact that such other funds and successor
series may be subject to a separate agreement and plan of reorganization
containing terms and conditions which are substantially the same as the terms
and conditions set forth herein.
In consideration of the mutual promises herein contained, Fundamental Fund,
for itself and on behalf of each Fund, and the Tocqueville Trust, for itself and
on behalf of each Successor Series, hereby agree as follows:
1. APPROVAL BY SHAREHOLDERS.
A special meeting of the shareholders of the Fund (the "Meeting")
will be called for the purpose of considering adoption of this Agreement and
Plan of Reorganization and considering such other business as may properly come
before the Meeting. The agenda for such Meeting may include such other proposals
as the Board of Trustees of Fundamental Fund may deem appropriate.
2. PLAN OF REORGANIZATION.
(i) Subject to the terms and conditions set forth in this
Agreement, the Fund will convey, transfer and deliver to the Successor Series at
the closing provided for in Section 3 (hereinafter called the "Closing") all of
its assets as set forth in paragraph 2(i) (the "Fund Assets"). In consideration
thereof, and subject to the terms and conditions set forth in this Agreement, at
the Closing the Successor Series will (a) assume certain identified liabilities
attributable to the Fund and (b) deliver to the Fund a number of full and
fractional shares of beneficial interest of the Successor Series, $.01 par value
(the "Shares"), having an aggregate net asset value ("NAV") equal to the
aggregate net asset value of the current Fund's shares of beneficial interest
(as determined in accordance with the Investment Company Act of 1940, as amended
(the "1940 Act"), and the Fund's current Prospectus) on the Closing Date.
(ii) The Fund Assets shall consist of all property and assets of
any nature whatsoever, including, without limitation, all cash, cash
equivalents, securities, claims and receivables (including dividend and interest
receivables) owned by the Fund, and any deferred or prepaid expenses shown as an
asset on the Fund's books on the Closing Date, as defined in paragraph 4.
At least five (5) days prior to the Closing Date, the Fund will provide its
corresponding Successor Series with (i) a list of the Fund Assets and (ii) a
list of the Fund's Identified Liabilities, as defined below.
<PAGE>
(iii) The Fund will, to the extent consistent with its ordinary
course of business and historical practices, discharge all of its known
liabilities and obligations prior to the Closing Date. The Successor Series will
assume all liabilities and obligations reflected on an unaudited statement of
assets and liabilities of its corresponding Fund prepared by the Fund's
accountant as of the Valuation Date (as defined in paragraph 3(i), in accordance
with generally accepted accounting principles consistently applied from the
prior audited period (the "Identified Liabilities"). The Successor Series shall
assume only the Identified Liabilities of its corresponding Fund, and no other
liabilities or obligations, whether absolute or contingent, known or unknown,
accrued or unaccrued, other than those described in Section 9 of this Agreement.
(iv) Upon consummation of the transactions described in Section
2(i) hereof, the Fund will distribute to persons who are shareholders of record
of the Fund at the Closing the Shares received by the Fund pursuant to Section
2(i), such distribution to be made pro rata to the shareholders based upon the
ratio that the percentage of the outstanding shares of the Fund owned by each
such shareholder at the Closing bears to the total number of Shares received by
the Fund from the Successor Series. Such distribution will be accomplished by
the establishment of an open account on the stock records of the Successor
Series in the name of each such shareholder of the Fund and setting forth the
number of Shares due such shareholder in accordance with the foregoing.
Fractional Shares will be carried to the third decimal place. Certificates
representing Shares will not be issued.
(v) As soon as is reasonably practicable after the Closing,
Fundamental Fund will take all necessary steps under its Declaration of Trust
and Massachusetts law to effect a complete liquidation and dissolution of the
Fund.
(vi) The transactions contemplated in this Section 2 are referred
to as the "Reorganization."
3. VALUATION
(i) The value of the Fund Assets shall be the value of such
assets computed as of the close of business on the business day immediately
preceding the Closing (such time and date being referred to as an "Valuation
Date"), using the valuation procedures set forth in the Fund's then current
Prospectus and Statement of Additional Information.
(ii) The net asset value of each share of beneficial interest of
the Successor Series shall be its net asset value per share computed on the
Valuation Date, using the valuation procedures set forth in the Successor
Series's then-current Prospectus and Statement of Additional Information.
(iii) All computations of value contemplated by this Section 3
shall be made by the Successor Series's fund accountant. The Successor Series
shall cause its fund accountant to deliver a copy of its valuation report to
Fundamental Fund and to the Tocqueville Trust at the Closing.
4. CLOSING.
The Closing will occur prior to the commencement of business on
December 15, 1997 (the "Closing Date") or such other time and date as may be
mutually agreed upon by the parties. In the event that the NAV calculations of
the Fund or the Successor Series are not readily determinable for purposes of
the Reorganization due to market disruption, the Closing shall occur on the next
successive business day.
5. CONDITIONS TO OBLIGATIONS OF FUNDAMENTAL FUND AND THE FUND.
The obligations of Fundamental Fund and the Fund in connection
with the consummation of the Reorganization shall be subject to the satisfaction
of each of the following conditions:
(i) Fundamental Fund shall have received the opinion of legal
counsel for the Tocqueville Trust, dated as of the date of the Closing and
addressed to Fundamental Fund, to the effect that: (a) the
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<PAGE>
Tocqueville Trust is established as a business trust and is validly existing
under the laws of The Commonwealth of Massachusetts, (b) the Tocqueville Trust
is an open-end investment company of the management type registered under the
1940 Act, and the Successor Series is a duly established series of the
Tocqueville Trust, (c) this Agreement, and the Reorganization provided for
herein, and the execution and delivery of this Agreement have been duly
authorized and approved by all requisite action of the Board of Trustees of the
Tocqueville Trust and this Agreement has been duly executed and delivered by the
Tocqueville Trust and is a valid and binding obligation of the Tocqueville Trust
and the Successor Series, enforceable in accordance with its terms, and (d) the
Shares to be issued in the Reorganization will be duly authorized and upon
issuance thereof in accordance with this Agreement will be validly issued, fully
paid and non-assessable Shares of the Successor Series. In rendering such
opinion, such legal counsel may rely on an opinion of Massachusetts counsel
reasonably acceptable to Fundamental Fund with respect to matters of
Massachusetts law, and on certificates of officers or trustees of the
Tocqueville Trust, in each case reasonably acceptable to Fundamental Fund.
(ii) The Tocqueville Trust and the Successor Series shall have
complied with each of their covenants contained herein and each of the
representations and warranties of the Tocqueville Trust and the Successor Series
contained herein shall be true in all material respects as of the Closing, and
the Tocqueville Trust shall have delivered to Fundamental Fund a certificate
from appropriate officers of the Tocqueville Trust reasonably acceptable to
Fundamental Fund to such effect.
6. CONDITIONS TO OBLIGATIONS OF THE TOCQUEVILLE TRUST AND THE
SUCCESSOR SERIES.
The obligations of the Tocqueville Trust and the Successor Series
in connection with the consummation of the Reorganization shall be subject to
the satisfaction of each of the following conditions:
(i) The Tocqueville Trust shall have received the opinion of
legal counsel for Fundamental Fund, dated as of the date of the Closing and
addressed to the Tocqueville Trust, to the effect that: (a) Fundamental Fund is
established as a Massachusetts business trust and is validly existing under the
laws of The Commonwealth of Massachusetts, (b) Fundamental Fund is an open-end
investment company of the management type registered under the 1940 Act, (c)
this Agreement and the Reorganization provided for herein and the execution and
delivery of this Agreement have been duly authorized and approved by all
requisite action of the Board of Trustees of Fundamental Fund and this Agreement
has been duly executed and delivered by Fundamental Fund and is a valid and
binding obligation of Fundamental Fund and the Fund, enforceable in accordance
with its terms, and (d) the outstanding shares of the Fund have been duly
authorized. In rendering such opinion, such legal counsel may rely on an opinion
of Massachusetts counsel reasonably acceptable to the Tocqueville Trust with
respect to matters of Massachusetts law, and on certificates of officers or
trustees of Fundamental Fund, in each case reasonably acceptable to the
Tocqueville Trust.
(ii) Fundamental Fund shall have complied with each of its
covenants contained herein and each of the representations and warranties of
Fundamental Fund shall be true in all material respects as of the Closing, and
Fundamental Fund shall have delivered to the Tocqueville Trust a certificate
from appropriate officers of Fundamental Fund reasonably acceptable to the
Tocqueville Trust to such effect.
(iii) The Board of Trustees of Fundamental Fund, including a
majority of the trustees who are not "interested persons" of Fundamental Fund
(as defined by the 1940 Act) shall have determined that this Agreement and the
transactions contemplated hereby are in the best interests of the Fund and that
the interests of the shareholders in the Fund would not be diluted as a result
of such transactions.
7. CONDITIONS TO OBLIGATIONS OF FUNDAMENTAL FUND AND THE
TOCQUEVILLE TRUST.
The obligations of Fundamental Fund and the Tocqueville Trust in
connection with the consummation of the Reorganization shall be subject to the
satisfaction of each of the following conditions:
(i) The Tocqueville Trust and Fundamental Fund shall have
received an opinion of legal counsel to Fundamental Fund, dated as of the date
of the Closing, addressed to and in form and substance
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<PAGE>
satisfactory to the Tocqueville Trust and Fundamental Fund to the effect that:
(a) the transfer of all of the assets of the Fund to the Successor Series in
exchange for the assumption of the Identified Liabilities of the Fund by the
Successor Series, the delivery to the Fund of shares of the Successor Series,
the distribution by the Fund pro rata to its shareholders of such shares of the
Successor Series, and the termination of such Fund, pursuant to the
Reorganization Plan, will constitute a reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended; (b) the Fund
will not recognize any gain or loss as a result of the Reorganization; (c) the
Successor Series will not recognize any gain or loss on the receipt of the
assets of the Fund in exchange for shares of the Successor Series; (d) the
shareholders of the Fund will not recognize any gain or loss on the exchange of
their shares of the Fund for shares of the Successor Series; (e) the aggregate
tax basis of the Successor Series received by each shareholder of the Fund in
the Reorganization will be the same as the aggregate tax basis of the shares of
the Fund exchanged therefor; (f) the Successor Series' adjusted tax bases in the
assets received from the Fund in the Reorganization will be the same as the
adjusted tax bases of such assets in the hands of the Fund immediately prior to
the Reorganization; (g) the holding period of each former shareholder of the
Fund in the shares of the Successor Series received in the Reorganization will
include the period for which such shareholder held his shares of the Fund as a
capital asset; and (h) the Successor Series' holding periods in the assets
received from the Fund in the Reorganization will include the holding periods of
such assets in the hands of the Fund immediately prior to the Reorganization.
(ii) Such authority, including "no-action" letters and orders
from the Securities and Exchange Commission (the "Commission") and state
securities commissions, as may be necessary to permit the parties to carry out
the transactions contemplated by this Agreement shall have been received.
(iii) The Shares shall have been duly qualified for offering to
the public in such jurisdictions (except where such qualifications are not
required) so as to permit the transfers contemplated by this Agreement to be
consummated.
(iv) This Agreement and the Reorganization and, if necessary, a
temporary amendment of the investment restrictions that might otherwise preclude
the consummation of the Reorganization, shall have been approved by the holders
of the requisite number of shares of beneficial interest of the Fund entitled to
vote on the matter under Fundamental Fund's Declaration of Trust.
(v) On the Closing Date, (a) the Commission shall not have issued
an unfavorable advisory report under Section 25(b) of the 1940 Act nor
instituted nor threatened to institute any proceeding seeking to enjoin
consummation of the Reorganization contemplated hereby under Section 25(c) of
the 1940 Act and (b) no other action, suit or other proceeding shall be
threatened or pending before any court or governmental agency which seeks to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
At any time prior to the Closing, any of the foregoing
conditions in Section 4, 5 or 6 may be waived by the Fund or the Successor
Series, as the case may be, if, in the judgment of such party, such waiver will
not have a material adverse effect on the benefits intended under this Agreement
to the shareholders of the Fund or the Successor Series, as the case may be.
8. REPRESENTATIONS AND WARRANTIES.
a. FUNDAMENTAL FUND. Fundamental Fund, with respect to itself and
the Fund, represents and warrants to the Tocqueville Trust as follows:
(i) Fundamental Fund is a business trust duly organized, validly
existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(ii) Fundamental Fund is a registered investment company,
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
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<PAGE>
(iii) Fundamental U.S. Government Strategic Income Fund,
High-Yield Municipal Bond Series and Tax-Free Money Market Series are duly
established series of Fundamental Fund;
(iv) Fundamental Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of
Fundamental Fund's Declaration of Trust or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which Fundamental
Fund is a party or is bound;
(v) Fundamental Fund has no material contracts or other
commitments (other than this Agreement) which will be terminated with liability
to the Fund prior to the Closing, except contracts entered into in the ordinary
course of its business and this Agreement;
(vi) Except as otherwise disclosed in writing to and accepted by
the Tocqueville Trust, there is no litigation or administrative proceeding or
investigation of or before any court or governmental body pending or to
Fundamental Fund's knowledge threatened against Fundamental Fund with respect to
the Fund or its properties or assets, and Fundamental Fund knows of no fact
which might form the basis for the institution of such proceedings, and neither
Fundamental Fund nor the Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects their respective businesses or their ability to consummate the
transactions contemplated herein;
(vii) The Statement of Assets and Liabilities of the Fund at the
last day of its most recently completed fiscal year, certified by McGladrey and
Pullen, LLP as independent auditors (as supplemented by any unaudited
semi-annual report as of the last day of its most recently completed semi-annual
fiscal period, if available) has been prepared in accordance with generally
accepted accounting principles consistently applied, fairly reflects the
financial condition of the Fund as of such date, and there are no known
liabilities (contingent or otherwise) of the Fund as of such date which are
required to be and are not disclosed therein;
(viii) From the date of the most recent report referred to in
paragraph (vii) above, there has not been any material adverse change in the
Fund's financial condition, assets, liabilities or business other than changes
occurring in the ordinary course of business or as a result of this transaction
(for the purposes of this paragraph (viii), a decline in net assets of the Fund
shall not constitute a material adverse change);
(ix) All shares of beneficial interest, no par value, of the Fund
are, and at the Closing will be, duly authorized, legally issued, fully paid and
non-assessable, and the Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the Fund (other than
dividend reinvestment plans of the Fund or as set forth in this Agreement) nor
are there outstanding any securities convertible into any shares of the Fund
(except pursuant to any exchange privileges described in the current Prospectus
or Registration Statement of the Fund under the Securities Act of 1933 (the
"1933 Act"));
(x) At the Closing, the Fund will have good and marketable title
to the Fund Assets to be transferred to the Successor Series and full right,
power and authority to assign, transfer and deliver such assets hereunder, and,
upon delivery and payment for such assets, the Successor Series will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933 Act;
(xi) Fundamental Fund has full power and authority to enter into
and perform its obligations under this Agreement; the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Board of Trustees of Fundamental Fund; and, subject to the
approval of the shareholders of the Fund, this Agreement constitutes a valid and
binding obligation of Fundamental Fund and the Fund, enforceable against
Fundamental Fund and the Fund in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and by
equitable principles;
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<PAGE>
(xii) Fundamental Fund has provided the Tocqueville Trust with
the Fund's most recent Form N-1A Registration Statement under the 1933 Act,
which does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(xiii) The information furnished by the Fund for use in proxy
materials and other documents in connection with the transactions contemplated
hereby, and the Registration Statement on Form N-1A of the Successor Series
(other than the portions of such materials which relate to this transaction), is
accurate and complete in all material respects and complies in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto; and
(xiv) The Proxy Statement to be used in connection with the
transactions contemplated hereby (only insofar as it relates to Fundamental
Fund) on its effective date and at the Closing, will comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the 1940 Act and the rules and
regulations thereunder, and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
b. THE TOCQUEVILLE TRUST. The Tocqueville Trust, with respect to
itself and the Successor Series, represents and warrants to Fundamental Fund as
follows:
(i) The Tocqueville Trust is a business trust duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(ii) The Tocqueville Trust is a registered investment company
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(iii) The Successor Series is a duly established series of the
Tocqueville Trust;
(iv) The Tocqueville Trust is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of the
Tocqueville Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Tocqueville Trust is a party or is bound;
(v) Except as otherwise disclosed in writing to and accepted by
Fundamental Fund, there is no litigation or administrative proceeding or
investigation of or before any court or governmental body pending or to the
Tocqueville Trust's knowledge threatened against the Tocqueville Trust with
respect to the Successor Series or its properties or assets, and the Tocqueville
Trust knows of no fact which might form the basis for the institution of such
proceedings, and neither the Tocqueville Trust nor the Successor Series is a
party or subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects their respective
businesses or their respective abilities to consummate the transactions
contemplated herein;
(vi) At the Closing all shares of beneficial interest in the
Successor Series will be duly authorized, legally issued, fully paid and
non-assessable, and the Successor Series does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Successor Series (other than dividend reinvestment plans of the Successor Series
or as set forth in this Agreement), nor are there outstanding any securities
convertible into any shares of the Successor Series (except pursuant to exchange
privileges described in the current Prospectus or Registration Statement of the
Successor Series under the 1933 Act);
(vii) The Tocqueville Trust has full power and authority to enter
into and perform its obligations under this Agreement; the execution, delivery
and performance of this Agreement have been duly authorized by all necessary
action on the part of the Board of Trustees of the Tocqueville Trust; and this
Agreement
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<PAGE>
constitutes a valid and binding obligation of the Tocqueville Trust and the
Successor Series, enforceable against the Tocqueville Trust and the Successor
Series in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and by equitable principles;
(viii) The Tocqueville Trust will provide to the Fund the Form
N-1A Registration Statement under the 1933 Act concerning the Successor Series,
which does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make any
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(ix) The information to be furnished by the Tocqueville Trust for
use in Registration Statements, proxy materials and other documents, in
connection with the transactions contemplated hereby, will be accurate and
complete in all material respects and will comply in all material respects with
federal securities laws and other laws and regulations thereunder applicable
thereto; and
(x) The Proxy Statement to be used in connection with the
transactions contemplated hereby (only insofar as it relates to the Successor
Series or the Tocqueville Trust), on its effective date and at the Closing, will
conform in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading.
9. COVENANTS OF THE TOCQUEVILLE TRUST
The Tocqueville Trust covenants to Fundamental Fund and the Fund
as follows:
(i) The Tocqueville Trust will use its best efforts and take all
actions as may be necessary or advisable to effectuate the Reorganization and to
continue the Successor Series in operation thereafter, including the obtaining
of any regulatory approvals required to be obtained by it.
(ii) The Tocqueville Trust, on behalf of the Successor Series,
agrees, for the period beginning at the Closing and ending not less than two
years thereafter, to indemnify and advance expenses to each person who at the
time of the execution of this Agreement serves as an independent trustee
("Indemnified Person") of Fundamental Fund, against all costs and expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by such Indemnified Person in connection with
any claim, whether the basis for which is known or unknown on the date hereof,
that is asserted against such Indemnified Person arising out of such person's
service as an independent trustee of Fundamental Fund, provided that such
indemnification and advancement of expenses shall be permitted under Maryland
law. This paragraph 9 (ii) shall not protect any such Indemnified Person against
any liability to Fundamental Fund, the Tocqueville Trust or their shareholders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or from reckless disregard of the duties involved in the
conduct of his office. An Indemnified Person seeking indemnification shall be
entitled to advances from the Tocqueville Trust for payment of the reasonable
expenses incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under
Maryland law. Such Indemnified Person shall provide to the Tocqueville Trust a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Tocqueville Trust has been met and a
written undertaking to repay any advance if it should ultimately be determined
that the standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the Indemnified Person shall
provide security in form and amount acceptable to the Tocqueville Trust for its
undertaking; or (b) either a majority of a quorum of disinterested non-party
trustees of the Tocqueville Trust, or independent legal counsel experienced in
mutual fund matters, selected by the Indemnified Person, in a written opinion,
shall have determined, based on a review of facts readily available to the
Tocqueville Trust at the time the advance is proposed to be made, that there is
reason to believe that the Indemnified Person will ultimately be found to be
entitled to indemnification.
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<PAGE>
The Tocqueville Trust agrees that in the event it or the
Successor Series is subsequently acquired by merger, acquisition or the sale of
substantially all of its assets ("Subsequent Merger"), or it reorganizes or
changes its domicile ("Subsequent Redomestication"), it will provide under the
terms of such Subsequent Merger or Subsequent Redomestication that the
indemnification provided for above shall continue in full force and effect. In
the event that the Tocqueville Trust enters into negotiation for a Subsequent
Merger or Subsequent Redomestication, the Tocqueville Trust shall promptly
notify the Indemnified Person of such intended Subsequent Merger or Subsequent
Redomestication.
10. COVENANTS OF FUNDAMENTAL FUND
Fundamental Fund covenants to the Tocqueville Trust and the
Successor Series as follows:
(i) Fundamental Fund will use its best efforts and take all
actions as may be necessary or advisable to effectuate the Reorganization,
including the obtaining of any regulatory approvals, as may be required to be
obtained by it.
(ii) Except as otherwise contemplated by this Agreement,
Fundamental Fund will use its best efforts to conduct the business of the Fund
in the ordinary course until the consummation of the Reorganization.
(iii) The Fund will duly supplement its Prospectus in the manner
prescribed by Rule 497(e) of the 1933 Act and all other applicable law and
regulations.
11. BROKERAGE FEES AND EXPENSES
(i) Fundamental Fund represents and warrants to the Tocqueville
Trust, and the Tocqueville Trust represents and warrants to Fundamental Fund,
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
(ii) Fundamental Fund and the Tocqueville Trust confirm their
understanding that Fundamental Portfolio Advisors, Inc. and Tocqueville Asset
Management L.P. will be responsible for all expenses in connection with the
Reorganization.
12. TERMINATION.
The Board of Trustees of Fundamental Fund may terminate this
Agreement and abandon the Reorganization contemplated hereby at any time prior
thereto, notwithstanding approval thereof by the shareholders of the Fund if, in
the judgment of such Board proceeding with the Reorganization would be
inadvisable or if any of the conditions set forth in Sections 5 or 7 hereof have
not been satisfied. The Board of Trustees of the Tocqueville Trust may terminate
this Agreement and abandon the Reorganization contemplated hereby if any of the
conditions set forth in Sections 6 or 7 hereof have not been satisfied. In the
event of any such termination, there shall be no liability for damages on the
part of either party to the other.
13. ENTIRE AGREEMENT.
This Agreement embodies the entire Agreement between the parties
and there are no agreements, understandings, restrictions or warranties among
the parties other than those set forth herein or herein provided for. This
Agreement may not be amended without the consent in writing of both parties
hereto. Furthermore, after approval of this Agreement by the shareholders of the
Fund, no amendments may be made that materially adversely affect the interests
of shareholders of the Fund unless such amendments are submitted for shareholder
approval.
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14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties made in this Agreement shall
not survive the Closing.
15. FURTHER ASSURANCES.
Fundamental Fund and the Tocqueville Trust shall take such
further action as may be reasonably necessary or desirable and proper to
consummate the transactions contemplated hereby.
16. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be
governed by and construed and enforced in accordance with the laws of The
Commonwealth of Massachusetts, without regard to principles of conflicts of law.
17. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
Copies of the Declaration of Trust of Fundamental Fund and the
Tocqueville Trust are on file with The Commonwealth of Massachusetts and notice
is hereby given that it is executed on behalf of the trustees of Fundamental
Fund and the Tocqueville Trust as trustees and not individually and that the
obligations of Fundamental Fund and the Tocqueville Trust pursuant to this
Agreement and the other agreements contemplated hereby are not binding upon any
of the trustees or shareholders individually but binding only upon the assets
and property of Fundamental Fund and the Tocqueville Trust.
18. NOTICES.
All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and deemed properly given if hand
delivered or deposited in the U.S. mail, return receipt requested or certified,
postage prepaid, or with an overnight delivery service, as follows:
a. if to Fundamental Fund:
Fundamental Fixed-Income Fund
90 Washington Street, 19th Floor
New York, New York 10006
Attention: Dr. Vincent J. Malanga
and additional copies to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Carl Frischling, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Stuart Coleman, Esq.
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b. if to the Tocqueville Trust:
The Tocqueville Trust
1675 Broadway
New York, New York 10019
Attention: Robert Kleinschmidt
and an additional copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Susan Penry-Williams, Esq.
or to such other person or address as Fundamental Fund or the Tocqueville Trust,
respectively, shall furnish to the other in writing.
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<PAGE>
IN WITNESS WHEREOF, each of Fundamental Fund and the Tocqueville
Trust have caused this Agreement and Plan of Reorganization to be executed on
its behalf by its Chairman, President or a Vice President and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
Fundamental Fixed-Income Fund, for itself and
on behalf of Fundamental U.S. Government Strategic
Income Fund, High-Yield Municipal Bond Series and
Tax-Free Money Market Series
By: /s/ Vincent J. Malanga
-------------------------
Name: Vincent J. Malanga
Title: President
ATTEST:
By: /s/ Carole M. Laible
Name: Carole M. Laible
Title: Secretary
The Tocqueville Trust, for itself and on behalf of the
U.S. Government Strategic Income Fund Series,
High-Yield Municipal Bond Fund Series and Tax-Free
Money Market Fund Series.
By: /s/ Robert Kleinschmidt
-----------------------
Name: Robert Kleinschmidt
Title: President
ATTEST:
By:/s/ Kieran Lyons
----------------
Name: Kieran Lyons
Title: Vice President
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EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is
made as of the 15th day of July, 1997, by and between The California Muni Fund,
a Massachusetts business trust (the "Fund"), and The Tocqueville Trust, a
Massachusetts business trust (the "Tocqueville Trust"), for itself and on behalf
of its Tocqueville California Muni Series (the "Successor Series").
This Agreement shall constitute a separate Agreement and Plan of
Reorganization for the Fund and the Successor Series. It is expressly agreed
that the respective rights and obligations of the Fund and the Successor Series,
as provided for hereunder, are separate from the rights and obligations of any
other funds managed by Fundamental Portfolio Advisors, Inc. and successor series
of the Tocqueville Trust, and that neither the rights and obligations of the
Fund nor of the Successor Series shall be construed to be joint rights or
obligations of the other funds managed by Fundamental Portfolio Advisors, Inc.
or their corresponding successor series, respectively, notwithstanding the fact
that such other funds and successor series may be subject to a separate
agreement and plan of reorganization containing terms and conditions which are
substantially the same as the terms and conditions set forth herein.
In consideration of the mutual promises herein contained, the
Fund and the Tocqueville Trust, for itself and on behalf of the Successor
Series, hereby agree as follows:
1. APPROVAL BY SHAREHOLDERS.
A special meeting of the shareholders of the Fund (the "Meeting")
will be called for the purpose of considering adoption of this Agreement and
Plan of Reorganization and considering such other business as may properly come
before the Meeting. The agenda for such Meeting may include such other proposals
as the Board of Trustees of the Fund may deem appropriate.
2. PLAN OF REORGANIZATION.
(i) Subject to the terms and conditions set forth in this
Agreement, the Fund will convey, transfer and deliver to the Successor Series at
the closing provided for in Section 3 (hereinafter called the "Closing") all of
its assets as set forth in paragraph 2(i) (the "Fund Assets"). In consideration
thereof, and subject to the terms and conditions set forth in this Agreement, at
the Closing the Successor Series will (a) assume certain identified liabilities
attributable to the Fund and (b) deliver to the Fund a number of full and
fractional shares of beneficial interest of the Successor Series, $.01 par value
(the "Shares"), having an aggregate net asset value ("NAV") equal to the
aggregate net asset value of the current Fund's shares of beneficial interest
(as determined in accordance with the Investment Company Act of 1940, as amended
(the "1940 Act") and the Fund's current Prospectus) on the Closing Date.
(ii) The Fund Assets shall consist of all property and assets of
any nature whatsoever, including, without limitation, all cash, cash
equivalents, securities, claims and receivables (including dividend and interest
receivables) owned by the Fund, and any deferred or prepaid expenses shown as an
asset on the Fund's books on the Closing Date, as defined in paragraph 4.
At least five (5) days prior to the Closing Date, the Fund will provide
the Successor Series with (i) a list of the Fund Assets and (ii) a list of the
Fund's Identified Liabilities, as defined below.
(iii) The Fund will, to the extent consistent with its ordinary
course of business and historical practices, discharge all of its known
liabilities and obligations prior to the Closing Date. The Successor Series will
assume all liabilities and obligations reflected on an unaudited statement of
assets and liabilities of its
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corresponding Fund prepared by the Fund's accountant as of the Valuation Date
(as defined in paragraph 3(i), in accordance with generally accepted accounting
principles consistently applied from the prior audited period (the "Identified
Liabilities"). The Successor Series shall assume only the Identified Liabilities
of its corresponding Fund, and no other liabilities or obligations, whether
absolute or contingent, known or unknown, accrued or unaccrued, other than those
described in Section 9 of this Agreement.
(iv) Upon consummation of the transactions described in Section
2(i) hereof, the Fund will distribute to persons who are shareholders of record
of the Fund at the Closing the Shares received by the Fund pursuant to Section
2(i), such distribution to be made pro rata to the shareholders based upon the
ratio that the percentage of the outstanding shares of the Fund owned by each
such shareholder at the Closing bears to the total number of Shares received by
the Fund from the Successor Series. Such distribution will be accomplished by
the establishment of an open account on the stock records of the Successor
Series in the name of each such shareholder of the Fund and setting forth the
number of Shares due such shareholder in accordance with the foregoing.
Fractional Shares will be carried to the third decimal place. Certificates
representing Shares will not be issued.
(v) As soon as is reasonably practicable after the Closing,
Fundamental Fund will take all necessary steps under its Declaration of Trust
and Massachusetts law to effect a complete liquidation and dissolution of the
Fund.
(vi) The transactions contemplated in this Section 2 are referred
to as the "Reorganization."
3. VALUATION
(i) The value of the Fund Assets shall be the value of such
assets computed as of the close of business on the business day immediately
preceding the Closing (such time and date being referred to as an "Valuation
Date"), using the valuation procedures set forth in the Fund's then current
Prospectus and Statement of Additional Information.
(ii) The net asset value of each share of beneficial interest of
the Successor Series shall be its net asset value per share computed on the
Valuation Date, using the valuation procedures set forth in the Successor
Series' then-current Prospectus and Statement of Additional Information.
(iii) All computations of value contemplated by this Section 3
shall be made by the Successor Series' fund accountant. The Successor Series
shall cause its fund accountant to deliver a copy of its valuation report to the
Fund and to the Tocqueville Trust at the Closing.
4. CLOSING.
The Closing will occur prior to the commencement of business on
December 15, 1997 (the "Closing Date") or such other time and date as may be
mutually agreed upon by the parties. In the event that the NAV calculations of
the Fund or the Successor Series are not readily determinable for purposes of
the Reorganization due to market disruption, the Closing shall occur on the next
successive business day.
5. CONDITIONS TO OBLIGATIONS OF THE FUND.
The obligations of the Fund in connection with the consummation
of the Reorganization shall be subject to the satisfaction of each of the
following conditions:
(i) The Fund shall have received the opinion of legal counsel for
the Tocqueville Trust, dated as of the date of the Closing and addressed to the
Fund, to the effect that: (a) the Tocqueville Trust is established as a business
trust and is validly existing under the laws of The Commonwealth of
Massachusetts, (b) the Tocqueville Trust is an open-end investment company of
the management type registered under the 1940 Act, and the Successor Series is a
duly established series of the Tocqueville Trust, (c) this Agreement, and the
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Reorganization provided for herein, and the execution and delivery of this
Agreement have been duly authorized and approved by all requisite action of the
Board of Trustees of the Tocqueville Trust and this Agreement has been duly
executed and delivered by the Tocqueville Trust and is a valid and binding
obligation of the Tocqueville Trust and the Successor Series, enforceable in
accordance with its terms, and (d) the Shares to be issued in the Reorganization
will be duly authorized and upon issuance thereof in accordance with this
Agreement will be validly issued, fully paid and non-assessable Shares of the
Successor Series. In rendering such opinion, such legal counsel may rely on an
opinion of Massachusetts counsel reasonably acceptable to the Fund with respect
to matters of Massachusetts law, and on certificates of officers or trustees of
the Tocqueville Trust, in each case reasonably acceptable to the Fund.
(ii) The Tocqueville Trust and the Successor Series shall have
complied with each of their covenants contained herein and each of the
representations and warranties of the Tocqueville Trust and the Successor Series
contained herein shall be true in all material respects as of the Closing, and
the Tocqueville Trust shall have delivered to the Fund a certificate from
appropriate officers of the Tocqueville Trust reasonably acceptable to the Fund
to such effect.
6. CONDITIONS TO OBLIGATIONS OF THE TOCQUEVILLE TRUST AND THE
SUCCESSOR SERIES.
The obligations of the Tocqueville Trust and the Successor Series
in connection with the consummation of the Reorganization shall be subject to
the satisfaction of each of the following conditions:
(i) The Tocqueville Trust shall have received the opinion of
legal counsel for the Fund, dated as of the date of the Closing and addressed to
the Tocqueville Trust, to the effect that: (a) the Fund is established as a
Massachusetts business trust and is validly existing under the laws of The
Commonwealth of Massachusetts, (b) Fundamental Fund is an open-end investment
company of the management type registered under the 1940 Act, (c) this Agreement
and the Reorganization provided for herein and the execution and delivery of
this Agreement have been duly authorized and approved by all requisite action of
the Board of Trustees of the Fund and this Agreement has been duly executed and
delivered by the Fund and is a valid and binding obligation of the Fund,
enforceable in accordance with its terms, and (d) the outstanding shares of the
Fund have been duly authorized. In rendering such opinion, such legal counsel
may rely on an opinion of Massachusetts counsel reasonably acceptable to the
Tocqueville Trust with respect to matters of Massachusetts law, and on
certificates of officers or trustees of the Fund, in each case reasonably
acceptable to the Tocqueville Trust.
(ii) The Fund shall have complied with each of its covenants
contained herein and each of the representations and warranties of the Fund
shall be true in all material respects as of the Closing, and the Fund shall
have delivered to the Tocqueville Trust a certificate from appropriate officers
of the Fund reasonably acceptable to the Tocqueville Trust to such effect.
(iii) The Board of Trustees of the Fund, including a majority of
the trustees (directors) who are not "interested persons" of the Fund (as
defined by the 1940 Act) shall have determined that this Agreement and the
transactions contemplated hereby are in the best interests of the Fund and that
the interests of the shareholders in the Fund would not be diluted as a result
of such transactions.
7. CONDITIONS TO OBLIGATIONS OF THE FUND AND THE TOCQUEVILLE TRUST.
The obligations of the Fund and the Tocqueville Trust in
connection with the consummation of the Reorganization shall be subject to the
satisfaction of each of the following conditions:
(i) The Tocqueville Trust and the Fund shall have received an
opinion of legal counsel to the Fund, dated as of the date of the Closing,
addressed to and in form and substance satisfactory to the Tocqueville Trust and
the Fund to the effect that: (a) the transfer of all of the assets of the Fund
to the Successor Series in exchange for the assumption of the Identified
Liabilities of the Fund by the Successor Series, the delivery to the Fund of
shares of the Successor Series, the distribution by the Fund pro rata to its
shareholders of such shares of the Successor Series, and the termination of such
Fund, pursuant to the Reorganization Plan, will constitute a
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reorganization within the meaning of Section 368(a)(1) of the Internal Revenue
Code of 1986, as amended; (b) the Fund will not recognize any gain or loss as a
result of the Reorganization; (c) the Successor Series will not recognize any
gain or loss on the receipt of the assets of the Fund in exchange for shares of
the Successor Series; (d) the shareholders of the Fund will not recognize any
gain or loss on the exchange of their shares of the Fund for shares of the
Successor Series; (e) the aggregate tax basis of the Successor Series received
by each shareholder of the Fund in the Reorganization will be the same as the
aggregate tax basis of the shares of the Fund exchanged therefor; (f) the
Successor Series' adjusted tax bases in the assets received from the Fund in the
Reorganization will be the same as the adjusted tax bases of such assets in the
hands of the Fund immediately prior to the Reorganization; (g) the holding
period of each former shareholder of the Fund in the shares of the Successor
Series received in the Reorganization will include the period for which such
shareholder held his shares of the Fund as a capital asset; and (h) the
Successor Series' holding periods in the assets received from the Fund in the
Reorganization will include the holding periods of such assets in the hands of
the Fund immediately prior to the Reorganization.
(ii) Such authority, including "no-action" letters and orders
from the Securities and Exchange Commission (the "Commission") and state
securities commissions, as may be necessary to permit the parties to carry out
the transactions contemplated by this Agreement shall have been received.
(iii) The Shares shall have been duly qualified for offering to
the public in such jurisdictions (except where such qualifications are not
required) so as to permit the transfers contemplated by this Agreement to be
consummated.
(iv) This Agreement and the Reorganization and, if necessary, a
temporary amendment of the investment restrictions that might otherwise preclude
the consummation of the Reorganization, shall have been approved by the holders
of the requisite number of shares of beneficial interest of the Fund entitled to
vote on the matter under Fundamental Fund's Declaration of Trust.
(v) On the Closing Date, (a) the Commission shall not have issued
an unfavorable advisory report under Section 25(b) of the 1940 Act nor
instituted nor threatened to institute any proceeding seeking to enjoin
consummation of the Reorganization contemplated hereby under Section 25(c) of
the 1940 Act and (b) no other action, suit or other proceeding shall be
threatened or pending before any court or governmental agency which seeks to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
At any time prior to the Closing, any of the foregoing conditions
in Section 4, 5 or 6 may be waived by the Fund or the Successor Series, as the
case may be, if, in the judgment of such party, such waiver will not have a
material adverse effect on the benefits intended under this Agreement to the
shareholders of the Fund or the Successor Series, as the case may be.
8. REPRESENTATIONS AND WARRANTIES.
a. THE FUND. The Fund represents and warrants to the Tocqueville
Trust as follows:
(i) The Fund is a business trust duly organized, validly existing
and in good standing under the laws of The Commonwealth of Massachusetts;
(ii) The Fund is a registered investment company, classified as a
management company of the open-end type, and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect;
(iii) The Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of the
Fund's Declaration of Trust or By-laws or of any agreement, indenture,
instrument, contract, lease or other undertaking to which the Fund is a party or
is bound;
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(iv) The Fund has no material contracts or other commitments
(other than this Agreement) which will be terminated with liability to the Fund
prior to the Closing, except contracts entered into in the ordinary course of
its business and this Agreement;
(v) Except as otherwise disclosed in writing to and accepted by
the Tocqueville Trust, there is no litigation or administrative proceeding or
investigation of or before any court or governmental body pending or to the
Fund's knowledge threatened against the Fund or its properties or assets, and
the Fund knows of no fact which might form the basis for the institution of such
proceedings, and the Fund is not a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects their respective businesses or their ability to consummate the
transactions contemplated herein;
(vi) The Statement of Assets and Liabilities of the Fund at the
last day of its most recently completed fiscal year, certified by McGladrey and
Pullen, LLP as independent auditors (as supplemented by any unaudited
semi-annual report as of the last day of its most recently completed semi-annual
fiscal period, if available) has been prepared in accordance with generally
accepted accounting principles consistently applied, fairly reflects the
financial condition of the Fund as of such date, and there are no known
liabilities (contingent or otherwise) of the Fund as of such date which are
required to be and are not disclosed therein;
(vii) From the date of the most recent report referred to in
paragraph (vi) above, there has not been any material adverse change in the
Fund's financial condition, assets, liabilities or business other than changes
occurring in the ordinary course of business or as a result of this transaction
(for the purposes of this paragraph (vii), a decline in net assets of the Fund
shall not constitute a material adverse change);
(viii) All shares of beneficial interest, no par value, of the
Fund are, and at the Closing will be, duly authorized, legally issued, fully
paid and non-assessable, and the Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the Fund
(other than dividend reinvestment plans of the Fund or as set forth in this
Agreement) nor are there outstanding any securities convertible into any shares
of the Fund (except pursuant to any exchange privileges described in the current
Prospectus or Registration Statement of the Fund under the Securities Act of
1933 (the "1933 Act"));
(ix) At the Closing, the Fund will have good and marketable title
to the Fund Assets to be transferred to the Successor Series and full right,
power and authority to assign, transfer and deliver such assets hereunder, and,
upon delivery and payment for such assets, the Successor Series will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933 Act;
(x) The Fund has full power and authority to enter into and
perform its obligations under this Agreement; the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Board of Trustees of the Fund; and, subject to the approval
of the shareholders of the Fund, this Agreement constitutes a valid and binding
obligation of the Fund and the Fund, enforceable against the Fund and the Fund
in accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other laws relating to or
affecting creditors' rights and by equitable principles;
(xi) The Fund has provided the Tocqueville Trust with the Fund's
most recent Form N-1A Registration Statement under the 1933 Act, which does not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading;
(xii) The information furnished by the Fund for use in proxy
materials and other documents in connection with the transactions contemplated
hereby, and the Registration Statement on Form N-1A of the Successor Series
(other than the portions of such materials which relate to this transaction), is
accurate and complete in all material respects and complies in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto; and
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(xiii) The Proxy Statement to be used in connection with the
transactions contemplated hereby (only insofar as it relates to Fundamental
Fund) on its effective date and at the Closing, will comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the 1940 Act and the rules and
regulations thereunder, and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
b. THE TOCQUEVILLE TRUST. The Tocqueville Trust, with respect to
itself and the Successor Series, represents and warrants to the Fund as follows:
(i) The Tocqueville Trust is a business trust duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(ii) The Tocqueville Trust is a registered investment company
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(iii) The Successor Series is a duly established series of the
Tocqueville Trust;
(iv) The Tocqueville Trust is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of the
Tocqueville Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Tocqueville Trust is a party or is bound;
(v) Except as otherwise disclosed in writing to and accepted by
the Fund, there is no litigation or administrative proceeding or investigation
of or before any court or governmental body pending or to the Tocqueville
Trust's knowledge threatened against the Tocqueville Trust with respect to the
Successor Series or its properties or assets, and the Tocqueville Trust knows of
no fact which might form the basis for the institution of such proceedings, and
neither the Tocqueville Trust nor the Successor Series is a party or subject to
the provisions of any order, decree or judgment of any court or governmental
body which materially and adversely affects their respective businesses or their
respective abilities to consummate the transactions contemplated herein;
(vi) At the Closing all shares of beneficial interest in the
Successor Series will be duly authorized, legally issued, fully paid and
non-assessable, and the Successor Series does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Successor Series (other than dividend reinvestment plans of the Successor Series
or as set forth in this Agreement), nor are there outstanding any securities
convertible into any shares of the Successor Series (except pursuant to exchange
privileges described in the current Prospectus or Registration Statement of the
Successor Series under the 1933 Act);
(vii) The Tocqueville Trust has full power and authority to enter
into and perform its obligations under this Agreement; the execution, delivery
and performance of this Agreement have been duly authorized by all necessary
action on the part of the Board of Trustees of the Tocqueville Trust; and this
Agreement constitutes a valid and binding obligation of the Tocqueville Trust
and the Successor Series, enforceable against the Tocqueville Trust and the
Successor Series in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and by equitable principles;
(viii) The Tocqueville Trust will provide to the Fund the Form
N-1A Registration Statement under the 1933 Act concerning the Successor Series,
which does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make any
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(ix) The information to be furnished by the Tocqueville Trust for
use in Registration Statements, proxy materials and other documents, in
connection with the transactions contemplated hereby, will be
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accurate and complete in all material respects and will comply in all material
respects with federal securities laws and other laws and regulations thereunder
applicable thereto; and
(x) The Proxy Statement to be used in connection with the
transactions contemplated hereby (only insofar as it relates to the Successor
Series or the Tocqueville Trust), on its effective date and at the Closing, will
conform in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading.
9. COVENANTS OF THE TOCQUEVILLE TRUST
The Tocqueville Trust covenants to the Fund as follows:
(i) The Tocqueville Trust will use its best efforts and take all
actions as may be necessary or advisable to effectuate the Reorganization and to
continue the Successor Series in operation thereafter, including the obtaining
of any regulatory approvals required to be obtained by it.
(ii) The Tocqueville Trust, on behalf of the Successor Series,
agrees, for the period beginning at the Closing and ending not less than two
years thereafter, to indemnify and advance expenses to each person who at the
time of the execution of this Agreement serves as an independent trustee
("Indemnified Person") of the Fund, against all costs and expenses, including
attorneys' fees, judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such Indemnified Person in connection with any claim,
whether the basis for which is known or unknown on the date hereof, that is
asserted against such Indemnified Person arising out of such person's service as
an independent trustee of the Fund, provided that such indemnification and
advancement of expenses shall be permitted under Massachusetts law. This
paragraph 9 (ii) shall not protect any such Indemnified Person against any
liability to the Fund, the Tocqueville Trust or their shareholders to which he
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or from reckless disregard of the duties involved in the conduct of
his office. An Indemnified Person seeking indemnification shall be entitled to
advances from the Tocqueville Trust for payment of the reasonable expenses
incurred by him in connection with the matter as to which he is seeking
indemnification in the manner and to the fullest extent permissible under
Massachusetts law. Such Indemnified Person shall provide to the Tocqueville
Trust a written affirmation of his good faith belief that the standard of
conduct necessary for indemnification by the Tocqueville Trust has been met and
a written undertaking to repay any advance if it should ultimately be determined
that the standard of conduct has not been met. In addition, at least one of the
following additional conditions shall be met: (a) the Indemnified Person shall
provide security in form and amount acceptable to the Tocqueville Trust for its
undertaking; or (b) either a majority of a quorum of disinterested non-party
trustees of the Tocqueville Trust, or independent legal counsel experienced in
mutual fund matters, selected by the Indemnified Person, in a written opinion,
shall have determined, based on a review of facts readily available to the
Tocqueville Trust at the time the advance is proposed to be made, that there is
reason to believe that the Indemnified Person will ultimately be found to be
entitled to indemnification.
The Tocqueville Trust agrees that in the event it or the
Successor Series is subsequently acquired by merger, acquisition or the sale of
substantially all of its assets ("Subsequent Merger"), or it reorganizes or
changes its domicile ("Subsequent Redomestication"), it will provide under the
terms of such Subsequent Merger or Subsequent Redomestication that the
indemnification provided for above shall continue in full force and effect. In
the event that the Tocqueville Trust enters into negotiation for a Subsequent
Merger or Subsequent Redomestication, the Tocqueville Trust shall promptly
notify the Indemnified Person of such intended Subsequent Merger or Subsequent
Redomestication.
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10. COVENANTS OF THE FUND
The Fund covenants to the Tocqueville Trust and the Successor
Series as follows:
(i) The Fund will use its best efforts and take all actions as
may be necessary or advisable to effectuate the Reorganization, including the
obtaining of any regulatory approvals, as may be required to be obtained by it.
(ii) Except as otherwise contemplated by this Agreement, the Fund
will use its best efforts to conduct the business of the Fund in the ordinary
course until the consummation of the Reorganization.
(iii) The Fund will duly supplement its Prospectus in the manner
prescribed by Rule 497(e) of the 1933 Act and all other applicable law and
regulations.
11. BROKERAGE FEES AND EXPENSES
(i) The Fund represents and warrants to the Tocqueville Trust,
and the Tocqueville Trust represents and warrants to the Fund, that there are no
brokers or finders entitled to receive any payments in connection with the
transactions provided for herein.
(ii) The Fund and the Tocqueville Trust confirm their
understanding that Fundamental Portfolio Advisors, Inc. and Tocqueville Asset
Management L.P. will be responsible for all expenses in connection with the
Reorganization.
12. TERMINATION.
The Board of Trustees of the Fund may terminate this Agreement
and abandon the Reorganization contemplated hereby at any time prior thereto,
notwithstanding approval thereof by the shareholders of the Fund if, in the
judgment of such Board proceeding with the Reorganization would be inadvisable
or if any of the conditions set forth in Sections 5 or 7 hereof have not been
satisfied. The Board of Trustees of the Tocqueville Trust may terminate this
Agreement and abandon the Reorganization contemplated hereby if any of the
conditions set forth in Sections 6 or 7 hereof have not been satisfied. In the
event of any such termination, there shall be no liability for damages on the
part of either party to the other.
13. ENTIRE AGREEMENT.
This Agreement embodies the entire Agreement between the parties
and there are no agreements, understandings, restrictions or warranties among
the parties other than those set forth herein or herein provided for. This
Agreement may not be amended without the consent in writing of both parties
hereto. Furthermore, after approval of this Agreement by the shareholders of the
Fund, no amendments may be made that materially adversely affect the interests
of shareholders of the Fund unless such amendments are submitted for shareholder
approval.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties made in this Agreement shall
not survive the Closing.
15. FURTHER ASSURANCES.
The Fund and the Tocqueville Trust shall take such further action
as may be reasonably necessary or desirable and proper to consummate the
transactions contemplated hereby.
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16. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be
governed by and construed and enforced in accordance with the laws of The
Commonwealth of Massachusetts, without regard to principles of conflicts of law.
17. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
Copies of the Declaration of Trust of the Fund and the
Tocqueville Trust are on file with The Commonwealth of Massachusetts and notice
is hereby given that it is executed on behalf of the trustees of the Fund and
the Tocqueville Trust as trustees and not individually and that the obligations
of the Fund and the Tocqueville Trust pursuant to this Agreement and the other
agreements contemplated hereby are not binding upon any of the trustees or
shareholders individually but binding only upon the assets and property of the
Fund and the Tocqueville Trust.
18. NOTICES.
All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and deemed properly given if hand
delivered or deposited in the U.S. mail, return receipt requested or certified,
postage prepaid, or with an overnight delivery service, as follows:
a. if to the Fund:
The California Muni Fund
90 Washington Street, 19th Floor
New York, New York 10006
Attention: Dr. Vincent J. Malanga
and additional copies to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Carl Frischling, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Stuart Coleman, Esq.
b. if to the Tocqueville Trust:
The Tocqueville Trust
1675 Broadway
New York, New York 10019
Attention: Robert Kleinschmidt
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and an additional copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Susan Penry-Williams, Esq.
or to such other person or address as the Fund or the Tocqueville Trust,
respectively, shall furnish to the other in writing.
IN WITNESS WHEREOF, each of the Fund and the Tocqueville Trust
have caused this Agreement and Plan of Reorganization to be executed on its
behalf by its Chairman, President or a Vice President and attested by its
Secretary or Assistant Secretary, all as of the day and year first above
written.
The California Muni Fund
By:/s/ Vincent J. Malanga
----------------------
Name: Vincent J. Malanga
Title: President
ATTEST:
By:/s/ Carole M. Laible
--------------------
Name: Carole M. Laible
Title: Secretary
The Tocqueville Trust, for itself and on
behalf of the California Muni Fund Series
By: /s/ Robert Kleinschmidt
-----------------------
Name: Robert Kleinschmidt
Title: President
ATTEST:
By:/s/ Kieran Lyons
----------------
Name: Kieran Lyons
Title: Vice President
B-10
<PAGE>
EXHIBIT C
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as
of the 15th day of July, 1997, by and between Fundamental Funds, Inc., a
Maryland corporation (the "Fundamental Fund"), for itself and on behalf of its
New York Muni Fund (the "Fund"), and The Tocqueville Trust, a Massachusetts
business trust ("the Tocqueville Trust"), for itself and on behalf of its
Tocqueville New York Muni Fund Series (the "Successor Series").
This Agreement shall constitute a separate Agreement and Plan of
Reorganization for the Fund and the Successor Series. It is expressly agreed
that the respective rights and obligations of the Fund and the Successor Series,
as provided for hereunder, are separate from the rights and obligations of any
other funds managed by Fundamental Portfolio Advisors, Inc. and successor series
of the Tocqueville Trust, and that neither the rights and obligations of the
Fund nor of the Successor Series shall be construed to be joint rights or
obligations of the other funds managed by Fundamental Portfolio Advisors, Inc.
or their corresponding successor series, respectively, notwithstanding the fact
that such other funds and successor series may be subject to a separate
agreement and plan of reorganization containing terms and conditions which are
substantially the same as the terms and conditions set forth herein. For
purposes of Maryland corporate law this Agreement shall constitute a separate
Agreement and Plan of Reorganization for Fundamental Fund and Tocqueville Trust.
In consideration of the mutual promises herein contained, Fundamental Fund,
for itself and on behalf of the Fund, and the Tocqueville Trust, for itself and
on behalf of the Successor Series, hereby agree as follows:
1. APPROVAL BY SHAREHOLDERS.
A special meeting of the shareholders of the Fund (which constitute all
of the shareholders of Fundamental Fund)(the "Meeting") will be called for the
purpose of considering adoption of this Agreement and Plan of Reorganization and
considering such other business as may properly come before the Meeting. The
agenda for such Meeting may include such other proposals as the Board of
Trustees of Fundamental Fund may deem appropriate.
2. PLAN OF REORGANIZATION.
(i) Subject to the terms and conditions set forth in this
Agreement, the Fund will convey, transfer and deliver to the Successor Series at
the closing provided for in Section 3 (hereinafter called the "Closing") all of
its assets as set forth in paragraph 2(ii) (which constitute all of the assets
of Fundamental Fund) (the "Fund Assets"). In consideration thereof, and subject
to the terms and conditions set forth in this Agreement, at the Closing the
Successor Series will (a) assume certain identified liabilities attributable to
the Fund and (b) deliver to the Fund and Fundamental Fund a number of full and
fractional shares of beneficial interest of the Successor Series, $.01 par value
(the "Shares"), having an aggregate net asset value ("NAV") equal to the
aggregate net asset value of the Fund's shares of common stock (as determined in
accordance with the Investment Company Act of 1940, as amended (the "1940 Act")
and the Fund's current Prospectus) on the Closing Date.
(ii) The Fund Assets shall consist of all property and assets
of any nature whatsoever, including, without limitation, all cash, cash
equivalents, securities, claims and receivables (including dividend and interest
receivables) owned by the Fund (which constitute all of the assets of
Fundamental Fund), and any deferred or prepaid expenses shown as an asset on the
Fund's books on the Closing Date, as defined in paragraph 4.
At least five (5) days prior to the Closing Date, the Fund will provide the
Successor Series with (i) a list of the Fund Assets and (ii) a list of the
Fund's Identified Liabilities, as defined below.
(iii) The Fund will, to the extent consistent with its
ordinary course of business and historical practices, discharge all of its known
liabilities and obligations prior to the Closing Date. The Successor
<PAGE>
Series will assume all liabilities and obligations reflected on an unaudited
statement of assets and liabilities of its Fund prepared by the Fund's
accountant as of the Valuation Date (as defined in paragraph 3(i), in accordance
with generally accepted accounting principles consistently applied from the
prior audited period (the "Identified Liabilities"). The Successor Series shall
assume only the Identified Liabilities of its Fund, and no other liabilities or
obligations, whether absolute or contingent, known or unknown, accrued or
unaccrued, other than those described in Section 9 of this Agreement.
(iv) Upon consummation of the transactions described in
Section 2(i) hereof, the Fund will distribute to persons who are shareholders of
record of the Fund at the Closing the Shares received by the Fund pursuant to
Section 2(i), such distribution to be made pro rata to the shareholders based
upon the ratio that the percentage of the outstanding shares of the Fund owned
by each such shareholder at the Closing bears to the total number of Shares
received by the Fund from the Successor Series. Such distribution will be
accomplished by the establishment of an open account on the stock records of the
Successor Series in the name of each such shareholder of the Fund and setting
forth the number of Shares due such shareholder in accordance with the
foregoing. Fractional Shares will be carried to the third decimal place.
Certificates representing Shares will not be issued.
(v) As soon as is reasonably practicable after the Closing,
Fundamental Fund will take all necessary steps under its Articles of
Incorporation and Maryland law to effect a complete liquidation and dissolution
of the Fund.
(vi) The transactions contemplated in this Section 2 are
referred to as the "Reorganization."
3. VALUATION
(i) The value of the Fund Assets shall be the value of such
assets computed as of the close of business on the business day immediately
preceding the Closing (such time and date being referred to as an "Valuation
Date"), using the valuation procedures set forth in the Fund's then current
Prospectus and Statement of Additional Information.
(ii) The net asset value of each share of beneficial interest
of the Successor Series shall be its net asset value per share computed on the
Valuation Date, using the valuation procedures set forth in the Successor
Series's then-current Prospectus and Statement of Additional Information.
(iii) All computations of value contemplated by this Section 3
shall be made by the Successor Series's fund accountant. The Successor Series
shall cause its fund accountant to deliver a copy of its valuation report to
Fundamental Fund and to the Tocqueville Trust at the Closing.
4. CLOSING.
The Closing will occur prior to the commencement of business on
December 15, 1997 (the "Closing Date") or such other time and date as may be
mutually agreed upon by the parties. In the event that the NAV calculations of
the Fund or the Successor Series are not readily determinable for purposes of
the Reorganization due to market disruption, the Closing shall occur on the next
successive business day.
5. CONDITIONS TO OBLIGATIONS OF FUNDAMENTAL FUND AND THE FUND.
The obligations of Fundamental Fund and the Fund in connection
with the consummation of the Reorganization shall be subject to the satisfaction
of each of the following conditions:
(i) Fundamental Fund shall have received the opinion of legal
counsel for the Tocqueville Trust, dated as of the date of the Closing and
addressed to Fundamental Fund, to the effect that: (a) the Tocqueville Trust is
established as a business trust and is validly existing under the laws of The
Commonwealth of Massachusetts, (b) the Tocqueville Trust is an open-end
investment company of the management type registered
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<PAGE>
under the 1940 Act, and the Successor Series is a duly established series of the
Tocqueville Trust, (c) this Agreement, and the Reorganization provided for
herein, and the execution and delivery of this Agreement have been duly
authorized and approved by all requisite action of the Board of Trustees of the
Tocqueville Trust and this Agreement has been duly executed and delivered by the
Tocqueville Trust and is a valid and binding obligation of the Tocqueville Trust
and the Successor Series, enforceable in accordance with its terms, and (d) the
Shares to be issued in the Reorganization will be duly authorized and upon
issuance thereof in accordance with this Agreement will be validly issued, fully
paid and non-assessable Shares of the Successor Series. In rendering such
opinion, such legal counsel may rely on an opinion of Massachusetts counsel
reasonably acceptable to Fundamental Fund with respect to matters of
Massachusetts law, and on certificates of officers or trustees of the
Tocqueville Trust, in each case reasonably acceptable to Fundamental Fund.
(ii) The Tocqueville Trust and the Successor Series shall have
complied with each of their covenants contained herein and each of the
representations and warranties of the Tocqueville Trust and the Successor Series
contained herein shall be true in all material respects as of the Closing, and
the Tocqueville Trust shall have delivered to Fundamental Fund a certificate
from appropriate officers of the Tocqueville Trust reasonably acceptable to
Fundamental Fund to such effect.
6. CONDITIONS TO OBLIGATIONS OF THE TOCQUEVILLE TRUST AND THE
SUCCESSOR SERIES.
The obligations of the Tocqueville Trust and the Successor Series in
connection with the consummation of the Reorganization shall be subject to the
satisfaction of each of the following conditions:
(i) The Tocqueville Trust shall have received the opinion of
legal counsel for Fundamental Fund, dated as of the date of the Closing and
addressed to the Tocqueville Trust, to the effect that: (a) Fundamental Fund is
established as a Maryland corporation and is validly existing under the laws of
the State of Maryland, (b) Fundamental Fund is an open-end investment company of
the management type registered under the 1940 Act, (c) this Agreement and the
Reorganization provided for herein and the execution and delivery of this
Agreement have been duly authorized and approved by all requisite action of the
Board of Directors of Fundamental Fund and this Agreement has been duly executed
and delivered by Fundamental Fund and is a valid and binding obligation of
Fundamental Fund and the Fund, enforceable in accordance with its terms, and (d)
the outstanding shares of the Fund have been duly authorized. In rendering such
opinion, such legal counsel may rely on an opinion of Maryland counsel
reasonably acceptable to the Tocqueville Trust with respect to matters of
Maryland law, and on certificates of officers or directors of Fundamental Fund,
in each case reasonably acceptable to the Tocqueville Trust.
(ii) Fundamental Fund shall have complied with each of its
covenants contained herein and each of the representations and warranties of
Fundamental Fund shall be true in all material respects as of the Closing, and
Fundamental Fund shall have delivered to the Tocqueville Trust a certificate
from appropriate officers of Fundamental Fund reasonably acceptable to the
Tocqueville Trust to such effect.
(iii) The Board of Directors of Fundamental Fund, including a
majority of the directors who are not "interested persons" of Fundamental Fund
(as defined by the 1940 Act) shall have determined that this Agreement and the
transactions contemplated hereby are in the best interests of the Fund and that
the interests of the shareholders in the Fund would not be diluted as a result
of such transactions.
7. CONDITIONS TO OBLIGATIONS OF FUNDAMENTAL FUND AND THE
TOCQUEVILLE TRUST.
The obligations of Fundamental Fund and the Tocqueville Trust in connection
with the consummation of the Reorganization shall be subject to the satisfaction
of each of the following conditions:
(i) The Tocqueville Trust and Fundamental Fund shall have
received an opinion of legal counsel to Fundamental Fund, dated as of the date
of the Closing, addressed to and in form and substance satisfactory to the
Tocqueville Trust and Fundamental Fund to the effect that: (a) the transfer of
all of the assets of the Fund to the Successor Series in exchange for the
assumption of the Identified Liabilities of the Fund by the
C-3
<PAGE>
Successor Series, the delivery to the Fund of shares of the Successor Series,
the distribution by the Fund pro rata to its shareholders of such shares of the
Successor Series, and the termination of such Fund, pursuant to the
Reorganization Plan, will constitute a reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended; (b) the Fund
will not recognize any gain or loss as a result of the Reorganization; (c) the
Successor Series will not recognize any gain or loss on the receipt of the
assets of the Fund in exchange for shares of the Successor Series; (d) the
shareholders of the Fund will not recognize any gain or loss on the exchange of
their shares of the Fund for shares of the Successor Series; (e) the aggregate
tax basis of the Successor Series received by each shareholder of the Fund in
the Reorganization will be the same as the aggregate tax basis of the shares of
the Fund exchanged therefor; (f) the Successor Series' adjusted tax bases in the
assets received from the Fund in the Reorganization will be the same as the
adjusted tax bases of such assets in the hands of the Fund immediately prior to
the Reorganization; (g) the holding period of each former shareholder of the
Fund in the shares of the Successor Series received in the Reorganization will
include the period for which such shareholder held his shares of the Fund as a
capital asset; and (h) the Successor Series' holding periods in the assets
received from the Fund in the Reorganization will include the holding periods of
such assets in the hands of the Fund immediately prior to the Reorganization.
(ii) Such authority, including "no-action" letters and orders
from the Securities and Exchange Commission (the "Commission") and state
securities commissions, as may be necessary to permit the parties to carry out
the transactions contemplated by this Agreement shall have been received.
(iii) The Shares shall have been duly qualified for offering to
the public in such jurisdictions (except where such qualifications are not
required) so as to permit the transfers contemplated by this Agreement to be
consummated.
(iv) This Agreement and the Reorganization and, if necessary, a
temporary amendment of the investment restrictions that might otherwise preclude
the consummation of the Reorganization, shall have been approved by the holders
of the requisite number of shares of common stock of the Fund entitled to vote
on the matter under Fundamental Fund's Articles of Incorporation.
(v) On the Closing Date, (a) the Commission shall not have issued
an unfavorable advisory report under Section 25(b) of the 1940 Act nor
instituted nor threatened to institute any proceeding seeking to enjoin
consummation of the Reorganization contemplated hereby under Section 25(c) of
the 1940 Act and (b) no other action, suit or other proceeding shall be
threatened or pending before any court or governmental agency which seeks to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
At any time prior to the Closing, any of the foregoing conditions in
Section 4, 5 or 6 may be waived by the Fund or the Successor Series, as the case
may be, if, in the judgment of such party, such waiver will not have a material
adverse effect on the benefits intended under this Agreement to the shareholders
of the Fund or the Successor Series, as the case may be.
8. REPRESENTATIONS AND WARRANTIES.
a. FUNDAMENTAL FUND. Fundamental Fund, with respect to itself and
the Fund, represents and warrants to the Tocqueville Trust as follows:
(i) Fundamental Fund is a corporation duly organized, validly
existing and in good standing under the laws of the State of Maryland;
(ii) Fundamental Fund is a registered investment company,
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(iii) New York Muni Fund is a duly established series of
Fundamental Fund;
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<PAGE>
(iv) Fundamental Fund is not, and the execution, delivery and
performance of this Agreement will not result, in material violation of
Fundamental Fund's Articles of Incorporation or By-laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which Fundamental
Fund is a party or is bound;
(v) Fundamental Fund has no material contracts or other
commitments (other than this Agreement) which will be terminated with liability
to the Fund prior to the Closing, except contracts entered into in the ordinary
course of its business and this Agreement;
(vi) Except as otherwise disclosed in writing to and accepted by
the Tocqueville Trust, there is no litigation or administrative proceeding or
investigation of or before any court or governmental body pending or to
Fundamental Fund's knowledge threatened against Fundamental Fund with respect to
the Fund or its properties or assets, and Fundamental Fund knows of no fact
which might form the basis for the institution of such proceedings, and neither
Fundamental Fund nor the Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental body which materially and
adversely affects their respective businesses or their ability to consummate the
transactions contemplated herein;
(vii) The Statement of Assets and Liabilities of the Fund at the
last day of its most recently completed fiscal year, certified by McGladrey and
Pullen, LLP as independent auditors (as supplemented by any unaudited
semi-annual report as of the last day of its most recently completed semi-annual
fiscal period, if available) has been prepared in accordance with generally
accepted accounting principles consistently applied, fairly reflects the
financial condition of the Fund as of such date, and there are no known
liabilities (contingent or otherwise) of the Fund as of such date which are
required to be and are not disclosed therein;
(viii) From the date of the most recent report referred to in
paragraph (vii) above, there has not been any material adverse change in the
Fund's financial condition, assets, liabilities or business other than changes
occurring in the ordinary course of business or as a result of this transaction
(for the purposes of this paragraph (viii), a decline in net assets of the Fund
shall not constitute a material adverse change);
(ix) All shares of common stock, $.001 par value, of the Fund
are, and at the Closing will be, duly authorized, legally issued, fully paid and
non-assessable, and the Fund does not have outstanding any options, warrants or
other rights to subscribe for or purchase any shares of the Fund (other than
dividend reinvestment plans of the Fund or as set forth in this Agreement) nor
are there outstanding any securities convertible into any shares of the Fund
(except pursuant to any exchange privileges described in the current Prospectus
or Registration Statement of the Fund under the Securities Act of 1933 (the
"1933 Act"));
(x) At the Closing, the Fund will have good and marketable title
to the Fund Assets to be transferred to the Successor Series and full right,
power and authority to assign, transfer and deliver such assets hereunder, and,
upon delivery and payment for such assets, the Successor Series will acquire
good and marketable title thereto, subject to no restrictions on the full
transfer thereof, including such restrictions as might arise under the 1933 Act;
(xi) Fundamental Fund has full power and authority to enter into
and perform its obligations under this Agreement; the execution, delivery and
performance of this Agreement have been duly authorized by all necessary action
on the part of the Board of Directors of Fundamental Fund; and, subject to the
approval of the shareholders of the Fund, this Agreement constitutes a valid and
binding obligation of Fundamental Fund and the Fund, enforceable against
Fundamental Fund and the Fund in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other laws relating to or affecting creditors' rights and by
equitable principles;
(xii) Fundamental Fund has provided the Tocqueville Trust with
the Fund's most recent Form N-1A Registration Statement under the 1933 Act,
which does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
C-5
<PAGE>
(xiii) The information furnished by the Fund for use in proxy
materials and other documents in connection with the transactions contemplated
hereby, and the Registration Statement on Form N-1A of the Successor Series
(other than the portions of such materials which relate to this transaction), is
accurate and complete in all material respects and complies in all material
respects with federal securities and other laws and regulations thereunder
applicable thereto; and
(xiv) The Proxy Statement to be used in connection with the
transactions contemplated hereby (only insofar as it relates to Fundamental
Fund) on its effective date and at the Closing, will comply in all material
respects with the provisions of the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), and the 1940 Act and the rules and
regulations thereunder, and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which such
statements were made, not materially misleading.
b. THE TOCQUEVILLE TRUST. The Tocqueville Trust, with respect to
itself and the Successor Series, represents and warrants to Fundamental Fund as
follows:
(i) The Tocqueville Trust is a business trust duly organized,
validly existing and in good standing under the laws of The Commonwealth of
Massachusetts;
(ii) The Tocqueville Trust is a registered investment company
classified as a management company of the open-end type, and its registration
with the Commission as an investment company under the 1940 Act is in full force
and effect;
(iii) The Successor Series is a duly established series of the
Tocqueville Trust;
(iv) The Tocqueville Trust is not, and the execution, delivery
and performance of this Agreement will not result, in material violation of the
Tocqueville Trust's Declaration of Trust or By-Laws or of any agreement,
indenture, instrument, contract, lease or other undertaking to which the
Tocqueville Trust is a party or is bound;
(v) Except as otherwise disclosed in writing to and accepted by
Fundamental Fund, there is no litigation or administrative proceeding or
investigation of or before any court or governmental body pending or to the
Tocqueville Trust's knowledge threatened against the Tocqueville Trust with
respect to the Successor Series or its properties or assets, and the Tocqueville
Trust knows of no fact which might form the basis for the institution of such
proceedings, and neither the Tocqueville Trust nor the Successor Series is a
party or subject to the provisions of any order, decree or judgment of any court
or governmental body which materially and adversely affects their respective
businesses or their respective abilities to consummate the transactions
contemplated herein;
(vi) At the Closing all shares of beneficial interest in the
Successor Series will be duly authorized, legally issued, fully paid and
non-assessable, and the Successor Series does not have outstanding any options,
warrants or other rights to subscribe for or purchase any shares of the
Successor Series (other than dividend reinvestment plans of the Successor Series
or as set forth in this Agreement), nor are there outstanding any securities
convertible into any shares of the Successor Series (except pursuant to exchange
privileges described in the current Prospectus or Registration Statement of the
Successor Series under the 1933 Act);
(vii) The Tocqueville Trust has full power and authority to enter
into and perform its obligations under this Agreement; the execution, delivery
and performance of this Agreement have been duly authorized by all necessary
action on the part of the Board of Trustees of the Tocqueville Trust; and this
Agreement constitutes a valid and binding obligation of the Tocqueville Trust
and the Successor Series, enforceable against the Tocqueville Trust and the
Successor Series in accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other laws
relating to or affecting creditors' rights and by equitable principles;
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<PAGE>
(viii) The Tocqueville Trust will provide to the Fund the Form
N-1A Registration Statement under the 1933 Act concerning the Successor Series,
which does not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make any
statements therein, in light of the circumstances under which such statements
were made, not materially misleading;
(ix) The information to be furnished by the Tocqueville Trust for
use in Registration Statements, proxy materials and other documents, in
connection with the transactions contemplated hereby, will be accurate and
complete in all material respects and will comply in all material respects with
federal securities laws and other laws and regulations thereunder applicable
thereto; and
(x) The Proxy Statement to be used in connection with the
transactions contemplated hereby (only insofar as it relates to the Successor
Series or the Tocqueville Trust), on its effective date and at the Closing, will
conform in all material respects with the provisions of the 1933 Act, the 1934
Act and the 1940 Act and the rules and regulations thereunder, and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which such statements were made, not materially
misleading.
9. COVENANTS OF THE TOCQUEVILLE TRUST
The Tocqueville Trust covenants to Fundamental Fund and the Fund as
follows:
(i) The Tocqueville Trust will use its best efforts and take all
actions as may be necessary or advisable to effectuate the Reorganization and to
continue the Successor Series in operation thereafter, including the obtaining
of any regulatory approvals required to be obtained by it.
(ii) The Tocqueville Trust, on behalf of the Successor Series,
agrees, for the period beginning at the Closing and ending not less than two
years thereafter, to indemnify and advance expenses to each person who at the
time of the execution of this Agreement serves as an independent director
("Indemnified Person") of Fundamental Fund, against all costs and expenses,
including attorneys' fees, judgments, fines and amounts paid in settlement,
actually and reasonably incurred by such Indemnified Person in connection with
any claim, whether the basis for which is known or unknown on the date hereof,
that is asserted against such Indemnified Person arising out of such person's
service as an independent director of Fundamental Fund, provided that such
indemnification and advancement of expenses shall be permitted under Maryland
law and other applicable law. This paragraph 9 (ii) shall not protect any such
Indemnified Person against any liability to Fundamental Fund, the Tocqueville
Trust or their shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or from reckless disregard of
the duties involved in the conduct of his office. An Indemnified Person seeking
indemnification shall be entitled to advances from the Tocqueville Trust for
payment of the reasonable expenses incurred by him in connection with the matter
as to which he is seeking indemnification in the manner and to the fullest
extent permissible under Maryland law and other applicable law. Such Indemnified
Person shall provide to the Tocqueville Trust a written affirmation of his good
faith belief that the standard of conduct necessary for indemnification by the
Tocqueville Trust has been met and a written undertaking to repay any advance if
it should ultimately be determined that the standard of conduct has not been
met. In addition, at least one of the following additional conditions shall be
met: (a) the Indemnified Person shall provide security in form and amount
acceptable to the Tocqueville Trust for its undertaking; or (b) either a
majority of a quorum of disinterested non-party trustees of the Tocqueville
Trust, or independent legal counsel experienced in mutual fund matters, selected
by the Indemnified Person, in a written opinion, shall have determined, based on
a review of facts readily available to the Tocqueville Trust at the time the
advance is proposed to be made, that there is reason to believe that the
Indemnified Person will ultimately be found to be entitled to indemnification.
The Tocqueville Trust agrees that in the event it or the Successor Series
is subsequently acquired by merger, acquisition or the sale of substantially all
of its assets ("Subsequent Merger"), or it reorganizes or changes its domicile
("Subsequent Redomestication"), it will provide under the terms of such
Subsequent Merger or Subsequent Redomestication that the indemnification
provided for above shall continue in full force and effect.
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<PAGE>
In the event that the Tocqueville Trust enters into negotiation for a Subsequent
Merger or Subsequent Redomestication, the Tocqueville Trust shall promptly
notify the Indemnified Person of such intended Subsequent Merger or Subsequent
Redomestication.
10. COVENANTS OF FUNDAMENTAL FUND
Fundamental Fund covenants to the Tocqueville Trust and the
Successor Series as follows:
(i) Fundamental Fund will use its best efforts and take all
actions as may be necessary or advisable to effectuate the Reorganization,
including the obtaining of any regulatory approvals, as may be required to be
obtained by it.
(ii) Except as otherwise contemplated by this Agreement,
Fundamental Fund will use its best efforts to conduct the business of the Fund
in the ordinary course until the consummation of the Reorganization.
(iii) The Fund will duly supplement its Prospectus in the manner
prescribed by Rule 497(e) of the 1933 Act and all other applicable law and
regulations.
11. BROKERAGE FEES AND EXPENSES
(i) Fundamental Fund represents and warrants to the Tocqueville
Trust, and the Tocqueville Trust represents and warrants to Fundamental Fund,
that there are no brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
(ii) Fundamental Fund and the Tocqueville Trust confirm their
understanding that Fundamental Portfolio Advisors, Inc. and Tocqueville Asset
Management L.P. will be responsible for all expenses in connection with the
Reorganization.
12. TERMINATION.
The Board of Directors of Fundamental Fund may terminate this
Agreement and abandon the Reorganization contemplated hereby at any time prior
thereto, notwithstanding approval thereof by the shareholders of the Fund if, in
the judgment of such Board proceeding with the Reorganization would be
inadvisable or if any of the conditions set forth in Sections 5 or 7 hereof have
not been satisfied. The Board of Trustees of the Tocqueville Trust may terminate
this Agreement and abandon the Reorganization contemplated hereby if any of the
conditions set forth in Sections 6 or 7 hereof have not been satisfied. In the
event of any such termination, there shall be no liability for damages on the
part of either party to the other.
13. ENTIRE AGREEMENT.
This Agreement embodies the entire Agreement between the parties
and there are no agreements, understandings, restrictions or warranties among
the parties other than those set forth herein or herein provided for. This
Agreement may not be amended without the consent in writing of both parties
hereto. Furthermore, after approval of this Agreement by the shareholders of the
Fund, no amendments may be made that materially adversely affect the interests
of shareholders of the Fund unless such amendments are submitted for shareholder
approval.
14. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties made in this Agreement shall
not survive the Closing.
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15. FURTHER ASSURANCES.
Fundamental Fund and the Tocqueville Trust shall take such
further action as may be reasonably necessary or desirable and proper to
consummate the transactions contemplated hereby.
16. GOVERNING LAW.
This Agreement and the transactions contemplated hereby shall be
governed by and construed and enforced in accordance with the laws of The
Commonwealth of Massachusetts, without regard to principles of conflicts of law.
17. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
Copies of the Declaration of Trust of the Tocqueville Trust are
on file with The Commonwealth of Massachusetts and notice is hereby given that
it is executed on behalf of the trustees of the Tocqueville Trust as trustees
and not individually and that the obligations of the Tocqueville Trust pursuant
to this Agreement and the other agreements contemplated hereby are not binding
upon any of the trustees or shareholders individually but binding only upon the
assets and property of the Tocqueville Trust.
18. NOTICES.
All notices, requests, demands and other communications required
or permitted hereunder shall be in writing and deemed properly given if hand
delivered or deposited in the U.S. mail, return receipt requested or certified,
postage prepaid, or with an overnight delivery service, as follows:
a. if to Fundamental Funds:
Fundamental Funds, Inc.:
90 Washington Street, 19th Floor
New York, New York 10006
Attention: Dr. Vincent J. Malanga
and additional copies to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Carl Frischling, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
New York, New York 10038
Attention: Stuart Coleman, Esq.
b. if to the Tocqueville Trust:
The Tocqueville Trust
1675 Broadway
New York, New York 10019
Attention: Robert Kleinschmidt
C-9
<PAGE>
and an additional copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Susan-Penry Williams, Esq.
or to such other person or address as Fundamental Fund or the Tocqueville Trust,
respectively, shall furnish to the other in writing.
IN WITNESS WHEREOF, each of Fundamental Fund and the
Tocqueville Trust have caused this Agreement and Plan of Reorganization to be
executed on its behalf by its Chairman, President or a Vice President and
attested by its Secretary or Assistant Secretary, all as of the day and year
first above written.
Fundamental Funds, Inc., for itself and
on behalf of New York Muni Fund
By: /s/ Vincent J. Malanga
------------------
Name: Vincent J. Malanga
Title: President
ATTEST:
By:/s/ Carole M. Laible
Name: Carole M. Laible
Title: Secretary
The Tocqueville Trust, for itself and on behalf of
the New York Muni Fund Series
By:/s/ Robert Kleinschmidt
-----------------------
Name: Robert Kleinschmidt
Title: President
ATTEST:
By:/s/ Kieran Lyons
Name: Kieran Lyons
Title: Vice President
C-10
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS -- _________, 1997
Please refer to the Proxy Statement for a discussion of the Proposal. THE
UNDERSIGNED HOLDER(S) OF SHARES OF BENEFICIAL INTEREST OF THE FUNDAMENTAL U.S.
GOVERNMENT STRATEGIC INCOME FUND SERIES OF FUNDAMENTAL FIXED-INCOME FUND HEREBY
CONSTITUTES AND APPOINTS ________________ AND _______________, OR EITHER OF
THEM, THE ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTE THE SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES
ANY PRIOR PROXIES. To vote, mark an X in blue or black ink on the proxy card
below. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF FUNDAMENTAL
FIXED-INCOME FUND.
- -----Detach card at perforation and mail in postage paid envelope provided------
1. Vote on Proposal to approve an Agreement and Plan of Reorganization.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
- -----Detach card at perforation and mail in postage paid envelope provided------
FUNDAMENTAL FIXED-INCOME FUND
FUNDAMENTAL U.S. GOVERNMENT STRATEGIC INCOME FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL 1.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x____________________________
x____________________________
Dated:___________________, 1997
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
SPECIAL MEETING OF SHAREHOLDERS -- _________, 1997
Please refer to the Proxy Statement for a discussion of the Proposal. THE
UNDERSIGNED HOLDER(S) OF SHARES OF BENEFICIAL INTEREST OF THE HIGH-YIELD
MUNICIPAL BOND SERIES OF FUNDAMENTAL FIXED-INCOME FUND HEREBY CONSTITUTES AND
APPOINTS ________________ AND _______________, OR EITHER OF THEM, THE ATTORNEYS
AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, TO VOTE THE
SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES ANY PRIOR PROXIES. To vote,
mark an X in blue or black ink on the proxy card below. THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF TRUSTEES OF FUNDAMENTAL FIXED-INCOME FUND.
- -----Detach card at perforation and mail in postage paid envelope provided------
1. Vote on Proposal to approve an Agreement and Plan of Reorganization.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
- -----Detach card at perforation and mail in postage paid envelope provided------
FUNDAMENTAL FIXED-INCOME FUND
HIGH-YIELD MUNICIPAL BOND SERIES
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL 1.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x____________________________
x____________________________
Dated:___________________, 1997
<PAGE>
FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES
SPECIAL MEETING OF SHAREHOLDERS -- _________, 1997
Please refer to the Proxy Statement for a discussion of the Proposal. THE
UNDERSIGNED HOLDER(S) OF SHARES OF BENEFICIAL INTEREST OF THE TAX-FREE MONEY
MARKET SERIES OF FUNDAMENTAL FIXED-INCOME FUND HEREBY CONSTITUTES AND APPOINTS
________________ AND _______________, OR EITHER OF THEM, THE ATTORNEYS AND
PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, TO VOTE THE SHARES
LISTED BELOW AS DIRECTED, AND HEREBY REVOKES ANY PRIOR PROXIES. To vote, mark an
X in blue or black ink on the proxy card below. THIS PROXY IS SOLICITED ON
BEHALF OF THE BOARD OF TRUSTEES OF FUNDAMENTAL FIXED-INCOME FUND.
- -----Detach card at perforation and mail in postage paid envelope provided------
1. Vote on Proposal to approve an Agreement and Plan of Reorganization.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
- -----Detach card at perforation and mail in postage paid envelope provided------
FUNDAMENTAL FIXED-INCOME FUND
TAX-FREE MONEY MARKET SERIES
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL 1.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x____________________________
x____________________________
Dated:___________________, 1997
<PAGE>
THE CALIFORNIA MUNI FUND
SPECIAL MEETING OF SHAREHOLDERS -- _________, 1997
Please refer to the Proxy Statement for a discussion of the Proposal. THE
UNDERSIGNED HOLDER(S) OF SHARES OF BENEFICIAL INTEREST OF THE CALIFORNIA MUNI
FUND HEREBY CONSTITUTES AND APPOINTS ________________ AND _______________, OR
EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE UNDERSIGNED, WITH FULL POWER OF
SUBSTITUTION, TO VOTE THE SHARES LISTED BELOW AS DIRECTED, AND HEREBY REVOKES
ANY PRIOR PROXIES. To vote, mark an X in blue or black ink on the proxy card
below. THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE
CALIFORNIA MUNI FUND.
- -----Detach card at perforation and mail in postage paid envelope provided------
1. Vote on Proposal to approve an Agreement and Plan of Reorganization.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
- -----Detach card at perforation and mail in postage paid envelope provided------
THE CALIFORNIA MUNI FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL 1.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x____________________________
x____________________________
Dated:___________________, 1997
<PAGE>
FUNDAMENTAL FUNDS, INC.
NEW YORK MUNI FUND
SPECIAL MEETING OF SHAREHOLDERS -- _________, 1997
Please refer to the Proxy Statement for a discussion of the Proposal. THE
UNDERSIGNED HOLDER(S) OF SHARES OF STOCK OF THE NEW YORK MUNI FUND SERIES OF
FUNDAMENTAL FUNDS, INC. HEREBY CONSTITUTES AND APPOINTS ________________ AND
_______________, OR EITHER OF THEM, THE ATTORNEYS AND PROXIES OF THE
UNDERSIGNED, WITH FULL POWER OF SUBSTITUTION, TO VOTE THE SHARES LISTED BELOW AS
DIRECTED, AND HEREBY REVOKES ANY PRIOR PROXIES. To vote, mark an X in blue or
black ink on the proxy card below. THIS PROXY IS SOLICITED ON BEHALF OF THE
BOARD OF DIRECTORS OF FUNDAMENTAL FUNDS, INC.
- -----Detach card at perforation and mail in postage paid envelope provided------
1. Vote on Proposal to approve an Agreement and Plan of Reorganization.
FOR AGAINST ABSTAIN
|_| |_| |_|
2. In their discretion, the proxies are authorized to vote upon such
other business as may properly come before the meeting.
<PAGE>
- -----Detach card at perforation and mail in postage paid envelope provided------
FUNDAMENTAL FUNDS, INC.
NEW YORK MUNI FUND
PROXY
THIS PROXY, WHEN PROPERLY EXECUTED AND RETURNED, WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR APPROVAL OF PROPOSAL 1.
Please sign exactly as name appears on this card. When account is joint tenants,
all should sign. When signing as administrator, trustee or guardian, please give
title. If a corporation or partnership, sign in entity's name and by authorized
person.
x____________________________
x____________________________
Dated:___________________, 1997
