CITIZENS TRUST
One Harbour Place
Suite 525
Portsmouth, NH 03801
(603) 436-5152
VIA EDGARLINK
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June 18, 1997
Securities and Exchange Commission
Judiciary Plaza
450 5th Street, N.W.
Washington, D.C. 20549-1004
Re: Citizens Investment Trust - File Nos. 811-3626 and 333-26077
Ladies and Gentlemen:
Enclosed herewith for filing on behalf of Citizens Investment Trust (the
"Trust") please find the Post-Effective Amendment No. 1 to the N-14 filing made
in connection with the registrant's proposed reorganization of the Muir
California Tax-Free Income Portfolio into the Citizens Income Portfolio. This
filing is made pursuant to paragraph (a) of Rule 485 under the Securities Act of
1933 (the "1933 Act").
If you have any questions regarding the enclosed materials, please call me at
(603) 436-5152.
Very truly yours,
Joseph F. Keefe
General Counsel
cc: Jeremiah deMichaelis
Roger Joseph, Esq
<PAGE>
As filed with the Securities and Exchange Commission on June 18, 1997
File Nos. 333-26077
811-3626
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post -Effective Amendment No. 1
CITIZENS INVESTMENT TRUST*
(Exact name of registrant as specified in charter)
One Harbour Place
Suite 525
Portsmouth, N.H. 03801
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(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (603) 436-5152
Sophia Collier
One Harbour Place
Suite 525
Portsmouth, N.H. 03801
(Name and address of Agent for Service)
It is proposed that this filing will become effective on August 17, 1997
pursuant to paragraph (a) of Rule 485, or such earlier date on which the
Commission may declare this filing effective pursuant to subparagraph (3) of
Rule 485 (a).
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, the Registrant
has previously registered an indefinite number of securities under the
Securities Act of 1933. The Notice required by Rule 24f-2 was filed by the
Registrant for its most recent fiscal year on August 29, 1996.
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*This filing only relates to Muir California Tax-Free Income Portfolio
<PAGE>
CITIZENS INVESTMENT TRUST
FORM N-14 CROSS-REFERENCE PAGE
PART A: INFORMATION REQUIRED IN THE PROSPECTUS
Item 1. Beginning of Registration Cover page
Statement and Outside
Front Cover Page of
Prospectus
Item 2. Beginning and Outside Back Back page
Cover Page of Prospectus
Item 3. Fee Table, Synopsis Summary; Investment Policies and
Information and Risk Risk Factors
Factors
Item 4. Information about the Summary; Description of the
Transaction Reorganization; Additional Information
About the Transaction
Item 5. Information about the Investment Policies and Risk Factors;
Registrant The People and Operations of Citizens
Trust; Additional Information About the
Transaction; Manager's Comments;
Additional Information About the Muir
and Income Portfolios
Item 6. Information about the Summary; Investment Policies and
Company being Acquired Risk Factors; Factors Considered by
the Board of Trustees Before
Recommending this Transaction;
Manager's Comments; Additional
Information About the Transaction;
Additional Information about the Muir
and Income Portfolios
Item 7. Voting Information Voting Information
Item 8. Interest of Certain Persons Description of the Reorganization; The
and Experts People and Operations of Citizens
Trust; Financial Statements and
Expert
<PAGE>
Item 9. Additional Information for Not Applicable
Reoffering by Persons
Deemed to be Underwriters
PART B: INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL
INFORMATION
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. Additional Information about Investment Policies and Risk Factors;
the Registran The People and Operations of Citizens
Trust; Additional Information About the
Transaction; Manager's Comments;
Additional Information About the Muir
and Income Portfolios
Item 13. Additional Information about Summary; Investment Policies and
the Company Being Risk Factors; Factors Considered by
Acquired the Board of Trustees Before
Recommending this Transaction;
Manager's Comments; Additional
Information About the Transaction;
Additional Information about the Muir
and Income Portfolios
Item 14. Financial Statements Additional Information About the
Transaction; Additional Information
about the Muir and Income Portfolios
PART C: OTHER INFORMATION
Item 15. Indemnification Indemnification
Item 16. Exhibits Exhibits
Item 17. Undertakings Undertakings
<PAGE>
August 1, 1997
Dear Shareholder:
The enclosed combined Proxy Statement/Prospectus describes a plan which
the Board of Trustees believes is in the interest of the shareholders of the
Muir California Tax Free Income Portfolio (the "Muir Portfolio"). Essentially,
the plan calls for the merger of the Muir Portfolio with the Citizens Income
Portfolio, another series of Citizens Trust investing in fixed income
securities. Unlike the Muir Portfolio, Citizens Income Portfolio is not tax-free
but it does share the objective of social responsibility. The full details are
included in the enclosed proxy. It is our belief that this merger will assist us
as we seek to increase the rate of return to shareholders while lowering their
costs.
The Special Meeting of Shareholders of the Muir Portfolio will be held
on September 10, 1997 at 10:30 a.m., EDT, at the offices of Citizens Investment
Trust, One Harbour Place, Portsmouth, New Hampshire.
If you cannot attend the meeting, please sign, date and return the
attached proxy. Your vote matters. We, the Trustees of Citizens Investment
Trust, recommend that you vote "Yes" to go ahead with the Plan of
Reorganization.
Sincerely yours,
Azie Taylor Morton
Chair
<PAGE>
PRELIMINARY PROXY MATERIALS
NOT FOR DISTRIBUTION
CITIZENS INVESTMENT TRUST
Muir California Tax Free Income Portfolio
One Harbour Place
Portsmouth, New Hampshire 03801
Phone: (800) 223-7010
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on September 10, 1997 at the offices of Citizens Investment Trust,
One Harbour Place, Portsmouth, New Hampshire 03801, at 10:30 am, EDT.
To the Shareholders of Muir California Tax-Free Income Portfolio:
NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders of Muir California
Tax Free Income Portfolio (the "Muir Portfolio") will be held on September 10,
1997 for the following purposes.
ITEM 1.
To decide whether or not to approve the attached Plan of Reorganization ("the
Plan") wherein it is proposed that the Muir Portfolio be reorganized with the
Citizens Income Portfolio (the "Income Portfolio"), another series of Citizens
Investment Trust ("Citizens Trust" or the "Trust").
If shareholders of the Muir Portfolio approve the Plan, they will be approving:
(a) The transfer of all the assets and liabilities of the Muir Portfolio to the
Income Portfolio, in exchange for shares of the Income Portfolio with a
value equal to the value of the assets (minus liabilities) transferred;
(b) The distribution of the shares of equal value in the Income Portfolio to the
shareholders of the Muir Portfolio;
(c) The dissolution of the Muir Portfolio.
ITEM 2.
To transact such other business as may properly come before the Meeting or any
adjournment thereof.
The proposed reorganization and related matters are described in the attached
Combined Proxy Statement/Prospectus. A copy of the Plan is also attached for
your information as Exhibit 1.
Shareholders of record of the Muir Portfolio, as of the close of business on
June 12, 1997, are entitled to notice of, and to vote at, the Special Meeting or
any adjournments thereof.
The Trustees recommend that shareholders of the Muir Portfolio vote YES on Item
1.
YOUR VOTE MATTERS! PLEASE READ, COMPLETE AND RETURN PROMPTLY THE ENCLOSED PROXY
CARD WHICH IS BEING SOLICITED BY THE BOARD OF TRUSTEES OF CITIZENS TRUST. THIS
IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. PROXIES MAY BE REVOKED AT ANY
TIME BEFORE THEY ARE EXERCISED BY A SIGNED WRITING DELIVERED AT THE MEETING OR
FILED WITH THE SHAREHOLDER SERVICING AGENT.
Sophia Collier
President
June 18, 1997
<PAGE>
PRELIMINARY PROXY MATERIALS
NOT FOR DISTRIBUTION
PROXY STATEMENT/PROSPECTUS
Dated: June 18, 1997
CITIZENS INVESTMENT TRUST
One Harbour Place, Portsmouth, New Hampshire 03801
Phone: (800) 223-7010
This document is called a Combined Proxy Statement/Prospectus. It is meant to
provide you with two types of information. First, it describes a reorganization
we, the Board of Trustees of Citizens Investment Trust ("Citizens Trust" or the
"Trust"), have approved, subject to shareholder approval, to reorganize Muir
California Tax-Free Income Portfolio (the "Muir Portfolio) into Citizens Income
Portfolio ("Income Portfolio"). Second, it offers the investment disclosures you
will need should the reorganization plan be effected.
We, the Board of Trustees, on behalf of Citizens Trust, are sending you this
Combined Proxy Statement/Prospectus to solicit your proxy to be voted for or
against the reorganization at a Special Meeting of Shareholders to be held on
September 10, 1997 at the offices of Citizens Trust, One Harbour Place,
Portsmouth, New Hampshire 03801, at 10:30 am EDT.
Why Are We Doing This?:
The primary reason for this reorganization is to allow shareholders of the Muir
Portfolio to continue to obtain income from securities that are selected using
both financial criteria and criteria of social responsibility, while combining
the assets of the Muir Portfolio with those of the Income Portfolio in order to
achieve economies of scale and, hopefully, better performance. The performance
of California tax free bonds in recent years has been disappointing and Muir
Portfolio shareholders have not fared well in comparison to shareholders of
other fixed income securities. In order to attempt to provide the Muir Portfolio
shareholders with stronger performance and a better rate of return on fixed
income securities while also lowering their costs, we, the Board of Trustees,
determined that it would be in the best interests of Muir Portfolio shareholders
to merge or reorganize the Muir Portfolio into the Income Portfolio.
How the Reorganization Will Work:
The Income Portfolio is an existing series of the Trust, which started
operations on June 10, 1992. If the shareholders vote to go ahead with the
reorganization, all of the assets and liabilities of the Muir Portfolio will be
transferred to the Income Portfolio. In exchange, the Muir Portfolio will then
be given shares of the Income Portfolio of equal value to the assets (reduced by
the liabilities) which the Muir Portfolio transferred to the Income Portfolio.
Following the exchange, the Muir Portfolio will make what is called a
liquidating distribution of the shares of the Income Portfolio, such that each
shareholder in the Muir Portfolio at the effective time of the reorganization
will receive a number of full and fractional shares of the Income Portfolio
having a net asset value equal to the value of the shares of the Muir Portfolio
held by that shareholder.
<PAGE>
What You Need To Know:
This Combined Proxy Statement/Prospectus sets forth concisely the information
that shareholders of the Muir Portfolio should know before voting on the Plan of
Reorganization and should be retained for future reference. The prospectus for
the Trust, dated September 28, 1996, as amended March 28, 1997 and as further
amended May 1, 1997, is attached as Appendix 1. The Trust's annual report for
the fiscal year ended June 30, 1996 and semi-annual report for the period ended
December 31, 1996 have been earlier sent to you. You may request another copy by
calling us, toll free, at (800) 223-7010, and we will send it to you without
charge.
Additional information is provided in the Statement of Additional Information,
dated September 26, 1996, as amended March 28, 1997. This document is on file
with the Securities and Exchange Commission (the "SEC"). If you would like us to
send you a copy of the Statement of Additional Information you may call us,
again, toll free at (800) 223-7010 and we will be happy to send it to you
without any charge.
The information contained in the enclosed prospectus, the annual report and the
Statement of Additional Information is incorporated herein by reference.
This Combined Proxy Statement/Prospectus is expected to first be sent to
shareholders on or about August 1, 1997
THE SECURITIES OF CITIZENS TRUST HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS COMBINED PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
End of Page
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TABLE OF CONTENTS
Item: Page
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Summary .............................................................. 3
Investment Policies and Risk Factors ................................. 8
The People and Operations of Citizens Trust .......................... 13
Voting Information ................................................... 17
Description of the Plan of Reorganization.............................. 19
Factors Considered by the Board of Trustees Before
Recommending this Transaction .................................... 20
Additional Information about the Transaction ......................... 22
Manager's Comments ................................................... 31
Additional Information about the Muir and Income Portfolio ........... 34
Financial Statements and Expert ...................................... 37
Other Business ....................................................... 37
Shareholders Inquiries ............................................... 37
Exhibit 1 - Plan of Reorganization ................................... 39
Appendix 1 - Prospectus of Citizens Trust
SUMMARY
THE FOLLOWING MATERIAL IS ONLY A SUMMARY. FOR COMPLETE INFORMATION, PLEASE READ
THIS PROSPECTUS/PROXY STATEMENT IN ITS ENTIRETY, AS WELL AS THE PLAN OF
REORGANIZATION, A COPY OF WHICH IS INCLUDED AS EXHIBIT 1 HERETO, AND THE
ACCOMPANYING PROSPECTUS OF THE TRUST DATED SEPTEMBER 27, 1997, AS AMENDED MARCH
28, 1997 AND AS FURTHER AMENDED MAY 1, 1997, A COPY OF WHICH IS INCLUDED AS
APPENDIX 1 HERETO.
The Plan of Reorganization (the "Plan") provides for the transfer of all of the
assets of the Muir Portfolio to the Income Portfolio in exchange for shares of
beneficial interest of the Income Portfolio and the assumption by the Income
Portfolio of all of the liabilities of the Muir Portfolio. The Muir Portfolio
would then distribute such shares of the Income Portfolio to its shareholders in
liquidation of the Muir Portfolio. As a result of the reorganization, each
shareholder of the Muir Portfolio will become the owner of that number of full
and fractional shares of the Income Portfolio having an aggregate value equal to
the aggregate value of that shareholder's shares of the Muir Portfolio
immediately prior to the time the reorganization becomes effective. Following
the reorganization, the Muir Portfolio will be terminated.
For the reasons set forth below under "Reasons for the Reorganization," your
Board of Trustees, including a majority of the Trustees who are not "interested
persons" as that term is defined in the Investment Company Act of 1940, as
amended (the "1940 Act") (the "Independent Trustees"), has unanimously concluded
that the reorganization would be in the best interests of the Muir Portfolio's
shareholders and the transactions contemplated by the reorganization will not
dilute the interests of the existing shareholders of the Muir Portfolio or the
Income Portfolio. The Board of Trustees has, therefore, submitted the Plan for
approval by the shareholders of the Muir Portfolio. Approval of the
reorganization will require the affirmative vote of the holders of more than 50%
of the outstanding shares of the Muir Portfolio entitled to vote. See "Voting
Information."
3
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Fees and Expenses
The following table provides: (1) a summary of the aggregate operating expenses
of the Muir Portfolio; (2) a summary of the aggregate operating expenses of the
Income Portfolio; and (3) a pro forma summary of the aggregate operating
expenses of the Income Portfolio following the reorganization. The table also
illustrates the dollar cost of such expenses on a $1,000 investment in the Muir
Portfolio and the Income Portfolio.
Expense Table
Annual Operating Expenses
(as a percentage of the average daily net assets)
Muir Income Pro Forma-Income
Portfolio Portfolio Portfolio
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Management fee 0.65% 0.65% 0.65%
Distribution fee (12b-1) 0.25% 0.25% 0.25%
Other expenses (after waiver and
reimbursement) 0.63%* 0.49%* 0.49%
Total 1.53% 1.39% 1.39%
*The Trust's investment adviser waived certain fees and reimbursed expenses,
without which total operating expenses for the six months ended December 31,
1996 would have been 1.39% for the Income Portfolio and 1.97% for the Muir
Portfolio. Operating expenses for the one year period ending June 30, 1996 are
contained in the Prospectus attached hereto as Appendix 1.
Example: You would have paid the following expenses on a $1,000 investment
assuming a 5% annual return and redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
Muir Portfolio $16 $48 $83 $182
Income Portfolio 14 44 76 167
Pro Forma-Income Portfolio 14 44 76 167
The example should not be considered a representation of past or future expenses
or past or future return. Actual expenses and actual return may be greater or
less than those included in the example above.
Exchange Privileges:
Shareholders of the Muir Portfolio and the Income Portfolio currently are
entitled to exchange their shares for shares of other series of Citizens Trust
that are registered in their state. It is anticipated that, after the
reorganization, the same exchange privileges will continue with respect to
shareholders of the former Muir Portfolio. Any exchange will be a taxable event
for which a shareholder may have to recognize a gain or a loss under federal
income tax provisions. The Trust reserves the right to terminate or modify the
exchange privilege in the future.
4
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Dividends:
Both the Muir Portfolio and the Income Portfolio distribute dividends monthly
and pay out net realized capital gains, if any, once each year. Shareholders of
either the Muir Portfolio or the Income Portfolio may reinvest distributions.
Your existing election in the Muir Portfolio with respect to dividends and/or
capital gains will be continued with respect to the shares of the Income
Portfolio you acquire in connection to the reorganization unless you notify the
Trust of a new election.
Proposed Reorganization:
The Board of Trustees have approved the Plan, which is being recommended to the
shareholders of the Muir Portfolio for approval at the Meeting. Subject to your
approval, the Plan provides for: (a) the acquisition by the Income Portfolio of
all the assets and liabilities of the Muir Portfolio in exchange for shares of
the Income Portfolio; and (b) the distribution of such Income Portfolio shares
to the shareholders of the Muir Portfolio in liquidation of the Muir Portfolio.
As a result of the proposed reorganization, each shareholder of the Muir
Portfolio will become a shareholder of the Income Portfolio and will hold,
immediately after the time the reorganization becomes effective (the "Effective
Time of the Reorganization"), shares of the Income Portfolio having the same
dollar value as the shares of the Muir Portfolio that such shareholder held in
the Muir Portfolio immediately before the Effective Time of the Reorganization.
Reasons for the Reorganization:
As of May 31, 1997, the Income Portfolio had approximately three times the total
net assets of the Muir Portfolio ($32.5 million in the Income Portfolio as
compared to less than $11.4 million in the Muir Portfolio). The Trustees have
considered the issues inherent in the small size of the Muir Portfolio and have
concluded that by combining the Muir Portfolio into the larger Income Portfolio,
assets could be more efficiently managed, expenses reduced and rate of return
increased without increasing (and possibly reducing) risk. The reorganization of
the Muir Portfolio will also allow shareholders to continue the investment goal
of a high level of current income from securities selected according to both
financial criteria and criteria of social responsibility as well. However, the
Income Portfolio does not share the Muir Portfolio's objective of "a high level
of current income exempt from both federal and California state personal income
tax." The investment objective for the Income Portfolio is to generate current
income and pay a dividend every month. Such income is subject to federal and
state personal income tax.
Although Muir Portfolio shareholders will no longer hold tax free securities
after the reorganization is consummated, in the opinion of the Trustees such tax
consequences are outweighed by the likelihood of lower expenses and the
possibility of higher returns and reduced risks flowing to Muir Portfolio
shareholders once they become shareholders of the Income Portfolio.
With regard to risk, the Trustees have considered the changes in the California
bond market subsequent to passage of Proposition 13, which limited the capacity
of local governments to stand behind bond issues and increased the possibilities
of default, which actually occurred in Orange County, California. In the opinion
of the Trustees, this risk to principal will be reduced once the Muir Portfolio
shareholders become shareholders in the Income Portfolio. In the Trustee's
opinion, this reduction in risk, combined with the likelihood of lower expenses
and the possibility of higher returns, outweighs the tax consequences to
shareholders exchanging tax free shares in the Muir Portfolio for taxable
investments in the Income Portfolio.
5
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Historicaly, the Income Portfolio has had a better performance track record than
the Muir Portfolio. The average annual total return for the Muir Portfolio and
the Income Portfolio for the 1, 3 and 5 year periods ended 3/31/97 is set forth
below:
Average Annual Total Return 30-Day Yield Expense Ratio
for the period ending 3/31/97 for period for six months
ending 3/31/97 ending 12/31/96
1YR. 3YR. 5YR.
Income Portfolio 5.62% 6.73% N/A 6.47% 1.39%
Muir Portfolio 3.08% 4.65% 5.24% 3.79% 1.53%
The tax-equivalent yield for the Muir Portfolio for the same period was 6.89%.
The tax-equivalent yield is computed by dividing that portion of the yield that
is tax-exempt by one minus the highest applicable combined federal and
California income tax rate (45%) and adding the result to that portion of the
yield that is not tax-exempt.
Although past performance is not an indication of future performance, the
Trustees of Citizens Trust believe that the Income Portfolio will offer a
higher, although taxable, yield than the Muir Portfolio and a lower expense
ratio than the Muir Portfolio. A specific example of how lower expenses will be
immediately realized by Muir Portfolio shareholders can be seen in the per
account maintenance fee charged by the Trust's transfer agency, which will be
reduced from approximately $27.48 to $12.00 - a savings to shareholders of over
56%. The Trustees anticipate that other savings will also accrue to Muir
Portfolio shareholders as a result of the reorganization since the combined
costs of the Income Portfolio (including advisory, administration, and
distribution fees) have historically been lower than those of the Muir
Portfolio. Moreover, the Trustees note favorably the downward trend in annual
operating expenses of the Income Portfolio, which is expected to continue.
Federal Income Tax Consequences:
The Muir Portfolio does not expect that the proposed reorganization will qualify
as a "tax free" reorganization under federal income tax law. The Muir Portfolio
anticipates that substantially all of its securities will be sold prior to the
reorganization and that it will realize taxable gain or loss from such sale. The
Muir Portfolio will also recognize taxable gain or loss to the extent ( if at
all) the fair market value of the assets transferred to the Income Portfolio
exceeds or is less than, respectively, the aggregate basis of those assets in
the hands of the Muir Portfolio. The Income Portfolio's basis in the assets
acquired from the Muir Portfolio will be the fair market value of such assets at
the time the reorganization is consummated. Shareholders of the Muir Portfolio
who receive shares of the Income Portfolio will recognize gain (or loss) to the
extent the fair market value of the Income Portfolio shares exceeds (or is less
than) the aggregate basis such shareholders had in their Muir Portfolio shares.
It is anticipated that the tax consequences to the Muir Portfolio will be
minimal given that only unrealized gains (or losses) as of the Effective Time of
the Reorganization will be subject to taxation.
As stated above, the Muir Portfolio's disposition of substantially all of the
Muir Portfolio's securities will result in the realization of taxable gain or
loss with respect to the securities disposed of. The Muir Portfolio will
recognize gain or loss to the extent (if at all) the fair market value of the
assets transferred
6
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to the Income Portfolio exceeds or is less than, respectively, the aggregate
basis of those assets in the hands of the Muir Portfolio. All such gain and loss
so recognized will be taken into account in determining the Muir Portfolio's
income and required distributions for its final taxable year; as is generally
the case, dividends of ordinary income and distributions of net short-term
capital gains will be taxable to Muir Portfolio shareholders as ordinary income
for federal income tax purposes, and distributions of net capital gains (i.e.,
the excess of net long-term capital gains over net short-term capital losses)
will be taxable to Muir Portfolio shareholders as long-term capital gains for
federal income tax purposes without regard to the length of time such
shareholders have held their shares.
It is expected that (a) in accordance with Section 1001 of the Code,
shareholders of the Muir Portfolio who receive shares of the Income Portfolio in
exchange for their Muir Portfolio shares will recognize gain (or loss) to the
extent the fair market value of the Income Portfolio shares exceeds (or is less
than) the aggregate basis such shareholders had in their Muir Portfolio shares,
and, if their Muir Portfolio shares were capital assets in their hands, the gain
(or loss) will be long-term capital gain (or loss) if they have held their
interest in the Muir Portfolio shares for more than one year, and short-term
capital gain (or loss) if they have held such interest for one year or less; (b)
in accordance with Section 1032 of the Code, no gain or loss will be recognized
by the Income Portfolio as a result of such transactions; (c) in accordance with
Section 1012 of the Code, the basis of the Income Portfolio shares received by
each shareholder of the Muir Portfolio will be the fair market value of such
Income Portfolio shares as of the time of the reorganization; (d) in accordance
with Section 1012 of the Code, the basis of the assets of the Muir Portfolio in
the hands of the Income Portfolio will be the fair market value of the assets at
the time of the reorganization; (e) in accordance with Section 1223 of the Code,
the holding period of the Income Portfolio shares received by each shareholder
of the Muir Portfolio will begin on the date of the reorganization, and will not
include the period for which that shareholder held shares of the Muir Portfolio;
and (f) in accordance with Section 1223 of the Code, the holding period of the
Income Portfolio with respect to the assets of the Muir Portfolio will begin as
of the date of the reorganization, and will not include the period for which the
assets were held by the Muir Portfolio.
The Muir Portfolio and the Income Portfolio have not sought a tax ruling from
the Internal Revenue Service (the "IRS") or an opinion of counsel concerning the
foregoing. Shareholders should consult their own advisers concerning the
potential tax consequences to them, including state and local income taxes.
Shareholder Service Policies:
The Income Portfolio has identical policies to the Muir Portfolio with respect
to purchases, redemptions, wire transfers and other shareholder service issues.
Please see the prospectus for the Trust which is attached hereto as Appendix 1.
Accounting Matters:
The Muir Portfolio and the Income Portfolio use the same method to value their
shares. This method is described in the Trust's prospectus which is attached as
Appendix 1.
7
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INVESTMENT POLICIES AND RISK FACTORS
The Income Portfolio
The Income Portfolio is similar to a money market portfolio in that it lends
money to the agencies and enterprises of the government and to companies in
exchange for interest payments. However, unlike a money market portfolio (which
only makes short-term loans), the Income Portfolio invests most of its money in
bonds or mortgages that are due within 2-30 years, although at times it will
hold short-term securities as well. The average maturity in the Income Portfolio
is usually between 5 and 15 years. By committing money for this longer period,
the Income Portfolio can generally earn higher interest than money market
portfolios.
Since the goal is to achieve a reliable stream of monthly income, the credit
quality of the debt which the Income Portfolio purchases is analyzed carefully.
At least 65% of the Income Portfolio's assets are invested in securities rated
"investment grade" (BBB or above). Up to 35% may be invested in bonds or other
debt instruments rated as below investment grades. Although bonds rated below
BBB are considered speculative (and are commonly referred to as "junk bonds")
and therefore add risk, by limiting the overall portfolio exposure to a maximum
level of 35%, it is felt that the higher yield usually available in these
securities can benefit the portfolio and more than compensate for the greater
risk.
Occasionally, the Income Portfolio purchases securities that are not rated. In
these cases, the security must be of comparable quality, in our judgment, to the
rated securities we buy for the applicable portfolio.
The Statement of Additional Information dated September 26, 1996, as amended
March 28, 1997, provides more detailed information about each rating agency and
its system of ratings.
Risk Factors:
Bond prices, like stock prices, go up and down in value. These market price
fluctuations will be reflected in the value of the Citizens Income Portfolio.
When interest rates rise the market value of our Income Portfolio will decline,
and when interest rates fall the market value of our Income Portfolio will rise.
The Muir Portfolio
The Muir Portfolio only buys securities which have been rated
"investment-grade," or are equivalent to investment-grade in our judgement. (The
Statement of Additional Information contains a full description of bond ratings
and the agencies which provide them.)
8
<PAGE>
The Muir Portfolio generally buys investment-grade bonds issued by cities and
towns in California or other types of organizations that issue tax-exempt
securities. The goal of providing a high level of income exempt from California
or federal taxes, provides a number of very interesting investment opportunities
with high social impact, as well as potentially attractive financial results. In
particular, the portfolio manager looks for bonds that are issued for three
basic purposes:
Education: Tax-exempt securities that finance projects like construction of
public and private educational facilities, as well as tax exempt securities used
to provide student loans.
Environment: Projects that foster the buying and building of parks, the
preservation of ancient forests and wildlife habitats, and the creation of
public transit. We also purchase pollution control bonds.
Housing: The availability of quality, low-cost housing is critical to a peaceful
and more just society. For this reason, we invest in securities financing
low-income housing.
In addition to tax-free bonds, the Muir Portfolio may also buy other types of
tax-exempt fixed-income securities. Some of the important examples: The Muir
Portfolio may invest up to 5% of its assets in installment contracts known as
municipal lease/purchase agreements. It may also invest in a type of security
known as a variable - or floating-rate demand note or "VRDN". Another type of
security it sometimes purchases is called a 'participation interest.' In this
case the portfolio buys part of a large loan made by a bank. Interest
development bonds are good examples of this particular type of investment.
Risk Factors:
As with all fixed-income investing, there are two types of risk. The first is
credit risk: The Muir Portfolio will lend money to an organization and won't be
paid back promptly, or at all. As mentioned above, to moderate this risk the
Muir Portfolio only buys securities which have been rated "investment grade," or
are equivalent to investment-grade in the judgment of the portfolio manager.
Many tax-exempt securities are ultimately backed by the issuing town's or city's
authority to tax its residents in order to pay its principal interest.
Some types of tax-exempt securities are not backed by taxing power. These
include revenue bonds that are payable from a particular facility or a special
excise or other specific revenue source. Another example is industrial
development bonds, which in most cases are revenue bonds that do not carry the
pledge of the credit of the issuing municipality, but generally are guaranteed
by the corporate entity on whose behalf they are issued.
As a California fund, under normal market conditions the Muir Portfolio will
have all or a substantial portion of its assets concentrated in California
municipal securities. In California there have been some changes in the
constitution and other laws, as well as fiscal deficits and other problems, that
have raised questions about the ability of California state and municipal
issuers to pay their obligations.
The other risk in fixed-income investing is interest rate risk. When interest
rates rise, the market value of the Muir Portfolio will decline, and when
interest rates fall, the market value of the Muir Portfolio will rise.
Securities with longer maturities typically have more fluctuation in market
value. The Muir Portfolio may invest in tax-exempt securities with maturities of
any length up to 30 years, depending
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upon an assessment of the relative yield on securities of different maturities
as well as an assessment of future changes in interest rates.
While these are risks, the portfolio manager watches them carefully in order to
monitor their impact on the Muir Portfolio.
Special Tax Considerations:
As a matter of fundamental policy, the Muir Portfolio must invest at least 80%
of its assets in securities, the interest on which is exempt from regular
federal and California state personal income taxes and which is not subject to
the federal alternative minimum tax. During normal market conditions, at least
65% of total portfolio assets must be invested in bonds. The Muir Portfolio
intends to always meet and usually substantially exceed these minimum
requirements. The Muir Portfolio will invest up to a maximum of 20% of its
assets in private activity bonds which may be subject to the federal alternative
minimum tax.
Other Policies:
If sufficient desirable tax-exempt securities issued by California governmental
entities are not available, the Muir Portfolio may invest in other types of
securities which meet our social and financial criteria and are exempt from
federal and personal income tax. These and other investment policies are more
fully discussed in the Statement of Additional Information under the section
entitled "Investment Objectives and Policies."
The Statement of Additional Information also contains more information about the
risks of California municipal securities as well as a description of municipal
securities ratings.
Comparison of the Muir Portfolio and the Income Portfolio
Investment Goals:
The investment objectives of the Muir Portfolio and the Income Portfolio are
fundamental policies, meaning that they cannot be changed without the prior
approval of the respective series' shareholders. The objective of the Muir
Portfolio is "high current income exempt from both federal and California state
income tax." By contrast, the Income Portfolio's objective is "to generate
current income and pay a monthly dividend." Although both portfolios seek a
steady flow of income for their respective shareholders, the primary difference
between the Muir Portfolio and the Income Portfolio is that the income produced
from the Income Portfolio would be subject to federal and state tax.
Risk:
As funds investing in fixed income securities, both the Muir Portfolio and the
Income Portfolio have certain risks associated with this investment strategy.
The first is credit risk. Although the Muir Portfolio and the Income Portfolio
both invest in primarily "investment grade" securities, that is, securities
rated BBB or higher by Moody's Investor Services, Inc. or Standard & Poor's
Rating Services, there is still the possibility that an issuing security will be
unable to repay its principal interest. The second is interest rate fluctuation
risk. Bond prices react directly to interest rate fluctuations and are also
reflected in the value of the Muir Portfolio and the Income Portfolio. When
interest rates rise, the
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market value of the Muir Portfolio and the Income Portfolio will decline, and
when interest rates fall, the market value of the Muir Portfolio and the Income
Portfolio will rise.
Because the Muir Portfolio invests primarily in California municipal securities,
the Muir Portfolio is subject to the risks associated with single state
investing. Factors contributing to concerns regarding California municipal
securities include the aftermath of Proposition 13 and the Orange County
bankruptcy, discussed above, as well as speculation over further tax reforms,
state regulatory changes and state fiscal deficits.
Given the similarities of the investment objectives and policies of the Income
Portfolio and the Muir Portfolio, and the fact that the Income Portfolio, unlike
the Muir Portfolio, does not invest primarily in a single state, the Trustees
believe that an investment in the Income Portfolio involves investment risks
that are substantially the same or possibly lower than those of the Muir
Portfolio.
How to Purchase and Redeem Shares
How to Buy Shares:
It's easy to buy shares in Citizens Trust Portfolios. Just fill out an
application and send in your payment by check, wire transfer, exchange from
another portfolio, or through arrangement with your investment dealer. All
checks must be made payable to Citizens Trust. Foreign checks drawn off of U.S.
dollars are accepted, but must be held in escrow for 20 days.
Your cost will be the Net Asset Value next determined after your payment is
received. You can purchase both full and fractional shares, which will be
rounded to the nearest 1/100th of a share. If your check is returned for any
reason, you will be assessed a fee of $10.00.
Investment Minimum:
We encourage every investor to make a minimum investment of $2,500 per
portfolio. Shareholders who sign up for our Automatic Investment Plan can start
with an investment balance as low as $250, with an automatic investment of
$50.00 per month
Automatic Investment Plan:
To enroll in our Automatic Investment Plan, simply check off that box on the
account application and provide us with your bank information and the amount and
frequency of your investment into your chosen portfolio. We will do the rest.
Payroll Deduction:
Setting up direct payroll deposit is very easy. We will send you a form
including the necessary information and steps to follow. Simply complete and
sign the form, then give it to your payroll administrator for processing. If you
or your payroll administrator have any questions please call our shareholder
service department.
Funds will be deposited into your account using the Electronic Funds Transfer
System. We will provide the account number. Your payroll department will let you
know the date of the pay period when your investment begins.
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If your account falls below $2,500 per portfolio, we may ask you to open an
Automatic Investment Plan or bring your balance back up over $2,500. If you
decide not to go ahead with either option, we may close your account by sending
you a check for your balance.
How to Redeem Shares:
We offer you several convenient ways to redeem your shares in any of the
Citizens Trust Portfolios.
Call Us:
We have a Telephone Exchange and Redemption option on your account application.
Under this option you can call us and tell us how much you want us to redeem.
Depending upon your instructions, we will then deposit your redemption into
another Citizens Trust Portfolio account, mail you a check, or electronically
transfer your redemption to your pre-designated account. One-day wired funds
cost $10, or, we offer two-day service via the Automated Clearing House (ACH).
You will earn dividends up to and including the date when we receive your
redemption request.
If you do select the Telephone Exchange and Redemption option, you should be
aware that it may increase the risk of error or of an unauthorized party gaining
access to your account. To keep these problems to a minimum we record all
telephone calls. But please remember, neither the Trust, our Adviser, nor our
Transfer Agent will be responsible if we properly act on telephone instructions
we reasonably believe to be genuine. Normally, we will send you your redemption
on the next business day after we receive your request.
Written Request for Redemption:
If you do not use Telephone Exchange and Redemption, you can still redeem your
shares at any time, although the process will take longer. Send us a written
request together with a signature guarantee. We may require further
documentation from corporations, fiduciaries, pension plans, and/or
institutional investors.
Redeem Your Shares in Person:
Investors may also redeem their shares through Citizens Securities, or through
participating broker-dealers (who may charge a fee for this service). Certain
broker-dealers may have arrangements with the Trust that permit them to order
redemption of shares by telephone or facsimile transmission. However, in rare
cases, payments for the redemption of non-money market accounts may take up to
five business days.
We also reserve the right to hold your redemption proceeds for up to seven
business days when you redeem any investments that have been made by check or
five business days for an ACH transfer. Therefore, if you need your redemption
proceeds within seven business days of your purchase, please invest by wire.
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THE PEOPLE AND OPERATIONS OF CITIZENS TRUST
Citizens Investment Trust began as Working Assets Money Fund on November 14,
1982. The Trust is a Massachusetts business trust and an open-end investment
company, registered under the 1940 Act as a diversified management company. The
Trust is set up as a "series" company which means that the Trust can have
several series, or portfolios, each with its own investment objectives, assets
and liabilities.
The Trust has a Management Agreement with Citizens Advisers, Inc. Citizens
Advisers, which prior to 1988 was organized as a limited partnership, has
managed the Trust's affairs since the Trust's inception in 1982.
The Trust is located at One Harbour Place, Portsmouth, New Hampshire 03801.
Management Company Owners:
Citizens Securities Inc., the Trust's Distributor, and its parent, Citizens
Advisers, are both California corporations. Sophia Collier, president of
Citizens Advisers, owns 60% of the outstanding stock of Citizens Advisers. Her
fellow shareholders are three brothers, John P. Dunfey, Robert J. Dunfey Sr.,
and Gerald F. Dunfey, who own 12% each, and William B. Hart, who owns 4%.
In its role as investment adviser to the Trust, Citizens Advisers determines
which companies meet the Trust's social and financial criteria and therefore
will be approved for inclusion in the Trust's investment portfolio. Citizens
Advisers also provides additional administrative functions as needed under a
separate Administrative Contract. Citizens Advisers' wholly owned subsidiary,
Citizens Securities, serves as the Trust's Distributor.
To assist Citizens Advisers with portfolio management, sub-investment advisers
(the "Sub-Advisers") have been retained to determine which securities should be
bought and sold for certain series of the Trust. Citizens Advisers has given
special attention to finding people who it believes have the potential to
achieve its financial goals, as well as to respect the Trust's social mission.
GMG/Seneca Capital Management L.P.:
GMG/Seneca Capital Management L.P. ("GMG/Seneca") is the Sub-Adviser to both the
Muir Portfolio and the Income Portfolio. GMG/Seneca also serves as Sub-Adviser
to Working Assets Money Market Portfolio, the E[o]fund and Citizens Emerging
Growth Portfolio, which are all series of the Trust. A registered investment
adviser established in 1990, GMG/Seneca and a related entity, GMG/Seneca Capital
Management LLC, manage over $4 billion for their clients, which include the Muir
and Income Portfolios. The GMG/Seneca offices are located at 909 Montgomery
Street, San Francisco, California. GMG/Seneca has significant experience in
fixed income and equity management.
GMG/Seneca Capital Management L.P. is organized as a California limited
partnership. It has three general partners, Gail Seneca, William K. Weinstein,
and Philip C. Stapleton. Prior to starting GMG/Seneca, Gail Seneca was employed
by Wells Fargo Bank as senior investment officer where she headed the fixed
income management group and co-chaired the equity strategy committee.
Citizens Advisers:
The Management Agreement with Citizens Advisers specifies that they be paid fees
based upon average annual net assets and they in turn pay fees to the
Sub-Adviser, as described below:
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Portfolio Adviser Sub-Adviser
- ----------------------------------------------------------------------
Muir Portfolio .65% .175%
Income Portfolio .65% .17%
In exchange for these fees, Citizens Advisers agrees to provide all office
space, facilities, equipment, and personnel necessary to do its job as
investment adviser. Citizens Advisers is also responsible for all fees paid to
Sub-Advisers.
Citizens Advisers also provides administrative services to the Trust under a
separate Administrative Contract. Under this contract, Citizens Advisers
provides general administrative services, shareholder servicing and
sub-accounting, telephone services and services relating to the organization of
a portfolio's federal and state regulatory filings. The fees paid by the Trust
under this contract are set by the Trustees based upon the services required and
are memorialized in the Administrative Contract. For the year ending June 30,
1996, the Trust paid Citizens Advisers $583,266 for administrative services
under the contract for all series of the Trust.
The individual series of the Trust pay all expenses not expressly assumed by
Citizens Advisers. These include interest, taxes, audit and legal fees,
custodian and transfer agent charges, insurance premiums, cost of registering
shares under federal and state laws, dues, and any litigation costs, as well as
the cost of typesetting, printing, and distributing shareholder reports and
prospectuses sent to shareholders. When a cost is shared by several series, the
staff at Citizens Advisers will allocate it among the series in a reasonable
manner.
12b-1 Fees:
The Trust has a 12b-1 plan. The plan allows the Trust to reimburse Citizens
Securities and other distributors of the Trust's shares for sales related costs
up to 0.25% of the average annual net assets of each series of the Trust, with
the exception of the Eofund.
Sometimes Citizens Securities makes additional promotional expenditures that are
not reimbursed under the 12b-1 plan. These may include paying broker dealers who
employ sales people, called registered representatives, additional fees beyond
the 12b-1 fees or giving them non-cash promotional incentives such as trips or
merchandise for special promotional purposes. Citizens Securities may also make
expense reimbursements to non-dealers for meetings, sales contests, advertising,
and/or other valid promotional purposes. Any promotional expenses beyond the
limits of the 12b-1 plan will be paid for by Citizens Securities.
Trustees:
Citizens Trust is governed by a group of Trustees. Their names, dates of
birth and occupations are as follows. The Trustees who are "interested persons,"
as defined in the 1940 Act ("Interested Trustees"), are indicated by an
asterisk.
William D. Glenn, II (9/9/48), Chair of the Board and Trustee, has been a
shareholder of Citizens Trust since 1983. He is a psychotherapist and the
Executive Director of Continuum HIV Day Services in San Francisco. He is a past
President of the San Francisco AIDS Foundation and former member of the Board of
Directors of the Gay Rights Chapter of the Northern California American Civil
Liberties Union. From 1981 to 1988, Mr. Glenn was the Assistant Principal and
Dean of Students at Mercy High School in San Francisco. He currently serves on
the boards of San Francisco's KQED and the 18th St.
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Services Chemical Dependency Recovery Center. Address: 915 Las Ovejas, San
Rafael, California 94903.
Azie Taylor Morton (2/1/36), incoming Chair of the Board as of July 1,
1997, Audit Committee Chair and Trustee, was Treasurer of the United States
during the Carter Administration. From 1984 - 1989, she owned and operated the
Stami Corporation, a franchisee of Wendy's Old Fashioned Hamburgers. Her 30 year
career began as a teacher at the State School for Girls in Crockett, Texas. She
went on to work at the AFL-CIO, the White House Conference on Civil Rights and
the U.S. Equal Employment Opportunity Commission. She has served as the
Commissioner of the Virginia Department of Labor and Industry as well as
Executive Director of the Human Rights Project, Inc. In 1990 - 1992 she was
Director of Resource Coordination at Reading is Fundamental, Inc. She is
currently an investment adviser. Address: 10910 Medfield Court, Austin, Texas
78739.
Sophia Collier* (3/13/56), President, Treasurer and Trustee, is President
and Principal owner of Citizens Advisers. She also serves in an advisory
capacity to RhumbLine Advisers. Ms. Collier is the founder of American Natural
Beverage Corp., the maker of Soho Natural Soda, a company which Ms. Collier
co-founded in her Brooklyn kitchen when she was 21 years old and built up over
the next 12 years to an enterprise with 52 employees and retail sales of $25
million. Soho Soda was the first natural soda in America and was created as an
alternative to unhealthy mass market sodas. Ms. Collier and her partner sold
American Natural Beverage in 1989. Address: One Harbour Place, Portsmouth, New
Hampshire 03801.
Juliana Eades (2/2/53), Trustee, has served as President of the $6 million
New Hampshire Community Loan Fund since its inception in 1984. In this capacity
she has been a leading force in the creation of jobs and affordable housing in
New Hampshire. Prior to accepting her position at the Loan Fund, Ms. Eades was
Program Manager at the N.H. Governor's Council on Energy. In other community
activities, Ms. Eades is a member of the Campaign for Rate Payers' Rights, the
Society for the Protection of New Hampshire Forests, and serves on the Board of
the New Hampshire Charitable Foundation. Address: 79 South State Street,
Concord, New Hampshire 03301.
Lokelani Devone (4/8/57), Trustee, is the Assistant General Counsel at DFS
Group Limited, an international retail business group where she has worked since
1989. Prior to that, she was an aide to Congresswoman Nancy Pelosi,
D-California. She is also a member of the Board of Continuum HIV Day Services in
San Francisco, where Board Chair William Glenn is employed. Ms. Devone is a
graduate of the University of California at Berkeley (B.A. 1978) and the
University of California, Davis (J.D 1983) and was an International Research
Fellow at the University of Tokyo from 1983 to 1985. Address: 525 Market Street,
33rd floor, San Francisco, California 94105.
J.D. Nelson* (3/28/38), Trustee, is the founder and C.E.O. of RhumbLine
Advisers Corp., an investment firm specializing in the management of
institutional pension assets using indexed and quantitative techniques. Mr.
Nelson was formerly Senior Vice President and Director of Public Funds Services
at State Street Bank and Trust Company in Boston. Prior to his twelve years at
State Street, he was the Administrator of the Democratic National Committee. He
currently serves on the Board of the
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City of Boston's Economic Development Industrial Corporation. He is a former
Chairman of the Roxbury MultiService Center (Mass.), a past director of the
United Way and has taught at the School of Banking at Williams College. Address:
RhumbLine Advisers, 50 Rowes Wharf, Boston, Massachusetts 02110.
Ada Sanchez (8/17/52), Trustee, is the former Director of the Public
Service and Social Change Program at Hampshire College. From 1985 - 1987 she was
the National Toxic Waste Campaign Coordinator for Greenpeace USA. Prior to that
Ms. Sanchez was involved with a number of activist organizations including;
Western States Field Consultant for the Disarmament Program for the National
Fellowship of Reconciliation, co-director and founder of Viewpoint Syndicate,
lecturer for Progressive Foundation Speakers Bureau, national coordinator for
Supporters of Silkwood and outreach coordinator for Coalition for a Non-Nuclear
World. Address: 16119 Oak Manor Drive, Tampa, Florida 33624.
Our Board of Trustees functions with a Nominating Committee comprised of
the whole Board, but pursuant to our Distribution Plan, we have agreed that
Trustees who are not "interested persons" of the Trust, as defined in the 1940
Act, and who have no direct or indirect financial interest in the operation of
the Distribution Plan or any agreement relating to the Plan ("Qualified
Trustees") shall have primary responsibility for the selection and nomination of
other Qualified Trustees. This agreement will continue for so long as our
Distribution Plan is in effect.
The following compensation table discloses the aggregate compensation from the
Trust for services provided through June 30, 1996.
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CITIZENS INVESTMENT TRUST - COMPENSATION TABLE
- --------------------------------------------------------------------------------
Name of Person and Position Aggregate Compensation from
The Trust
- --------------------------------------------------------------------------------
Azie Taylor Morton $4,000
- --------------------------------------------------------------------------------
Juliana Eades $4,000
- --------------------------------------------------------------------------------
William D. Glenn, Jr. $6,500
- --------------------------------------------------------------------------------
Ada Sanchez $4,000
- --------------------------------------------------------------------------------
Lokelani Devone $ 750
- --------------------------------------------------------------------------------
Sophia Collier* 0
- --------------------------------------------------------------------------------
J.D. Nelson* 0
- --------------------------------------------------------------------------------
Wilma Mankiller** $1,500
- --------------------------------------------------------------------------------
Aileen Hernandez** $1,000
- --------------------------------------------------------------------------------
Jeffrey Mori** $2,500
- --------------------------------------------------------------------------------
* Sophia Collier and J.D. Nelson are Interested Trustees and received no
compensation from Citizens Trust.
**Wilma Mankiller, Aileen Hernandez and Jeffrey Mori are no longer Trustees but
Aileen Hernandez retains the honorary position of Chair Emerita of the Trust.
Trustees received no further fees from the fund complex. Each Trustee is a
Trustee of a total of seven series Portfolios of Citizens Trust, two of which
have an additional class of shares.
The Trustees who are not "interested persons" received aggregate fees from the
Trust of $24,250 for services provided through June 30, 1996 and were also
reimbursed for out of pocket expenses.
VOTING INFORMATION
This Combined Proxy Statement/Prospectus is being furnished in connection with
the solicitation of proxies by the Trust's Board of Trustees for use at the
Meeting to be held on September 10, 1997 at the offices of the Trust, One
Harbour Place, Suite 525, Portsmouth New Hampshire, at 10:30 am EDT.
Only shareholders of record at the close of business on June 12, 1997 (the
"Record Date") will be entitled to vote at the Meeting or any adjournments
thereof. On that date, there were outstanding and entitled to be voted 711,427
shares of the Muir Portfolio.
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As of the Record Date the officers and Trustees of the Trust beneficially owned
as a group less than 1% of the outstanding shares of the Muir Portfolio and the
Income Portfolio. To the best knowledge of the Trust, as of the Record Date, no
shareholders or "group" (as the term is defined in section 13(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) owned
beneficially or of record more than 5% of the outstanding shares of the Muir
Portfolio or the Income Portfolio.
Holders of each share or fraction thereof are entitled to one vote or fraction
thereof. Shares represented by a properly executed proxy will be voted in
accordance with the instructions thereon, or if no specification is made, the
persons named as proxies will vote in favor of the proposal set forth in the
Notice of Meeting. Broker non-votes or abstentions are counted for the purpose
of determination of a quorum and will be considered to be votes against the
proposals. Proxies may be revoked at any time before they are exercised by a
signed writing delivered at the Meeting or filed with the shareholder's
Shareholder Servicing Agent which is the agent of record with respect to the
shares represented by the proxy.
It is expected that the solicitation of proxies will be primarily by mail and
telephone. The Trust's officers and service contractors may also solicit proxies
by telephone, telegraph or personal interview.
Expenses of the shareholders meeting, mailing, and all other expenses related to
the Meeting (estimated to be approximately $15,000) will be paid by the
reorganized Income Portfolio. If the reorganization fails to achieve an
affirmative vote, these expenses will be borne by Citizens Advisers. In
addition, the Income Portfolio will bear all share registration expenses arising
in connection with the reorganization.
If the accompanying proxy is executed and returned in time for the Meeting, the
shares covered thereby will be voted in accordance with the proxy on all matters
that may properly come before the Meeting (or any adjournments thereof).
Shareholder and Board Approvals:
The Plan (and the transactions contemplated therein) are being submitted for
approval at the Meeting by an affirmative vote of the holders of more than 50%
of the outstanding shares of the Muir Portfolio entitled to vote in accordance
with the provisions of the Trust's Declaration of Trust and the requirements of
the 1940 Act.
The vote of the shareholders of the Income Portfolio is not being solicited,
since their approval or consent is not necessary for the reorganization.
The Plan of Reorganization was approved by the Trust's Board of Trustees on May
5, 1997.
Appraisal Rights:
Shareholders are not entitled to any rights of share appraisal under the Trust's
Declaration of Trust or under the laws of the Commonwealth of Massachusetts in
connection with the reorganization. Shareholders have, however, the right to
redeem from the Trust their Muir Portfolio shares at net asset value until the
Effective Time of the Reorganization, and thereafter shareholders may redeem
from the Income Portfolio the shares acquired by them in the reorganization at
net asset value in the manner described in the prospectus for the Income
Portfolio.
Quorum:
In the event that a quorum is not present at the Meeting, or in the event that a
quorum is present at the Meeting but sufficient votes to approve the Plan are
not received, the persons named as proxies, or their substitutes, may propose
one or more adjournments of the Meeting to permit further solicitation of
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proxies. Any such adjournment will require the affirmative vote of a majority of
the shares represented at the Meeting in person or by proxy. If a quorum is
present, the persons named as proxies will vote those proxies which they are
entitled to vote FOR the Plan in favor of such adjournments, and will vote those
proxies required to be voted AGAINST such proposal against any adjournment. A
quorum is constituted by the presence in person or by proxy of the holders of
more than 50% of the outstanding shares of the Portfolio entitled to vote at the
Meeting.
Annual Meetings:
The Trust does not presently intend to hold annual meetings of shareholders for
the election of Trustees and other business unless and until such time as less
than a majority of the Trustees holding office have been elected by the
shareholders, at which time the Trustees then in office will call a
shareholders' meeting for the election of Trustees. Under certain circumstances,
however, shareholders have the right to call a meeting of shareholders to
consider the removal of one or more Trustees and such meetings will be called
when requested by the holders of record of 10% or more of the Trust's
outstanding shares. To the extent required by law and the Trust's undertaking
with the SEC, the Trust will assist in shareholder communications in such
matters. In addition, the Trust will hold special meetings of shareholders when
required under the 1940 Act.
DESCRIPTION OF THE REORGANIZATION
The terms and conditions for the reorganization are contained in the Plan.
Significant provisions of the Plan are summarized below. For full details please
read the complete Plan, a copy of which is attached as Exhibit 1 to this
Combined Proxy Statement/Prospectus.
The Muir Portfolio will transfer assets and liabilities to the Income Portfolio
in exchange for shares in the Income Portfolio.
The Plan provides that at the Effective Time of the Reorganization all of the
assets and liabilities of the Muir Portfolio will be transferred to the Income
Portfolio. In exchange for the transfer of the assets and liabilities of the
Muir Portfolio, the Income Portfolio will simultaneously issue at the Effective
Time of the Reorganization full and fractional shares of the Income Portfolio.
The number of shares so issued will be equal in value to the value of the shares
of beneficial interest of the Muir Portfolio that are outstanding immediately
prior to the Effective Time of the Reorganization.
Shareholders of the Muir Portfolio will receive shares of the Income Portfolio.
Following the transfer of assets and liabilities in exchange for Income
Portfolio shares, the Trust will distribute the shares of the Income Portfolio
so received to the shareholders of the Muir Portfolio. Each shareholder owning
shares of the Muir Portfolio at the Effective Time of the Reorganization will
receive an equivalent dollar value of Income Portfolio shares for each Muir
Portfolio share held by the shareholder, plus the right to receive any unpaid
dividends or distributions which were declared prior to the Effective Time of
the Reorganization on Muir Portfolio shares with a record date and ex-dividend
date prior to the Effective Time of the Reorganization.
The stock transfer books of the Trust with respect to the Muir Portfolio will be
permanently closed as of the close of business on the day immediately preceding
the Effective Time of the Reorganization. Redemption requests received
thereafter by the Trust with respect to the Portfolio will be deemed to be
redemption requests for shares of the Income Portfolio to be distributed to the
former Muir Portfolio shareholders.
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The Plan contemplates that advisory and administration services will continue to
be provided to the Income Portfolio after the Effective Time of the
Reorganization by Citizens Advisers as described in the accompanying Prospectus.
The reorganization is subject to the following conditions:
[bullet] Approval of the Plan and the transactions contemplated therein by the
shareholders of the Muir Portfolio.
[bullet] The receipt of a legal opinion described in Section 4 of the Plan
(which includes the opinion of counsel that Income Portfolio shares
issued to Muir Portofolio shareholders in accordance with the terms of
the Plan will be validly issued, fully paid and non-assessable) except
as otherwise described in this Combined Proxy Statement/Prospectus.
Assuming satisfaction of the conditions in the Plan, the Effective Time of the
Reorganization will be on September 11, 1997 or such other date as is
established by the Trust.
The Trustees retain the option to cancel or modify the Plan.
The Plan and the reorganization described herein may be abandoned at any time
prior to the Effective Time of the Reorganization upon the concurring votes of a
majority of the Board of Trustees. The Plan provides further that at any time
prior to or (to the fullest extent permitted by law) after approval of the Plan
by the shareholders of the Muir Portfolio the Trustees with or without the
approval of their shareholders, may amend any of the provisions of the Plan.
Strategy to effect a transition from the Muir Portfolio to the Income Portfolio:
As is described in this proxy, the Income Portfolio will receive all assets and
liabilities of the Muir Portfolio after the reorganization. Because it is
unlikely that the securities currently held by the Muir Portfolio will be
suitable for the Income Portfolio, it is expected that the Muir Portfolio will
liquidate substantially all of its securities prior to the reorganization. Thus,
the Muir Portfolio will primarily hold cash prior to the reorganization.
FACTORS CONSIDERED BY THE BOARD OF TRUSTEES BEFORE
RECOMMENDING THIS TRANSACTION
Based upon their evaluations of the relevant information presented to them, and
in light of their fiduciary duties under federal and state law, the Board of
Trustees of the Trust has unanimously determined that the proposed
reorganization is in the best interests of the shareholders of the Muir
Portfolio, and recommends the approval of the Plan of Reorganization by such
shareholders at the Meeting.
The following is a summary of the information that was presented to, and
considered by, the Board in making its determination.
At a meeting held on May 5, 1997 the Board of Trustees discussed and considered
the proposed reorganization.
During the course of their review and deliberation, the Trustees evaluated the
potential benefits, detriments, costs and alternatives available to the Muir
Portfolio and its shareholders. The Trustees
20
<PAGE>
received from Citizens Advisers written material containing relevant information
about the Income Portfolio and the proposed reorganization, including fee
structure and expense ratio information.
Citizens Advisers also provided the Trustees with analyses of the benefits to
the shareholders of the Muir Portfolio resulting from the proposed
reorganization, and a variety of other information relevant to the consideration
of the proposed reorganization.
Cost considerations:
The Trustees of the Trust reviewed the terms of the Plan as it would impact
shareholders of both the Muir Portfolio and the Income Portfolio. This review
included both direct and indirect expenses, such as the expected costs of the
reorganization to be borne by the Income Portfolio, and the anticipated expenses
of the Income Portfolio after the reorganization.
The Trustees evaluated the contractual expense levels of the Income Portfolio
and compared such expense levels with the current actual and contractual expense
levels of the Muir Portfolio. They noted favorably that the combined contractual
costs (including advisory, administration, and distribution fees) of the Income
Portfolio were lower overall than those of the Muir Portfolio.
The Trustees also considered the additional efficiencies and benefits that were
expected to result from the reorganization of the Muir Portfolio. These benefits
include greater potential asset growth with resulting economies of scale, such
as lower per share professional, registration and other non-management expenses;
greater portfolio trading efficiencies, such as quantity discounts, lower
transfer agency costs, better securities execution and reduced portfolio
volatility resulting from shareholder purchase and redemption activity and
broader portfolio diversification.
Investment Considerations:
The Trustees considered the compatibility of the Income Portfolio's investment
objectives, policies, restrictions and portfolio with those of the Muir
Portfolio. It was favorably noted that both Citizens Advisers and GMG/Seneca
would continue as investment manager and Sub-Adviser, respectively. The Trustees
noted that both the Muir Portfolio and the Income Portfolio sought income from
investments selected according to both financial criteria and criteria of social
responsibility. They recognized, however, that the Income Portfolio did not
share the Muir Portfolio's objective of "high current income exempt from both
federal and California state income tax." In this regard, they noted in their
deliberations that the Income Portfolio was expected to offer a higher, although
taxable, yield and a lower expense ratio than the Muir Portfolio. The Trustees
also considered the tax consequences of the proposed reorganization, including
the fact that the reorganization would not be effected on a tax-free basis and
that, in particular, substantially all of the Muir Portfolio's securities were
anticipated to be sold prior to the reorganization, resulting in realization by
both the Muir Portfolio and its shareholders of taxable gain or loss. The
Trustees considered the amounts of gain expected to be realized both by the Muir
Portfolio and by shareholders of the Muir Portfolio in connection with the
proposed reorganization.
The Trustees also considered presentations by representatives of Citizens
Advisers regarding the expected future prospects of the Income Portfolio. In
this regard, a significant overlap in marketing areas and efforts of the Muir
Portfolio and the Income Portfolio was noted. The Trustees also favorably noted
that Citizens Advisers would continue the same social investment criteria for
the Income Portfolio as the Muir Portfolio had used in the past. Overall, the
Trustees concluded that, while the Income Portfolio would not continue the Muir
Portfolio's objective of seeking income exempt from federal and California state
income tax, and while the sales of securities by the Muir Portfolio prior to the
reorganization and the reorganization itself would be taxable events which could
have adverse consequences to shareholders of the Muir Portfolio, the benefits of
the reorganization as noted above outweighed the possible detriments of the
reorganization. The Trustees determined that, were the reorganization not to be
carried
21
<PAGE>
through, the most likely alternative, given the relatively small size of the
Muir Portfolio, would be a termination and liquidation of the Muir Portfolio,
which would result in similar tax consequences to shareholders.
Based upon their evaluation of the relevant information presented to them, and
in light of their fiduciary duties under federal and state law, the Trust's
Board of Trustees, including all members who were not "interested persons" of
the Trust as that term is defined in the 1940 Act, unanimously determined that
the proposed reorganization (1) was in the best interests of the Trust and the
Muir Portfolio and that (2) the interests of existing shareholders of the Muir
Portfolio would not be diluted as a result of their effecting the transaction,
and therefore recommended the approval of the Plan by shareholders at the
Meeting.
ADDITIONAL INFORMATION ABOUT THE TRANSACTION
Capitalization:
The following pages provide pro forma combination statements of assets and
liabilities, of operations, and of investments for the Muir Portfolio and the
Income Portfolio as of December 31, 1996.
22
<PAGE>
Pro-Forma Combination: Citizens Income Portfolio and Muir California Tax-Free
Income Portfolio Statement of Assets and Liabilities-December 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
Muir California
Tax-Free Citizens
Income Income Pro-Forma Combined
Portfolio Portfolio Adjustments Pro-Forma
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Investments in securities, at market value
(Identified cost $11,550,087 and $33,549,880) $ 11,810,701 $ 34,114,387 ($11,810,701) $ 34,114,387
Cash -- 741 11,810,701 11,811,442
Receivable for:
Interest 211,633 565,965 -- 777,598
Dividends -- -- -- --
Fund shares sold -- -- -- --
Investment securities sold -- -- -- --
Other -- 3,920 -- 3,920
Deferred organization costs -- -- --
Prepaid expenses 109,588 4,334 8,552 122,474
------------ ------------ ------------ ------------
Total Assets 12,131,922 34,689,347 8,552 46,829,821
------------ ------------ ------------ ------------
LIABILITIES
Payables:
Investment securities purchased -- -- -- --
Capital shares redeemed -- -- -- --
Distributions 38,352 175,861 -- 214,213
Accrued expenses -- 1,549 15,000 * 16,549
------------ ------------ ------------ ------------
Total Liabilities 38,352 177,410 15,000 230,762
------------ ------------ ------------ ------------
NET ASSETS
Retail Shares
Net assets $ 12,093,570 $ 34,511,937 ($6,448) $ 46,599,059
Shares outstanding 754,548 3,278,486 -- 4,427,323
Net asset value (offering and redemption price) $ 16.03 $ 10.53 -- $ 10.53
============ ============ ============ ============
NET ASSETS
At December 31, 1996 net assets consisted of:
Paid-in capital $12,197,620 $ 34,292,301 -- $ 46,489,920
Undistributed net investment income 76,939 (1,343) (6,448) 69,148
Accumulated realized gain (loss) (441,603) (343,528) -- (785,131)
Net unrealized appreciation of investments 260,615 564,507 -- 825,122
------------ ------------ ------------ ------------
$ 12,093,570 $ 34,511,937 ($6,448) $ 46,599,059
</TABLE>
* Expected cost of the shareholder meeting and the reorganization
<PAGE>
Pro-Forma Combination: Citizens Income Portfolio and Muir California Tax-Free
Income Portfolio Statement of Operations - December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Muir California
Tax-Free Citizens
Income Income Pro-Forma Combined
Portfolio Portfolio Adjustments Pro-Forma
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Investment Income
Interest $ 330,043 $ 1,297,662 -- $ 1,627,705
Dividends 5,480 -- -- 5,480
----------- ----------- ----------- -----------
Total investment income 335,523 1,297,662 -- 1,633,185
----------- ----------- ----------- -----------
Expenses
Investment management fees 40,772 109,688 -- 150,460
Transfer agent fees 16,247 22,510 (6,260)* 32,497
Custody and accounting fees 18,196 14,361 (15,700)* 16,857
Distribution expense 15,682 42,188 -- 57,870
Administration expense 17,152 35,404 (4,789* 47,767
Legal & audit fees 3,067 3,756 (3,000)* 3,823
Registration fees 314 5,471 (300)* 5,485
Trustees' fees and expenses 3,915 2,759 (3,198)* 3,476
Printing and postage 2,855 2,285 (2,057)* 3,083
Dues 551 1,122 (550)* 1,123
Insurance 120 207 (120)* 207
Other expenses 19,385 16,885 (15,183)* 21,087
Amortization of organization costs -- -- -- --
----------- ----------- ----------- -----------
Total expenses 138,256 256,636 (51,157) 343,735
Fee Reductions (18,196) (14,361) 15,700 (16,857)
Reimbursement by Adviser (26,936) -- 26,936 --
----------- ----------- ----------- -----------
Net expenses 93,124 242,275 (8,521) 326,878
----------- ----------- ----------- -----------
Net investment income 242,399 1,055,387 8,521 1,306,307
----------- ----------- ----------- -----------
Realized and Unrealized Gain on Investments
Realized gain/(loss) on investments 94,724 87,772 -- 182,496
Realized gain on investments 94,724 87,772 182,496
Increase in unrealized
appreciation on investments 207,806 702,561 -- 910,367
----------- ----------- ----------- -----------
Net realized and unrealized gain
on investments 302,530 790,333 -- 1,092,863
----------- ----------- ----------- -----------
Net increase in net assets
resulting from operations $ 544,929 $ 1,845,720 $ 8,521 $ 2,399,169
=========== =========== =========== ===========
</TABLE>
* To reflect the economies realized through the reorganization
<PAGE>
Pro-Forma Combination: Citizens Income Portfolio and Muir California Tax-Free
Income Portfolio
Statement of Investments - December 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
Muir California
Principal Security Description Citizens Income Tax-Free Pro-Forma Combined
Amount Rate, Maturity Date (yy/mm/dd) Portfolio Income Portfolio Adjustments Pro-Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Amusements 7.65%
1,000,000 J.Q. Hammons Hotels 987,500 -- -- 987,500
8.875%,04/02/15
1,000,000 Royal Caribbean 1,072,500 -- -- 1,072,500
11.375%,02/05/15
1,400,000 Time Warner, Inc. 1,506,876 -- -- 1,506,876
9.130%,13/01/15
----------------------------------------------------------
3,566,876 -- -- 3,566,876
----------------------------------------------------------
Broadcasting & Communications 6.10%
1,500,000 Continental Cablevision, Inc. 1,604,778 -- -- 1,604,778
8.300%-10.625%, 02/06/15-06/05/15
200,000 Cablevision Inds. Corp. 211,750 -- -- 211,750
10.750%, 02/01/30
250,000 Jones Intercable, Inc. 272,500 -- -- 272,500
11.500%, 04/07/15
750,000 Sullivan Broadcasting 755,625 -- -- 755,625
10.250%, 05/15/15
----------------------------------------------------------
2,844,653 -- -- 2,844,653
----------------------------------------------------------
Computer, Office & Business Equipment 3.50% ----------------------------------------------------------
1,600,000 Corporate Express, Inc. 1,630,000 -- -- 1,630,000
9.130%, 04/03/15 ----------------------------------------------------------
Financial Services & Insurance 11.86%
1,025,000 Countrywide Funding Corp. 1,033,645 -- -- 1,033,645
6.875%-8.250%, 02/07/15-26/12/15
851,857 DLJ Mortgage Acceptance Corp. 829,326 -- -- 829,326
6.620%, 09/05/25
700,000 Donaldson, Lufkin & Jenrette, Inc. 682,150 -- -- 682,150
6.875%, 05/11/01
100,000 First Chicago NBD Corp. 102,009 -- -- 102,009
7.250%, 04/08/15
161,699 Green Tree Financial Corp. 162,188 -- -- 162,188
5.600%, 19/04/15
</TABLE>
<PAGE>
Statement of Investments - December 31, 1996
<TABLE>
<CAPTION>
Muir California
Principal Security Description Citizens Income Tax-Free Pro-Forma Combined
Amount Rate, Maturity Date (yy/mm/dd) Portfolio Income Portfolio Adjustments Pro-Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1,500,000 Lehman Brothers, Inc. 1,532,221 -- -- 1,532,221
5.040%-8.050%,03/12/15-19/01/15
50,000 Mbia, Inc. 54,070 -- -- 54,070
9.000%,01/02/15
1,000,000 Secured Finance Dels 1,132,500 -- -- 1,132,500
9.050%, 04/12/15
----------------------------------------------------------
5,528,108 -- -- 5,528,108
----------------------------------------------------------
Healthcare 2.80%
50,000 Kaiser Foundation Health Plan 55,136 -- -- 55,136
9.000%, 01/11/01
150,000 Manor Care, Inc. 159,375 -- -- 159,375
9.500%, 02/11/15
1,000,000 Quorum Health Group, Inc. 1,089,063 -- -- 1,089,063
8.750%-11.875%, 02/12/15-05/11/01
----------------------------------------------------------
1,303,574 -- -- 1,303,574
----------------------------------------------------------
Industrial Products 1.75% ----------------------------------------------------------
750,000 MVE, Inc. 817,500 -- -- 817,500
12.500%, 02/02/15 ----------------------------------------------------------
Manufacturing 4.23%
900,000 Scotsman Group, Inc. 918,000 -- -- 918,000
9.500%, 00/12/15
1,000,000 Tyco Toys, Inc. 1,055,000 -- -- 1,055,000
10.125%, 02/08/15
----------------------------------------------------------
1,973,000 -- -- 1,973,000
----------------------------------------------------------
Real Estate 9.70%
1,300,000 ERP Operations Ltd Partnership 1,314,274 -- -- 1,314,274
7.570%, 26/08/15
1,000,000 Merry Land & Investment, Inc. 988,540 -- -- 988,540
6.875%, 03/11/01
1,000,000 Property Trust Of America 943,650 -- -- 943,650
6.875%, 08/02/15
</TABLE>
<PAGE>
Statement of Investments - December 31, 1996
<TABLE>
<CAPTION>
Muir California
Principal Security Description Citizens Income Tax-Free Pro-Forma Combined
Amount Rate, Maturity Date (yy/mm/dd) Portfolio Income Portfolio Adjustments Pro-Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
500,000 Security Cap Pac, Inc. 492,385 -- -- 492,385
7.900%, 16/02/15
800,000 Weingarten Realty 780,824 -- -- 780,824
6.900%, 08/11/24
----------------------------------------------------------
4,519,673 -- -- 4,519,673
----------------------------------------------------------
Retail 10.01%
250,000 Baby Superstore, Inc. 243,438 -- -- 243,438
4.875%, 00/10/01
1,500,000 Hook SuperX, Inc. 1,595,625 -- -- 1,595,625
10.125%, 02/06/01
1,500,000 Orchard Supply 1,593,750 -- -- 1,593,750
9.375%, 02/02/15
472,000 Smiths Food And Drug 522,740 -- -- 522,740
11.250%, 07/05/15
679,000 Vons Companies, Inc. 709,555 -- -- 709,555
9.625%, 02/04/01
----------------------------------------------------------
==========================================================
26,848,491 -- -- 26,848,491
==========================================================
SHORT TERM INVESTMENTS 1.08%
204,000 State Street Bank & Trust 204,000 -- -- 204,000
5.150%, 97/01/02
General Electric Capital Corp. 299,895 299,895
6.250% 97/01/03
----------------------------------------------------------
503,895 -- -- 503,895
----------------------------------------------------------
LONG TERM U.S. GOVERNMENT
AGENCIES 14.51%
1,600,000 Federal Home Loan Mortgage Corp. 1,500,407 -- -- 1,500,407
6.800%-8.750%, 05/06/15-18/04/15
4,500,000 Federal National Mortgage Assn. 3,537,272 -- -- 3,537,272
6.500%-8.000%, 06/07/25-24/01/25
3,865,000 Government National Mortgage Assn. 1,724,322 -- -- 1,724,322
7.000%-9.500%, 07/04/15-22/10/15
----------------------------------------------------------
6,762,001 -- -- 6,762,001
----------------------------------------------------------
</TABLE>
<PAGE>
Statement of Investments - December 31, 1996
<TABLE>
<CAPTION>
Muir California
Principal Security Description Citizens Income Tax-Free Pro-Forma Combined
Amount Rate, Maturity Date (yy/mm/dd) Portfolio Income Portfolio Adjustments Pro-Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MUNICIPAL SECURITIES
Affordable Housing 5.00%
370,000 California Housing Finance -- 388,612 (388,612) --
Agency Revenue 00/02/01, AA-
740,000 California Housing Finance -- 774,155 (774,155) --
Agency Revenue 05/02/01, AA-
500,000 California Housing Finance -- 512,889 (512,889) --
Agency Revenue 00/08/01, AA-
100,000 California State Housing -- 100,926 (100,926) --
07/04/01, A+
10,000 Los Angeles CA Single Family Homes -- 10,604 (10,604) --
05/06/01, AAA
35,000 Riverside County CA Single -- 36,426 (36,426) --
Family Mortgage 16/10/01, AAA
500,000 Thousand Oaks CA Redevelopment -- 508,184 (508,184) --
Agency Tax 10/12/01, AAA
----------------------------------------------------------
-- 2,331,796 (2,331,796) --
----------------------------------------------------------
Airports 1.12% ----------------------------------------------------------
500,000 Los Angeles CA Dept. Of Airports -- 522,151 (522,151) --
09/05/15, AAA ----------------------------------------------------------
Education & Health 4.02%
500,000 Duarte CA Certificate of -- 502,834 (502,834) --
Participation 13/04/01, BAAA1
500,000 Escondido CA United High School Dist. -- 520,614 (520,614) --
09/11/01, AAA
250,000 Madera County CA Certificate -- 279,981 (279,981) --
of Participation 10/03/15, AAA
500,000 University of California Revenue -- 568,310 (568,310) --
Bonds 16/09/01, AAA
----------------------------------------------------------
-- 1,871,739 (1,871,739) --
----------------------------------------------------------
Environmental 14.85%
500,000 Burbank CA Waste Water Treatmnt -- 497,683 (497,683) --
Revenue 15/06/01, AAA
</TABLE>
<PAGE>
Statement of Investments - December 31, 1996
<TABLE>
<CAPTION>
Muir California
Principal Security Description Citizens Income Tax-Free Pro-Forma Combined
Amount Rate, Maturity Date (yy/mm/dd) Portfolio Income Portfolio Adjustments Pro-Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
550,000 California State Public -- 548,141 (548,141) --
Works Lease 14/06/01, Ap
500,000 East Bay CA Municipal Utilities -- 469,745 (469,745) --
Dist. 001 15/04/01, AA
440,000 Kings County CA Waste Mgmt. -- 456,742 (456,742) --
Authority 99/10/01, BBB+
500,000 Los Angeles CA Waste Water -- 483,022 (483,022) --
Systems Revenue 12/02/01, AAA
500,000 Los Angeles County CA Public Works -- 513,684 (513,684) --
15/10/01, AA
300,000 Ontario CA Redevelopment Financing -- 350,492 (350,492) --
Auth. Revenue 11/08/01, AAA
500,000 Metropolitan Water District -- 478,864 (478,864) --
Southern CA 13/07/01, AAA
500,000 Midpeninsula Regional Open Space -- 516,341 (516,341) --
District 14/09/01, AAA
500,000 Mountain View CA Shoreline Park -- 511,097 (511,097) --
10/08/01, AAA
515,000 Pasadena CA Waste Water Revenue -- 477,864 (477,864) --
18/07/01, AA
600,000 Santa Margarita Dana Point CA -- 592,631 (592,631)
14/07/01, AAA
500,000 Southgate CA Public Financing -- 510,616 (510,616) --
Authority 09/10/01, AAA
500,000 Tulare CA Sewer Revenue -- 511,225 (511,225) --
12/11/15, AAA
----------------------------------------------------------
-- 6,918,145 (6,918,145) --
==========================================================
SHORT TERM
MUNICIPAL INVESTMENTS 0.36%
7,786 GOLDMAN SACHS ITA CALIFORNIA -- 7,786 (7,786) --
99/12/31
159,085 MUNICIPAL FUND FOR CALIFORNIA -- 159,085 (159,085) --
INVESTMENTS, INC. 99/12/31
==========================================================
-- 166,872 (166,872) --
</TABLE>
<PAGE>
Statement of Investments - December 31, 1996
<TABLE>
<CAPTION>
Muir California
Citizens Income Tax-Free Pro-Forma Combined
Portfolio Income Portfolio Adjustments Pro-Forma
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Investments
(Cost $45,102,226)(a) 34,114,387 11,810,701 (11,810,701) 34,114,387
Other assets, less liabilities 397,550 282,869 11,804,253 12,484,672
----------------------------------------------------------
NET ASSETS $34,511,937 $12,093,570 ($6,448) $46,599,059
==========================================================
</TABLE>
Key: (a) Cost for federal income tax purposes is the same.
(b) Source of ratings is Standard' s & Poors, Moody's or Fitch Investor
Services.
<PAGE>
<TABLE>
<CAPTION>
MUIR CALIFORNIA TAX FREE For the six months For the year For the year For the period For the year For the year
INCOME PORTFOLIO ended 12/31/96 ended 6/30/96 ended 6/30/95 4/1/94 to 6/30/94 ended 3/31/94 ended 3/31/93
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.64 $15.53 $15.43 $15.71 $16.67 $15.76
--------------------------------------------------------------------------------------------
Income (loss) from
investment operations
Net Investment Income 0.30 0.62 0.67 0.18 0.84 0.90
Net Gain (loss) on Securities
(both realized and unrealized) 0.39 0.11 0.10 0.01 (0.79) 1.00
--------------------------------------------------------------------------------------------
Total From Investment Operations 0.69 0.73 0.77 0.19 0.05 1.90
--------------------------------------------------------------------------------------------
Less distributions
Dividends
(from net investment income) (0.30) (0.62) (0.67) (0.32) (0.86) (0.91)
Distributions
(from net realized gains) -- -- -- (0.15) (0.15) (0.08)
--------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.62) (0.67) (0.47) (1.01) (0.99)
--------------------------------------------------------------------------------------------
Net Asset Value, End of Period 16.03 15.64 15.53 15.43 15.71 16.67
============================================================================================
Total Return 4.46% 4.71% 5.15% 5.09%* 0.04% 12.58%
Net Assets, End of Period (000's) $12,094 $13,221 $15,241 $17,276 $17,532 $15,455
============================================================================================
Ratio of Expenses
to Average Net Assets 1.53%* 1.55% 1.25% 1.25%* 0.75% 0.46%
Ratio of Expenses
to Average Net Assets
Prior to Reimbursement 1.97%* 1.87% 1.74% 1.86%* 1.62% 1.87%
Ratio of Net Income (Loss)
to Average Net Assets 3.98%* 3.98% 4.37% 4.70%* 4.98% 5.59%
Ratio of Net Income (Loss)
to Average Net Assets
Prior to Reimbursement 3.53%* 3.66% 3.88% 4.09%* 4.11% 4.18%
Portfolio Turnover Rate 48.62% 83.12% 74.94% 38.29% 31.04% 36.24%
</TABLE>
* Annualized
<PAGE>
<TABLE>
<CAPTION>
CITIZENS INCOME PORTFOLIO For the six months For the year For the year For the year For the year For the year
ended 12/31/96 ended 6/30/96 ended 6/30/95 ended 6/30/94 ended 6/30/93 ended 6/30/92**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.28 $10.38 $10.04 $10.60 $10.07 $10.00
--------------------------------------------------------------------------------------------
Income (loss) from
investment operations
Net Investment Income 0.33 0.66 0.65 0.55 0.46 0.01
Net Gain (loss) on Securities
(both realized and unrealized) 0.25 -0.10 0.36 -0.54 0.54 0.07
--------------------------------------------------------------------------------------------
Total From Investment Operations 0.58 0.56 1.01 0.01 1.00 0.08
--------------------------------------------------------------------------------------------
Less distributions
Dividends
(from net investment income) (0.33) (0.66) (0.65) (0.55) (0.47) (0.01)
Distributions
(from net realized gains) -- -- (0.02) (0.02) -- --
--------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.66) (0.67) (0.57) (0.47) (0.01)
--------------------------------------------------------------------------------------------
Net Asset Value, End of Period 10.53 10.28 10.38 10.04 10.60 10.07
--------------------------------------------------------------------------------------------
Total Return 5.71% 5.48% 10.45% 5.09% 12.58% 14.60%*
Net Assets, End of Period (000's) $34,512 $32,276 $30,122 $24,410 $12,601 $ 1,030
============================================================================================
Ratio of Expenses
to Average Net Assets 1.39%* 1.43% 1.35% 1.25% 1.42% 1.75%*
Ratio of Expenses
to Average Net Assets
Prior to Reimbursement 1.39%* 1.48% 1.48% 2.01% 2.38% N/A%
Ratio of Net Income (Loss)
to Average Net Assets 6.07%* 6.26% 6.47% 5.43% 4.98% 4.38%*
Ratio of Net Income (Loss)
to Average Net Assets
Prior to Reimbursement 6.07%* 6.21% 6.34% 4.68% 4.02% N/A
Portfolio Turnover Rate 19.02% 41.36% 46.03% 52.62% 22.35% 0.00%
</TABLE>
* Annualized ** Commencement of operations June 10, 1992
<PAGE>
MANAGER'S COMMENTS
The following comments regarding the Income Portfolio and the Muir Portfolio
have been provided by our Sub-Adviser charged with managing the portfolios. Such
information was prepared in connection with and is included within the Trust's
annual report for the fiscal year ended June 30, 1996, and the semi-annual
report for the six months ended December 31, 1996.
Citizens Income Portfolio
Sub-Adviser: GMG/Seneca Capital Management L.P.
Portfolio Manager: Gail Seneca
Objective: High current income
The Ground Rules: Invests at least 65% of its assets in taxable bonds rated as
"investment grade."
The Results: 5.71% for the six months ended 12/31/96; 4.85% for the year ended
12/31/96 and 7.09% average annual return since inception of 6/10/92. The Lehman
Government/Corporate Intermediate Index returned 4.05% for the year ended
12/31/96.
Fiscal Year 1996 Recap (period ending 6/30/96):
The Citizens Income Portfolio provided a total return of 5.48% for the year
ending 6/30/96. This return placed the Income Portfolio in the top quartile of
comparable funds according to Morningstar rankings for the one year period
ending 6/30/96, and well above the bond market average. On July 3, 1996, the
Wall Street Journal listed the Citizens Income Portfolio with an "A" ranking.
This denoted the top 20% in performance among comparable funds for the one year
and three year periods ending 6/30/96?. These competitive results were achieved
with a lower risk strategy, focused on intermediate maturity bonds with
relatively high income payouts.
The benefits of this careful, risk averse strategy are especially obvious during
periods of great volatility in the markets. Fiscal year 1996 was such a period.
In fact, the price volatility of long maturity bonds actually exceeded the
volatility of common stocks during the year. Rather than attempting to time the
swings in the market, the Citizens Income Portfolio controls its maturity
exposure, and over long periods, realizes most of its return through current
income.
* Performance data represents past performance which does not guarantee future
results. The principal value and investment return of an investment will
fluctuate so that an investor's shares, when redeemed, may be worth more or less
than their original cost.
31
<PAGE>
The bulk of our analytic work is the identification of bonds which can provide a
steady, long term, and high income stream. During fiscal year 1996, this led us
to emphasize corporate bonds and mortgage backed issues, especially
collateralized mortgage obligations. The issues in which we invested generally
carried above market coupons, which proved quite defensive during the price
downturn in the first half of 1996. As of 6/30/96, our top holdings in the
Income Portfolio included a number of corporate issues (such as Corporate
Express and Time Warner) as well as some government guaranteed collateralized
mortgage obligations.
In absolute terms, the overall bond market's return during fiscal year 1996 was
below average. This return reflected a drop in bond prices in 1996, caused by a
rise in interest rates. Rates jumped over one percentage point in the first half
of 1996 in response to stronger than expected economic news. We expect a more
benign trend in interest rates going forward, as the economy slows a bit and
inflation remains tame. This will benefit bond investors. Our approach will
remain focused on providing above market returns through the disciplined,
lower-risk strategy which has proven beneficial for the Income Portfolio thus
far.
Six Month Recap (period ending 12/31/96):
Bond market action in 1996 was extremely volatile. Long term interest rates rose
from less than 6% at the start of the year to over 7% by fall. While this is a
swing of only one percent, readers of our prospectus will recall that the price
of bonds varies inversely with interest rates. For longer term bonds a 1% swing
can cause a change of 15% or more in the price of a bond.
This very difficult environment for bond investors produced a below average
return, of just 2.9%, for the broad bond market, as measured by the Lehman
Government/Corporate Index. The Citizens Income Portfolio outperformed the broad
market, returning 4.85% for the year.
The portfolio achieved these strong results by emphasizing high current income.
Instead of attempting to time the swings in the market, the Citizens Income
Portfolio maintains an intermediate term maturity exposure, and over long
periods, realizes most of its return through current income. Our approach seeks
to ensure that investors will receive a high and steady income stream despite
volatile market conditions.
As noted above, the bulk of our analytic work concentrates on the identification
of bonds which can provide a steady, high income stream. In 1996, the portfolio
invested mainly in corporate bonds and mortgage backed securities. Some of the
best performers over the second half of 1996 included Smiths Food and Drug, MVE
Inc., Orchard Supply and Hardware (purchased by Sears Roebuck and Co.), and
Weingarten Realty Investors. As of 12/31/96 our top holdings included mortgage
backed bonds issued by FHLMC, FNMA and GNMA as well as corporate issues such as
Corporate Express, Continental Cablevision, Equity Residential Properties,
Orchard Supply and Hook Super-X.
Market volatility will continue in 1997, but we believe rates will probably
fluctuate within a fairly tight range between 6% and 7.25%. Inflation appears
steady at about 3% in the U.S., and has fallen to even lower levels in other
industrialized countries. "Real" or inflation adjusted returns from bonds at 6%
- - 7.25% are therefore quite attractive. Our approach will remain focused on
providing above market returns through the disciplined, low risk strategy which
has proven so beneficial for the Income Portfolio thus far.
32
<PAGE>
The Muir California Tax Free Income Portfolio
Sub-Adviser: GMG/Seneca Capital Management L.P.
Portfolio Manager: Gail Seneca
Objective: Current income exempt from California State and Federal Taxes.
The Ground Rules: Invests up to 100% in California municipal securities.
The Results: 4.46% for the six months ended 12/31/96; 3.19% for the year ended
12/31/96 and 6.47% average annual return since inception on 6/10/91. The Lehman
7 Year Municipal Index returned 4.36% for the year ended 12/31/96.
Fiscal Year 1996 Recap (period ending 6/30/96):
The Muir Portfolio provides tax free income for California residents, through
investment in a high quality portfolio of municipal issues which has positive
social and environmental impact.
The Muir Portfolio provided investors a one year total return of 4.71% as of
6/30/96, consisting mostly of tax free income. At 6/30/96, the current
distribution rate for the Muir Portfolio was 3.95%, which translated into a very
attractive tax equivalent return of over 7.2%. (Assuming a combined Federal and
California income tax bracket of 45%.)
Volatile conditions prevailed in the California municipal market over the year.
Late in 1995, municipal bond yields fell sharply as the overall economy
softened. 1996 saw an abrupt reversal of the downtrend in rates. By mid year,
interest rates had risen again, completely reversing the prior decline.
In addition to the swings in the general level of interest rates, municipal
bonds experienced additional volatility due to the changing prospects for tax
reform. In 1995, a change in the tax-free status of municipal bond income was
proposed in Congress. Fears that such a change might be enacted into law
dampened investor demand for municipals. By early 1996, prospects for tax reform
faded, and the tone in the municipal bond market improved. Also contributing to
the firmer tone was the long awaited emergence of Orange County form bankruptcy
and a rebound in the California economy.
Looking through the volatility, we see good value in California municipals for
high tax bracket investors. At current yields, investors are adequately
compensated for inflation. Credit trends are improving in California, to the
benefit of bond investors. Finally, investor demand is likely to pick up in
response to recent stock market turmoil.
Stable, tax free return, produced by a risk averse strategy focused on
intermediate rather than long maturity bonds, remains our objective.
33
<PAGE>
Six Month Recap (period ending 12/31/96):
The most important news for tax-free investors in 1996 was that the market for
municipal securities seems to have recovered from its long slump. At 12/31/96,
the current distribution rate for the Portfolio was 3.73%, which translates into
a very attractive tax equivalent yield of over 6.93% for California taxpayers.
This means that for the first time in several years investors in high tax
brackets who invest in taxable bonds may actually do better in tax-free bonds.
Although interest rates were volatile during the year, yields on municipal bonds
finished the year only moderately higher than at 1995 year end. More noteworthy,
however, is the fact that the elimination of the prospect of "tax reform" has
caused a pleasant upward revaluation of the municipal market.
However, not all is good news. While an improvement in the California economy
has resulted in credit upgrades by both Moody's and Standard & Poor's in the
rating of issues of the state and its agencies, concerns over the passage of
Prop. 218, which limits the flexibility of the counties to satisfy their
financial obligations, caused the rating agencies to reduce the ratings on the
large counties of San Diego and Los Angeles. To protect the portfolio from this
risk, we have paid particular attention to the essentiality of the purposes for
the bonds in which we have invested, concentrating our purchases largely in
essential service revenue bonds. As additional protection, over half of the
bonds in the portfolio are insured and carry an AAA rating.
We continue to perceive good value in California municipals for high tax bracket
individuals. Stable, tax free return, produced by a risk averse strategy focused
on intermediate rather than long maturity bonds, remains our objective.
ADDITIONAL INFORMATION ABOUT THE MUIR AND INCOME PORTFOLIOS
The following tables provide additional financial information for the Muir
Portfolio and the Income Portfolio for the periods indicated. The information is
based on a single share outstanding throughout such periods.
34
<PAGE>
<TABLE>
<CAPTION>
MUIR CALIFORNIA TAX FREE For the six months For the year For the year For the period For the year For the year
INCOME PORTFOLIO ended 12/31/96 ended 6/30/96 ended 6/30/95 4/1/94 to 6/30/94 ended 3/31/94 ended 3/31/93
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $15.64 $15.53 $15.43 $15.71 $16.67 $15.76
--------------------------------------------------------------------------------------------
Income (loss) from
investment operations
Net Investment Income 0.30 0.62 0.67 0.18 0.84 0.90
Net Gain (loss) on Securities
(both realized and unrealized) 0.39 0.11 0.10 0.01 (0.79) 1.00
--------------------------------------------------------------------------------------------
Total From Investment Operations 0.69 0.73 0.77 0.19 0.05 1.90
--------------------------------------------------------------------------------------------
Less distributions
Dividends
(from net investment income) (0.30) (0.62) (0.67) (0.32) (0.86) (0.91)
Distributions
(from net realized gains) -- -- -- (0.15) (0.15) (0.08)
--------------------------------------------------------------------------------------------
Total Distributions (0.30) (0.62) (0.67) (0.47) (1.01) (0.99)
--------------------------------------------------------------------------------------------
Net Asset Value, End of Period 16.03 15.64 15.53 15.43 15.71 16.67
============================================================================================
Total Return 4.46% 4.71% 5.15% 5.09%* 0.04% 12.58%
Net Assets, End of Period (000's) $12,094 $13,221 $15,241 $17,276 $17,532 $15,455
Ratio of Expenses
to Average Net Assets 1.53%* 1.55% 1.25% 1.25%* 0.75% 0.46%
Ratio of Expenses
to Average Net Assets
Prior to Reimbursement 1.97%* 1.87% 1.74% 1.86%* 1.62% 1.87%
Ratio of Net Income (Loss)
to Average Net Assets 3.98%* 3.98% 4.37% 4.70%* 4.98% 5.59%
Ratio of Net Income (Loss)
to Average Net Assets
Prior to Reimbursement 3.53%* 3.66% 3.88% 4.09%* 4.11% 4.18%
Portfolio Turnover Rate 48.62% 83.12% 74.94% 38.29% 31.04% 36.24%
</TABLE>
* Annualized
<PAGE>
<TABLE>
<CAPTION>
CITIZENS INCOME PORTFOLIO For the six months For the year For the year For the year For the year For the year
ended 12/31/96 ended 6/30/96 ended 6/30/95 ended 6/30/94 ended 6/30/93 ended 6/30/92**
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $10.28 $10.38 $10.04 $10.60 $10.07 $10.00
Income (loss) from
investment operations
Net Investment Income 0.33 0.66 0.65 0.55 0.46 0.01
Net Gain (loss) on Securities
(both realized and unrealized) 0.25 (0.10) 0.36 (0.54) 0.54 0.07
Total From Investment Operations 0.58 0.56 1.01 0.01 1.00 0.08
Less distributions
Dividends
(from net investment income) (0.33) (0.66) (0.65) (0.55) (0.47) (0.01)
Distributions
(from net realized gains) -- -- (0.02) (0.02) -- --
Total Distributions (0.33) (0.66) (0.67) (0.57) (0.47) (0.01)
Net Asset Value, End of Period 10.53 10.28 10.38 10.04 10.60 10.07
Total Return 5.71% 5.48% 10.45% 5.09 12.58% 14.60%
Net Assets, End of Period (000's) 34,512 32,276 30,122 24,410 12,601 1,030
Ratio of Expenses
to Average Net Assets 1.39%* 1.43% 1.35% 1.25% 1.42% 1.75%*
Ratio of Expenses
to Average Net Assets
Prior to Reimbursement 1.39%* 1.48% 1.48% 2.01% 2.38% N/A
Ratio of Net Income (Loss)
to Average Net Assets 6.07%* 6.26% 6.47% 5.43% 4.98% 4.38%*
Ratio of Net Income (Loss)
to Average Net Assets
Prior to Reimbursement 6.07%* 6.21% 6.34% 4.68% 4.02% N/A
Portfolio Turnover Rate 19.02% 41.36% 46.03% 52.62% 22.35% 0.00%
</TABLE>
* Annualized ** Commencement of operations June 10, 1992
<PAGE>
Information about the Income Portfolio is included in the Prospectus dated
September 27, 1996, as amended March 28, 1997 and further amended May 1, 1997,
accompanying this Combined Proxy Statement/Prospectus, which is incorporated by
reference herein. Additional information the Income Portfolio is included in the
Statement of Additional Information dated September 27, 1996, as amended March
28, 1997. Additional information about both the Muir Portfolio and the Income
Portfolio is contained in the Trust's annual report for the fiscal year ended
June 30, 1996, and the semi-annual report for the period ended December 31,
1996, copies of which have been earlier provided to shareholders. Additional
copies may also be obtained without charge by writing or calling the Trust at
the address and telephone number shown on the cover page of this Combined Proxy
Statement/Prospectus.
The Trust is subject to the informational requirements of the Exchange Act and
the 1940 Act, as applicable, and, in accordance with such requirements, files
proxy materials, reports and other information with the SEC. These materials can
be inspected and copied at the Public Reference Facilities maintained by the SEC
at 450 Fifth Street, N.W. , Washington, D.C. 20549, at the offices of Citizens
Advisers listed above and at the SEC's Regional Offices at 75 Park Place, Room
1228, New York, New York 10007 and Everett McKinley Dirksen Building, 219 South
Dearborn Street, Room 1204, Chicago, Illinois 60604. Copies of such materials
can also be obtained from Public Reference Branch, Office of Consumer Affairs
and Information Services, Securities and Exchange Commission, Washington, D.C.
20549, at prescribed rates.
FINANCIAL STATEMENTS AND EXPERT
Financial statements for both the Muir Portfolio and the Income Portfolio
(including assets and liabilities, operations, and investments) for the relevant
periods are contained in this Combined Proxy Statement/Prospectus in reliance
upon the reports of Tait, Weller and Baker, independent certified public
accountants, given on the authority of such firm as experts in accounting and
auditing.
OTHER BUSINESS
The Board of Trustees knows of no other business to be brought before the
Meeting. However, if any other matters come before the Meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to the Trust in writing at the address on
the cover page of this Combined Proxy Statement/Prospectus or by telephoning
(800) 223-7010.
THE BOARD OF TRUSTEES OF THE TRUST, INCLUDING THE INDEPENDENT TRUSTEES,
UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN, AND ANY UNMARKED PROXIES WITHOUT
INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN FAVOR OF APPROVAL OF THE PLAN
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED TO
DATE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT. NO POSTAGE IS REQUIRED IF
MAILED IN THE UNITED STATES.
Exhibit 1
PLAN OF REORGANIZATION
Citizens Investment Trust
May 5, 1997
Table of Contents
Item Page
- --------------------------------------------------------------------------------
1. Transfer of Assets of the Portfolio 2
2. Liquidating Distributions 2
3. Effective Time of the Reorganization 3
4. Conditions 3
5. Termination of Plan 3
6. Amendment 3
<PAGE>
This PLAN OF REORGANIZATION (the "Plan") is established as of this fifth day of
May 1997 by Citizens Investment Trust, a Massachusetts business trust (the
"Trust").
The Plan's purpose is to define the steps that will be followed upon the
affirmative vote of the shareholders of the Muir California Tax-Free Income
Portfolio (the "Muir Portfolio") to transfer all of the assets and liabilities
of the Muir Portfolio to the Citizens Income Portfolio (the "Income Portfolio"),
and be acquired and assumed by, the Income Portfolio as stated herein in
exchange for shares of the Income Portfolio which shall thereafter be
distributed to the shareholders of the Muir Portfolio as described in this Plan
(the "Reorganization").
1. Transfer of Assets of the Muir Portfolio.
At the Effective Time of the Reorganization as defined in Section 3, all
property of every description, and all interests, rights, privileges and
powers of the Muir Portfolio, subject to all liabilities of the Muir
Portfolio, whether accrued, absolute, contingent or otherwise (such assets
subject to such liabilities are herein referred to as the "Fund Assets"),
shall be transferred and conveyed by the Muir Portfolio to the Income
Portfolio, such that at and after the Effective Time of the Reorganization:
(a) all assets of the Muir Portfolio shall become and be the assets of the
Income Portfolio; and
(b) all debts, liabilities, obligations and duties of the Muir Portfolio
shall become the debts, liabilities, obligations and duties of the Income
Portfolio as aforesaid and may thenceforth be enforced against the Income
Portfolio to the extent as if the same had been incurred by it. It is
further understood that recourse for the liabilities of the Muir Portfolio
shall, at and after the Effective Time of the Reorganization, be limited to
the Income Portfolio.
In exchange for the transfer of the Fund Assets, the Income Portfolio shall
simultaneously issue at the Effective Time of the Reorganization to the
Muir Portfolio full and fractional shares of beneficial interest of the
Income Portfolio. The number of shares so issued by the Income Portfolio
shall be equal in value to the aggregate value of the shares of beneficial
interest of the Muir Portfolio that are outstanding immediately prior to
the Effective Time of the Reorganization.
2. Liquidating Distribution.
At the Effective Time of the Reorganization, each Muir Portfolio shall make
a liquidating distribution to its shareholders as follows. Each shareholder
of record shall be credited a number of shares of the Income Portfolio
having an aggregate value equal to the aggregate value of the shares of the
Muir Portfolio held of record by such shareholder immediately prior to the
Effective Time of the Reorganization. In addition, each shareholder of
record of the Muir Portfolio shall have the right to receive any unpaid
dividends or other distributions which were declared prior to the Effective
Time of the Reorganization as defined in Section 3 with respect to the
shares of the Muir Portfolio that are held by the shareholder at the
Effective Time of the Reorganization. The Trust shall record on the books
of the Income Portfolio the ownership of Income Portfolio shares by the
shareholders of record of the Muir Portfolio (the "Fund Record Holders").
All of the issued and outstanding shares representing interests in the Muir
Portfolio shall be canceled on the books of the Muir Portfolio at the
Effective Time of the Reorganization, and the Trust's transfer books with
respect to the Muir Portfolio shall be closed permanently.
<PAGE>
3. Effective Time of the Reorganization.
Delivery of the Fund Assets and the shares of the Income Portfolio to be
issued pursuant to Section 1 and the liquidation and termination of the
Muir Portfolio pursuant to Section 2 shall take effect as of 4:00 P.M.,
Eastern Time, on September 11, 1997, or such earlier or later date and time
as may be declared by the Board of Trustees. Such date and time at which
such actions are taken are referred to herein as the "Effective Time of the
Reorganization." To the extent any Fund Assets are, for any reason, not
transferred at the Effective Time of the Reorganization, the Muir Portfolio
shall cause such Fund Assets to be transferred in accordance with this Plan
at the earliest practicable date thereafter.
4. Conditions.
The following conditions must be met in order for the reorganization to be
completed as to the Muir Portfolio:
(a) This Plan shall have been adopted and the transactions contemplated by
this Plan shall have been approved by the shareholders of the Muir
Portfolio in the manner required by the Trust's Declaration of Trust and
applicable law.
(b) The Trust shall have received an opinion of counsel to the Trust, in
form reasonable satisfactory to it, and dated the Effective Time of the
Reorganization, substantially to the effect that the shares of the Income
Portfolio to be delivered to the Muir Portfolio as provided for by this
Agreement are duly authorized and upon delivery will be validly issued,
fully paid and non-assessable (except as otherwise disclosed in the
Registration Statement of the Trust on Form N-1A filed with the Securities
and Exchange Commission).
5. Termination of Plan.
This Plan may be terminated at any time at or prior to the Effective Time
of the Reorganization by a vote of a majority of the Trust's Board of
Trustees.
6. Amendment.
At any time prior to or (to the fullest extent permitted by law) after
approval of this Plan by the shareholders of the Portfolio, the Board of
Trustees may with or without the approval of the shareholders, amend this
Plan.
<PAGE>
PRELIMINARY PROXY MATERIAL
NOT FOR DISTRIBUTION
CITIZENS INVESTMENT TRUST
MUIR CALIFORNIA TAX-FREE INCOME PORTFOLIO
MEETING OF SHAREHOLDERS
TO BE HELD SEPTEMBER 10, 1997
The undersigned, having received the Notice of the Special Meeting of
Shareholders and the Board of Trustees' Prospectus/Proxy Statement (the "Proxy
Statement") hereby appoints Sophia Collier, William D. Glenn II and Azie Taylor
Morton or any of them, his/her true and lawful agents and proxies with full
power of substitution in each to represent the undersigned at the aforementioned
meeting of the Shareholders to be held September 10, 1997 at 10:30 a.m., EDT, at
the offices of Citizens Investment Trust, One Harbour Place, Portsmouth, New
Hampshire and at any adjournment thereof on all matters coming before the
meeting.
1. To approve the 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 or any adjournments thereof.
Please sign exactly as your name or names appear on the label. Joint owners
should each sign personally. Corporate accounts should be signed with full
corporate names by an officer of the corporation. Fiduciaries should give full
titles as such. This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no decision is indicated,
this proxy will be voted in favor of proposal 1.
- ---------------------------------- ------------------------
Signature Signature (Joint Owners)
- ---------------------------------- ------------------------
Date Date
<PAGE>
OTHER INFORMATION
Item 15. Indemnification:
Article VII, Section 12 of the Agreement and Declaration of Trust
provides that the Trust shall indemnify any person who was or is a party or is
threatened to be made a party to any proceeding by reason of the fact that such
person is or was an agent of the Trust, against expenses, judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with such proceeding if that person acted in good faith and reasonably believe
her/his conduct to be in the best interest of the Trust. Indemnification will
not be provided in certain circumstances, however, including instance of willful
misfeasance, bad faith, gross negligence, and reckless disregard of the duties
involved in the conduct of the particular office involved.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to the trustees, officers, and controlling persons
of the registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable in the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 16. Exhibits:
(1) declaration of trust: material currently on file
(2) by-laws: material currently on file
(3) not applicable
(4) copies of the agreement of reorganization: attached as
Exhibit 1 to the Combined Proxy Statement/Prospectus
(5) not applicable
(6) management agreement: material currently on file
(7) distribution agreement: material currently on file
(8) not applicable
(9) custodian agreement: material currently on file
(10) Rule 12b-1 distribution plan: material currently on file
(11) opinion and consent of counsel as to the legality of the
securities being registered
(12) not applicable
(13) other material contracts:
a) administrative agreement: material currently on file
(14) consent of independent certified public accountants as to use
of their report
<PAGE>
(15) not applicable
(16) power of attorneys: material currently on file
(17a) Rule 24f-2 Notice of Election of Registrant: material currently
on file
(17b) Prospectus for the Trust dated September 28, 1996, as amended
March 25, 1997 and as further amended May 1, 1997: material
currently on file (Accession No. 0000950146-97-000678)
(17c) Statement of Additional Information for the Trust, dated
September 26, 1996, as amended March 28, 1997: material
currently on file (Accession No. 0001029869-97-000092)
(17d) Annual Report to Shareholders of the Trust for the fiscal year
ended June 30, 1996: material currently on file (Accession No.
0000950146-96-001499)
Item 17. Undertakings:
(1) The undersigned registrant agrees that prior to any public
reoffering of the securities registered through the use of a prospectus which is
part of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act, the
reoffering prospectus will contain the information called for by the applicable
registration form for reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other items of the applicable
form.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the 1933 Act, each post-effective
amendment shall be deemed to be a new registration statement for the securities
offered therein, and the offering of the securities at that time shall be deemed
to be the initial bona fide offering of them.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Amendment to be signed on its behalf by the
undersigned, thereto duly authorized, in the City of Portsmouth, and State of
New Hampshire, on the 18th day of June, 1997.
CITIZENS INVESTMENT TRUST
By /s/ Sophia Collier
------------------------------------
Sophia Collier, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment has
been signed below by the following persons in the capacities and on the date
indicated.
/s/ Sophia Collier*
- ------------------------------- Trustee
Sophia Collier President and June 18, 1997
Principal Executive
Principal Accounting Officer
Principal Financial Officer
/s/ William Glenn*
- -------------------------------- Trustee June 18, 1997
(William Glenn)
/s/ Ada Sanchez
- -------------------------------- Trustee June 18, 1997
(Ada Sanchez)
/s/ J.D. Nelson*
- -------------------------------- Trustee June 18, 1997
(J.D. Nelson)
/s/ Azie Taylor Morton*
- -------------------------------- Trustee June 18, 1997
Azie Taylor Morton)
/s/ Juliana Eades*
- -------------------------------- Trustee June 18, 1997
(Juliana Eades)
/s/ Lokelani Devone*
- -------------------------------- Trustee June 18, 1997
(Lokelani Devone )
<PAGE>
* By Sophia Collier Attorney in Fact
See Power of Attorney dated May 15, 1992, filed with the commission on May 15,
1992 as part of Registrant's Post Effective Amendment #12.
See Power of Attorney dated November 12, 1992, filed with the commission on
November 12, 1992 as part of Registrant's Post Effective Amendment #14.
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
- ----------- -----------
4 Plan of Reorganization (Attached as Exhibit 1 to the Combined
Proxy Statement/Prospectus)
11 Opinion and consent of counsel as to the legality of the
securities being registered
14 Consent of independent certified public accountants as to
use of their report
Exhibit 11
BINGHAM, DANA & GOULD LLP
150 FEDERAL STREET
BOSTON, MASSACHUSETTS 02110-1726
June 18, 1997
Citizens Investment Trust
One Harbour Place
Portsmouth, NH 03801
Ladies and Gentlemen:
We have acted as counsel to Citizens Investment Trust, a
Massachusetts business trust (the "Trust"), in connection with the Trust's
Registration Statement on Form N-14 to be filed with the Securities and Exchange
Commission on or about June 18, 1997 (the "Registration Statement") with respect
to the transfer of all of the assets and liabilities of the series of the Trust
designated as the Muir California Tax-Free Income Portfolio (the "Portfolio") to
the series of the Trust designated as the Citizens Income Portfolio (the "Income
Portfolio"), and the receipt of shares of the Income Portfolio ("Shares") by the
holders of shares of the Portfolio.
In connection with the furnishing of this opinion, we have examined the
following documents:
(a) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
(b) copies, certified by the Secretary of State of the Commonwealth
of Massachusetts, of the Trust's Declaration of Trust and of all
amendments thereto on file in the office of the Secretary of State (the
"Declaration of Trust");
(c) a Certificate executed by the President of the Trust,
certifying as to, and attaching copies of, the Trust's Declaration of
Trust, By-Laws and certain resolutions adopted by the Trustees of the
Trust;
(d) a draft of the Registration Statement; and
(e) a copy of the Plan of Reorganization, dated as of May 5, 1997
(the "Plan").
In such examination, we have assumed the genuineness of all signatures,
the conformity to the originals of all of the documents reviewed by us as
copies, the authenticity and completeness of all original documents reviewed by
us in original or copy form and the legal competence of each individual
executing any document. We have also assumed that the Registration Statement as
filed with the Securities and Exchange Commission will be in substantially the
form of the draft referred to in paragraph (d) above.
<PAGE>
This opinion is based entirely on our review of the documents listed
above and such investigation of law as we have deemed necessary or appropriate.
We have made no other review or investigation of any kind whatsoever, and we
have assumed, without independent inquiry, the accuracy of the information set
forth in such documents.
This opinion is limited solely to the internal substantive laws of the
Commonwealth of Massachusetts as applied by courts located in such Commonwealth,
except that we express no opinion as to any Massachusetts securities law. No
opinion is given herein as to the choice of law or internal substantive rules of
law which any tribunal may apply to the transaction referred to herein.
As to the opinion set forth in paragraph 1 below relating to the
existence of the Trust, our opinion relies entirely upon and is limited by the
certificate of the Secretary of State of the Commonwealth of Massachusetts
described in paragraph (a) above.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is
our opinion that:
1. The Trust is validly existing under the Declaration of Trust and the
laws of the Commonwealth of Massachusetts as a voluntary association with
transferable shares of beneficial interest commonly referred to as a
"Massachusetts business trust."
2. The Shares to be delivered to the Portfolio pursuant to the Plan are
duly authorized and will be, when issued and sold in accordance with the
Declaration of Trust and By-Laws of the Trust in exchange for the consideration
described in the Plan, validly issued, fully paid and non-assessable, except
that, as set forth in the Trust's Statement of Additional Information which is
incorporated by reference in the Registration Statement, shareholders of the
Trust may, under certain circumstances, be held personally liable for its
obligations.
We hereby consent to the filing of this Opinion as an Exhibit to the
Registration Statement, to the use of our name, and to the references to our
Firm in the Registration Statement. This consent, however, does not constitute a
consent under Section 7 of the Securities Act of 1933, as amended, because we
have not certified any part of the Registration Statement and do not otherwise
come within the categories of persons whose consent is required under such
Section 7 or under the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
Bingham, Dana & Gould LLP
BINGHAM, DANA & GOULD LLP
Exhibit 14
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated August 14, 1996, accompanying the
financial statements and financial highlights of Citizens Income Portfolio and
Muir California Tax-Free Income Portfolio, each a series of shares of
beneficial interest of Citizens Trust, appearing in the Annual Report to
Shareholders for the year ended June 30, 1996 which is incorporated by reference
in the Registration Statement on Form N-14 of Citizens Trust. We consent to the
use of the aforementioned report and to the references to our Firm in the
Registration Statement.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
June 13, 1997
