As filed with the Securities and Exchange Commission on October 31, 1997
Securities Act of 1933 File No. 2-80886
Investment Company Act of 1940 File No. 811-3626
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 39
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 34
---------------------------------
CITIZENS INVESTMENT TRUST*
(Exact name of registrant as specified in charter)
One Harbour Place
Suite 525
Portsmouth, N.H. 03801
(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
_X_ immediately upon filing pursuant to paragraph (b)
___ on _____________ pursuant to paragraph (b)
___ 75 days after filing pursuant to paragraph (a)
___ on (date) pursuant to paragraph (a) of Rule 485
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 28, 1997.
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*This N-1A filing relates to the institutional classes of shares of
Citizens Index Portfolio and Working Assets Money Market Portfolio.
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CITIZENS INVESTMENT TRUST
CROSS-REFERENCE PAGE
PART A: INFORMATION REQUIRED IN THE PROSPECTUS
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<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis; Fee Information Introduction; Fee Information
Item 3. Condensed Financial Financial Highlights
Information
Item 4. General Description Organization and Management
Of Registrant of the Trust
Item 5. Management of the Organization and Management
Fund Of the Trust
Item 5A. Management's Discussion Not Applicable
Of Fund Performance
Item 6. Capital Stock and How to Purchase and Redeem
Other Securities Shares; Dividends, Distributions
And Taxes
Item 7. Purchase of Securities How to Purchase and Redeem
Being Offered Shares; Shareholder Services
Item 8. Redemption or Repurchase How to Purchase and Redeem
Shares; Shareholder Services
Item 9. Legal Proceedings None
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. General Information Introduction; How We Select Our
And History Investments; Organization and
Management of the Trust
<PAGE>
Item 13. Investment Objectives How We Select our Investments;
And Policies Policies and Risk Factors; Other
Investment Techniques
Item 14. Management of the Organization and Management
Registrant Of the Trust; Trustee Profiles
Item 15. Control Persons and Organization and Management
Principal Holders of of The Trust
Securities
Item 16. Investment Advisory Organization and Management
And other Services of The Trust
Item 17. Brokerage Allocation Organization and Management
And Other Practices of The Trust
Item 18. Capital Stock and Dividends, Distributions and
Other Securities Taxes
Item 19. Purchase, Redemption How to Purchase and Redeem
And Pricing of Shares; Shareholder Services;
Securities Dividends, Distributions and
Taxes
Item 20. Tax Status Federal Taxes
Item 21. Underwriters Organization and Management
Of the Trust
Item 22. Calculation of Yield Dividends, Distributions and
Quotations of Money Taxes
Market Funds
Item 23. Financial Statements Financial Highlights
PART C: OTHER INFORMATION
Item 24. Indemnification Indemnification
Item 25. Exhibits Exhibits
Item 26. Undertakings Undertakings
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<PAGE>
Institutional Prospectus
October 30, 1997
Dear Investor,
Since our inception in 1982, our goal has been to earn money for our
shareholders by investing in companies that exhibit both strong financial
promise and corporate responsibility.
We believe there is a revolution going on in business today, and only certain
companies will be able to thrive in this faster-paced and environmentally
concerned business environment. At Citizens Trust, we identify and invest in
these companies - businesses with the potential to produce strong financial
results today, as well as create a world we want to live in tomorrow.
We hope you find this prospectus informative and that our portfolios meet
your investment needs. We look forward to serving you at Citizens Trust.
[Photo of Sincerely,
Sophia Collier]
/s/ Sophia Collier
---------------------------
Sophia Collier
President
Our Portfolios
This prospectus relates solely to the Institutional Shares of the Working
Assets Money Market Portfolio and the Citizens Index Portfolio. It sets forth
concisely the information that a prospective investor ought to know before
investing and should be retained for future reference.
Working Assets(R) Money Market Portfolio's objective is current income
consistent with safety and liquidity. We seek to maintain a stable $1.00 Net
Asset Value per share at all times, although there is no assurance that we will
be able to do so. Shares are neither insured nor guaranteed by the U.S.
Government.
Citizens Index Portfolio is a market-weighted portfolio of 300 companies,
with the objective of long-term capital appreciation.
Minimum Investment.
The minimum initial investment in Institutional Shares is $100,000.
Statement of Additional Information.
Our Statement of Additional Information, dated the same as this prospectus
and incorporated herein by reference, is filed with the Securities and Exchange
Commission. If you would like a copy, please call us toll-free at 800-223-7010.
The Securities and Exchange Commission maintains a website (http://www.sec.gov)
that contains the Statement of Additional Information, material incorporated by
reference and other information regarding the portfolios.
CITIZENS TRUST
One Harbour Place
Portsmouth, NH
03801
603-436-5152
For Shareholder Service and
New Account Information:
1-800-223-7010
For Broker-Dealer Sales & Service:
1-800-982-7200
CITIZENS TRUST IS AN OPEN-ENDED, DIVERSIFIED MANAGEMENT COMPANY, NOT A BANK.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED ON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
[CITIZENS TRUST LOGO]
[AMERICAN MEDICAL ASSOCIATION LOGO]
Coalition for Tobacco-free Investments
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Institutional Prospectus
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TABLE OF CONTENTS
Introduction: Our Portfolios 1
Fee Information 2
Financial Highlights 3
How We Select Our Investments 4
Investment Objectives, Policies and Risk Factors 5
Organization and Management of the Trust 6
Trustee Profiles 7
How to Purchase and Redeem Shares 8
Shareholder Services 9
Mailing Address/Wiring Instructions 10
Dividends, Distributions and Taxes 10
Fee Information
INSTITUTIONAL CLASSES
WORKING ASSETS CITIZENS
MONEY MARKET INDEX
Shareholder Transaction Expenses
Maximum sales load imposed on purchases
(as a % of offering price) None None
Maximum sales load imposed on reinvested
Dividends (as a % of offering price) None None
Deferred sales load (as a %
of amount redeemed) None None
Redemption fees (as a % of amount redeemed) None None
Exchange fee (per exchange) None None
Costs For Other Services
Returned checks $15.00
Outgoing wire transfer $10.00
International Wires $20.00
Stop payments $10.00
Copies of statements, checks and tax forms $2.00
Annual Portfolio Operating Expenses
Management fee 0.35% 0.50%
Distribution expense (12b-1 Fee) 0.00% 0.00%
Other expenses 0.33% 0.34%
Total operating expenses 0.68% 0.84%
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
Working Assets Money Market Portfolio $7 $22 $38 $85
Citizens Index Portfolio $9 $27 $47 $104
The assumption of a 5% annual return is required by the Securities and Exchange
Commission for all mutual funds, and is not a prediction of the portfolio's
future performance. 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.
About The "Financial Highlights" Table
The "Financial Highlights" on the following page are for the fiscal years
ended June 30, 1996 and 1997. The complete statements and our auditor's opinion
on the condensed financial information for the most recent two years appear in
the 1997 Annual Report to Shareholders for each of the portfolios and are part
of this prospectus. For a copy of the Annual Report, please call the Trust's
toll-free number. It contains a full discussion of each portfolio's performance.
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Citizens Trust
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Financial Highlights
WORKING ASSETS
MONEY MARKET PORTFOLIO
Institutional Class
--------------------------
Year Ended June 30 1997 1996*
----- -----
Net asset value, beginning of period $1.00 $1.00
----- -----
Income from investment operations
Net investment income 0.049 0.021
----- -----
Less distributions
Dividends (from net investment income) (0.049) (0.021)
Net asset value, end of period $1.00 $1.00
===== =====
Total return 5.01% 2.09%
Net assets, end of period (in thousands) $17,504 $14,539
Ratio of expenses to average net assets 0.60% 0.47%(ss.)
Ratio of net income to average net assets 4.92% 5.16%(ss.)
CITIZENS INDEX PORTFOLIO
Institutional Class
---------------------------------
Year Ended June 30 1997 1996+
---- ------
Net asset value, beginning of period $11.00 $10.00
----- -----
Income from investment operations
Net income 0.08 0.08
Net gains on securities
(both realized and unrealized) 3.94 .92
----- -----
Total from investment operations 4.02 1.00
Less distributions
Dividends (from net income) (0.09) -
Distribution from net realized gains (0.09) -
----- -----
Total distributions (0.18) -
Net asset value, end of period $14.84 $11.00
===== =====
Total return 36.93% 10.00%
Net assets, end of period (in thousands) $13,001 $7,524
Ratio of expenses to average net assets 0.88% 1.01%(ss.)
Ratio of net income to average net assets 0.76% 2.37%(ss.)
Portfolio turnover rate 18.64% 6.44%
Average broker commission per share $0.0443 N/A
* Commencement of Operations February 1, 1996
+ Commencement of Operations January 25, 1996
(ss.) Annualized
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Institutional Prospectus
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[PICTURE OF AUDITOR] AUDITOR
[CAPTION]
A partner at the firm Tait, Weller & Baker, Jim Mahoney has served as the
Trust's Certified Public Accountant and Auditor since 1986.
How We Select Our Investments
Financially Sound
Citizens Trust has certain policies we consider fundamental, such as
consistently applying both social and financial screens to all our investment
decisions. This, together with each portfolio's investment objective and other
technical investment policies described in the Statement of Additional
Information, cannot be changed without the approval of a majority of the
outstanding shares of each portfolio that would be affected by the change. In
addition to the specific policies for each portfolio, we also have some general
policies we use to manage all our portfolios.
Socially Responsible
We are always seeking profitable investments for our shareholders. To find
them, we favor companies which make good and useful products and have positive
environmental, community and workplace records. We avoid companies which engage
in discrimination or union busting; whose primary business is the manufacture of
alcohol, tobacco, firearms or nuclear power; and those that use animals to test
personal care products or otherwise treat animals in an inhumane manner.
General Investment Policies
We try not to put all our eggs in one basket. This means that 75% of a
portfolio's assets will never hold more than 5% of any one company. We do not
invest more than 25% of the value of any one portfolio in one industry with the
exception of securities of U.S. government agencies or enterprises or, in our
money market portfolios, domestic banks.
Citizens Trust's role is to be a conscientious and alert investor, not a
controlling manager; therefore, across all our portfolios, we will not
accumulate more than 10% of the voting securities of any one company.
We sometimes purchase securities issued by companies that do not trade in the
public market. To obtain a good investment balance, we will limit these and all
other illiquid securities to a total of no more than 10% of each portfolio's
assets.
Each of our portfolios may, from time to time, invest in money market
securities such as the ones we use in our money market funds.
Each portfolio may temporarily borrow money from banks (and pledge its assets
to secure such borrowing) to meet redemption requests, or for other purposes. We
will keep this borrowing down to no more than 10% of the value of each
portfolio's total assets and make no purchases while we have any outstanding
loans.
Repurchase Agreements
To allow us to earn a return on surplus cash, we usually invest this cash
overnight or for longer periods through an arrangement called a repurchase
agreement, or "repo," with a financially strong company that is either a large
stock broker or a substantial bank that is a member of the Federal Reserve Bank.
As additional security, we always require all vendors of repurchase agreements
to set aside collateral in our name in the form of government securities equal
to 102% of the value of any repurchase agreement. However, it
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Citizens Trust
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is important to note that while repurchase agreements are a useful tool in
managing the portfolios, they do have some greater risk than direct investment
in government securities. If a bank or a stockbroker becomes bankrupt or
otherwise defaults after selling us a repurchase agreement, we may suffer some
delay and expense in liquidating our collateral or have a loss of principal or
interest. However, in any default, the resold securities are expected to provide
collateral sufficient to cover the amount of the repurchase agreement, so we do
not feel these risks outweigh the benefits of repurchase agreements.
Investment Objectives, Policies and
Risk Factors
Working Assets Money Market Portfolio
Objective: Current income consistent with safety and liquidity.
This is a good vehicle for short-term cash management and for investors who
need stability of principal. Checking services are available.
We only invest in short-term money market instruments (short-term debt issued
by branches of the government, corporations, banks or other financial
institutions) that we believe present minimal risk, and we maintain a weighted
average maturity of 90 days or less for the portfolio as a whole.
U.S. Government Securities
When we look at government securities, we only buy those that are issued or
guaranteed, as to both interest and principal, by agencies or other enterprises
of the United States government.
Commercial Paper
We will also buy high quality "commercial paper," which is short-term debt
issued by well-established corporations. One hundred percent of this short-term
debt must be rated A-1 by Standard & Poor's Rating Services or have a comparably
high rating by another nationally recognized rating service. If a security is
rated by one agency, it must be rated A-1 or A-1+ by Standard & Poor's Rating
Services or have a comparably high rating by another nationally recognized
rating service. If a security is not rated, it must be as good as A-1 in our
judgment. We also use our own research and experience to help assure our money
market securities have only a minimal credit risk.
Other types of debt that offer us a yield advantage are sometimes issued by
banks. These include certificates of deposit, time deposits and bankers'
acceptances of U.S. banks or thrift institutions.
Citizens Index Portfolio
Objective: Long-term capital appreciation.
The Citizens Index Portfolio is invested in 300 companies that make up the
Citizens Index(TM). We believe these companies best represent their industries.
Approximately 200 are very large companies that are also included in the S&P
500. The others are companies selected in order to provide industry diversity
that we believe is essential to a sound investment program.
On a day-to-day basis, the portfolio is run by purchasing and holding common
stock of all the companies in the Index in a percentage, as closely as possible,
equal to each security's total market value divided by the total
[PHOTO OF MANAGER] MANAGER
[CAPTION]
Laura Provost is part of the team that manages the Working Assets Money Market
Portfolio. She joined Citizens Advisers in 1997. Previously, she was a portfolio
manager with John Hancock Mutual Funds.
5
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Institutional Prospectus
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[PHOTO OF MANAGER] MANAGER
[CAPTION]
EDWIN EK, part of the team that manages the Citizens Index Portfolio spent eight
years at Wilshire Associates before joining the RhumbLine team in October, 1994.
"The Citizens Index Portfolio is highly diversified, both by industry and in the
number of individual companies. We think it presents lower risk than a portfolio
with fewer holdings or more industry concentration."
market value of all the companies in the Index. In addition, under normal
circumstances, the portfolio usually will hold a small amount of cash or money
market instruments (no more than 5%) resulting from shareholder purchase and
redemption activity and a provision for operating expenses. Holding this cash,
together with the costs of operations, will prevent us from ever perfectly
tracking the theoretical performance of the underlying Index. Payment of our
operating expenses will reduce returns. Our allocation to cash will improve
returns when the market is heading down and hurt them when the market is moving
up. Companies will be deleted from the Index and divested from the portfolio if
they fail our annual social responsibility review. If a company is removed we
will seek to replace it with another company from the same industry which meets
all social criteria. In addition, from time to time we may make other small
changes in the Index to include, for example, exceptional companies or to
reflect changes in the composition of the S&P 500. We do not expect these
changes to exceed 10% of the members of the Index on an annual basis.
Income is anticipated to be similar to that of the S&P 500.
Risk Factors
Like all stock funds, the Net Asset Value of the Citizens Index Portfolio will
fluctuate based on market and economic conditions or other factors that affect
particular companies or industries.
We are always pleased to send interested investors a current list of the
members of our Index.
Organization and Management of the Trust
Citizens Investment Trust (or "Citizens Trust") began its existence as
Working Assets Money Fund on November 24, 1982. We are a Massachusetts business
trust and an open-end investment company registered under the Investment Company
Act of 1940 as a diversified management company. The Trust is also a "series"
company, which means we can have several portfolios, each with its own
investment objective, assets, and liabilities. The Trust is supervised by a
board of trustees.
With an Institutional Class we are able to offer institutional investors an
opportunity to invest their money with lower overall expenses. Both the Working
Assets Money Market Portfolio and the Citizens Index Portfolio also offer a
retail class with expense levels different from those of the institutional
classes. To obtain additional information about the retail classes, please call
us toll-free at 1-800-223-7010.
In order to manage the Trust on a day-to-day basis, we have signed a
Management Agreement with Citizens Advisers, which has served as the Trust's
Adviser since its inception in 1982. Citizens Securities, a subsidiary of
Citizens Advisers, serves as the Trust's Distributor.
Owners
Citizens Advisers and its subsidiary, Citizens Securities, are both
California corporations. Sophia Collier is the 60% owner. 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%.
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The Role of Investment Adviser
In its role as Investment Adviser to the Trust, Citizens Advisers determines
which companies meet our social and financial criteria and therefore will be
approved for inclusion in the Trust's portfolios. It determines which securities
should be bought and sold for the Working Assets Money Market Portfolio and,
with respect to the Citizens Index Portfolio, it has retained a "sub-adviser" to
assist in actual portfolio management.
Citizens Trust's Management Agreement with Citizens Advisers specifies fees
of .35% and .50% of average annual net assets for the Working Assets Money
Market Portfolio and the Citizens Index Portfolio, respectively. Citizens
Advisers pays the sub-adviser, RhumbLine Advisers, Inc., .10% of average annual
net assets of the Citizens Index Portfolio for their services.
RhumbLine Advisers, Inc.
The Citizens Index Portfolio is sub-advised by RhumbLine Advisers, a
registered investment adviser established in 1990 with offices at 30 Rowes
Wharf, Boston, MA. RhumbLine is owned in excess of 97% by J.D. Nelson, who is
also an interested trustee of the Trust.
Institutional Share Expenses
Institutional Shareholders will pay their pro rata portion of expenses of the
Portfolio ("Portfolio Expenses"), as well as any expenses attributable to
Institutional Shares only ("Class Expenses"). Citizens Advisers may from time to
time enter into agreements and make payments to other third party providers of
Trust-related advisory and administrative services.
Citizens Advisers also provides administrative services to the Trust under a
separate administrative contract. This contract provides for payment to the
management company of "market price" (a price comparable to the cost to the
Trust from an unaffiliated vendor) for services contracted with the Trust and
reimbursement of out-of-pocket expenses.
Services provided by Citizens Advisers and paid for by the Trust under this
agreement include, but are not limited to, shareholder servicing and
sub-accounting, telephone charges, services related to the organization of new
portfolios, and blue sky reporting services. Citizens Advisers may at times
perform services provided under this agreement directly, or may contract to have
such services provided by a third party. Under the administrative contract, for
the year ended June 30, 1997, the Trust as a whole paid $1,711,524 to Citizens
Advisers for its administrative services, of which the institutional classes
paid $2,103.
The individual portfolios pay all expenses not expressly assumed by Citizens
Advisers. Portfolio expenses include, but are not limited to, interest, taxes,
audit and legal fees, custodian charges, insurance premiums, cost of registering
shares under federal laws, dues and any litigation costs attributable to the
portfolio as a whole. When a cost is shared by several portfolios, the staff,
under the supervision of the Board of Trustees and Citizens Advisers, will
allocate it among the portfolios in a reasonable manner.
Class expenses include, but are not limited to, transfer agent fees, cost of
registering shares under state laws, the cost of typesetting, printing, and
distributing shareholder reports and prospectuses sent to shareholders,
[SIDEBAR]
Trustee Profiles
Azie Taylor Morton, Chair of the Board of Trustees, operates an investment
management firm, and was the 36th Treasurer of the United States. William D.
Glenn II, is the executive director of Continuum HIV Day Services in San
Francisco. *Sophia Collier is the Trust's president and principal owner of our
investment adviser, Citizens Advisers. Lokelani Devone is assistant general
counsel at DFS Group Limited, an international retail business group. Juliana
Eades is the executive director of the New Hampshire Community Loan Fund, one of
the country's oldest local community economic development institutions. *J.D.
Nelson is the chief executive officer of RhumbLine Advisers, an investment
advisory firm specializing in institutional and pension assets. Ada Sanchez is
the former director of the Public Service and Social Change Program at Hampshire
College.
*INTERESTED PERSON (INSIDE TRUSTEE)
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Institutional Prospectus
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[PICTURE OF TRUSTEE] TRUSTEE
[CAPTION]
Azie Taylor Morton, Chair of the Board of Trustees and former Treasurer of
the United States.
administrative expenses necessary to support the institutional shares, and the
cost of litigation and Trustees' fees directly related to the institutional
shares.
12b-1 Fees
Citizens Trust has a 12b-1 plan which allows us to reimburse Citizens
Securities and other broker/dealers for sales-related costs. During 1997 there
were no 12b-1 expenses assessed to the institutional classes of the Citizens
Index and Working Assets Money Market Portfolios. We do not expect there to be
12b-1 expenses for the institutional classes for 1998.
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.
Shares in the Working Assets Money Market Portfolio cost $1.00 per share. For
the Citizen Index Portfolio, 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 1/1000th of a share. If
your check is returned for any reason, you will be assessed a fee of $15.00.
Investment Minimums
The minimum initial investment in the institutional class is $100,000. With
respect to accounts that fall below $100,000, Citizens Trust reserves the right
to transfer these accounts from the institutional class of the portfolio to the
retail class of the portfolio. Citizens Trust will give adequate notice to the
shareholder allowing the opportunity to bring the account up to the $100,000
level.
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
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Citizens Trust
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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.
Write a Check
When you open an account in the Working Assets Money Market Portfolio, we
will send you free checks. Although these checks are payable through a banking
agent of Citizens Trust, your account is not FDIC insured and your shares are
subject to fluctuations in value. You may write a check for any amount. There
will be a $15.00 charge for any checks returned for any reason.
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
up to 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.
Shareholder Services
Exchange Privilege
You may make an exchange at any time and to any portfolio, provided the
portfolio is legally registered for sale in your state.
Systematic Withdrawal Plan
You can send us a written request to automatically redeem a portion of your
shares and make a regular monthly, quarterly or annual payment on your behalf.
Making a Change in Your Account
After your account is set up, you may want to make a change in one of the
options or in the account title. We are pleased to assist, but to protect both
you and Citizens Trust from fraud, we may require a signature guarantee from all
registered owners of the accounts.
Tax-Sheltered Retirement Plans
Our distributor, Citizens Securities, has arranged for shareholders to have
access to qualified Individual Retirement Accounts (IRAs) and 403(b) plans
(non-profit employees). Our portfolios are also suitable for other types of
retirement plans as well.
[SIDEBAR]
Common Transactions That Require Medallion Signature Guarantees:
[bullet] Written request for redemption
[bullet] Changing your account title in any way
[bullet] Authorizing a telephone transaction for the first time
[bullet] Changing your predesignated wire or ACH instructions
[bullet] Establishing or modifying a systematic withdrawal plan
[bullet] Exchanges between accounts which do not have identical titles
Eligible Guarantors:
[bullet] Commercial Bank
[bullet] Trust Company
[bullet] Savings Associations
[bullet] Credit Unions
[bullet] Members of domestic stock exchange
Note:
Notaries public are not eligible guarantors.
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[CAPTION]
Mailing and Wiring Instructions
Regular U.S. Mail:
Please use the Business Reply Envelope
provided with this Prospectus, or mail to:
Citizens Trust
c/o PFPC Inc.
PO Box 8962
Wilmington, DE
19899-8962
Our Wiring Address Instructions:
PNC Bank, N.A.
Philadelphia, PA
ABA#: 031000053
For Further Credit A/C# 86-1030-3646
Shareholder
name/acct. number
Overnight Delivery Package (i.e. Federal Express, UPS, Airborne Express etc.)
No U.S. mail, please.
Send to:
Citizens Trust
c/o PFPC Inc.
400 Bellevue Parkway Suite 108
Wilmington, DE 19809
Phone: 800-223-7010
Please send overnight delivery packages only to the above address. Regular U.S.
Mail will not be accepted at the above address and may be returned to you.
Dividends, Distributions and Taxes
Unless you give us other instructions, we will automatically reinvest your
dividends and distributions at the Net Asset Value, calculated on the dividend's
payable date.
We can also pay your dividends and distributions to you by check or
electronic transfer through the Automated Clearing House to your bank account.
The details of your dividends and other distributions will be included on your
statement. Payments of dividends and distribution of capital gains, if any, are
declared and paid on the following schedule:
DIVIDEND CAPITAL GAINS PAID
Declared Paid Long-term Short-term
WORKING ASSETS
MONEY MARKET PORTFOLIO Daily Monthly None None
CITIZENS INDEX PORTFOLIO Annually Annually Annually Annually
How We Report Yields
Every business day, the Working Assets Money Market Portfolio quotes both a
"7-day yield" and a "7-day effective yield." To calculate the 7-day yield, we
take our Net Investment Income per share for the most recent 7 days, annualize
it and then divide by the Net Asset Value per share (expected, but not
guaranteed, always to be $1.00) to get a percentage. The "Effective Yield"
assumes you have reinvested your dividends.
Total Return and Other Quotations
For the Citizens Index Portfolio, we start with the total number of shares
you can buy for $1,000 at the beginning of the period. We then add all the
additional shares you would have purchased within the period with reinvested
dividends and distributions (this takes into account the portfolio's income, if
any). Finally, we multiply the number of these shares by the Net Asset Value on
the last day of the period and divide the result by the initial $1,000
investment to see our percentage gain or loss. For periods of more than one
year, we adjust the cumulative Total Return to get an average annual Total
Return.
When we quote our investment results, we will sometimes compare them to
unmanaged market indices such as the Dow Jones Industrial Average and Standard &
Poor's 500, as well as other data and rankings from recognized independent
publishers or sources such as Donoghue's Money Fund Report, Money Magazine,
Mutual Funds Magazine, Kiplinger's Personal Finance Magazine, Co-Op America
Quarterly, The Green Money Journal, Bloomberg News, Morningstar, Inc. and Lipper
Analytical Services.
Valuation of Shares
To calculate our Net Asset Value, we add up the total assets of the
portfolio, subtract all liabilities, then divide by the number of shares
outstanding. To value money market securities in the Working Assets Money Market
Portfolio, we use an accounting system called the amortized cost method. This
system is described in the Statement of Additional Information.
In the Citizens Index Portfolio, we value our holdings at the most recent
closing price or, if there is no closing sale price, halfway between the bid and
asked price. If no market quotation is available for a given security, our
10
<PAGE>
Citizens Trust
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adviser will fairly value that security in good faith. Securities maturing
within 60 days normally are valued at amortized cost, which approximates market
value.
Tax Matters
The dividends you receive generally will be subject to federal income tax
(and any applicable state or local taxes) unless you are otherwise exempt from
such taxes. Some dividends received from the Citizens Index Portfolio may
qualify for the dividends received deduction for corporate shareholders. We will
send you a complete statement each January as to the federal tax status of
dividends and distributions paid by each portfolio during the previous calendar
year.
Distributions of the Citizens Index Portfolio will reduce the portfolio's net
asset value per share. If you purchase shares just before the portfolio makes a
distribution, therefore, you will pay the full purchase price for the shares and
then receive a portion of the purchase price back as a taxable distribution.
A redemption of shares or an exchange for shares of another Citizens Trust
portfolio will ordinarily be a taxable event, and will give rise to a taxable
gain or loss.
Please consult your own tax adviser for further information regarding the
federal, state and local tax consequences of an investment in the Trust.
Voting Rights
As a shareholder, you are entitled to one vote for each full share you own
and a fractional vote for fractional shares. Shares of each portfolio or class
generally vote separately on matters that only concern that portfolio or class.
However, all shareholders of the Trust vote together on the selection of
trustees and other matters as required by the Investment Company Act of 1940, as
amended. The holders of shares have no preemptive, conversion or subscription
rights, and voting rights are not cumulative. To save money, we do not hold
annual meetings. However, a meeting may be called by our trustees or at the
request of 10% of the Trust shares. We will assist shareholders in communicating
with one another to arrange such a meeting.
[CAPTION]
Transfer Agent:
PFPC Inc.
400 Bellevue Parkway Suite 108
Wilmington, DE 19809
Dividend Paying Agent:
PFPC Inc.
400 Bellevue Parkway Suite 108
Wilmington, DE 19809
Phone: 800-223-7010
11
<PAGE>
[CITIZENS TRUST LOGO] CITIZENS TRUST
[RECYCLE LOGO]
(C) 1997 Citizens Securities
Working Assets is a registered trademark of Working Assets(R) Funding Service.
Used under license.
Citizens Index(TM) is a trademark of Citizens Advisers.
<PAGE>
Statement of Additional Information
October 30, 1997
This Statement is not a prospectus and should be read in conjunction with the
Prospectus dated October 30, 1997, as may be amended from time to time. A copy
of the current Prospectus can be obtained by calling (800) 223-7010, or by
writing Citizens Investment Trust (hereafter Citizens Trust), One Harbour Place,
Portsmouth, NH 03801. This Statement and the Citizens Trust Prospectus may be
supplemented from time to time.
Citizens Investment Trust
E[bullet]fund(R)
Working Assets Money Market Portfolio
(Retail and Institutional Shares)
Citizens Income Portfolio
Citizens Emerging Growth Portfolio
Citizens Global Equity Portfolio
Citizens Index Portfolio
(Retail and Institutional Shares)
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Table of Contents Page
The Fund 2
Investment Objectives and Policies 2
Other Investment Techniques 7
Factors that Affect the Value of Our Investments 9
Turnover and Portfolio Transactions 9
The Value of Our Shares 11
Information About Our Yield and Total Return 12
Dividends and Distributions 15
Federal Taxes 16
Redemption Information 18
Trustees and Officers 19
Additional Information Regarding Citizens Advisers 21
Investment Advisory and Other Services 22
Additional Information 25
Voting Rights 25
Shareholder and Trustee Liability 26
Custodian 26
Auditors 26
Legal Counsel 26
Proposed Reorganization 27
Financial Statements 27
Appendix: Description of Ratings 28
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<PAGE>
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The Fund
Citizens Investment Trust (the "Fund" or "Citizens Trust") presently
consists of six separate portfolios: Working Assets Money Market Portfolio
(inception date 8/30/83), Citizens Income Portfolio (inception date 6/10/92),
Citizens Emerging Growth Portfolio (inception date 2/8/94), Citizens Global
Equity Portfolio (inception date 2/8/94), Citizens Index Portfolio (inception
date 3/3/95), and the E[bullet]fund(R) (inception date 7/1/95). On May 28, 1992
the Fund, which had operated as a money market fund since 1983, changed its name
from Working Assets Money Fund to Working Assets Common Holdings. On October 5,
1995 the Fund changed its name from Working Assets Common Holdings to Citizens
Investment Trust.
This Statement of Additional Information relates to all six portfolios;
with respect to the Working Assets Money Market Portfolio and the Citizens Index
Portfolio, it relates both to the retail class of shares and institutional class
of shares.
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Investment Objectives and Policies
The following are fundamental investment policies followed by each of the
current portfolios of the Fund (each a "Portfolio," and collectively, the
"Portfolios") which supplement those listed in the Prospectus. Any policy
identified as a fundamental investment policy of a Portfolio may be amended only
with approval of the holders of a majority of the outstanding shares of that
Portfolio as defined by the Investment Company Act of 1940, as amended (the
"1940 Act").
Each Portfolio:
1. May not buy the securities of any company if the Portfolio would then
own more than 10% of the total value of all of the company's outstanding
voting securities, or if the Fund as a whole would then own more than 10%
of the total value of all of the company's outstanding voting securities. A
Portfolio may not concentrate its investments by buying the securities of
companies in any one industry if more than 25% of the value of total assets
would then be invested in that industry; however, obligations issued or
guaranteed by the U. S. Government, its agencies and instrumentalities, and
obligations of domestic branches of domestic banks, are not included in
this limit.
2. Will not invest in limited partnerships, including those, which own
commodities, real estate and oil, gas and mineral leases.
3. May not make loans other than pursuant to repurchase agreements. When we
buy money market instruments or loan participation interests, we are
investing, not making a loan.
4. May not invest for the purpose of exercising control or management of
other companies.
5. May not buy or continue to hold securities if our Trustees, officers or
the Directors or officers of Citizens Advisers, Inc. (the "Adviser") own
more than certain limits of these securities. If all of these people who
own more than 1/2 of 1% of the shares of a company together own more than
5% of the company's shares, we cannot buy, or continue to own, that
company's shares.
6. May not participate with others on a joint, or a joint and several,
basis in any trading account in any securities.
7. May not underwrite securities, which means we may not sell securities
for others.
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<PAGE>
8. May borrow only under special circumstances. We do not normally borrow
money, but for temporary purposes a Portfolio may borrow from banks up to
10% of the Portfolio's total assets. If we borrow, we can pledge our assets
up to the amount borrowed. A Portfolio cannot borrow to purchase securities
or to increase its income, but can borrow to pay for shares being redeemed
so that we do not have to sell securities we do not want to sell. Thus, a
Portfolio will not purchase any securities while the Portfolio has
borrowings above 5% of assets outstanding. The interest paid on our
borrowings would reduce our net income.
9. Subject to the provisions of our Declaration of Trust, which provides
that we may issue several classes of shares in any one portfolio, we may
not issue senior securities. We may not issue securities that have priority
over others in dividends, redemption rights, or have other privileges. We
must limit our involvement in "illiquid instruments," that is, repurchase
agreements that have a term of more than seven days, and securities that
have restrictions on resale or lack readily available market quotations, to
10% of the total value of a Portfolio's net assets and we will buy no such
securities for a Portfolio unless the assets in the Portfolio exceed $10
million at the time of purchase. Private Placements which may be traded
pursuant to Rule 144A under the Securities Act of 1933 will not be subject
to these limitations, if our Board of Trustees finds that a liquid trading
market exists for these securities. Our Trustees will review on an ongoing
basis any determination by the Adviser to treat a restricted security as a
liquid security, including the Adviser's assessment of current trading
activity and the availability of reliable price information. In determining
whether a privately placed security is properly considered a liquid
security, the Adviser and our Trustees will take into account the following
factors: (i) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers, and the mechanics of transfer); (ii) dealer undertakings
to make a market in the security; and (iii) the number of dealers willing
to purchase or sell the security and the number of other potential
purchasers. To the extent the Portfolio invests in restricted securities
that are deemed liquid, the general level of illiquidity in the Portfolio
may be increased if qualified institutional buyers become uninterested in
purchasing these securities or the market for these securities contracts.
Acquisitions of such liquid restricted securities will be made from a list
approved by our Trustees.
10. There is a limit on a Portfolio's ability to loan portfolio securities.
If a Portfolio loans securities, then it must maintain collateral at 100%
of the value of the securities and any collateral must be marketable on an
exchange.
The following is a fundamental policy for Working Assets Money Market
Portfolio, the E[bullet]fund(R), Citizens Income Portfolio, Citizens Global
Equity Portfolio and Citizens Index Portfolio and does not apply to the Citizens
Emerging Growth Portfolio.
A Portfolio may place only 5% of its total assets in companies which have
been in operation, including operations of predecessors, for less than three
years.
As a general policy, none of the Portfolios will invest in real estate
assets or interests therein, excluding readily marketable securities.
If a percentage restriction is adhered to at the time of investment, a
subsequent increase or decrease in a percentage resulting from a change in
values or assets will not constitute a violation of that restriction.
3
<PAGE>
The Portfolios
The following discussion elaborates on the description of each Portfolio's
investment objectives and policies as contained in the Prospectus, including any
fundamental investment policies of a Portfolio that supplement the fundamental
policies of the Portfolios in the Prospectus.
Working Assets Money Market Portfolio and the E[bullet]fund(R)
The Working Assets Money Market Portfolio and the E[bullet]fund(R), as a
fundamental investment policy of each Portfolio, may not buy any securities
other than money market securities. Thus, each Portfolio cannot buy any
commodities or commodity futures contracts, any mineral programs or leases, any
shares of other investment companies or any warrants, puts, calls or
combinations of these. Neither of the Portfolios may buy real estate, or real
estate loans, but each Portfolio may buy money market securities even though the
issuer invests in real estate or interests in real estate.
The following are also the present policies of each Portfolio, but may be
changed by our Trustees without a vote of the shareholders of the Portfolios:
1. Each Portfolio may invest in variable amount master demand notes, which
are obligations that permit us to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between us and the
borrower, subject to the 10% limitation referred to in paragraph 3 below.
The interest rates and amounts involved may change daily. We have the right
to increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount; and the borrower
may repay up to the full amount of the note without penalty. Because these
types of notes are direct lending arrangements between us and the borrower,
they generally will not be traded and there is no active secondary market
for these notes. However, they are redeemable on demand, and thus
immediately repayable by the borrower, at face value plus accrued interest
at any time. Our right to redeem is dependent on the borrower's ability to
pay principal and interest on demand. Accordingly, our Adviser will
consider and continuously monitor the earning power, cash flow and other
liquidity ratios of the borrower to assess its ability to meet its
obligations on demand. We will invest in these notes only if the Board of
Trustees or its designee determines that they present minimal credit risks
and are of comparable quality to commercial paper having the highest rating
of Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Rating
Services ("Standard & Poor's").
2. Each Portfolio may not invest more than 10% of its assets in time
deposits maturing in more than two business days but less than seven
business days.
3. Each Portfolio will not enter into a repurchase agreement if it would
cause more than 10% of its assets to be subject to repurchase agreements
having a maturity of more than seven days; included in this 10% limitation
would be any illiquid securities (as described below). See "Other
Investment Techniques--Money Market Instruments and Repurchase Agreements."
4. Each Portfolio will not invest more than 10% of its net assets in
illiquid securities. Generally an illiquid security is any security that
cannot be disposed of promptly and in the ordinary course of business at
approximately the amount at which the Portfolio has valued the instrument.
Subject to this limitation, our Trustees have authorized the Portfolio to
invest in restricted securities, specifically privately placed commercial
paper, where such investment is consistent with each Portfolio's investment
objective, and has authorized such securities to be considered to be liquid
to the extent the Adviser determines that there is a liquid institutional
or other daily market for such securities. For example, restricted
securities which may be freely transferred among qualified institutional
buyers pursuant to Rule 144A under the Securities Act of 1933 and for which
a liquid institutional market has developed may be considered to be liquid
securities. See the discussion
4
<PAGE>
relating to the purchase of illiquid securities in the section regarding the
fundamental investment policies of the Portfolios under "Investment Objectives
and Policies" above.
5. The E[bullet]fund(R) will not invest more than 5% of its assets in
variable rate securities.
6. Each Portfolio may not sell short or buy on margin and may not write put
or call options.
Portfolio Quality and Required Maturities. Because the Working Assets Money
Market Portfolio and the E[bullet]fund(R) each uses the amortized cost method of
valuation (see "The Value of Our Shares"), a Portfolio will not purchase any
instruments with a remaining maturity of more than 397 days (13 months), except
for certain exceptions permitted by rules under the 1940 Act. Obligations of
U.S. Government agencies and instrumentalities which have a variable rate of
interest which is adjusted no less frequently than every 762 days are considered
to have a maturity equal to the period remaining until the next adjustment date.
A variable rate instrument which permits us to demand payment of the principal
amount of the instrument at any time or at specified intervals of no more than
397 days (13 months), on no more than 30 days notice, is deemed to have a
maturity of the longer of the period remaining until the interest rate is
adjusted or the period remaining until the principal amount will be paid to us
on demand. A variable rate instrument maturing in 397 days (13 months) or less
is deemed to have a maturity equal to the period remaining until the next
interest adjustment date. A floating rate instrument with a demand feature, and
which has its interest rate pegged to an identified market interest rate, is
deemed to have a maturity equal to the period of time remaining until the
principal amount will be paid to us on demand, provided that our Trustees
determine that the floating rate feature insures that the market value of the
instrument will always approximate par value and that the instrument is of high
quality. Our Trustees will review our holdings of variable rate instruments
quarterly to assure themselves that these instruments continue to be of high
quality. A repurchase agreement is considered to have a maturity equal to the
period remaining until the delivery date on resale. An instrument called for
redemption is considered as maturing on the date on which the redemption payment
must be made. The Working Assets Money Market Portfolio and the E[bullet]fund(R)
will each maintain a dollar-weighted average portfolio maturity that does not
exceed 90 days.
The Working Assets Money Market Portfolio and the E[bullet]fund(R) each
intends to comply with Rule 2a-7 under the 1940 Act. Under that Rule, each
Portfolio may not invest more than 5% of its total assets in the securities of
any one issuer, except for U.S. Government agency securities. In addition, we
may only invest in securities which are rated within the top two rating
categories (or, if unrated, deemed by our Adviser to be of equivalent credit
quality) by at least two nationally recognized statistical rating organizations
("NRSROs") (for single-rated securities, one rating organization will suffice;
for unrated securities, our Adviser may rely on its own credit equivalency
assessment based upon procedures approved by our Trustees). If we do invest in
securities which are not rated in (or, if unrated, not deemed equivalent to) the
highest rating category, we will limit such investments so that no more than 1%
of the total assets of each Portfolio is invested in securities of any one
issuer rated below the highest category. In addition, pursuant to our own credit
procedures, we will not invest in any unrated security or in any security rated
by only one rating organization unless such security is on a list approved by
our Trustees.
Although Rule 2a-7 allows that 5% may be invested in second tier
securities, each Portfolio's policy is to invest 100% in first tier securities
only.
Citizens Income Portfolio The objective of Citizens Income Portfolio is to
provide as high a level of current income as we believe to be consistent with
prudent investment risk. We invest in bonds and other debt securities which meet
our financial and social criteria. We intend to purchase primarily intermediate-
and long-term securities and to maintain a weighted average maturity of 5-15
years. However, at times, we may have a longer or shorter weighted average
maturity if we believe it will help us meet our investment objective.
5
<PAGE>
We plan to invest at least 65% of the value of the Citizens Income
Portfolio's assets in debt securities that are rated BBB or better by a NRSRO
such as Standard & Poor's or Moody's; unrated securities which we believe are
comparable in credit quality to securities rated BBB or better as described
above; obligations issued or guaranteed by the U.S. Government or its agencies
or instrumentalities; mortgages and other asset backed securities; other debt
securities or cash and cash equivalents. Up to 35% of the Citizens Income
Portfolio's total assets may be invested in debt securities which do not have
the investment characteristics described above. Such debt securities could
include convertible debt securities, convertible preferred and preferred stocks
or other securities.
In pursuit of our investment objective we will sometimes purchase
securities that have warrants attached to them. These warrants are typically
held on our books at a zero value, as the value of the warrants can only be
realized upon their exercise (see "Other Investment Techniques--Warrants"). From
time to time, we will also purchase options to buy or sell securities in the
future at values determined by the performance of financial bench marks or
indexes. The use of options can add risk to the Portfolio because the portfolio
manager may determine that exercise of the option will not benefit the Portfolio
and therefore, the amount invested to acquire the option will be lost. We may
also purchase "structured securities," such as interest-only strips or similar
vehicles where one or more of the rights within the underlying securities has
been traded through the financial markets for a different right or series of
rights. The risk associated with "interest-only strips" is that the security may
prepay or default and our ability to collect interest payments will end.
The Citizens Income Portfolio is authorized to purchase the securities
described above from both U.S. and non-U.S. issuers (see "Other Investment
Techniques--Foreign Securities").
Citizens Emerging Growth Portfolio
The objective of the Citizens Emerging Growth Portfolio is aggressive
growth through investment in small and medium sized companies. Up to 100% of
this Portfolio's assets will be invested in companies in the common and
preferred stock of companies with capitalization in the range of $75 million to
$4 billion. While many of these companies will have already demonstrated their
strength, some will be still unseasoned, and therefore may have some speculative
characteristics.
The net asset value of this Portfolio is subject to significant
fluctuation. Smaller companies have the potential for a much higher reward, as
well as significantly more risk. To moderate this risk we plan to typically hold
between 30-50 companies in the Portfolio, under normal conditions.
At times we will also buy short-term fixed income securities for the
Citizens Emerging Growth Portfolio. Since most of the companies we will purchase
are relatively new, we expect dividend income to be negligible to accomplishing
the Portfolio's objective.
Citizens Global Equity Portfolio
The objective of the Citizens Global Equity Portfolio is capital
appreciation by investing in both foreign and U.S. markets. Investing in foreign
companies and on international exchanges may entail greater risk than investing
solely in the United States (see "Other Investment Techniques--Foreign
Securities").
In the Citizens Global Equity Portfolio we buy primarily common stocks of
U.S. domestic and foreign companies. From time to time, we may also buy other
securities such as convertible or preferred stocks and short-term debt
securities. We plan to allocate over half our assets to foreign markets in most
circumstances in a minimum of three countries.
To moderate these risks as well as gain potential benefits we use a number
of investment techniques. The first of these is country selection. We restrict
our investments in emerging nations (those not included in Morgan Stanley's
World Index) to no more than 25% of the assets of Citizens Global Equity
Portfolio.
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<PAGE>
When we invest on foreign exchanges we buy securities in the currency of
the local country. Often the local currency will fluctuate vs. the dollar. To
moderate this risk we engage in currency "hedging" when we feel it is
appropriate to protect the value of our portfolio. We do this by entering into
arrangements to buy or sell a particular currency, security, or securities index
for a stated value at a given point in time. Hedging strategies, if successful,
can reduce the risk of loss by wholly or partially offsetting the negative
effect of unfavorable price movements in the investment being hedged. While
there is a cost involved in hedging, we believe it allows us to moderate the
risk of currency exchange. However, hedging strategies can also reduce the
opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments (see "Other Investment Techniques--Options
Transactions").
Citizens Index Portfolio
The objective of the Citizens Index Portfolio is long-term capital
appreciation.
The Citizens Index Portfolio invests primarily in the securities comprising
the Citizens Index, a market weighted index of companies included in the
Standard & Poor's Composite Index of 500 Stocks ("S&P 500") that have passed
Citizens' social screens in addition to companies that are not part of the S&P
500 but which pass our social and financial screens. Companies outside the S&P
500 are included in the Citizens Index to add industry diversity and other
financial characteristics that we believe will enable the Index to track the
returns of the S&P 500 as a whole.
Securities will be purchased in a proportion approximately equal to the
weight of each company to the total Index. At times we will also buy short-term
fixed income securities for the Citizens Index Portfolio. Under normal
circumstances these short-term investments will amount to no more than 5% of the
Portfolio's total assets. Our investment results will usually lag the
performance of the underlying Citizens Index due to short-term cash investments
and the deduction of portfolio expenses and transaction costs.
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Other Investment Techniques
Money Market Instruments and Repurchase Agreements
During periods of unusual market conditions, or for liquidity purposes or
pending the investment of the proceeds of the sale of its shares, we may invest
all or a portion of assets of the Citizens Income Portfolio, Citizens Emerging
Growth Portfolio, Citizens Global Equity Portfolio, Citizens Index Portfolio,
the E[bullet]fund(R) and Working Assets Money Market Portfolio in money market
instruments, including: obligations of agencies and instrumentalities of the
U.S. Government; certificates of deposit of banks; and commercial paper or other
corporate notes of investment grade quality. We may also buy such securities
subject to repurchase agreements with primary dealers or banks which are members
of the Federal Reserve, secured by instruments issued or guaranteed by the
agencies or instrumentalities of the U.S. Government, the values including
accrued interest, or which are equal to or greater than the repurchase price
agreed to be paid by the seller. The repurchase price may be higher than the
purchase price, the difference being income to the Portfolio, or the purchase
and repurchase prices may be the same, with interest at a standard rate due to
the Portfolio together with the repurchase price on repurchase. In either case,
the income to the Portfolio is unrelated to the interest rate on securities
collateralizing the repurchase. In the event of bankruptcy or other default by
the vendor of a repurchase agreement, there may be possible delays and expenses
in liquidating the resold securities, decline in the value of the resold
securities and loss of principal or interest. However, in the opinion of
management, these risks are not material; upon default, the resold securities
constitute collateral for the repurchase obligation.
7
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Options Transactions
Each Portfolio, other than Working Assets Money Market Portfolio and the
E[bullet]fund(R), may from time to time buy and write (sell) call and put
options on securities, security indices, and foreign currencies that are traded
on recognized securities exchanges and over-the-counter markets. A call option
gives the holder (buyer) the right to purchase a security or currency at a
specified price (the exercise price) at any time until or on a certain date (the
expiration date). A put option gives the purchaser of the option the right to
sell, and the writer (seller) the obligation to buy, the underlying security or
currency at the exercise price at any time until or on the expiration date. The
premium that a Portfolio receives for buying or writing a call or put option is
deemed to constitute the market value of an option. Aggregate premiums paid for
put and call options will not exceed 5% of the Portfolio's total assets at the
time of each purchase. The premium that a Portfolio will receive from writing a
call option will reflect, among other things, the current market price of the
underlying investment, the relationship of the exercise price to such market
price, the historical price volatility of the underlying investment, and the
length of the option period. These instruments are often referred to as
"derivatives" which may be defined as financial instruments whose performance is
derived, at least in part, from the performance of another asset (such as a
security, currency or an index of securities). The Portfolios may use these
techniques to hedge against changes in interest rates, foreign currency exchange
rates, changes in securities prices or other factors affecting the value of
their investments, or as part of their overall investment strategies. Each
Portfolio will maintain segregated accounts consisting of liquid assets (or, as
permitted by applicable regulations, enter into certain offsetting positions to
cover its obligations under derivatives transactions) to avoid "leveraging" the
Portfolio.
Risks in the use of these derivative securities depends on the Adviser's
ability to predict correctly the direction of interest rates, securities prices
or other factors. Risks include: a) the risk that interest rates, securities
prices or other factors do not move in the directions being hedged against, in
which case the Portfolio will have incurred the cost of the derivative (either
its purchase price or, by writing an option, losing the opportunity to profit
from increases in the value of the securities covered) with no tangible
benefits; b) an imperfect correlation between the price of derivatives and the
movements of the securities prices, interest rates or currency exchange rates
being hedged; c) the possible absence of a liquid secondary market for any
particular derivative at any time; d) the potential loss if the counterparty to
the transaction does not perform as promised; and e) the possible need to defer
closing out certain positions to avoid adverse tax consequences.
Warrants
Citizens Income Portfolio may invest in warrants. Warrants are instruments
which entitle the holder to buy underlying equity securities at a specific price
for a specific period of time. A warrant tends to be more volatile than its
underlying securities and ceases to have value if it is not exercised prior to
its expiration date. In addition, changes in the value of a warrant do not
necessarily correspond to changes in the value of the underlying securities.
Foreign Securities
Each Portfolio, other than the E[bullet]fund(R), may invest in foreign
securities which meet our social and financial criteria. As discussed in the
Prospectus, investing in foreign securities generally presents a greater degree
of risk than investing in domestic securities due to possible exchange rate
fluctuations, less publicly available information, more volatile markets, less
securities regulation, less favorable tax provisions, war or expropriation. As a
result of its investments in foreign securities, a Portfolio may receive
interest or dividend payments, or the proceeds of the sale or redemption of such
securities, in the foreign currencies in which such securities are denominated.
Under certain circumstances, such as where we believe that the applicable
exchange rate is unfavorable at the time the currencies are received or we
anticipate, for any other reason, that the exchange rate will improve, a
Portfolio may hold such currencies for an indefinite period of time. A Portfolio
may also hold foreign currency in anticipation of purchasing foreign securities.
While the holding of currencies will permit the Portfolio to take advantage of
favorable movements in the applicable exchange rate, such strategy also exposes
the Portfolio to risk of loss if exchange rates move in a direction adverse to
the Portfolio's position. Such losses could reduce
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any profits or increase any losses sustained by the Portfolio from the sale or
redemption of securities and could reduce the dollar value of interest or
dividend payments received.
When-Issued Securities
Each Portfolio, other than the Working Assets Money Market Portfolio and
the E[bullet]fund(R), may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, in many cases, a Portfolio
purchasing securities on a when-issued basis, will take delivery of such
securities. When a Portfolio commits to purchase a security on a when-issued or
on a forward delivery basis, it will set up procedures consistent with current
policies of the Securities and Exchange Commission (the "SEC") concerning such
purchases. Since that policy currently recommends that an amount of a fund's
assets equal to the amount of the purchase be held aside or segregated to be
used to pay for the commitment, we intend that a Portfolio will always have
cash, short-term money market instruments or high quality debt securities
sufficient to cover any commitments or to limit any potential risk. However,
although we do not intend to make such purchases for speculative purposes and we
intend to adhere to current regulatory policies with respect to such purchases,
purchases of securities on such bases may involve more risk than other types of
purchases. For example, we may have to sell assets which have been set aside to
cover our commitments in order to meet redemptions. Also, if we were to
determine that it is necessary to sell the when-issued or forward delivery
securities before delivery to a Portfolio, the Portfolio may incur a loss
because of market fluctuations since the time the commitment to purchase such
securities was made. When the time comes to pay for when-issued or forward
delivery securities, a Portfolio will meet its obligations from the
then-available cash flow on the sale of securities, or, although it would not
normally expect to do so, from the sale of the when-issued or forward delivery
securities themselves (which may have a value greater or less than the
Portfolio's payment obligation).
- -------------------------------------------------------------------------------
Factors That Affect the Value of Our Investments
Money Market Instruments and Fixed Income Securities
The value of the fixed income securities in which we invest will fluctuate
depending in large part on changes in prevailing interest rates. Fixed income
securities comprise all assets in the Working Assets Money Market Portfolio, the
E[bullet]fund(R) and Citizens Income Portfolio and a portion of assets in the
Citizens Emerging Growth Portfolio, Citizens Index Portfolio and Citizens Global
Equity Portfolio under normal conditions. If these rates go up after we buy a
security, its value may go down. On the other hand, if the rates go down, the
security's value may go up. Changes in value and yield based on changes in
interest rate may have different effects on short-term obligations than on
long-term obligations. Long-term obligations, which often have higher yields,
may fluctuate in value more than short-term ones. We do not expect changes in
interest rates to significantly affect the value of our shares in the Working
Assets Money Market Portfolio and the E[bullet]fund(R), since we use the
amortized cost method, which is described in the section "The Value of Our
Shares." However, changes in interest rates can have a significant effect on the
value of non-money market fixed income securities.
The value of equity securities held in the Citizens Emerging Growth, Global
Equity and Index Portfolios will fluctuate based upon market conditions and
issues specific to the issuer. These include changes in the management and
fundamental financial condition of the issuing company, prevailing economic and
competitive conditions in the industry sectors in which the company does
business and other factors which affect individual securities and the equity
market as a whole.
- -------------------------------------------------------------------------------
Turnover and Portfolio Transactions
With regard to the Working Assets Money Market Portfolio and the
E[bullet]fund(R), we generally purchase investments and hold them until they
mature. Historically, securities of U.S. Government agencies or
instrumentalities have involved minimal risk when they have been held by
investors to maturity. However, we may from time to time sell securities and
purchase others to attempt to take
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<PAGE>
advantage of short-term market variations. We may also sell securities prior to
maturity to meet redemptions or as a result of a revised evaluation of the
issuer by our Adviser.
For the Citizens Income Portfolio we purchase fixed income securities and
for Citizens Emerging Growth Portfolio, Citizens Global Equity Portfolio and the
Citizens Index Portfolio, we may purchase both equity and fixed income
securities and hold them until such time as we believe it is advisable to sell
them in order to realize a gain or loss whereupon we reinvest these assets in
other securities.
Portfolio turnover rates will vary, depending on the type of fund and its
particular investment objective. For example, the Citizens Index Portfolio seeks
to have a turnover rate of less than 25% per year, whereas the Global Equity
Portfolio's turnover rate may be in the vicinity of 200%. Higher portfolio
turnover rates increase transaction costs and may increase taxable gains. For
the fiscal years ended June 30, 1996 and 1997, the Portfolios had the following
portfolio turnover rates: Citizens Income Portfolio -- 41.36% and 64.56%;
Citizens Emerging Growth Portfolio -- 337.41% and 228.66%; Citizens Global
Equity Portfolio -- 85.92% and 69.34%; Citizens Index Portfolio -- 6.44% and
18.64%, respectively.
Our Adviser seeks to obtain for us the best net price and the most
favorable execution of orders. Purchases are made from issuers, underwriters,
dealers or brokers, and banks who specialize in the types of securities we buy.
Purchases from underwriters include a commission or concession paid by the
issuer to the underwriters. Purchases from dealers include the spread between
the bid and asked prices and purchase from brokers include commissions paid to
the broker based upon the transaction size. If the execution and price offered
by more than one dealer are comparable, the order may be given to a dealer who
has provided research advice, quotations on portfolio securities or other
services. Our Adviser will comply with Rule 17e-1 under the 1940 Act in regards
to brokerage transactions with affiliates, to assure that commissions will be
fair and reasonable to the shareholders.
Our Adviser may allocate transactions to broker/dealers in exchange for
services. By allocating transactions to obtain services, the Adviser is able to
supplement its own efforts. While it is not possible to place a dollar value on
these services, it is the opinion of the Adviser that the receipt of these
services does not materially reduce the Adviser's overall expenses. These
services may or may not be useful to us or to our Adviser and its affiliates
which engage in securities activities. For the fiscal years ended June 30, 1995,
1996 and 1997, all portfolio purchases, as described above, were made directly
from issuers or from dealers, and we paid commissions in aggregate as follows:
1995-$250,000, 1996-$171,957 and 1997-$323,948.
It is the policy of Citizens Advisers and the Trust to seek to obtain the
benefit of "soft dollar" payments for a Portfolio when consistent with obtaining
best execution and the best execution policy and when doing so is within the
"safe harbor" created by Section 28(e) of the Securities Exchange Act of 1934.
To that end, Citizens Advisers will maintain an account for each Portfolio with
one or more broker-dealers which agree to provide or pay for third-party
research which benefits the Portfolio. Sub-advisers will be informed in writing
of the name of the broker-dealer and provided with account information to allow
the execution of trades through that broker-dealer. In the event that best
execution of an equity transaction is available through a broker-dealer which
has been so identified, a sub-adviser shall place the transaction with that
broker-dealer. No transactions shall be placed with such broker-dealer other
than on an agency basis.
Any "soft dollars" generated in this fashion shall be used solely to
purchase research, within the meaning of Section 28(e), which benefits the
Portfolio on whose behalf the transaction is made. For these purposes, research
means that which provides assistance to Citizens Advisers, or a sub-adviser, in
the performance of decision making responsibilities. If a product or service
serves non-research as well as research functions, "soft dollars" shall be used
to pay for the product or service only to the extent that it constitutes
research.
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The Value of Our Shares
The value of our shares is expressed as net asset value. The net asset
value per share is computed by subtracting total liabilities from total assets
and dividing that number by the total number of our outstanding shares. All
expenses are accrued daily and taken into account in determining net asset
value.
We attempt to keep the net asset value of our Working Assets Money Market
Portfolio and the E[bullet]fund(R) fixed at $1.00 per share, while we expect the
net asset value per share in our other Portfolios to fluctuate.
The value of our shares for each Portfolio, other than the Working Assets
Money Market Portfolio and the E[bullet]fund(R), is determined at the time the
New York Stock Exchange closes on each day on which the New York Stock Exchange
is open for regular trading and at such other times as we feel may be necessary
or appropriate.
The value of our shares for the Working Assets Money Market Portfolio and
the E[bullet]fund(R) is determined at 4:00 p.m. Eastern Time on each day that
the Portfolios are open. The Portfolios are currently open on each day, Monday
through Friday, except New Year's Day, Martin Luther King, Jr's. Birthday
(observed), Presidents' Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, the
Friday following Thanksgiving Day and Christmas Day.
Working Assets Money Market Portfolio and the E[bullet]fund(R)
Our Trustees have determined that it is appropriate for us to value our
Working Assets Money Market Portfolio and the E[bullet]fund(R) using the
amortized cost method and that this method represents the fair value of each
Portfolio's shares. This method values a security at the time of its purchase at
cost and thereafter assumes a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the security. This method does not take into account unrealized gains
and losses.
While the amortized cost method provides certainty in valuation, there may
be periods during which value, as determined by the amortized cost method, is
higher or lower than the price we would receive if we sold the instrument.
During periods of declining interest rates, the daily yield on our shares may
tend to be higher than a like computation made by a fund with identical
investments which uses a method of valuation based on market prices and which
reflects capital changes in its dividends. Thus, if the use of amortized cost by
us resulted in a lower aggregate portfolio value on a particular day, a
prospective investor in our shares would be able to obtain a somewhat higher
yield from us than he would from investment in the other fund, and existing
investors in our shares would receive less investment income. The converse would
apply in a period of rising interest rates.
To use the amortized cost method, our Board of Trustees must establish
procedures designed to stabilize the net asset value of the Working Assets Money
Market Portfolio and the E[bullet]fund(R) at $1.00 per share, to the extent
reasonably possible. These procedures must include review of the Portfolio by
the Board at intervals it deems appropriate and reasonable in the light of
market conditions to determine how much the net asset value using available
market quotations deviates from the net asset value based on amortized cost. For
this purpose, when market quotations are available, securities are valued at bid
price. If market quotations are not available, investments are valued at their
fair value as determined in good faith under procedures established by and under
the general supervision and responsibility of our Board of Trustees, including
being valued at prices based on market quotations for investments of similar
type, yield and maturity.
Under the procedures which our Trustees have adopted in connection with
valuation of our securities at amortized cost, our dividend policy will change
under certain circumstances. If on any day
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<PAGE>
there is a deviation of more than 3/10th of 1% between the net asset value of a
share computed on the amortized cost basis and that computed on an available
market price basis, the amount of the deviation in excess of $0.003 will be
added to or subtracted from the dividend for that day in order to reduce the
deviation to within $0.003. If on any day the dividend is not large enough to
absorb any such reduction and the deviation is more than $0.005, our Board will
be required, under a rule of the SEC, to consider taking other action. Such
action could include the sale of portfolio securities, reducing or eliminating
dividends or establishing a net asset value per share based on market
quotations.
To use the amortized cost method, we must also limit our portfolio
investments, including repurchase agreements, to those U.S. dollar denominated
instruments which our Board of Trustees determines present minimal credit risks
and which are of "high quality," e.g., portfolio investments rated in one of the
top two rating categories by at least two rating organizations or, if not rated
or created by only one rating agency, are of comparable quality in the judgment
of our Adviser and Trustees. A rated instrument that is subject to some external
agreement (such as a bank letter of credit), which agreement was not considered
in rating the instrument, is considered unrated and the Board of Trustees and
our Adviser will determine whether the external agreement makes the instrument
of comparable quality.
Citizens Income Portfolio, Citizens Emerging Growth Portfolio, Citizens
Global Equity Portfolio and the Citizens Index Portfolio
As described in the Prospectus, the Citizens Income Portfolio, Citizens
Emerging Growth Portfolio, Citizens Global Equity Portfolio and Citizens Index
Portfolio are generally valued on the basis of market values. Equity securities,
if any, in a Portfolio are valued at the last sales price on the exchange on
which they are primarily traded or on the NASDAQ system for unlisted national
market issues, or at the last quoted bid price for listed securities in which
there were no sales during the day or for unlisted securities not reported on
the NASDAQ system. Debt securities are generally valued at their most recent
closing sale prices, or, if there is no closing sale price, at the bid price, in
the principal market in which such securities are normally traded. Fixed income
securities maturing within 60 days are normally valued at cost, plus or minus
any amortized discount or premium. Securities and other assets for which market
quotations are not readily available (including restricted securities, if any)
are appraised at their fair value as determined in good faith under consistently
applied procedures under the general supervision of the Fund's Board of
Trustees.
Securities may also be valued on the basis of valuations furnished by a
pricing service that uses both dealer supplied valuations and evaluation based
upon expert analysis of market data or other factors if such valuations are
believed to reflect more accurately the fair value of such securities.
Use of a pricing service has been approved by the Fund's Board of Trustees.
There are a number of pricing services available, and the Trustees and officers
of the Fund acting on behalf of the Trustees, may use or discontinue the use of
any pricing service now, or in the future, employed.
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Information About Our Yield and Total Return
We report the investment performance of each Portfolio in several ways. All
performance reported in advertisements is historical and not intended to
indicate future returns.
Yield
From time to time the "yield" and "compounded effective yield" of the
Portfolios may be published in advertisements and sales material. For the
Working Assets Money Market Portfolio and the E[bullet]fund(R), the yield is
usually quoted for a seven day period. For Citizens Income Portfolio we usually
report for a 30 day period.
Current yield is determined by dividing the net investment income per share
earned during a 30-day base period by the maximum offering price per share on
the last day of the period and annualizing
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<PAGE>
the result. Expenses accrued for the period include any fees charged to all
shareholders during the base period.
Our yield is calculated by using the SEC formula:
Yield = 2[ (a-b + 1)(6) - 1]
--------------
cd
where:
a = interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that were
entitled to receive income distributions
d = the maximum offering price per share on the last day of the period
Compounded effective yield, which we may also quote, is determined by
taking the base period return (computed as described above) and calculating the
effect of assumed compounding.
The formula for effective yield is:
[ (base period return + 1) 365/7 - 1]
Current yield and effective yield which are calculated according to a
formula prescribed by the SEC are not indicative of the amounts that actually
may be paid to our shareholders. Amounts paid to shareholders are reflected in
the quoted current distribution rate. The current distribution rate is computed
by dividing the total amount of dividends per share we paid during the past
twelve months by a current maximum offering price. Under certain circumstances,
such as when there has been a change in the amount of dividend payout, or a
fundamental change in investment policies, it might be appropriate to annualize
the dividends paid over the period such policies were in effect, rather than
using the dividends during the past twelve months. The current distribution rate
differs from the current yield computation because it may include distributions
to shareholders from additional sources (i.e., sources other than dividends and
interest, such as short-term capital gains), and is calculated over a different
period of time.
The following table sets forth various measures of performance for the
Portfolios as of June 30, 1997:
Portfolio 7-Day Yield Effective Yield 30-Day Yield
--------- ----------- --------------- ------------
Working Assets Money Market 4.44% 4.54% NA
Portfolio (Retail Class)
Working Assets Money Market 5.09% 5.22% NA
Portfolio (Institutional Class)
E[bullet]fund(R) 5.71%* 5.87%* NA
Citizens Income Portfolio NA NA 6.74%
* These figures include waivers and reimbursements, without which the
E[bullet]fund(R)'s 7-day yield would have been 4.24% and its effective yield
would have been 4.40%
The current yield of the Working Assets Money Market Portfolio and the
E[bullet]fund(R) for a specific period of time is calculated based on a
hypothetical account containing exactly one share at the beginning of the
period. The net change in the value of the account during the period is
determined by subtracting this beginning value from the value of the account at
the end of the period including a hypothetical charge reflecting deductions from
shareholder accounts. Capital changes (i.e., realized gains
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<PAGE>
and losses from the sale of securities and unrealized appreciation and
depreciation) are excluded from the calculation. Because the change will not
reflect any capital changes, the dividends used in the yield computation may not
be the same as the dividends actually declared. The dividends used in the yield
calculation will be those which would have been declared if there had been no
capital changes included in our actual dividends. The net change in the account
value is then divided by the value of the account at the beginning of the period
and the resulting figure is called the "base period return." The base period
return is then multiplied by (365/7) for a seven day effective yield with the
resulting yield figure carried to the nearest hundredth of one percent.
The "compounded effective yield" for the Working Assets Money Market
Portfolio and the E[bullet]fund(R) is determined by annualizing the base period
return and assuming that dividends earned are reinvested daily. Compounded
effective yield is calculated by adding 1 to the base period return (which is
derived in the same manner as discussed above) raising the sum to a power equal
to 365 divided by 7 and subtracting 1 from the result.
Compounded effective yield information is useful to investors in reviewing
the performance of our Working Assets Money Market Portfolio and the
E[bullet]fund(R) since the yield is calculated on the same basis as those of
other money market funds. However, shareholders should take a number of factors
into account in using our yield information as a basis for comparison with other
investments.
Since the Working Assets Money Market Portfolio and the E[bullet]fund(R)
are invested in short-term money market instruments, our yield will fluctuate
with money market rates. Therefore, the compounded effective yield is not an
indication of future yields. Other investment alternatives such as savings
certificates provide a fixed yield if held full term, but there may be penalties
if redeemed before maturity, whereas there is no penalty for withdrawal at any
time in the case of our Portfolios.
The yield quotation for the Citizens Income Portfolio is based on the
annualized net investment income per share of the Portfolio over a 30 day
period. The yield is calculated by dividing the net investment income per share
of the Portfolio earned during the period by the public offering price per share
of the Portfolio on the last day of that period. The resulting figure is then
annualized. Net investment income per share is determined by dividing (i) the
dividends and interest earned by the Portfolio during the period, minus accrued
expenses for the period, by (ii) the average number of the Portfolio's shares
entitled to receive dividends during the period multiplied by the public
offering price per share on the last day of the period. Income is calculated for
the purposes of yield calculations in accordance with standardized methods
applicable to all stock and bond funds. In general, interest income is reduced
with respect to bonds trading at a premium over their par value by subtracting a
portion of the premium from income on a daily basis and is increased with
respect to bonds trading at a discount by adding a portion of the discount to
daily income. Capital gains and losses are generally excluded from the
calculation as these are reflected in the Portfolio's net asset value per share.
Total Return and Other Quotations
We also can express the investment results in terms of "total return." We
do this for the Citizens Income Portfolio, Citizens Emerging Growth Portfolio,
Citizens Global Equity Portfolio and Citizens Index Portfolio to take account of
fluctuations in share value in addition to income from interest and dividends.
Total return refers to the total change in value of an investment in the
Portfolio over a specified period, while the yield calculation only reflects the
income component.
We compute total return by taking the total number of shares purchased by a
hypothetical $1,000 investment after deducting any applicable sales charge,
adding all additional shares purchased within the period with reinvested
dividends and distributions, calculating the value of these shares at the end of
the period, and dividing the result by the initial $1,000 investment. For
periods of more than one year, we adjust the cumulative total return to
calculate average annual total return during that period.
These figures will be calculated according to the SEC formula:
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<PAGE>
P(1 + T)(n) = ERV
where:
P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year
periods
For the period ended June 30, 1997 the Portfolios had the following
performance:
Hypothetical
Investment
Average Annual Return on $1,000
1 Year 5 Year Total Return for the
Portfolio Total Return Total Return Since Inception 1 Year Period
- -------- ------------ ------------ --------------- ---------------
Citizens Income 9.56% 7.03% 7.12% $1,095.60
Portfolio (6/10/92)
Citizens Emerging 4.03% N/A 19.18% $1,040.30
Growth Portfolio (2/8/94)
Citizens Global 21.70% N/A 12.11% $1,217.00
Equity Portfolio (2/8/94)
Citizens Index 35.89% N/A 29.77% $1,358.90
Portfolio (3/3/95)
(Retail Class)
Citizens Index 35.89% N/A 33.10% $1,368.30
Portfolio (1/25/96)
(Institutional Class)
When we quote each Portfolio's yield or total return we are referring to
its past results and not predicting our future performance. We quote total
return for the most recent one year period as well as average annual total
return for the most recent five- and ten-year periods, or from the time when we
first offered shares, whichever is shorter. Sometimes we advertise our actual
return quotations for annual or quarterly periods or quote cumulative return for
various periods. When we do this, we also always present the standardized total
return quotations at the same time.
When we quote our investment results we sometimes will compare them to
unmanaged market indices such as the Dow Jones Industrial Average and the S&P
500, and other data and rankings from recognized independent publishers, sources
such as Donoghue's Money Fund Report, Money Magazine, Mutual Funds Magazine,
Kiplinger's Personal Finance Magazine, Co-Op America Quarterly, The Green Money
Journal, Bloomberg News, Morningstar, Inc., Lipper Analytical Services and
others.
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Dividends and Distributions
Working Assets Money Market Portfolio and the E[bullet]fund(R)
As described in the Prospectus, net income is determined and accrued daily
and paid monthly. This dividend is payable to everyone who was a shareholder at
4:00 p.m. Eastern time on the day the dividend is declared. Accordingly, when
shares are purchased dividends begin to accrue on the day the Transfer
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<PAGE>
Agent receives payment for the shares, provided that the payment is received by
4:00 p.m. Eastern time. When shares are redeemed, the shares are entitled to the
dividend declared on the day the redemption request is received by the Transfer
Agent, provided that the request is received after 4:00 p.m. Eastern time.
Dividends are automatically reinvested in shares, at net asset value, unless a
shareholder otherwise instructs the Transfer Agent in writing. Shareholders so
requesting will be mailed checks in the amount of the accumulated dividends. For
the purpose of calculating dividends, our daily net investment income consists
of: (a) all interest income accrued on investments (including any discount or
premium ratably amortized to the date of maturity or determined in such other
manner as the Trustees may determine); and (b) minus all liabilities accrued,
including interest, taxes and other expense items, amounts determined and
declared as dividends or distributions and reserves for contingent or
undetermined liabilities, all determined in accordance with generally accepted
accounting principles; and (c) plus or minus all realized and unrealized gains
or losses on investments.
Citizens Income Portfolio
The Citizens Income Portfolio distributes to its shareholders monthly
dividends substantially equal to all of its net investment income. The
Portfolio's net investment income consists of non-capital gain income less
expenses. Net realized short-term capital gains, if any, and net realized
long-term capital gains, if any, will be distributed by the Portfolio at least
annually. Dividends and capital gains distributions are automatically reinvested
at net asset value in additional shares, unless a shareholder elects cash
distributions. Cash distributions will be paid at the close of the appropriate
monthly or annual period.
Citizens Emerging Growth Portfolio, Citizens Global Equity Portfolio and
Citizens Index Portfolio
The Citizens Emerging Growth Portfolio, Citizens Global Equity Portfolio
and the Citizens Index Portfolio normally declare and pay dividends
substantially equal to all net investment income annually. Net investment income
consists of non-capital gain income less expenses. Net realized short-term
capital gains, if any, and net realized long-term capital gains, if any, will be
distributed by the Portfolios at least annually. Dividends and capital gains
distributions are automatically reinvested at net asset value in additional
shares, unless a shareholder elects cash distributions. Cash distributions will
be paid annually.
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Federal Taxes
Status as a "Regulated Investment Company"
Each of the Portfolios has elected to be treated and intends to qualify as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). We plan to continue this election in the
future for all Portfolios of the Fund.
To qualify for the tax treatment afforded a "regulated investment company"
under the Code, a Portfolio must annually distribute at least 90% of its net
investment income and net short-term capital gains and meet certain requirements
with respect to sources of income, diversification of assets, and distributions
to shareholders. If a Portfolio elects and qualifies for such tax treatment, the
Portfolio will not be subject to federal income tax with respect to amounts
distributed. Under current law, in order to qualify, a Portfolio must (a) derive
at least 90% of its gross income from dividends, interest, payments with respect
to securities loans, gains from the sale or other disposition of stock or
securities, and income from certain other sources; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. Government
securities, and other securities, limited, in respect of any one issuer, to an
amount not greater than 5% of the fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities).
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<PAGE>
A Portfolio that qualifies as a "regulated investment company" may
nonetheless be subject to certain federal excise taxes unless the Portfolio
meets certain additional distribution requirements. Under the Code, a
nondeductible excise tax of 4% is imposed on the excess of a regulated
investment company's "required distribution" for the calendar year ending within
the regulated investment company's taxable year over the "distributed amount"
for such calendar year. The term "required distribution" means the sum of (i)
98% of ordinary income (generally net investment income) for the calendar year,
(ii) 98% of capital gain net income (both long-term and short-term) for the
one-year period ending on October 31 (as though the one-year period ending on
October 31 were the regulated investment company's taxable year), and (iii) the
excess, if any, of the sum of the taxable income of the regulated investment
company for the previous calendar year plus all amounts from previous years that
were not distributed over the amount actually distributed for such preceding
calendar year. The term "distributed amount" generally means the sum of (i)
amounts actually distributed by a Portfolio from the Portfolio's current year's
ordinary income and capital gain net income and (ii) any amount on which the
Portfolio pays income tax for the year. We intend to meet these distribution
requirements, to avoid the excise tax liability, with respect to each of the
Portfolios. As long as a Portfolio maintains its status as a regulated
investment company and distributes all of its income, the Portfolio will not be
subject to any Massachusetts income or excise tax. If a portfolio should fail to
qualify as a regulated investment company in any year, the Portfolio wold incur
federal and Massachusetts income taxes upon its taxable income and distributions
from the portfolio would generally be taxable as ordinary dividend income to
shareholders.
Distributions of Net Investment Income
Dividends derived from net investment income and any excess of net
short-term capital gains over net long-term capital losses will be taxable to
shareholders as ordinary income. For each of the Portfolios other than Working
Assets Money Market Portfolio, the E[bullet]fund(R) and Citizens Income
Portfolio, a portion of these ordinary income dividends is normally eligible for
the dividends received deduction for corporations if the recipient otherwise
qualified for that deduction with respect to its holding of a Portfolio's
shares. Availability of the deduction to particular corporate shareholders is
subject to certain limitations and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Since the
investment income of the Working Assets Money Market Portfolio, the
E[bullet]fund(R) and Citizens Income Portfolio is derived from interest rather
than dividends, no portion of the dividends received from these Portfolios will
be eligible for the dividends received deduction. Moreover, the portion of any
Portfolio's dividends that is derived from investments in foreign corporations
will not qualify for such deduction. 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 shareholders as long-term capital gains without regard to the
length of time that shareholders have held their shares. It is uncertain at this
time whether all or any part of such capital gains will be eligible to be taxed
at a maximum rate below 28%. Shareholders will be taxed for federal income tax
purposes on dividends in the same manner whether such dividends are received as
shares or in cash. Any dividend that is declared in October, November or
December of any calendar year, that is payable to shareholders of record in such
a month and that is paid the following January, will be treated as if received
by shareholders on December 31 of the year in which the dividend is declared.
Any dividend or distribution from a Portfolio other than the Working Assets
Money Market Portfolio and the E[bullet]fund(R) will have the effect of reducing
the per share net asset value of shares in the Portfolio by the amount of the
dividend or distribution. Shareholders purchasing shares in such a Portfolio
shortly before the record date of any taxable dividend or other distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares
of a Portfolio by a shareholder that holds such shares as a capital asset will
be treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss;
individual shareholders who realize a long-term capital gain on the sale of
shares may be eligible
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for reduced tax rates if the shares were held for more than 18 months. However,
any loss realized upon a disposition of the shares in a Portfolio held for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon disposition of shares may also be disallowed under the rules
relating to wash sales.
Special tax considerations apply with respect to foreign investments of
those Portfolios which permit such investments. For example, foreign exchange
gains and losses realized by a Portfolio generally will be treated as ordinary
income or losses. In addition, investment income received by a Portfolio from
sources within foreign countries may be subject to foreign income taxes withheld
at the source; none of the Portfolios other than the Global Equity Portfolio
expects to be able to pass through to shareholders foreign tax credits with
respect to such foreign taxes. If the Global Equity Portfolio holds more than
50% of its assets in foreign stock and securities at the close of its taxable
year, it may elect to "pass through" to its shareholders foreign income taxes
paid. If the Global Equity Portfolio so elects, its shareholders will be
required to treat their pro rata portions of the foreign income taxes paid by
the Portfolio as part of the amounts distributed by them from the Portfolio and
thus includable in their gross income for federal income tax purposes.
Shareholders who itemize deductions would then be allowed to claim a deduction
or credit (but not both) on their federal income tax returns for such amounts,
subject to certain limitations. Shareholders who do not itemize deductions would
(subject to such limitations) be able to claim a credit but not a deduction. No
deduction for such amounts will be permitted to individuals in computing their
alternative minimum tax liability. If the Global Equity Portfolio does not
qualify or elect to "pass through" to its shareholders foreign income taxes that
it pays, shareholders will not be able to claim any deduction or credit for any
part of such taxes. The United States has entered into tax treaties with many
foreign countries which may entitle a Portfolio to a reduced rate of tax or an
exemption from tax on foreign income.
Non-U.S. Shareholders
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The Portfolios
intend to withhold U.S. federal income tax at the rate of 30% (or at such lower
rate as may be permitted under an applicable treaty) on taxable dividends and
other payments to Non-U.S. Persons that are subject to such withholding. Any
amounts overwithheld may be recovered by such persons by filing a claim for
refund with the U.S. Internal Revenue Service within the time period appropriate
to such claims. Distributions from a Portfolio to a Non-U.S. Person also may be
subject to tax under the laws of the Non-U.S. Person's jurisdiction.
The Portfolios are also required in certain circumstances to apply backup
withholding at the rate of 31% on taxable dividends and (except in the case of
the Working Assets Money Market Portfolio and the E(Fund(R)) redemption proceeds
paid to any shareholder (including a Non-U.S. Person) who does not furnish to
the Portfolio certain information and certifications or who is otherwise subject
to backup withholding. Backup withholding will not, however, be applied to
payments that have been subject to 30% withholding.
The foregoing is limited to a discussion of federal taxation. It should not
be viewed as a comprehensive discussion of the items referred to nor as covering
all provisions relevant to investors. Dividends and distributions may also be
subject to state or local taxes. Shareholders should consult their own tax
advisers for additional details on their particular tax status.
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Redemption Information
The redemption information below supplements the information contained in
the Prospectus. We pay redemption proceeds within five business days after we
receive a proper redemption request. Our obligation to pay for redemptions can
be suspended when the New York Stock Exchange is closed other than for weekends
or holidays or under certain emergency conditions determined by the SEC. The
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holidays on which the New York Stock Exchange is closed currently are: New
Year's Day, Martin Luther King, Jr's. Birthday (observed), Presidents' Day
(observed), Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. In addition, to the above mentioned
holidays, Working Assets Money Market Portfolio and the E[bullet]fund(R) are
also closed on Columbus Day and Veterans Day. All funds are closed on the Friday
following Thanksgiving Day. We pay redemption proceeds in cash, except that our
Board of Trustees has the power to decide that conditions exist which would make
cash payments undesirable. In that case, we could send redemption payments in
securities from our portfolio, valued in the same method as we used to determine
our net asset value. There might then be brokerage or other costs to the
shareholder in selling these securities. We have elected to be governed by Rule
18f-1 under the 1940 Act, which requires us to redeem shares solely in cash up
to the lesser of $250,000 or 1% of our total net assets during any 90 day period
for any one shareholder. Your redemption proceeds may be more or less than your
cost, depending on the value or our shares.
If any of the shares being redeemed were recently purchased by check or
electronic funds transfer, we may delay sending the redemption proceeds for up
to seven business days while we determine whether the check or electronic funds
transfer used to purchase the shares has been honored by the bank on which it
was drawn or made. You can eliminate any possible delay by making your
investment by wire.
We have the right to compel the redemption of shares of each Portfolio,
other than the E[bullet]fund(R), held in an amount if the aggregate net asset
value of the shares in the account is less than $2,500. If our Adviser decides
to do this, we will advise shareholders who would be affected to increase the
size of their accounts to the $2,500 minimum.
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Trustees and Officers
We have a Board of Trustees which provides broad supervision over our
affairs. Our officers are elected by the Board and are responsible for day to
day operations. The Trustees and officers are listed below, together with their
date of birth and principal occupations during at least the past five years.
(Their titles may have varied during that period.) The address of each, except
where an address is indicated, is One Harbour Place, Portsmouth, New Hampshire
03801.
The Trustees who are "interested persons," as defined in the 1940 Act
("Interested Trustees"), are indicated by an asterisk.
Azie Taylor Morton (2/1/36), Chair of the Board 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 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. From 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.
William D. Glenn, II (9/9/48), 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. Services Chemical Dependency Recovery Center.
Address: 915 Las Ovejas, San Rafael, California 94903.
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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. Please see the section entitled "Additional
Information Regarding The Management Company" for more information regarding Ms.
Collier.
Juliana Eades (2/2/53), Trustee, has served as Executive Director 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 and the Society for the Protection of New Hampshire Forests. 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 Trustee 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., a minority-owned 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 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: 5416 Delette Avenue South, Gulfport, Florida 33707.
Our Board of Trustees functions with a Nominating Committee comprised of
the whole Board, but pursuant to our Distribution Plan (see "Our Distributor")
below, we have agreed that Trustees who are not "interested persons" of the
Fund, 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 Fund for services provided through June 30, 1997.
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CITIZENS INVESTMENT TRUST - COMPENSATION TABLE
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Name of Person and Position Aggregate Compensation from The Fund
Azie Taylor Morton $4,514.80
Juliana Eades $4,500.00
William D. Glenn, Jr. $6,304.90
Ada Sanchez $4,000.00
Lokelani Devone $3,500.00
Sophia Collier* 0
J.D. Nelson* 0
Wilma Mankiller** $ 500.00
* Sophia Collier and J.D. Nelson are Interested Trustees and received no
compensation from Citizens Trust.
** Wilma Mankiller is no longer a Trustee.
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The Trustees who are not "interested persons" received aggregate fees from
us of $23,319.70 for services provided through June 30, 1997 and were also
reimbursed for out-of-pocket expenses. Our Trustees and officers as a group
owned less than 1% of our outstanding shares as of October 29,1997.
Other Officers of The Fund
Crescentia True (12/16/63) Vice President, is the Vice President and
Director of Operations of Citizens Advisers, where she has been employed since
1994. Susan Barry, (5/21/63) Treasurer, is Controller of Citizens Advisers where
she has been employed since 1992. Joseph F. Keefe (9/30/53), Secretary, is
Executive Vice President and General Counsel of Citizens Advisers. Prior to
joining Citizens Advisers in 1997, Mr. Keefe was in private law practice for 16
years.
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Additional Information Regarding Citizens Advisers
Sophia Collier individually owns 60% of the outstanding stock of Citizens
Advisers, Inc. 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
unhealthful mass market sodas. Ms. Collier and her partners sold American
Natural Beverage Corp. in 1989.
Four other individuals own the remaining 40% of the outstanding stock of
Citizens Advisers, Inc., as follows: John F. Dunfey (12%); Robert J. Dunfey, Sr.
(12%); Gerald F. Dunfey (12%); and William B. Hart, Jr. (4%). John, Robert and
Gerald Dunfey, brothers, now serve as directors of the Dunfey Group, a venture
capital and investment company. The Dunfey family has been associated, over a
number of years, with progressive social and political causes and has actively
participated in organizations dedicated to world peace, human and civil rights,
and economic justice. The family founded and continues to sponsor New England
Circle, a forum for the "discussion of social, political, literary and
educational topics that can lead to constructive change in our lives, our nation
and our world."
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Investment Advisory and Other Services
We are advised by Citizens Advisers, Inc. (the "Adviser") under a contract
known as the Management Agreement. The Adviser's office is at One Harbour Place,
Portsmouth, New Hampshire 03801. The Adviser is a California corporation.
Citizens Securities, Inc., a wholly-owned subsidiary of the Adviser and a
California corporation, serves as the Fund's distributor.
The Management Agreement provides for the Adviser, which is subject to the
control of our Board of Trustees, to decide what securities will be bought and
sold, and when, and requires the Adviser to place purchase and sale orders. At
the Adviser's discretion and sole expense, these duties may be delegated to a
sub-adviser.
Seneca Capital Management, LLC
Our sub-adviser for the Citizens Income and Emerging Growth Portfolios is
Seneca Capital Management, LLC, a registered investment adviser which manages
over $4 billion from its offices at 909 Montgomery Street, San Francisco,
California. It is majority owned by Phoenix, Duff & Phelps Corporation
("Phoenix"), with a 74.9% ownership interest. Phoenix is a diversified financial
services organization engaged primarily in investment management of
institutional and individual accounts, with over $33 billion in assets under
management. Gail Seneca, who with her partners founded Seneca's predecessor
company, GMG/Seneca Capital Management, L.P. in 1990, continues, along with her
key staff members, to be the owners of the minority interests in Seneca. Ms.
Seneca and her key staff members entered into long term employment contracts
with Phoenix when it purchased Seneca in 1997. The day to day business and
affairs of Seneca, including its investment management activities, remain under
the control of Ms. Seneca and her staff.
Clemente Capital, Inc.
Our sub-adviser for the Citizens Global Equity Portfolio, Clemente Capital,
Inc., is a registered investment adviser organized in 1979. It is majority owned
by Lilia Clemente with 61.15% ownership; Wilmington Trust of Wilmington,
Delaware with 24% and Diaz-Verson Capital Investments, Inc. of Columbus, Georgia
with 14.85%. Clemente also manages the First Philippine and Clemente Global
Growth Funds, two closed-end funds traded on the New York Stock Exchange. Its
headquarters are at Carnegie Hall Tower, 152 West 57th Street, New York, New
York.
RhumbLine Advisers, Inc.
The Citizens Index Portfolio is sub-advised by RhumbLine Advisers, a
registered investment adviser established in 1990 with offices at 30 Rowes
Wharf, Boston, Massachusetts. RhumbLine is owned in excess of 97% by J.D.
Nelson, who is also an interested trustee of the Trust.
The Adviser (or the sub-adviser) provides us, at the Adviser's expense,
with all office space, facilities and equipment and clerical personnel necessary
to carry out its duties under the Management Agreement. Some of our Trustees and
our officers are employees of our Adviser and receive their compensation from
the Adviser. Our custodian bank maintains, as part of its services for which we
pay a fee, many of the books and records that we are required to have and
computes our net asset value and dividends per share.
We pay the Adviser a fee for its services at a percentage of each
Portfolio's average annual net assets as follows:
Working Assets Money Market Portfolio--0.35%; the E[bullet]fund(R)--0.10%;
Citizens Income Portfolio--65%; Citizens Emerging Growth Portfolio--1.00%;
Citizens Global Equity Portfolio--1.00%; and Citizens Index Portfolio--0.50%.
The fee is accrued daily and paid at least monthly. The Adviser has agreed to
limit our expenses each year. If expenses exceed this limit, the Adviser will
reduce its fee by,
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or refund, the amount of the excess. The limit on our expenses, pursuant to the
Management Agreement, is as follows: Working Assets Money Market Portfolio:
1.50% of the first $40 million or our average annual net assets and 1%
thereafter; and Citizens Income Portfolio: 1.75% of the first $75 million of
average net assets and 1.25% thereafter.
There is no limit on expenses for the E[bullet]fund(R), Citizens Emerging
Growth Portfolio, Citizens Global Equity Portfolio and Citizens Index Portfolio.
Not all our expenses are subject to this limit. Interest expenses, taxes,
brokerage commissions, and extraordinary expenses, such as litigation, that do
not usually occur in the operations of a mutual fund are not included. We are
also subject to a statutory expense limitation imposed by the State of
California. This expense limitation requires the Adviser to reduce its fee to
the extent the aggregate annual expenses of a Portfolio exceed 2.50% of the
first $30 million of average net assets in the Portfolio, 2% of the next $70
million of average net assets, and 1.50% of the remaining average net assets in
a Portfolio in any fiscal year.
For the fiscal years ended June 30, 1995, 1996 and 1997, the Adviser
received the following fees: Working Assets Money Market Portfolio,
1995-$526,422, 1996-$423,731 and 1997-$341,144; Citizens Income Portfolio,
1995-$167,280, 1996-$207,386 and 1997-$218,016; Citizens Emerging Growth
Portfolio, 1995-$67,908, 1996-$197,492 and 1997-$503,188; Citizens Global Equity
Portfolio, 1995-$78,349, 1996-$118,662 and 1997-$206,581; and Citizens Index
Portfolio, 1995-$760,572, 1996-$689,466 and 1997-$878,074. For the fiscal period
ended June 30, 1996, the Adviser accrued expenses of $4,018 on behalf of the
E[bullet]fund(R), all of which was waived by the Adviser. For the fiscal year
ended June 30, 1997 the Adviser waived fees totaling $17,288 on behalf of the
E[bullet]fund(R).
The Management Agreement provides that in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations thereunder, the Adviser is not liable for any loss sustained by the
purchase, sale or retention of any security and permits the Adviser to act as
investment adviser and/or principal underwriter for any other person, firm or
corporation. The Management Agreement provides that we will indemnify the
Adviser to the full extent permitted under the Declaration of Trust. The
Management Agreement also states that it is agreed that the Adviser shall have
no responsibility or liability for the accuracy or completeness of our
Registration Statement under the Securities Act of 1933 and the 1940 Act except
for information supplied by the Adviser for inclusion therein.
There are similar provisions with respect to the liability of the
sub-adviser, and the obligation of the Fund to indemnify the sub-adviser.
Administrative Services Agreement
The Adviser has also entered into an Administrative Services Agreement with
Citizens Trust, whereby it provides the Trust with the following facilities and
services: 1. Receipt of calls from existing shareholders in a timely manner; 2.
Maintenance of a toll-free number; 3. Response to shareholder questions; 4.
Maintenance of computer interface with the Trust's transfer agent; 5. Execution
of appropriate shareholder requests. 6; Organizational services for any new
series, including, but not limited to the drafting of the prospectus and
statement of additional information, the filing of all required documents,
soliciting proxies, and clerical duties associated with the filing of any such
documents; and 7. Blue Sky reporting services as required for the issuer of
securities in the states and territories. In addition to the fees paid pursuant
to the foregoing, the Trust has agreed to reimburse Citizens Advisers for out-of
pocket expenses, including but not limited to postage, forms, telephone, and
records storage and any other expenses incurred by Citizens Advisers at the
request or with the consent of the Trust. The Trust also pays to the Adviser
shareholder servicing fees at the following fixed rates: Citizens Income
Portfolio, Citizens Emerging Growth Portfolio and Citizens Global Equity
Portfolio, 0.10% of average assets; and Citizens Index Portfolio, 0.65% of
average assets.
For the fiscal years ended June 30, 1995, 1996 and 1997, the Advisor
accrued the following administrative fees: Working Assets Money Market
Portfolio, 1995-$28,499, 1996-$186,145 and 1997-
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$153,084; Citizens Income Portfolio, 1995-$25,295, 1996-$74,254 and
1997-$44,992; Citizens Emerging Growth Portfolio, 1995-$24,120, 1996-$117,910
and 1997-$75,190; and Citizens Global Equity Portfolio, 1995-$22,815,
1996-$68,745 and 1997-$32,743. Citizens Index Portfolio paid fees in the amounts
of $28,607, $903,081 and $919,818 for the period from March 3, 1995
(commencement of operations) through June 30, 1995 and the fiscal years ended
June 30, 1996 and 1997, respectively. The E[bullet]fund(R) paid fees in the
amounts of $6,931 for the period from July 1, 1995 (commencement of operations)
through June 30, 1996 and $11,805 for the fiscal year ended June 30, 1997.
Distribution Plan
Pursuant to a Distribution Agreement, Citizens Securities, Inc. (the
"Distributor"), a wholly owned subsidiary of the Adviser, acts as the
distributor of our shares. There is no sales charge imposed on any of the
Portfolios of the Fund, either when you purchase or redeem shares.
Broker-dealer and other organizations, known as Service Organizations,
which assist in the distribution of our shares may receive fees from us or our
Distributor. Our Board of Trustees has adopted a Distribution Plan under Section
12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Plan"). In approving the
Plan, the Trustees determined, in the exercise of their business judgment and in
light of their fiduciary duties, that there is a reasonable likelihood that the
Plan will benefit us and our shareholders. Pursuant to this Plan, Service
Organizations that enter into written agreements with us and our Distributor may
receive, for administration, shareholder service and distribution assistance,
fees at rates determined by our Trustees. In addition, our Distributor is
authorized to purchase advertising, sales literature and other promotional
material and to pay its own salespeople. We will reimburse the Distributor for
these expenditures and for fees paid to Service Organizations, up to a limit of
0.25% on an annual basis of our average daily net assets. In addition, if and to
the extent that the fee we pay our Distributor as well as other payments we make
are considered as indirectly financing any activity which is primarily intended
to result in the sale of our shares, such payments are authorized under the
Plan.
The Plan was initially approved on July 5, 1983, by our Trustees, including
a majority of the Trustees who are not "interested persons" (as defined in the
1940 Act) and who have no financial interest in the operation of the Plan or in
any agreement related to the Plan. These Trustees are known as "Qualified
Trustees." The Plan was approved by a majority of our shareholders at our annual
meeting on April 24, 1984, and has been continued from year to year thereafter
subject to annual approval by a majority vote of our Trustees, including a
majority of the Qualified Trustees, cast in person at a meeting called for the
purpose of voting on the Plan. The Plan was approved by the shareholders of the
Citizens Income Portfolio, on June 11, 1992. The E[bullet]fund(R) has not
adopted the Plan. Agreements related to the Plan must also be approved in the
same manner by a vote of the Trustees and the Qualified Trustees. These
agreements will terminate automatically if assigned, and may be terminated at
any time, without payment of any penalty, by a vote of the majority of the
Qualified Trustees or a vote of our outstanding voting securities on not more
than 60 days notice.
Each Portfolio is responsible for the cost of preparing and setting in type
prospectuses and reports to shareholders and distributing copies of the
prospectuses and reports to shareholders. The Distributor pays the cost of
printing and distributing all other copies of prospectuses and reports, as well
as the costs of supplemental sales literature and advertising. The Fund pays all
of our other expenses not expressly assumed by the Adviser such as interest,
taxes, audit and legal fees and expenses, charges of our custodian, our
shareholder servicing, transfer and record-keeping agent costs, insurance
premiums, stock issuance and redemption costs, certain printing costs, costs of
registering our shares under federal and state laws, and dues and assessments of
the Investment Company Institute, as well as any non-recurring expenses,
including litigation.
The Plan provides that the Distributor shall provide and the Trustee shall
review quarterly reports setting forth the amounts, payments and the purpose for
which the amounts were expended. The Plan further provides that while it is in
effect the selection and nomination of the Trustees who are not interested
persons shall be committed to the discretion of the Qualified Trustees. The Plan
may not be
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<PAGE>
amended to increase materially the amounts to be spent without shareholder
approval, as set forth above, and all amendments must be approved by the
Trustees, as described above. The Plan only permits reimbursement of actual
expenses and does not permit expenses to be carried forward from one fiscal
period to another. For the years ended June 30, the following fees were approved
and paid under this Plan, 1995-$783,111, 1996-$683,515 and 1997-$838,348. The
major categories of expenses for 1997 were as follows: advertising, printing and
mailing prospectuses to other than current shareholders, compensation to
broker/dealers and compensation to sales personnel.
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Additional Information
Our Declaration of Trust permits our Trustees to issue an unlimited number
of full and fractional shares of beneficial interest and to divide or combine
the shares into a greater or lesser number of shares without thereby changing
the proportionate beneficial interests in the Fund. Each share represents an
interest in the Fund. Certificates representing our shares are not issued. In
the event of our liquidation, all shareholders would share pro rata in our net
assets available for distribution to shareholders. The Trustees also have the
power to designate "series" of the Fund which will function as separate
Portfolios, each having it's own assets and liabilities. They may also create
additional classes of shares which may differ from each other as to dividends.
Shares of each class are entitled to vote as a class or series only to the
extent required by the 1940 Act or as provided in our Declaration of Trust or as
permitted by our Trustees. Income and operating expenses are allocated fairly
among the series and classes by our Trustees. We intend to manage our Portfolios
in such a way as to be a "diversified" investment company, as defined in the
1940 Act. As of June 30, 1997, there were 125,737,084 outstanding shares of our
Common Stock, representing all the shares of all of the Citizens Trust
Portfolios. The following are the shareholders who owned beneficially or of
record 5% or more of the outstanding shares: Working Assets Money Market
Portfolio, the E[bullet]fund(R), Citizens Index Portfolio and Citizens Income
Portfolio - no holders of 5% or more. Citizens Emerging Growth Portfolio -
Charles Schwab & Co, Inc., 7.4%; and Citizens Global Equity Portfolio - Charles
Schwab & Co, Inc., 25.4%.
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Voting Rights
Shareholders are entitled to one vote for each full shares held (and
fractional votes for fractional shares) and may vote in the election of Trustees
and on other matters submitted to meetings of shareholders. Voting is generally
by class and series except as otherwise provided by the provisions of the 1940
Act. The Trustees will call a meeting of shareholders to vote on the removal of
a Trustee upon the written request of the record holders of ten percent of our
shares. No amendment may be made to the Declaration of Trust without the
affirmative vote of the holders of more than 50% of our outstanding shares. The
holders of shares have no preemptive or conversion rights. Shares when issued
are fully paid and non assessable, except as set forth under "Shareholder and
Trustee Liability" below. The Fund may be terminated upon the sale of its assets
to another issuer, if such sale is approved by the vote of the holders or more
than 50% of our outstanding shares, or upon liquidation and distribution of our
assets, if approved by the vote of the holders of more than 50% of our
outstanding shares. If not so terminated, the Fund will continue indefinitely.
25
<PAGE>
- -------------------------------------------------------------------------------
Shareholder and Trustee Liability
We are an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. Our Declaration of Trust contains an express disclaimer of shareholder
liability for our acts or obligations and requires that notice of such
disclaimer be given in each agreement, obligation or instrument entered into or
executed by us or our Trustees. The Declaration of Trust provides for
indemnification and reimbursement of expenses by the relevant Portfolio out of
the Portfolio's property for any shareholder held personally liable for the
Portfolio's obligations. The Declaration of Trust also provides that we shall,
upon request, assume the defense of any claim made against any shareholder for
any act or obligation of ours and satisfy our judgment thereon. Thus, the risk
of a shareholder incurring financial loss on account of shareholders liability
is highly unlikely and is limited to the relatively remote circumstances in
which we would be unable to meet our obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
- -------------------------------------------------------------------------------
Custodian
State Street Bank and Trust, One Heritage Drive, North Quincy,
Massachusetts, is the custodian of the assets of the Fund. The custodian takes
no part in determining the investment policies of the Fund or in deciding which
securities are purchased or sold by the Fund. We, however, may invest in
obligations of the custodian and may purchase or sell securities from or to the
custodian.
- -------------------------------------------------------------------------------
Auditors
Tait, Weller & Baker, Two Penn Center, Suite 700, Philadelphia,
Pennsylvania serves as our Fund's independent auditors, providing audit services
including (1) examination of the annual financial statements and limited review
of unaudited semi-annual financial statements (2) assistance and consultation in
connection with SEC filings and (3) review of the federal and state income tax
returns filed on our behalf.
The financial statements of the Fund incorporated here by reference, have
been examined by Tait, Weller & Baker, independent auditors, as stated in their
report which is incorporated by reference, and have been so incorporated in
reliance upon such report given upon their authority as experts in accounting
and auditing.
- -------------------------------------------------------------------------------
Legal Counsel
Bingham, Dana & Gould LLP, 150 Federal Street, Boston, Massachusetts.
26
<PAGE>
- -------------------------------------------------------------------------------
Proposed Reorganization
At a meeting to be held on December 1, 1997, shareholders of the
E[bullet]fund(R) will be asked to approve a Plan of Reorganization which sets
out the steps needed to combine the E[bullet]fund(R) with the Working Assets
Money Market Portfolio.
The basic steps in the proposed reorganization are as follows:
a) The transfer of all the assets and liabilities of the E[bullet]fund(R)
to the Working Assets Money Market Portfolio, in exchange for shares of
equal value in the Working Assets Money Market Portfolio, Retail Class;
b) The distribution of these new Working Assets Money Market Portfolio
Retail Class shares to the shareholders of the E[bullet]fund(R); and
c) The dissolution of the E[bullet]fund(R).
If the E[bullet]fund(R) shareholders vote to approve the proposed
reorganization at the December 1, 1997 meeting, the above steps will be taken
and the reorganization will be completed a short time afterwards.
- -------------------------------------------------------------------------------
Financial Statements
The following financial statements of the Fund and the opinion of its
independent auditors, included in the Annual Report to the shareholders for the
year ended June 30, 1997 are incorporated herein by reference and are provided
to each person to whom the Statement of Additional Information is sent or given:
Statement of Investments - June 30, 1997
Statement of Assets and Liabilities - June 30,1997
Statement of Operations for the year ended - June 30, 1997
Statement of Changes in Net Assets for the years ended June 30, 1996 and 1997.
Financial Highlights for the years ended June 30, 1996 and 1997.
Notes to Financial Statements
Report of Independent Certified Public Accountants
Management Discussion
It is the policy of the Fund to provide a management discussion of the
strategy and performance of each Portfolio in the Annual Report.
27
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX A: Description of Ratings
Description of Bond Ratings
We use the ratings provided by national rating services as one of several
indicators of the investment quality of fixed income securities. The following
is a description of the ratings of the two services we use most frequently. When
considering any rating, it is important to remember that the ratings of Moody's
and Standard & Poor's represent their opinions as to the quality of various debt
instruments. It should be emphasized, however, that ratings are not absolute
standards of quality. Consequently, debt instruments with the same maturity,
coupon and rating may have different yields while debt instruments with the same
maturity and coupon with different ratings may have the same yield.
Moody's
"Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
28
<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing."
Rating Refinements: Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through B. The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and modifier 3 indicates a ranking in
the lower end of that generic rating category.
Standard & Poor's Long-Term Issue Credit Ratings
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC and C: Obligations rated BB, B, CCC, CC and C are regarded as
having significant speculative characteristics. BB indicates the least degree of
speculation and C the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The rating C may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also
29
<PAGE>
will be used upon the filing of a bankruptcy petition or the taking of a similar
action if payments on an obligation are jeopardized.
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
Fitch Investors Service, Inc., Investment Grade Bond and Preferred Stock Ratings
AAA: Bonds and preferred stock considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and/or dividends and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA: Bonds and preferred stock considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and/or dividends and repay
principal is considered very strong, although not quite as strong as bonds rated
AAA. Because bonds and preferred stock rated in the AAA and AA categories are
not significantly vulnerable to foreseeable future developments, short-term debt
of these issuers is generally rated F-1+ (i.e., Exceptionally Strong Credit
Quality).
A: Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and/or dividends and repay
principal is considered to be strong, but may be more vulnerable to adverse
changes in economic conditions and circumstances than debt or preferred
securities with higher ratings.
BBB: Bonds and preferred stock considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest or dividends
and repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse impact on
these securities and, therefore, impair timely payment. The likelihood that the
ratings of these bonds or preferred stock will fall below investment grade is
higher than for securities with higher ratings.
Plus (+) or minus (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit quality within the rating category.
Plus and minus signs, however, are not used in the AAA category.
Moody's Short-Term Prime Rating System--Taxable Debt & Deposits Globally
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. The obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
Prime-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
30
<PAGE>
[bullet] Leading market positions in well-established industries.
[bullet] High rates of return on funds employed.
[bullet] Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
[bullet] Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
[bullet] Well-established access to a range of financial markets and assured
sources of alternate liquidity.
Prime-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protections measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Not Prime: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
Note: Moody's ratings are opinions, not recommendations to buy or sell, and
their accuracy is not guaranteed. A rating should be weighed solely as one
factor in an investment decision and you should make your own study and
evaluation of any issuers whose securities or debt obligations you consider
buying or selling.
Standard & Poor's Short-Term Issue Credit Ratings
Standard & Poor's short-term issue credit ratings are a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded as follows:
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation.
31
<PAGE>
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period had not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
32
<PAGE>
PART C: OTHER INFORMATION
Item 24. 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 believed
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 25. Exhibits:
(1) declaration of trust: material currently on file ***
(2) by-laws: material currently on file **
(3) not applicable
(4) not applicable
(5) not applicable
(6) management agreement: material currently on file
(a) management agreement *
(b) renewal of management agreement ***
(c) amendment to management agreement dated May 30, 1996 ***
(d) form of sub-investment advisory agreement ***
(7) distribution agreement: material currently on file
(a) distribution agreement, as amended *
(b) renewal of distribution agreement ***
(c) amendment to distribution agreement dated May 6, 1996 ***
(d) amendment to distribution agreement dated May 30, 1996 ***
(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 *****
<PAGE>
(12) not applicable
(13) other material contracts: material currently on file
(a) administrative agreement as amended *
(b) amendment to administrative agreement ***
(14) consent of independent certified public accountants as to use
of their report *****
(15) not applicable
(16) power of attorneys ******
(17a) Rule 24f-2 Notice of Election of Registrant *******
(17b) Prospectus for the Trust dated October 3, 1997 ********
(17c) Statement of Additional Information for the Trust
dated October 3, 1997 *********
(17d) Annual Report to Shareholders of the Trust for the fiscal year
ended June 30, 1997 *********
----------------
* Incorporated by reference to Amendment No.27 to the
Registrant's Registration Statement (File No. 2-80886), as
filed with the Securities and Exchange Commission on June 27,
1995.
** Incorporated by reference to amendment No. 38 to the
Registrant's Registration Statement (File No. 2-80886) as
filed with the Securities and Exchange commission on October
7, 1997.
*** Incorporated by reference to Amendment No. 34 to the
Registrant's Registration Statement (File No. 2-80886), as
filed with the Securities and Exchange Commission on June 21,
1996.
**** Incorporated by reference to Amendment No. 35 to the
Registrant's Registration Statement (File No. 2-80886), as
filed with the Securities and Exchange Commission on September
27, 1996.
***** Incorporated within the Registrant's N-14 dated September 5,
1997: material currently on file (Accession No.
0000950146-97-001409).
****** Incorporated by reference to Amendment Nos. 12 and 14 to the
Registrant's Registration Statement (File No. 2-80886), as
filed with the Securities and Exchange Commission on May 15,
1992.
******* Incorporated by reference to the Registrant's notice pursuant
to Rule 24f-2 (Accession No. 0000929638-97-000212), as filed
with the Securities and Exchange Commission on August 28,
1997.
******** Incorporated by reference to the Registrant's filings with the
Securities and Exchange Commission dated October 3, 1997 (File
No. 2-80886).
********* Incorporated by reference to the Registrant's filings with the
Securities and Exchange Commission dated October 3, 1997 (File
No. 2-80886).
********** Incorporated by reference to the Registrant's Annual Report
for the year ended June 30, 1997, as filed with the Securities
and Exchange Commission (Accession No. 0000950146-96-001499)
on August 28, 1997.
<PAGE>
Item 26. 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 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 certifies that it meets all the requirements for effectiveness of
this Post-Effective Amendment to this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Portsmouth, and State of New Hampshire, on the 30th
day of October 1997.
CITIZENS INVESTMENT TRUST
By /s/ Sophia Collier
------------------------------------
Sophia Collier, President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
<TABLE>
<S> <C> <C>
/s/ Sophia Collier * Trustee
- ----------------------------------- President and
Sophia Collier Principal Executive, October 30, 1997
Principal Accounting and
Principal Financial Officer
/s/ Azie Taylor Morton *
- ----------------------------------- Trustee October 30, 1997
(Azie Taylor Morton)
/s/ William Glenn *
- ----------------------------------- Trustee October 30, 1997
(William Glenn)
/s/ Ada Sanchez *
- ----------------------------------- Trustee October 30, 1997
(Ada Sanchez)
/s/ J.D. Nelson *
- ----------------------------------- Trustee October 30, 1997
(J.D. Nelson)
/s/ Juliana Eades *
- ----------------------------------- Trustee October 30, 1997
(Juliana Eades)
/s/ Lokelani Devone *
- ----------------------------------- Trustee October 30, 1997
(Lokelani Devone)
</TABLE>
* By /s/ Sophia Collier
--------------------------------
Attorney in Fact
See Power of Attorney dated May 15, 1992, filed with the commission on
May 15, 1992 as part of Citizens Trust Post Effective Amendment #12.
See Power of Attorney dated November 12, 1992, filed with the
commission on November 12, 1992 as part of Citizens Trust Post Effective
Amendment #14.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(11) Consent of independent
certified public accountants
(27) Financial Data Schedule
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated July 25, 1997, accompanying the financial
statements and financial highlights of Working Assets Money Market Portfolio,
Citizens Income Portfolio, Citizens Index Portfolio, Citizens Emerging Growth
Portfolio, Citizens Global Equity Portfolio, Muir California Tax-Free Income
Portfolio, and E?Fund, each a series of shares of beneficial interest of
Citizens Trust, appearing in the Annual Report to Shareholders for the year
ended June 30, 1997 which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement on Form N-1A and related Prospectus of
Citizens Trust. We consent to the use of the aforementioned report and to the
references to our Firm in the Registration Statement and Prospectus.
TAIT, WELLER & BAKER
_____________________________
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
October 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This FDS is to show the breakout of
institutional shares for the Portfolio.
</LEGEND>
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 012
<NAME> Working Assets Money Market Portfolio
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 99,960,197
<INVESTMENTS-AT-VALUE> 99,960,197
<RECEIVABLES> 2,348,517
<ASSETS-OTHER> 62,525
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 103,511,889
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 828,592
<TOTAL-LIABILITIES> 828,592
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102,683,297
<SHARES-COMMON-STOCK> 102,683,297
<SHARES-COMMON-PRIOR> 92,865,013
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 102,683,297
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,339,283
<OTHER-INCOME> 0
<EXPENSES-NET> 1,111,879
<NET-INVESTMENT-INCOME> 4,227,404
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,227,404
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 13,951,439
<NUMBER-OF-SHARES-REDEEMED> 11,780,996
<SHARES-REINVESTED> 794,475
<NET-CHANGE-IN-ASSETS> 9,818,284
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 341,144
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,223,645
<AVERAGE-NET-ASSETS> 97,470,708
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.049
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.049
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 0.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This FDS is to show the breakout of
institutional shares for the Portfolio.
</LEGEND>
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 032
<NAME> CITIZENS INDEX PORTFOLIO
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1.000
<INVESTMENTS-AT-COST> 148,772,660
<INVESTMENTS-AT-VALUE> 224,619,315
<RECEIVABLES> 20,330,008
<ASSETS-OTHER> 66,990
<OTHER-ITEMS-ASSETS> 0
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<EQUALIZATION> 0
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</TABLE>
