As filed with the Securities and Exchange Commission on April 30, 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. 37
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 32
---------------------------------
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
----- immediately upon filing pursuant to paragraph (b)
----- on _____________ pursuant to paragraph (b) 60
----- 60 days after filing pursuant to paragraph (a)(i)
[ X ] on _May 2, 1997___ pursuant to paragraph (a)(i)
----- 75 days after filing pursuant to paragraph (a)(ii)
----- on (date) pursuant to paragraph (a)(ii) 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 29, 1996.
This N-1A filing relates to Muir National Tax-Free Income Portfolio.
<PAGE>
EXPLANATORY NOTE
The Post-Effective Amendment No. 37 (the "Amendment") to the Registrant's
Registration Statement on Form N-1A is being filed with respect to the Muir
National Tax Free Income Portfolio (the "Portfolio"), a series of shares of the
Registrant. The Amendment is being filed to address comments from the
Commission's Division of Investment Managment to Post Effective Amendment No. 36
Working Assets Money Market Portfolio, the E[bullet]fund, Citizens Income
Portfolio, Citizens Index Portfolio, Muir California Tax-Free Income Portfolio,
Citizens Emerging Growth Portfolio and Citizens Global Equity Portfolio are each
a series of shares of the Registrant and are each offered by a separate
Prospectus included in Post-Effective Amendment No. 35 to the Registrant's
Registration Statement. This Amendment does not relate to, amend or otherwise
affect the separate Prospectus contained in Post-Effective Amendment No. 35 and,
therefore, pursuant to Rule 485(d) under the Securities Act of 1933, as amended
(the "1933 Act"), does not affect the effectiveness of such Post-Effective
Amendment.
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CITIZENS INVESTMENT TRUST
CROSS INDEX PAGE
MUIR NATIONAL TAX-FREE INCOME PORTFOLIO
Part A INFORMATION REQUIRED IN A PROSPECTUS
<TABLE>
<CAPTION>
ITEM REFERENCE
<S> <C> <C>
Item 1. Cover Page Cover Page
Item 2. Synopsis; Fee Information Cover Page; Fee Information
Item 3. Condensed Financial Information Condensed Financial Information; Financial
Highlights
Item 4. General Description of Registrant Organization and Management of the Trust
Item 5. Management of the Fund Organization and Management of the Trust
Item 6. Capital Stock and other Securities How to Purchase and Redeem Shares;
Dividends, Distributions, and Taxes
Item 7. Purchase of Securities Being Offered How to Purchase and Redeem Shares
Item 8. Redemption or Repurchase How to Purchase and Redeem Shares
Item 9. Legal Proceedings None
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION -
Working Assets Money Market, Citizens Income, Citizens Emerging Growth,
Citizens Global Equity, Citizens Index, Muir National Tax-Free Income and
E[bullet]fund Portfolios
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information & History The Fund
Item 13. Investment Objectives & Policies Investment Objectives and
Policies; Other Investment Techniques
Item 14. Management of the Registrant Trustees and Officers; Add'l Information
Regarding Management Company
Item 15. Control Persons & Principal Holders of Add'l Information Regarding Citizens
Securities Adviser
Item 16. Investment Advisory & Other Services Investment Advisory & Other Services
Item 17. Brokerage Allocation & Other Practices Turnover and Portfolio Transactions
Item 18. Capital Stock & Other Securities The Value of Our Shares
Item 19. Purchase, Redemption & Pricing of Additional Redemption Information
Securities Being Offered
Item 20. Tax Status Federal Taxes
Item 21 Underwriters Investment Advisory and Other Services
.
Item 22. Calculation of Yield Quotations of Money About Our Yield and Total Return
Market Funds
Item 23. Financial Statements Financial Statements
</TABLE>
<PAGE>
PROSPECTUS May 2, 1997
CITIZENS TRUST
One Harbour Place, Portsmouth, NH 03801
603-436-5152
800-223-7010
Dear Friend,
This prospectus is a bit different from other mutual fund prospectuses. It is
written - not by a lawyer - but by the people who work for the Trust. I hope
you'll take some time to read it carefully (and retain it for your future
reference). I think you'll find we have some new and interesting ideas about how
to make money investing in mutual funds.
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 truly believe that understanding your investments starts right here with our
own prospectus. You deserve not only lucid, concise prose, but an informative,
even enjoyable, reading experience.
Sincerely,
Sophia Collier
President
Muir National Tax-Free Income Portfolio seeks a high level of current income
exempt from federal income tax.
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.
Our detailed Statement of Additional Information, is dated the same as this
prospectus and is filed with the Securities and Exchange Commission. It is
incorporated into this prospectus by reference. If you would like a copy please
call us toll-free at 800-223-7010.
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TABLE OF CONTENTS
Fee Information
How We Select Our Investments
Muir National Tax-Free Income Portfolio
Organization and Management of the Trust
How to Purchase and Redeem Shares
Shareholder Services
Mailing Address/Wiring Instructions
Dividends, Distributions and Taxes
How We Report Investment Results
Trustee Profiles
William D. Glenn II, co-chair of the board of trustees, is the executive
director of Continuum HIV Day Services in San Francisco.
Azie Taylor Morton, co-chair and audit chair of the board of trustees, operates
an investment management firm, and was the 36th Treasurer of the United States.
*Sophia Collier is the Trust's president and principal owner of our investment
adviser, Citizens Adviser.
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 director of the Public Service and Social Change Program at
Hampshire College.
*INTERESTED
PERSON (INSIDE TRUSTEE)
Confidentiality of Shareholder Transactions
"As Trustees we have a firm `no exceptions' policy stating that no shareholder
transaction information will be sold or shared with anyone, except as required
by law, or with the shareholder's permission."
No Load
The Portfolio is no load. The Portfolio is subject to 12b-1 fees.
Minimum Initial Investment
There is a minimum investment of $2,500 which requires an initial investment of
only $1,000. You can invest in a portfolio for as little as $250 if you set up
an Automatic Investment Plan, currently $50 per month.
This prospectus is available electronically at: http://www.efund.com.
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.
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Escrow Policy
We reserve the right to wait up to seven business days to redeem any investments
that have been made by check or five business days for purchases made by ACH
transfer. Therefore, if you need to redeem shares within seven business days of
your purchase, please invest by wire.
FEE INFORMATION
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchase
(as a % of offering price) None
Maximum Sales Load Imposed on
Reinvested Dividends (as a % of offering price) None
Deferred Sales Load (as a % of the Original Purchase Price
or Redemption Proceeds) None
Redemption Fees (as a % of the amount redeemed) None
Exchange Fee (per exchange) None
Annual Portfolio Operating Expenses
(as a percentage of Average Net Assets)
Management Fees .65%
Distribution Expense .25%
Other Expenses (after waiver and reimbursement) .65%
Total Portfolio Operating Expenses 1.55%
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
- ------ -------
$16 $49
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.
HOW WE SELECT OUR INVESTMENTS
Financially Sound
Citizens Trust has certain policies that we consider fundamental such as
consistently applying both social and financial screens to all our investment
decisions. This, together with the 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 the Portfolio. In addition to the specific policies for
the Portfolio, we also have some general policies that we use to manage the
Portfolio.
Socially Responsible
We are always seeking profitable investments for our shareholders. To find them,
we favor companies
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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.
Additional Investment Policies
We try not to put all our eggs in one basket. This means that as a diversified
fund, no more than 5% of the Portfolio's assets may be invested in the
securities of any one company (other than U.S. governemnt securities) except
that up to 25% of the value of the Portfolio's assets may be invested without
regard to this limitation. We believe Citizens Trust's role is to be a
conscientious and alert investor, not a controlling manager; therefore, 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 maintain 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.
The Portfolio may, from time to time, invest in money market securities such as
the ones we use in our money market funds.
The 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 the
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. 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 is important to note that while repurchase agreements are a useful
tool in managing the Portfolio, they do have some greater risk than direct
investing in securities. If a bank or 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.
MUIR NATIONAL TAX-FREE INCOME PORTFOLIO
Objective: High level of current income exempt from federal income tax.
The Portfolio only buys securities which have been rated "investment-grade," or
are equivalent to investment-grade in our judgment. (Our Statement of Additional
Information contains a full description of bond ratings and the agencies which
provide them.)
In addition to tax-free bonds, we may also buy other types of tax-exempt
fixed-income securities. Some of the important examples: We may invest up to 5%
of our assets in installment contracts known as municipal lease/purchase
agreements. We may also invest in a type of security known as a variable - or
floating-rate demand note or "VRDN." Another type of security we sometimes buy
is called a `participation interest.' In this case we are buying part of a large
loan made by a bank. Interest development bonds are good examples of this
particular type of investment.
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Risk Factors
As with all fixed-income investing, we have two types of risk. The first is
credit risk: We will lend money to an organization and we won't be paid back
promptly, or at all. As we mentioned before, to moderate this risk we only buy
securities which have been rated "investment grade," or are equivalent to
investment-grade in our judgment. Many tax-exempt securities are ultimately
backed by the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest.
Some types of tax-exempt securities are not backed by taxing power. These
include revenue bonds that are payable from a particular facility or a special
excise or other specific revenue source. Another example is industrial
development bonds, which in most cases are revenue bonds that do not carry the
pledge of the credit of the issuing municipality, but generally are guaranteed
by the corporate entity on whose behalf they are issued.
The other risk in fixed-income investing is interest rate risk. When interest
rates rise, the market value of our Portfolio will decline, and when interest
rates fall, the market value of the Portfolio will rise. Securities with longer
maturities typically have more fluctuation in market value. We may invest in
tax-exempt securities with maturities of any length up to 30 years, depending
upon our assessment of the relative yield on securities of different maturities
and our expectations of future changes in interest rates.
While these are risks, we watch them carefully in order to monitor their impact
on the portfolio.
Special Tax Considerations
As a matter of fundamental policy, we must invest at least 80% of our assets in
securities, the interest on which is exempt from regular federal income taxes
and which is not subject to the federal alternative minimum tax. During normal
market conditions, at least 65% of our total assets must be invested in bonds.
We intend to always meet and usually substantially exceed these minimum
requirements. The Portfolio will invest up to a maximum of 20% of its assets in
private activity bonds which may be subject to the federal alternative minimum
tax.
MUIR INVESTMENT BONDS. The Muir National Tax-Free Income Portfolio generally
buys investment-grade bonds issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies, authorities and instrumentalities. In
particular, we look for bonds that are issued for three basic purposes:
Education: Tax-exempt securities that finance projects like construction of
public and private educational facilities, as well as tax exempt securities used
to provide student loans.
Environment: Projects that foster the buying and building of parks, the
preservation of ancient forests and wildlife habitats, and the creation of
public transit. We also purchase pollution control bonds.
Housing: In our opinion, the availability of quality, low-cost housing is
critical to a peaceful and more just society. For this reason, we invest in
securities financing low-income housing.
Other Policies
If sufficient desirable tax-exempt securities are not available, we may invest
in other types of securities which meet our social and financial criteria. These
and other investment policies are more fully discussed in our Statement of
Additional Information under the section entitled "Investment Objectives and
Policies." Our Statement of Additional Information also contains more
information about the risks of California municipal securities as well as a
description of municipal securities ratings.
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ORGANIZATION AND MANAGEMENT OF THE TRUST
Citizens Investment Trust began November 24, 1982. Today, it's affectionately
known as Citizens Trust. We are a Massachusetts business trust and an open end
investment company, registered under the Investment Company Act of 1940, as
amended as a diversified management company. The Trust is also a "series"
company which means that we can have several portfolios, each with its own
investment objective, assets, and liabilities. The Trust is supervised by a
board of trustees.
In order to manage the Trust on a day-to-day basis, we have signed a Management
Agreement with our investment adviser, Citizens Advisers, with offices at 111
Pine Street, San Francisco, CA 94111 and One Harbour Place, Portsmouth, NH
03801. Citizens Advisers has managed the Trust's assets since the Trust's
inception.
Citizens Advisers and its wholly-owned 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%.
The Role of Investment Adviser
Our investment adviser's job is to determine which companies meet the Trust's
investment criteria and will be carried on our "Approved List." Citizens
Advisers is also responsible for the day-to-day management of the Portfolio.
Management of the Portfolio is provided by a team of investment professionals
each of whom plays an important role in the management process of the Portfolio.
Team members work together to develop investment strategies and select
securities for the Portfolio.
Azie Taylor Morton chair of the Audit Committee, explains the Trust's
relationship with its advisers. "One of the Trust's most important contracts is
our Management Agreement with Citizens Advisers. It states that Citizens
Advisers has authority to manage our portfolios and will provide all necessary
office space, facilities, equipment and personnel to do so."
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
Citizens Trust's Management Agreement
Citizens Trust's Management Agreement with Citizens Advisers specifies fees as
follows (based on average annual net assets of the Portfolio):
Trust
Pays
Portfolio Adviser
- --------- -------
Muir National Tax- Free Portfolio .65%
Citizens Advisers also has a separate administrative contract for providing
general administrative services, shareholder servicing and sub-accounting,
telephone services and services related to the organization of a Portfolio's
federal and state regulatory filings. The fee paid by the Trust on behalf of the
Portfolio under this contract is .10% of the Portfolio's average net assets.
Citizens Advisers will sometimes contract to have specialized services provided
by third parties, such as investment advisers for pension funds, or other
institutions which maintain omnibus accounts with the Trust.
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The individual portfolios pay all expenses not expressly assumed by Citizens
Advisers. These include interest, taxes, audit and legal fees, custodian and
transfer agent charges, shareholder service and administration, insurance
premiums, cost of registering shares under federal and state laws, dues, and any
litigation costs, as well as the cost of typesetting, printing, and distributing
shareholder reports and prospectuses sent to shareholders. When a cost is shared
by several portfolios, the staff at Citizens Advisers will allocate the expense
in a reasonable manner under the supervision of the board of trustees.
Citizens Advisers also provides administrative services and acts as the Trust's
distributor through its subsidiary, Citizens Securities.
Voting Rights. Our shareholders are entitled to one vote for each full share
owned and a fractional vote for fractional shares. Shares of each portfolio
generally vote separately on matters that only concern that portfolio. 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. 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.
12b-1 Fees
Citizens Trust has a 12b-1 plan which allows us to reimburse Citizens Securities
and other distributors of the Trust's shares for sales related costs. These
costs include the printing of prospectuses and reports not sent to current
shareholders, as well as other sales material, advertising, and salaries for
salespeople and other personnel. We will also pay commissions to outside brokers
or service organizations for similar services.
Sometimes Citizens Securities makes additional promotional expenditures that are
not reimbursed by the 12b-1 plan such as expense reimbursements to non-dealers
for meetings, advertising, and other valid promotional purposes.
Customer Service Manager, DAVID PARKER , oversees the Citizens Trust Call
Center. " We talk to thousands of people from almost every circumstance and
stage of life. If you need help or have any questions, please call us. We are
available Monday through Friday from 9 AM to 8 PM, Eastern Time. Our goal is to
serve you in a caring and responsible manner that respects your time and needs.
Our service people pride themselves on getting the job done for you in a quick,
efficient manner."
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.
For shares of the 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 1/100th of a share. If
your check is returned for any reason, you will be assessed a fee of $10.00.
Investment Minimums
We encourage every investor to make a minimum investment of $2,500 per
Portfolio. Shareholders who sign up for our Automatic Investment Plan can start
with an investment balance as low as $250, with an automatic investment of
$50.00 per month.
Automatic Investment Plan
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To enroll in our Automatic Investment Plan, simply check off that box on the
account application and provide us with your bank information and the amount and
frequency of your investment into your chosen Portfolio. We will do the rest.
Payroll Deduction
Setting up direct payroll deposit is very easy. We can send you a form including
the necessary information and steps to follow. Simply complete and sign the
form, then give it to your payroll administrator for processing. If you or your
payroll administrator have any questions please call our shareholder service
department.
Funds will be deposited into your account using the Electronic Funds Transfer
System. We will provide the account number. Your payroll department will let you
know the date of the pay period when your investment begins.
If your account falls below $2,500 per portfolio, we may ask you to open an
Automatic Investment Plan or bring your balance back up over $2,500. If you
decide not to go ahead with either option, we may close your account by sending
you a check for your balance.
How to Redeem Shares
We offer you several convenient ways to redeem your shares in any of the
Citizens Trust Portfolios.
Call Us
We have a Telephone Exchange and Redemption option on your account application.
Under this option you can call us and tell us how much you want us to redeem.
Depending upon your instructions, we will then deposit your redemption into
another Citizens Trust Portfolio account, mail you a check, or electronically
transfer your redemption to your pre-designated account. One day wired funds
cost $10, or, we offer two day service via the Automated Clearing House (ACH).
You will earn dividends up to and including the date when we receive your
redemption request.
If you do select the Telephone Exchange and Redemption option, you should be
aware that it may increase the risk of error or of an unauthorized party gaining
access to your account. To keep these problems to a minimum we record all
telephone calls. But please remember, neither the Trust, our Adviser, nor our
Transfer Agent will be responsible if we properly act on telephone instructions
we reasonably believe to be genuine. Normally, we will send you your redemption
on the next business day after we receive your request.
Written Request for Redemption
If you do not use Telephone Exchange and Redemption, you can still redeem your
shares at any time, although the process will take longer. Send us a written
request together with a signature guarantee. We may require further
documentation from corporations, fiduciaries, pension plans, and/or
institutional investors.
Redeem Your Shares in Person
Investors may also redeem their shares through Citizens Securities, or through
participating broker-dealers (who may charge a fee for this service). Certain
broker-dealers may have arrangements with the Trust that permit them to order
redemption of shares by telephone or facsimile transmission.
However, in rare cases, payments for the redemption of non-money market accounts
may take up to five business days. We also reserve the right to hold your
redemption proceeds for up to seven business days when you redeem any
investments that have been made by check or five 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
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Exchange Privilege
Since people's investment needs change over time, we provide for easy exchanges
among our Portfolios at no charge. You may make an exchange at any time and to
any Portfolio. Just call us or write to us with your request.
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 in many cases
will 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.
Common Transactions That Require Signature Guarantees:
[bullet] Written request for edemption
[bullet] Changing your account title in any way
[bullet] Authorizing telephone transaction for the first time
[bullet] Changing your pre designated 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.
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
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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 this address. Regular U.S. Mail
will not be accepted at this 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.
Payment of dividends are declared daily and paid monthly. Distribution of
capital gains, if any, are paid annually:
HOW WE REPORT INVESTMENT RESULTS
There are a number of ways of reporting performance, and we'll walk through each
one that we use, but, when you look at any mutual fund, remember, actual mileage
may vary.
Yield
We start with Net Investment Income per share for the most
recent 30 days and divide it by the maximum offering price per share on the 30th
day and annualize the result assuming a semiannual compounding.
Total Return and Other Quotations
We start with the total number of shares that you can buy for $1,000 at the
beginning of the period. We then add all the additional shares that 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.
Valuation of Shares
To calculate our Net Asset Value, we add up the total assets of the Portfolio,
subtract all liabilities and then divide by the number of shares outstanding.
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 adviser will fairly value that
security in good faith. Securities maturing within 60 days are normally valued
at amortized cost, which approximates market value.
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From time to time, we may compare the investment results of our Portfolios to
unmanaged market indices, and other data and rankings from recognized
independent publishers.
TAX MATTERS
The dividends you have earned are taxable to you as dividends (unless of course
you are otherwise not subject to taxes). Remember, the exchange of shares is
treated as a sale and any exchanging shareholder may, therefore, realize a
taxable gain or loss. You may also be subject to state and local taxes on
dividends and distributions from the Trust. Please consult your own tax adviser.
We will send you a complete statement each January as to the federal tax status
of dividends and distributions paid by the Portfolio during the previous
calendar year.
We do not expect the Trust itself to pay any federal income or excise taxes
because each year we expect to qualify each portfolio as a separate regulated
investment company under the Internal Revenue Code. To do this, the Portfolio
must meet certain income, distribution and diversification requirements such as
distributing all of the Portfolio's Net Investment Income and realized capital
gains to shareholders in a timely manner.
"Mutual Fund advertisements and stock brokers' offices have many ways of
reporting mutual fund performance. It's no wonder investors can become confused.
Remember: When you look at mutual fund quotations, you are looking at history -
how the fund did in the past. And, as Jim Mahoney said at the front of the
prospectus, there are only two ways you can make money from your investment:
through an increase in Net Asset Value or through `Net Income.' These two
elements are the building blocks of all performance calculations."
- -Sophia Collier
That's it!
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Statement of Additional Information
May 2, 1997
This Statement is not a prospectus and should be read in conjunction with the
Prospectuses dated May 2, 1997 relating to Muir National Tax-Free Income
Portfolio, and September 27, 1996 as amended March 28, 1997 relating to the
remaining Portfolios, as may be amended from time to time. A copy of the current
Prospectuses 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 Citizen Trust Prospectuses may be supplemented
from time to time.
Citizens Investment Trust
E[bullet]fund
Working Assets Money Market Portfolio
Citizens Income Portfolio
Citizens Emerging Growth Portfolio
Citizens Global Equity Portfolio
Citizens Index Portfolio
Muir National Tax-Free Income Portfolio
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Table of Contents Page
The Fund 2
Investment Objective and Policies 2
Other Investment Techniques 9
Factors that Affect the Value of Our Investments 14
Turnover and Portfolio Transactions 14
The Value of Our Shares 15
Information About Our Yield and Total Return 17
Dividends and Distributions 20
Federal Taxes 21
Redemption Information 24
Trustees and Officers 25
Additional Information Regarding the Management Company 27
Investment Advisory and Other Services 28
Additional Information 31
Voting Rights 31
Shareholder and Trustee Liability 31
Custodian 32
Auditors 32
Legal Counsel 32
Financial Statements 32
Appendix: Description of Ratings 33
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1
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The Fund
Citizens Investment Trust (the "Fund" or "Citizens Trust") presently
consists of seven 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), Muir National Tax-Free Income
Portfolio (inception date 5/2/97), Citizens Index Portfolio (inception date
3/3/95), and the E[bullet]fund (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. 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 the Retail Shares for
the Working Assets Money Market Portfolio and the Citizens Index Portfolio.
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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 (with the exception of the Muir National Tax-Free Income
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, Citizens Income Portfolio, Citizens Global Equity
Portfolio and Citizens Index Portfolio and do not apply to the Citizens Emerging
Growth Portfolio and the Muir National Tax-Free Income 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.
The Muir National Tax-Free Income Portfolio may not:
1. Make loans to others, except (a) through the purchase of debt
securities in accordance with our investment objectives and policies, and
(b) to the extent the entry into a repurchase agreement is deemed to be a
loan.
3
<PAGE>
2. Borrow money, except temporarily for extraordinary or emergency (not
leveraging) purposes from a bank and then not in excess of 5% of our
total assets (at the lower of cost or fair market value).
3. Purchase securities on margin, sell securities short, participate on a
joint or joint and several basis in any securities trading account, or
underwrite securities except insofar as we may be technically deemed an
underwriter under the federal securities laws in connection with the
disposition of portfolio securities. (This is an operating restriction
and does not preclude us from obtaining such short-term credit as may be
necessary for the clearance of purchases and sales of its portfolio
securities.)
4. Buy or sell interests in commodities or commodity contracts, oil, gas
or mineral exploration or development programs, or real estate, provided
that this limitation shall not prohibit the purchase of municipal and
other debt securities secured by real estate or interests therein.
5. Invest more than 10% of our net assets in illiquid securities, a term
which means securities that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which we
have valued our securities, and includes, among other things, (i)
repurchase agreements maturing in more than seven days, and (ii)
municipal lease/purchase agreements, VRDNs (as defined below) and
Participating VRDNs (as defined below) which the sub-adviser has
determined are illiquid because there is an inefficient or thin trading
market.
6. Issue senior securities, as defined in the 1940 Act, except that this
restriction shall not be deemed to prohibit us from (a) entering into
permitted borrowings, mortgages or pledges, (b) purchasing securities on
a when-issued or delayed-delivery basis or (c) entering into repurchase
transactions.
As an operation policy, the Muir National Tax-Free Income Portfolio may
not:
1. Purchase or sell common stocks, preferred stocks, warrants or other
equity securities, or futures contracts, or purchase or write put, call,
straddle or spread options, except that we may purchase, hold and dispose
of "obligations with puts attached" in accordance with our investment
policies as described in the Prospectus.
2. Invest in securities of other investment companies (except as they may
be acquired as part of a merger, consolidation or acquisition of assets)
which would result in our (i) owning more than 3% of the total
outstanding voting stock of another registered investment company; (ii)
investing more than 5% of our total assets in the securities of a single
registered investment company; or (iii) investing more than 10% or our
total assets in the securities (other than treasury stock) of registered
investment companies. Within these limitations, we may invest in other
investment companies.
3. Invest in any issuer for purposes of exercising control or management.
4. May not underwrite securities, which means we may not sell securities
for others.
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.
4
<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 and in the Prospectus.
Working Assets Money Market Portfolio and the E[bullet]fund Working
Assets Money Market Portfolio ("Money Market Portfolio") and the E[bullet]fund,
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. Each Portfolio may not buy real estate, or real estate
loans, but 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 Corporation ("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 relating to the purchase of illiquid securities in the section
regarding the fundamental investment policies of the Portfolios under
"Investment Objective and Policies" above.
5
<PAGE>
5. The E[bullet]fund will not invest more than 5% of its assets in
variable rate securities.
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 Money Market
Portfolio and the E[bullet]fund 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 Money Market Portfolio and the E[bullet]fund will each
maintain a dollar-weighted average portfolio maturity that does not exceed 90
days.
The Money Market Portfolio and the E[bullet]fund 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). We may not invest
more than 5% of each Portfolio's assets in securities which are not rated in the
highest rating category 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.
6
<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 capital appreciation by
investing in a specially designed index of 300 socially responsible companies.
The Citizens Index Portfolio invests primarily in 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 used in the Citizens Index Portfolio
to add industry diversity and other financial characteristics that we believe
will enable the Portfolio to track the returns of the S&P 500 as a whole.
Securities will be purchased in a proportion 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. Our
investment results will usually lag the performance of the underlying index due
to short-term cash investments and the deduction of portfolio expenses and
transaction costs.
Muir National Tax-Free Income Portfolio
Our objective is to provide a high level of current income exempt from
federal income tax. We seek to achieve this objective by investing primarily in
securities which our Trustees believe will provide social, environmental and
economic benefits.
We will not compromise the quality of our Portfolio. While we place a
high premium on the economic and social benefit of our investments, we do not
sacrifice the quality of our portfolio to achieve our social, environmental and
economic agenda. Our securities portfolio contains only Tax-Exempt Securities
(as defined below) which have been rated "investment grade." Investment grade
securities are securities which, at the time of purchase, have been rated in one
of the four highest rating categories (i.e., "Baa" or higher) by Moody's,
Standard & Poor's or Fitch Investors Service, Inc. or if not rated, are
determined by our sub-adviser to be at least of equivalent quality.
We do not invest in "junk bonds" (i.e. securities rated below investment
grade). However, Tax-Exempt securities rated in the fourth highest rating
category (the lowest rating category in which we may invest) have speculative
characteristics. With respect to these securities, changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher rated
Tax-Exempt Securities. If we invest in any Tax-Exempt Security the rating of
which subsequently drops below investment grade, our Board of Trustees will be
notified and shall promptly determine on a case by case basis whether the
security should be retained or sold. We maintain an operating policy that no
more than 5% of our securities portfolio may consist of securities which,
although rated investment grade when purchased, subsequently drop below
investment grade.
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Many Tax-Exempt Securities are not rated by any credit rating agency.
Although we are permitted to invest up to 10% of our total assets in unrated
Tax-Exempt Securities, we currently do not invest in any such unrated securities
and do not intend to do so in the foreseeable future. If we were to invest in
unrated securities, the sub-adviser first would determine that these unrated
Tax-Exempt Securities meet our credit quality standards by performing an
independent credit analysis of the issuer of the security (and any institution
giving a credit enhancement to the security) in accordance with procedures
adopted by our Board of Trustees and reviewed by the Adviser.
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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 and 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.
Options Transactions
Each Portfolio, other than Money Market Portfolio and E[bullet]fund, 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.
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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, 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 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 Money Market Portfolio and the E[bullet]
fund, 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,
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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).
Special Considerations Regarding Tax-Exempt Securities; Muir National
Tax-Free Income Portfolio
"Tax-Exempt Securities," as this term is used in this Statement of
Additional Information, includes debt obligations issued by the United States,
including U.S. Territorial obligations, obligations of Puerto Rico, Guam and the
Virgin Islands and the obligations of the U.S. Government and its agencies and
instrumentalities, the interest on which is, in the opinion of bond counsel to
the issuer, exempt from federal income taxes. Tax-Exempt Securities are
generally issued to obtain funds for various public purposes. An inverse
relationship exists between the value of debt obligations, including Tax-Exempt
Securities, and interest rates (i.e., when interest rates decline, the value of
debt obligations generally will tend to increase and when interest rates
increase, the value of debt obligations generally will tend to decline).
Municipal Notes. We may invest in different types of municipal notes
including (i) tax anticipation notes; (ii) revenue anticipation notes; (iii)
bond anticipation notes; (iv) construction loan notes; (v) short-term discount
notes; and (vi) variable rate demand notes.
Tax anticipation notes are used to finance working capital needs of
municipalities and are issued in anticipation of various seasonal tax revenues,
to be payable from these specific future taxes. They are usually general
obligations of the issuer secured by the issuer's taxing power for the payment
of principal and interest. Revenue anticipation notes are issued in expectation
of receipt of other kinds of revenue, such as federal revenues available under
the federal Revenue Sharing Program. They also are usually general obligations
of the issuer.
Bond anticipation notes normally are issued to provide interim financing
until long-term financing can be arranged. The long-term bonds then provide the
money for the repayment of the notes.
Construction loan notes are sold to provide construction financing for
specific projects. After successful completing and acceptance, many projects
receive permanent financing through the Federal Housing Administration under the
Federal National Mortgage Association or the Government National Mortgage
Association.
Short-term discount notes (tax-exempt commercial paper) are short-term
(365 days or less) promissory notes issued by municipalities to supplement their
cash flow.
We may also invest up to 5% of our total assets in variable or floating
rate demand notes ("VRDNs"). VRDNs are tax-exempt securities that contain a
floating or variable interest rate adjustable formula and an unconditional right
of demand to receive payment of the unpaid principal balance plus accrued
interest upon a short notice period prior to specified dates, either from the
issuer or by drawing on a bank letter of credit, a guarantee or insurance issued
with respect to such instrument. The interest rate on a VRDN is adjusted
periodically based on a specific external rate (e.g., bank prime rate) to
maintain the VRDN's market value at approximately par. We decide which VRDNs to
purchase in accordance with procedures prescribed by our Board of Trustees,
which are intended to minimize credit risks. These procedures include, among
other things, both a credit analysis of any financial institution that is giving
credit support and a requirement that a VRDN be investment grade, as determined
in accordance with procedures adopted by the Board of Trustees with respect to
both its long-term and short-term aspects; (except that where credit support for
the instrument is provided even in the event of default on the underlying
security, we may rely only on the investment grade character of the short-term
aspect of the VRDN, i.e., the demand feature.) VRDNs which are unrated must have
quality characteristics similar to rated VRDNs in accordance with procedures
adopted by our Board of Trustees.
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We may also invest in participation interests ("Participating VRDNs") in
variable or floating rate tax-exempt obligations held by a financial
institution, typically a commercial bank ("institution"). Participating VRDNs
provide us with a specified undivided interest (up to 100%) in the underlying
obligation and the right to demand payment of the unpaid principal balance plus
accrued interest on the Participating VRDNs from the institution upon a
specified number of days notice. In addition, the Participating VRDN is backed
by an irrevocable letter of credit or guarantee of the institution. The
institution typically retains fees out of the interest paid on the obligation
for servicing the obligation, providing the letter of credit and issuing the
repurchase commitment. Our sub-adviser performs a credit analysis of the
institution involved, following procedures adopted by our Board of Trustees.
Municipal Bonds. Municipal bonds meet longer-term capital needs and
generally have maturities of more than one year when issued. Municipal bonds
have three principal classifications: (i) general obligation bonds; (ii) revenue
bonds; and (iii) industrial development bonds.
General obligation bonds are issued by states, counties, cities, towns,
and regional districts. The proceeds of these obligations are used to fund a
wide range of public projects, including construction or improvement of schools,
and water and sewer systems. The basic security behind general obligation bonds
is the issuer's pledge of its full faith, credit and taxing power for the
payment of principal and interest. The taxes that can be levied for the payment
of debt service may be limited or unlimited as to the rate or amount of special
assessments.
Revenue bonds are not secured by the full faith, credit and taxing power
of their issuer. Rather, the principal security for revenue bonds is generally
the net revenue derived from a particular facility, group of facilities, or, in
some cases, the proceeds of a special excise tax or other specific revenue
source. Revenue bonds are issued to finance a wide variety of capital projects
including: electric, gas, water and sewer systems; highways, bridges, and
tunnels; port and airport facilities; colleges and universities; and hospitals.
Although the principal security behind these bonds may vary, many provide
additional security in the form of a debt service reserve fund whose money may
be used to make principal and interest payments on the issuer's obligations.
Housing finance authorities have a wide range of security, including partially
or fully insured mortgages, rent subsidized and/or the net revenues from housing
or other public projects. Some authorities are provided further security in the
form of a state's assurance (although without obligation) to make up
deficiencies in the debt service reserve fund.
Industrial development bonds are in most cases revenue bonds and are
issued by or on behalf of public authorities to raise money to finance various
privately-operated facilities for business, manufacturing, housing, sports, and
pollution control. These bonds are also used to finance public facilities such
as airports, mass transit systems, ports, and parking. The payment of the
principal and interest on such bonds is dependent solely on the ability of the
facility's user to meet its financial obligations and the pledge, if any, of the
real and personal property so financed as security for such payment. Tax-exempt
industrial development bonds, in most cases, are revenue bonds and generally do
not carry the pledge of the credit of the issuing municipality, but generally
are guaranteed by the corporate entity on whose behalf they are issued. The
social performance of any such corporate guarantor will be considered in
accordance with procedures adopted by our Board of Trustees before we make an
investment decision with respect to any guaranteed securities. We will not
purchase industrial development bonds to the extent that the interest paid by
particular bonds is not excluded from gross income for federal regular income
tax purposes. We will not invest 25% or more of our total assets in industrial
development bonds.
Tax-Exempt Securities include municipal lease/purchase agreements which
are similar to installment purchase contracts for property or equipment issued
by municipalities. Our investment in municipal lease/purchase agreements will
not exceed 5% of our total assets.
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While we may invest in Tax-Exempt Securities with maturities of any
length, securities with longer maturities typically exhibit more fluctuation in
market value and therefore the inclusion of such securities in our portfolio may
increase the fluctuation of our net asset value. We invest in Tax-Exempt
Securities with maturities of up to 30 years depending upon our assessment of
the relative yield on securities of different maturities and our expectations of
future changes in interest rates.
There may, of course, be other types of municipal securities, similar to
the foregoing described municipal securities, which may become available and
could be included in our investment portfolio.
It is also possible, although not anticipated, that under normal market
conditions up to 20% of our net assets could be invested in municipal
obligations, other securities on which the interest is a tax preference item
under the federal alternative minimum tax, U.S. Treasury obligations, high
quality commercial paper, obligations of U.S. banks (including commercial banks
and savings institutions insured by the Federal Deposit Insurance Corporation
("FDIC") with assets of $1 billion or more, and repurchase agreements secured by
U.S. Government securities. Some of the foregoing investments generate income
that possibly would be subject to federal personal income taxes when distributed
to our shareholders.
For temporary defensive purposes only, we may invest up to 100% of our
assets in (i) obligations issued or guaranteed by the full faith and credit of
the U.S. Government, its agencies, instrumentalities or authorities, highest
rated commercial paper, certificates of deposits of domestic banks with assets
of $1 billion or more and repurchase agreements (subject to the limitations
described below) the interest on which is subject to federal tax.
We may purchase shares of no-load, open-end investment companies which
invest in Tax-Exempt Securities with remaining maturities of one year or less
(commonly known as "money market funds"). We will invest in such tax-exempt
money market funds only as a short-term measure if our Adviser or sub-adviser
determines that such money market funds provide a better combination of yield
and liquidity than direct investment in short-term, Tax-Exempt Securities. Our
Adviser will waive its management fee on any portion of our assets invested in
such money market funds. We will not invest more than 10% of our total assets in
shares issued by money market funds nor will we invest more than 5% of our total
assets in a single money market fund.
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Factors That Affect the Value of Our Investment
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 Money Market Portfolio, the
E[bullet]fund, Citizens Income Portfolio and Muir National Tax-Free 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 Money Market Portfolio and the E[bullet]fund, 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.
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Turnover and Portfolio Transactions
With regard to the Money Market Portfolio and the E[bullet]fund, 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
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 and Muir National Tax-Free 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.
The Citizens Index Portfolio seeks to have a turnover of less than 25% per year.
The Global Equity Portfolio is expected to have a portfolio turnover rate of
200%. Higher portfolio turnover rate increases transaction costs and may
increase taxable gains.
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
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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, 1993, 1994, 1995 and 1996, all portfolio purchases,
as described above, were made directly from issuers or from dealers, and we paid
commissions in aggregate as follows: 1993-$79,300, 1994-$329,000, 1995-$250,000
and 1996-$171,957.
Our Adviser also may enter into "soft dollar" arrangements with
broker/dealers. A soft dollar arrangement is one in which the brokerage
commissions generated through trading are used to purchase ancillary products
and services relating to social and investment 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 Money Market Portfolio and
the E[bullet]fund 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 Money Market
Portfolio and the E[bullet]fund, is determined at 4:00 p.m. Eastern Time 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 Money Market Portfolio and the
E[bullet]fund 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 and
Christmas Day.
Money Market Portfolio and the E[bullet]fund
Our Trustees have determined that it is appropriate for us to value our
Money Market Portfolio and the E[bullet]fund 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 Money Market
Portfolio and the E[bullet]fund 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
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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 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, the Citizens Index Portfolio and the Muir
National Tax-Free Income Portfolio
As described in the Prospectus, the Citizens Income Portfolio, Citizens
Emerging Growth Portfolio, Citizens Global Equity Portfolio, the Citizens Index
Portfolio and the Muir National Tax-Free Income 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 Money
Market Portfolio and the Eofund, the yield is usually quoted for a seven day
period. For the Citizens Income Portfolio and the Muir National Tax-Free 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 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]
In addition, we may also quote a tax equivalent yield for the Muir
National Tax-Free Income Portfolio which demonstrates the taxable yield
necessary to produce an after-tax yield equivalent to that of a fund which
invests in tax-exempt obligations. Such yield is computed by dividing that
portion of our yield (computed as indicated above) that is tax-exempt by one
minus the highest applicable income tax rate and adding the product to that
portion of our yield that is not tax-exempt.
Current yield, effective yield and tax equivalent 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 or taxable
equivalent 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. A taxable equivalent distribution
rate demonstrates the taxable distribution rate equivalent to our current
distribution rate (calculated as indicated above). 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.
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The following table sets forth various measures of performance for the
Portfolios as of June 30, 1996:
Compounded
Effective
Portfolio 7-Day Yield Yield 30-Day Yield
---------- ----------- ----------- ------------
Working Assets Money Market
Portfolio 4.02% 4.10% NA
E[bullet]fund 5.24% 5.38% NA
Citizens Income Portfolio NA NA 6.42%
The current yield of the Money Market Portfolio and the E[bullet]fund
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 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 Money Market Portfolio and the
E[bullet]fund 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 Money Market Portfolio and the E[bullet]fund
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 our Money Market Portfolio and the E[bullet]fund 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 and the Muir
National Tax-Free Income Portfolio is based on the annualized net investment
income per share of a Portfolio over a 30 day period. The yield is calculated by
dividing the net investment income per share of a 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 a
Portfolio during the
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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 each 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, Citizens Index Portfolio and Muir National
Tax-Free Income 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:
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
We also calculate an annual total return for the E[bullet]fund on a daily
basis. This number is the true reflection of what the E[bullet]fund returns to
you. We calculate total return for the E[bullet]fund by adding the net
investment income together with the Portfolio's other income, including income
from debit card transactions, and other income and capital changes, if any.
19
<PAGE>
For the fiscal year ended June 30, 1996 the Portfolios had the following
performance:
<TABLE>
<CAPTION>
Annualized Hypothetical Investment
Total Return Return on $1,000 for the 1
Portfolio 1 Year Total Return Since Inception Year Period
--------- ------------------- --------------- -------------------------
<S> <C> <C> <C>
Citizens Income Portfolio 5.48% 6.54% $1,054.80
Citizens Emerging Growth 42.53% 26.19% $1,425.30
Portfolio
Citizens Global Equity 12.64% 8.36% $1,126.40
Portfolio
Citizens Index Portfolio 23.79% 25.58% $1,237.90
</TABLE>
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 Bank Rate Monitor, Money Magazine, Morningstar, Forbes Magazine, Lipper
Analytical Services and others.
- -------------------------------------------------------------------------------
Dividends and Distributions
Money Market Portfolio and the E[bullet]fund
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 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.
20
<PAGE>
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.
Muir National Tax-Free Income Portfolio
The Portfolio intends to declare a dividend daily, payable monthly, equal
to substantially all of its net investment income and to distribute
substantially all net realized long-term capital gains (and any short-term
capital gains) at least once each calendar year. Dividends and capital gains are
automatically reinvested in additional shares at net asset value per share on
the reinvestment date unless the shareholder has previously requested in writing
that the payment be made in cash.
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.
- ------------------------------------------------------------------------------
Federal Taxes
Status as a "Regulated Investment Company"
Each of the Portfolios 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; (b) derive less than
30% of its gross income from the sale or other disposition of stock, or
securities and certain other investment held less than three months; and (c)
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). Options that are held by a Portfolio at the end of
its taxable year are subject to section 1256 of the Code and will be deemed to
have been sold at market value for federal income tax purposes. Sixty percent of
any net gain or loss recognized on these deemed sales, and 60% of any net gain
or loss realized from any actual sales of Section 1256 Contracts, will be
treated as long-term capital gain or loss, and the balance will be treated as
short-term capital gain or loss.
21
<PAGE>
A Portfolio that qualifies as a "qualified 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 distribute all of its income, the Portfolio will not be
subject to any Massachusetts income or excise tax.
The Code permits the character of tax-exempt interest received by a
regulated investment company to flow through as tax-exempt dividends when
distributed to its shareholders, provided that at least 50% of the value of its
assets at the end of each quarter of its taxable year is invested in state,
municipal and other obligations, the interest on which is exempt under Section
103 (a) of the Code. We intend to satisfy this 50% requirement in order to
permit our distributions of tax-exempt interest to be treated as such for
federal income tax purposes in the hands of our shareholders. Distributions to
shareholders of tax-exempt interest earned by us for the taxable year are
therefore not subject to federal income tax, although such distributions may be
subject to the individual and corporate alternative minimum taxes described
below. A portion of original issue discount relating to stripped municipal bonds
and their coupons may be treated as taxable income under certain circumstances.
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 Money
Market Portfolio, the E[bullet]fund, Citizens Income Portfolio and Muir National
Tax-Free 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 deductible amounts may be
subject to the alternative minimum tax and result in certain basis adjustments.
Since the investment income of the Money Market Portfolio, the E[bullet]fund,
Citizens Income Portfolio and Muir National Tax-Free 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, to the extent that a Portfolio derives investment income from sources
within foreign countries, such Portfolio's dividends and distributions will not
qualify for such deduction.
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.
Distributions from the Portfolios will also be included in individual and
corporate shareholders' income on which the alternative minimum tax may be
imposed.
Any dividend or distribution (except for dividends of net investment
income declared by the Money Market Portfolio and the E[bullet]fund) will have
the effect of reducing the per share net asset value of shares in a Portfolio by
the amount of the dividend or distribution. Shareholders purchasing shares in
any of the Portfolios shortly before the record date of any taxable dividend or
other distribution may thus pay
22
<PAGE>
the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.
Any loss realized upon a redemption 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 redemption of shares may also be disallowed under the rules
relating to wash sales.
If we acquire securities that produce taxable income, we will be able to
designate only a portion of our dividends as tax-exempt to you. We will
designate the tax-exempt percentage on an actual earned basis and will notify
you of the percentage by January 31st of the following year. Under this
designation method, the percentage designated as tax-exempt for any particular
distribution may be substantially different from the percentage of our income
that was tax-exempt during the period covered by the distribution.
Section 147 (a) of the Code prohibits exemption from taxation of interest
on certain governmental obligations to persons who are "substantial users" (or
persons related thereto) of facilities financed by such obligations. We have not
undertaken any investigations as to the users of the facilities financed by
tax-exempt bonds in its portfolio.
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. The United States has entered into tax treaties with many foreign
countries which entitle a Portfolio to a reduced rate of tax or an exemption
from tax on such income.
Non-U.S. Shareholders
Distributions of net investment income to non-resident aliens and foreign
corporations will be subject to U.S. tax. For shareholders who are not engaged
in a trade or business in the U.S. to which the distribution is effectively
connected, this tax is withheld at the rate of 30% upon the gross amount of the
distribution in the absence of a Tax Treaty providing for a reduced rate or
exemption from U.S. taxation. However, if the distribution is effectively
connected with the conduct of the shareholder's trade or business within the
United States, the distribution will be included in the net income of the
shareholder and subject to U.S. income tax at the applicable marginal rate.
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.
Taxation; Muir National Tax-Free Income Portfolio
Investment in the Muir National Tax-Free Income Portfolio would not be
suitable for tax-exempt institutions, qualified retirement plans, H.R. 10 plans
and individual retirement accounts since such investors would not gain any
additional tax benefit from the receipt of tax-exempt income.
Because the Muir National Tax-Free Income Portfolio will distribute
exempt-interest dividends, all or a portion of any interest on indebtedness
incurred by a shareholder to purchase or carry shares of these Funds will not be
deductible for federal personal income tax purposes. In addition, the Code may
require a shareholder of this Portfolio, if he receives exempt-interest
dividends, to treat as taxable income a portion of certain otherwise nontaxable
social security and railroad retirement benefit payments. Furthermore, that
portion of any exempt-interest dividend paid by this Portfolio which represents
income from private activity bonds held by the Portfolio may not retain its
tax-exempt status in the hands of a shareholder who is a "substantial user" of a
facility financed by such
23
<PAGE>
bonds, or a "related person" thereof. Moreover, (i) some or all of a the
Portfolio's dividends and distributions may be specific preference items, or a
component of an adjustment item, for purposes of the federal individual and
corporate alternative minimum taxes and (ii) the receipt of the Portfolio's
dividends and distributions may affect a corporate shareholder's federal
"environmental" tax liability. In addition, the receipt of Portfolio dividends
and distributions may affect a foreign corporate shareholder's federal "branch
profits" tax liability and a Subchapter S corporate shareholder's federal
"excess et passive income" tax liability. Shareholders should consult their own
tax advisers as to whether they are (i) "substantial users" with respect to a
facility or "related" to such users within the meaning of the Code and (ii)
subject to a federal alternative minimum tax, the federal "environmental" tax,
the federal "branch profits" tax or the federal "excess net passive income" tax.
In the case of the Muir National Tax-Free Income Portfolio, these
statements will also designate the amount of exempt-interest dividends that is a
specific preference item for purposes of the federal individual and corporate
alternative minimum taxes.
After the end of each calendar year, each shareholder receives
information for tax purposes on the dividends and distributions for that year,
including any portion taxable as ordinary income, any portion taxable as capital
gains, any portion representing a return of capital, any amount of dividends
eligible for the dividends-received deduction for corporations. Shareholders of
the Muir National Tax-Free Income Portfolio will also receive information
regarding the federal income tax status of all distributions, including a
statement of the percentage of the prior calendar year's distributions which we
have designated as tax-exempt, and the percentage of such tax-exempt
distributions treated as a tax-preference item for purposes of the alternative
minimum tax.
===============================================================================
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
holidays on which the New York Stock Exchange is closed currently are: New
Year's Day, Presidents' Day (observed), Good Friday, Memorial Day (observed),
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In addition, to
the above mentioned holidays, Money Market Portfolio and the Eofund are also
closed on Martin Luther King, Jr's. Birthday (observed), Columbus Day and
Veterans 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 ten 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 Eofund, 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.
24
<PAGE>
- -------------------------------------------------------------------------------
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.
William D. Glenn, II (9/9/48), Co-Chair of the Board and Trustee, has
been a shareholder of Citizens Trust since 1983. He is a psychotherapist and the
Executive Director of Continuum HIV Day Services in San Francisco. He is a past
President of the San Francisco AIDS Foundation and former member of the Board of
Directors of the Gay Rights Chapter of the Northern California American Civil
Liberties Union. From 1981 to 1988, Mr. Glenn was the Assistant Principal and
Dean of Students at Mercy High School in San Francisco. He currently serves on
the boards of San Francisco's KQED and the 18th St. Services Chemical Dependency
Recovery Center. Address: 915 Las Ovejas, San Rafael, California 94903
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
$4 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. Address: 525 Market Street, 33rd floor, San Francisco, California
94105.
Azie Taylor Morton (2/1/36), Co-Chair of the Board, Audit Committee Chair
and Trustee, was Treasurer of the United States during the Carter
Administration. From 1984 - 1989, she owned and operated the Stami Corporation,
a franchisee of Wendy's Old Fashioned Hamburgers. Her 30 year career began as a
teacher at the State School for Girls in Crockett, Texas. She went on to work at
the AFL-CIO, the White House Conference on Civil Rights and U.S. Equal
Employment Opportunity Commission. She has served as the Commissioner of the
Virginia Department of Labor and Industry as well as Executive Director of the
Human Rights Project, Inc. In 1990 - 92 she was Director of Resource
Coordination at Reading is Fundamental, Inc. She is currently an investment
adviser. Address: 10910 Medfield Court, Austin, Texas 78739.
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
25
<PAGE>
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 Non-Nuclear
World. Address: 16119 Oak Manor Drive, Tampa, Florida 33624
Our Board of Trustees functions with a Nominating Committee comprised of
the whole Board, but pursuant to our Distribution Plan (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 disclosed the aggregate compensation from the
Fund for services provided through June 30, 1996.
26
<PAGE>
CITIZENS INVESTMENT TRUST - COMPENSATION TABLE
<TABLE>
<CAPTION>
==================================================================================================================
Name of Person and Position Aggregate Compensation from The Fund Total Compensation Paid to Trustees
<S> <C> <C>
Azie Taylor Morton $4,000 $4,000
Juliana Eades $4,000 $4,000
William D. Glenn, Jr. $6,500 $6,500
Ada Sanchez $4,000 $2,000
Lokelani Devone $ 750 $ 750
Sophia Collier* 0 0
J.D. Nelson* 0 0
==================================================================================================================
</TABLE>
* Sophia Collier is an Interested Trustee and received no compensation from
Citizens Trust. J.D. Nelson did not become an Interested Trustee until March
1995 and received compensation from the Fund prior to his change in status to an
interested trustee.
The Trustees who are not "interested persons" received aggregate fees
from us of $23,750 for services provided through June 30, 1996 and were also
reimbursed for out of pocket expenses. Our Trustees, officers and members of the
Board of Advisors as a group owned less than 1% of our outstanding shares as of
June 30, 1996.
Other Officers of The Fund
Christine Pratt (1/6/47), Secretary, is Senior Vice President of Citizens
Advisers and began working for Citizens Advisers in June, 1996. Prior to that
time, Ms. Pratt was employed by BayBanks, where she headed up the lending and
servicing division for BayBanks Consumer Lending and Mortgage subsidiaries.
Suzan Barron (9/5/64), Vice President, is Legal Counsel of Citizens
Advisers and joined the Adviser in January, 1997. From March, 1993 to October,
1996, Ms. Barron held the position of Legal Counsel with Signature Financial
Group, Inc., a mutual fund administrator and distributor. Prior to that time,
Ms. Barron was a Legal Administration Officer with The Boston Company.
- ------------------------------------------------------------------------------
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."
27
<PAGE>
- ------------------------------------------------------------------------------
Investment Advisory and Other Services
We are advised by Citizens Advisers, Inc. (the "Adviser") under a
contract known as the Management Agreement. The Adviser has offices at 111 Pine
Street, San Francisco, California 94111 and One Harbour Place, Portsmouth, New
Hampshire 03801. The Adviser is a California corporation. Citizens Securities,
Inc., a wholly-owned subsidiary 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. The Adviser maintains these duties for the Muir National Tax-Free
income Portfolio.
GMG/Seneca Capital Management, L.P.
Our sub-adviser for the Money Market, E[bullet]fund, Citizens Income and
Emerging Growth Portfolios is GMG/Seneca Capital Management, L.P., a registered
investment adviser established in 1990. It is a wholly owned subsidiary of GMG
Capital Management, LLC, which manages over $3 billion from their offices at 909
Montgomery Street, San Francisco, California. Organized as a California limited
partnership, GMG/Seneca Capital Management, L.P. has two general partners, Gail
Seneca and Genesis Merchant Group, L.P., an Illinois Limited Partnership.
Genesis Merchant Group, in turn, has three general partners: William K.
Weinstein, Gail Seneca and Philip C. Stapleton. Prior to starting GMG/Seneca,
Ms. Seneca was employed by Wells Fargo Bank as a senior investment officer.
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 and 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 as we are
required to have and computes our net assets 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:
Money Market Portfolio--0.35%; the E[bullet]fund--0.10%; Citizens Income
Portfolio--65%; Citizens Emerging Growth Portfolio--1.00%; Citizens Global
Equity Portfolio--1.00%; Citizens Index Portfolio--0.50%; and Muir National
Tax-Free Income Portfolio--0.65%. 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, or refund, the amount of
the excess. The limit on our expenses, pursuant to the Management Agreement, is
as follows: Money Market Portfolio: 1.50% of the
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first $40 million or our average annual net assets and 1% thereafter; Citizens
Income Portfolio: 1.75% of the first $75 million of average net assets and 1.25%
thereafter; and Muir National Tax-Free Income Portfolio: 0.65% of the
Portfolio's average daily net assets.
There is no limit on expenses for the E[bullet]fund, 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, 1994, 1995 and 1996, the Adviser
received the following fees: Money Market Portfolio, 1994-$619,206,
1995-$526,422, 1996-$423,731; Citizens Income Portfolio, 1994-$125,495,
1995-$167,280, 1996-$207,386; Citizens Emerging Growth Portfolio, 1994-$7,696,
1995-$67,908, 1996-$197,492; Citizens Global Equity Portfolio,
1994-$12,569,1995-$78,349, 1996-$118,662; and Citizens Index Portfolio, 1994-$0,
1995-$760,572, 1996-$689,466. For the fiscal period ended June 30, 1996, the
Adviser accrued expenses of $4,018 on behalf of the E[bullet]fund, all of which
was waived by the Adviser.
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 Citizen 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, Citizens Global Equity Portfolio
and Muir National Tax-Free Income Portfolio, 0.10% of average assets; and
Citizens Index Portfolio, 0.65% of average assets.
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<PAGE>
Distribution Plan
Citizens Securities, Inc. (the "Distributor"), a wholly owned subsidiary
of Citizens Advisers, Inc., 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. 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 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. 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 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, 1991-$474,900,
1992-$508,374, 1993-$ 606,018, 1994-$713,847, 1995-$783,111 and 1996-$683,515.
The major categories of expenses for 1996 were as follows: advertising, printing
and mailing prospectuses to other than current shareholders, compensation to
broker/dealers, compensation to sales personnel.
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<PAGE>
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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, 1996, there were 108,006,752 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: Money Market Portfolio, the
E[bullet]fund and Citizens Income Portfolio - no holders of 5% or more. Citizens
Emerging Growth Portfolio - Charles Schwab & Co, Inc., 9.0%. Citizens Global
Equity Portfolio - Charles Schwab & Co, Inc., 17.9%. Citizens Index Portfolio -
Charles Schwab & Co, Inc., 2.3%.
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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.
- ------------------------------------------------------------------------------
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.
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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.
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Custodian
State Street Bank and Trust of Boston, 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.
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Auditors
Tait, Weller & Baker of 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.
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Legal Counsel
Bingham, Dana & Gould of Boston, Massachusetts.
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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, 1996, are incorporated herein by reference and is provided
to each person to whom the Statement of Additional Information is sent or given:
Statement of Investments - June 30, 1996
Statement of Assets and Liabilities - June 30,1996
Statement of Operations for the year ended - June 30, 1996
Statement of Changes in Net Assets for the years ended June 30, 1995 and 1996.
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.
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<PAGE>
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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 to 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 granted 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 fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A posses 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 sometime 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.
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.
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Conditional Ratings: Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operations experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.
Rating Refinements: Moody's may apply numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through B in its municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
Absence of Rating: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities or companies that are
not rated as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not published in
Moody's publications. Suspension or withdrawal may occur if new and material
circumstances arise, the effects of which preclude satisfactory analysis; if
there is no longer available reasonable up-to-date data to permit a judgment to
be formed; if a bond is called for redemption; or for other reasons.
Standard & Poor's
AAA: Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A: Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB: Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to weakened capacity to pay interest and repay principal for debt
in this category than in higher rated categories.
BB, B, CCC, CC and C: Debt rated BB, CCC, CC and C is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB indicates the
lowest degree of speculation and C the highest degree of speculation. While such
debt will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures for adverse
conditions.
BB: Debt rated BB has less near- term vulnerability to default than other
speculative issues. However, it faces major on- going uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments. The
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BB rating category also used for debt subordinated to senior debt that is
assigned as actual or implied BBB rating.
B: Debt rated B has a greater vulnerability to default but has the capacity to
meet interest payments and principal repayments. Adverse business, financial or
economic conditions will likely impair capacity or willingness to pay interest
and repay principal. The B rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied BBb or BB rating.
CCC: Debt rated CCC has a currently identifiable vulnerability to default, and
is dependent upon favorable business, financial or economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, it is not likely to have the
capacity to pay interest and repay principal. The CCC rating category is also
used for debt subordinated to senior debt that it assigned an actual or implied
B or B rating.
CC: The rating CC is typically applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.
C: The rating C is typically applied to debt subordinated to senior debt which
is assigned an actual or implied CCC debt rating. The C rating may be used to
cover a situation where a bankruptcy petition has been filed, but debt service
payments are continued.
CI: The rating CI is reserved for income bonds on which no interest is being
paid.
D: Debt rated D is in payment default. The D rating category is used when
interest payments or principal payments 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 will be
used upon the filing of a bankruptcy petition if debt service payments are
jeopardized.
NR: indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular type of obligation as a matter of policy.
Provisional Ratings: The letter "p" indicates the rating is provisional. A
provisional rating assumes the successful completion of the project being
financed by the bonds being rated and indicates that payment of debt service
requirements is largely or entirely dependent upon the successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project, makes no comment on the likelihood of,
or the risk of default upon failure of, such completion. The investor should
exercise his own judgment with respect to such likelihood and risk.
Note: The Standard & Poor's ratings may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within the major rating
categories.
Fitch Investors Service, Inc.:
AAA: (highest quality) The obligor has an extraordinary ability to pay interest
and repay principal which is unlikely to be affected by reasonably foreseeable
events.
AA: (high quality) The obligor's ability to pay interest and repay principal,
while very strong, is somewhat less than for AAA rated securities or more
subject to possible change over the term of the issue.
A: (good quality) The obligor's ability to pay interest and repay principal is
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
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BBB: (satisfactory bonds) The obligor's ability to pay interest and repay
principal is considered to be adequate. Adverse changes in economic conditions
and circumstances, however, are more likely to weaken this ability than bonds
with higher ratings.
Municipal Notes
Moody's:
Moody's ratings for state and municipal and other short-term obligations will be
designated Moody's Investment Grade ("MIG"). This distinction is in recognition
of the differences between short-term credit risk and long-term risk. Factors
affecting the liquidity of the borrower are uppermost in importance in short
term-borrowing, while various factors of the first importance in long-term
borrowing risk are of lesser importance in the short run. Symbols used will be
as follows:
MIG-1: Notes are of the best quality enjoying strong protection from established
cash flows of funds for their servicing or from established and broad-based
access to the market for refinancing, or both.
MIG-2: Notes are of high quality, with margins of protection ample, although not
so large as in the preceding group.
MIG-3: Notes are of favorable quality, with all security elements accounted for,
but lacking the undeniable strength of the preceding grades. Market access for
refinancing, in particular, is likely to be less well established.
Standard & Poor's:
SP-1: Issues carrying this designation have a strong or very strong capacity to
pay principal and interest. Issues determined to possess overwhelming safety
characteristics will be given a "plus" (+) designation.
SP-2: Issues carrying this designation have a satisfactory capacity to pay
principal and interest.
Commercial Paper
Moody's:
Moody's Commercial Paper ratings, which are also applicable to municipal paper
investments permitted to be made by the Trust, are opinions of the ability of
issuers to repay punctually their promissory obligations not having an original
maturity in excess of nine months. Moody's employs the following designations,
all judged to be investment grade, to indicate the relative repayment capacity
of rated issuers:
P-1 (Prime-1): Superior capacity for repayment
P-2 (Prime-2): Strong capacity for repayment
P-3 (Prime-3) Acceptable capacity for repayment
Standard & Poor's:
Standard & Poor's 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 into four categories, ranging from "A" for the highest quality
obligations to "D" for the lowest. Issues within the "A" category are delineated
with the numbers 1, 2 and 3 to indicate the relative safety, as follows:
A-1: This designation indicates the degree of safety regarding timely payment is
very strong. A "plus" (+) designation indicates an even stronger likelihood of
timely payment.
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A-2: Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated A-1.
A-3: Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
The Commercial Paper Rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in or unavailability of such information.
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CITIZENS INVESTMENT TRUST
PART C
Item 24: Financial Statements and Exhibits
(A) Audited Financial Statements: the following audited Financial
statements are incorporated by reference to the Registrant's Annual
Report to shareholders for the period ended June 30, 1996: material
currently on file
Statement of Investments - June 30, 1996
Statement of Assets and Liabilities - June 30, 1996
Statement of Operations for the year ended June 30, 1996
Statement of Changes in Net Assets for the year ended June 30, 1996
Selected per Share Data and Ratios from Inception through June 30, 1996
Notes to Financial Statements: June 30, 1996
Auditors Report: June 30, 1996
(B)Exhibits
(1) declaration of trust, as amended3
(1)(a) series designation relating to the Muir National Tax-Free Portfolio5
(2) by-laws3
(3) not applicable
(4) not applicable
(5) form of management agreement is filed herein
(5)(a) form of sub-investment advisory agreement3
(6) distribution agreement
(6)(a) distribution agreement, as amended1
(6)(b) renewal of distribution agreement3
(6)(c) amendment to distribution agreement dated May 6, 1996 3
(6)(d) amendment to distribution agreement dated May 30, 19963
(7) not applicable
(8) custodian agreement4
(9) other material contracts:
(9)(a) administrative agreement as amended, is filed herein
(10) opinion and consent of counsel as to the legality of the securities
being registered1
(11) consent of independent certified public accountants 5
(12) not applicable
(13) copies of written assurance from initial stockholders1
(14) copies of model plan used in establishment of retirement plan 1
(15) Rule 12b-1 distribution plan1
(16) Schedule for computation of each performance quotation provided in the
registration statement (in response to Item 22): provided in
Statement of Additional Information.
(27) Financial Data Schedules are filed herein.
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1 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.
2 Incorporated by reference to Amendment Nos. 12 and 14 to the
Registrant's Registration Statement (File No. 2-80886), as filed wit
the Securities and Exchange Commission.
3 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
4 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.
5 Incorporated by reference to Amendment No. 36 to the Registrant's
Registration Statement (File No. 2-80886), as filed with the Securities
and Exchange Commission.
<PAGE>
CITIZENS INVESTMENT TRUST
PART C (CONT'D)
Item 25: Persons controlled by or under common control with Registrant: None
Item 26: Number of holders of securities as of April 23, 1997:
Title Number of Record Holders
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Working Assets Money Market Portfolio 8958
Citizens Income Portfolio 2382
Citizens Emerging Growth Portfolio 7422
Citizens Global Equity Portfolio 2769
Muir California Tax-Free Income Portfolio 826
Citizens Index Portfolio 13762
E[bullet]fund 2800
Muir National Tax-Free Income Portfolio 0
Item 27: Indemnification.
Article VII, Section 12 of the Agreement and Declaration of Trust of
Citizens Investment Trust provides that the Trust shall indemnify any person who
was or is a party or is threatened to be made a party to any proceeding by
reason of the fact that such person is or was an agent of the Trust, against
expenses, judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with such proceeding if that person acted in
good faith and reasonably believe her/his conduct to be in the best interest of
the Trust. Indemnification will not be provided in certain circumstances,
however, including instances 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.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insure under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28: Business and Other Connections of Investment Adviser.
Citizens Advisers, Inc., a California corporation located at 111 Pine Street,
San Francisco, California 94111, and One Harbour Place, Portsmouth, New
Hampshire 03801, a registered investment adviser, is the investment manager for
the Registrant. The officers and directors of Citizens Advisers having other
business of a substantial nature are as follows:
<PAGE>
CITIZENS INVESTMENT TRUST
PART C (CONT'D)
Name and Principal
Business Address: Nature of Other Business:
Sophia Collier President and Director
One Harbour Place, Suite 525 of Registrant
Portsmouth, N.H. 03801
Item 29: Principal Underwriters
(A) Citizens Securities, Inc., 111 Pine Street, San Francisco,
California 94111, and One Harbour Place, Portsmouth, New Hampshire 03801, a
registered broker/dealer, is the principal underwriter for the Registrant and is
a wholly owned subsidiary of Citizens Advisers, Inc., the Investment Manager, a
California corporation. The officers and directors of Citizens Securities having
other business of a substantial nature are as follows:
(B)
Positions and
Name and Principal Positions and Offices Offices with
Business Address with Underwriter Registrant
Sophia Collier President and Director of President and
See Item 28 underwriter Director
(C) Not Applicable
Item 30: Location of Accounts and Records: The account, books, or other
documents required to be maintained by Section 31(a) of the 1940 Act and the
rules thereunder are kept by the Registrants Transfer and Dividend Distributing
Agent, PFPC, Inc., 400 Bellevue Pkwy., Wilmington, DE 19809.
Item 31: Management Services.
Not applicable
Item 32: Undertakings.
(A) If the information called for by item 5A of Form N-1A is contained in the
latest Annual Report to shareholders, the Registrant undertakes to furnish each
person to whom a prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.
(B) The Registrant undertakes to file a post-effective amendment, using current
financial statements which need not be certified, within four to six months from
the effective date of the Registrant's 1933 Act Registration Statement.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant 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 28th
day of April, 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>
<CAPTION>
<S> <C> <C>
/s/ Sophia Collier *
- ----------------------------------Trustee
Sophia Collier President and April 28, 1997
Principal Executive
Principal Accounting Officer
Principal Financial Officer
s/ William Glenn *
- ---------------------------------- Trustee April 28, 1997
(William Glenn)
/s/ Ada Sanchez
- ---------------------------------- Trustee April 28, 1997
(Ada Sanchez)
/s/ J.D. Nelson *
- ---------------------------------- Trustee April 28, 1997
(J.D. Nelson)
/s/ Azie Taylor Morton *
- ---------------------------------- Trustee April 28, 1997
(Azie Taylor Morton)
/s/ Juliana Eades *
- ---------------------------------- Trustee April 28, 1997
(Juliana Eades)
/s/ Sophia Collier
- ----------------------------------
* By Sophia Collier Attorney in Fact
</TABLE>
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
---------- -----------
(5) Form of Management Agreement
(9)(a) Form of Administration Agreement
(27) Financial Data Schedule
Exhibit 5
MANAGEMENT AGREEMENT
Agreement made the 1st day of June, 1992, as amended January 19, 1997,
between Citizens Investment Trust (the "Trust"), a Massachusetts business trust,
and Citizens Advisers, Inc., a California corporation (the "Manager").
WHEREAS, the assets and liabilities and the shares of beneficial
interest of the Trust are divided into separate series (together with any series
that may be established in the future, the "Portfolios" and each individually, a
"Portfolio").
WITNESSETH:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
I. In General
The Manager agrees, all as more fully set forth herein, to act as
managerial investment adviser to the Trust with respect to the
investment of the assets of each Portfolio, and to supervise and
arrange for the purchase and sale of securities held in each Portfolio.
II. Duties and Obligations of the Manager with Respect to Investment of Assets
in the Trust
A. Subject to the succeeding provision of this section and subject to
the direction and control of the Board of Trustees of the Trust, the
Manager is responsible for:
1. determining which securities are to be bought and sold for
each Portfolio; and
2. the timing of such purchases and sales as well as the
placement of orders to effect these purchases and sales.
The Manager, at its sole option and expense, may, subject to the
provisions of the Investment Company Act of 1940, as amended (the
"Act"), delegate some or all of these duties to one or more
sub-managers.
B. Any investment purchases or sales made by the Manager shall at all
times conform to and be in accordance with any requirements imposed by:
1. the provisions of the Act, and of any rules and regulations in
force thereunder;
2. any other applicable provisions of law;
3. the provisions of the Declaration of Trust and By-Laws of the
Trust, each as amended from time to time;
4. any policies and determinations of the Board of Trustees of the
Trust; and
5. the fundamental policies of the Trust, as reflected in the
applicable then-current registration statement of the Trust under
the Act, or as amended by the Shareholders of the Trust.
C. The Manager shall use its best efforts in rendering services
hereunder, but neither the Manager nor any sub-manager shall be liable
for any loss sustained by reason of the purchase, sale or retention of
any security, whether or not such purchase, sale or retention shall
have been based upon its own investigation and research or upon the
investigation or research of another entity including, but not limited
to, in the case of the Manager or a sub-manager, the employees or
agents of the Manager or any sub-manager, provided that such purchase,
sale or retention was made in good faith. Nothing herein contained
shall, however, be construed to protect the Manager or any sub-manager
against any liability to the Trust or its Shareholders by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its obligations
and duties under this Agreement.
<PAGE>
D. Nothing in this Agreement shall prevent the Manager or any
affiliated person (as defined in the Act) of the Manager from acting as
investment adviser or manager and/or principal underwriter for any
other entity and shall not in any way restrict the Manager, any
sub-manager, or any such affiliated person from buying, selling or
trading securities for its or their own accounts or for the accounts of
others for whom they may be acting, provided that the Manager
represents that it will not undertake any activities which, in its sole
judgment, will adversely affect the performance of its obligations to
the Trust under this Agreement. The Trust expressly acknowledges that
the trade name "Citizens", and each Portfolio's name (collectively, the
"Trade Names") are not the property of the Trust for any purpose. The
Trust may use the Trade Names only in the manner allowed by the
Manager. The Trust further agrees that in the event that the Manager
ceases to be the Trust's investment manager for any reason, the Trust
will promptly take all necessary steps to stop using the Trade Names.
E. It is agreed that the Manager and any sub-manager, will have no
responsibility or liability for the accuracy or completeness of the
Trust's registration statement under the Act or the Securities Act of
1933, as amended, except for information supplied by the Manager for
inclusion therein. The Trust agrees to indemnify the Manager and any
sub-manager to the full extent permitted by the Trust's Declaration of
Trust.
III. Allocation of Expenses
The Manager agrees that it (or a sub-manager) will provide the Trust, at the
Manager's expense, with all office space, facilities, equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Manager will also pay all compensation of all Trustees, officers and employees
of the Trust who are affiliated persons (as defined in the Act) of the Manager.
All costs and expenses not expressly agreed to be paid by the Manager or a
sub-manager as described above, shall be paid by the Trust, including but not
limited to:
1. interest and taxes;
2. brokerage commissions;
3. insurance premiums;
4. compensation and expenses of the Trust's Trustees who are not
affiliated persons of the Manager;
5. legal and audit expenses;
6. fees and expenses of the Trust's custodian, shareholder
servicing agent, transfer agent, fund accountant and record
keeping agent;
7. expenses incident to the issuance of the Trust's shares of
beneficial interest, including those shares issued as reinvested
dividends;
8. fees and expenses incident to the registration of the Fund or
its shares of beneficial interest under Federal or State securities
laws;
9. expenses of preparing, printing or mailing reports and notices
and proxy material sent to the Shareholders of the Trust;
10. all other expenses incidental to holding meetings of the
Shareholders of the Trust;
<PAGE>
11. dues, assessments and/or contributions to the Investment
Company Institute or any successor thereto;
12. such non-recurring expenses as may arise, including those
relating to litigation affecting the Trust and the legal obligation
of the Trust to indemnify its officers and Trustees with respect
thereto; and
13. all expenses which the Trust agrees to bear in any distribution
agreement with the Manager or any other entity or in any plan
adopted by the Trust pursuant to rule 12b-1 under the Act.
IV. Compensation of the Manager
A. The Trust agrees to pay the Manager and the Manager agrees to accept
as full compensation for all of the services rendered by the Manager
hereunder, an annual management fee payable monthly and computed as of
the close of each business day at the annual rates with respect to each
Portfolio as detailed in Exhibit A.
B. The Manager agrees to reduce or eliminate its fee to the extent that
the total expenses of each Portfolio for any fiscal year (exclusive of
taxes, interest, brokerage commissions, and extraordinary expenses such
as litigation) shall exceed the limits as detailed in Exhibit B.
The payment of the management fee at the end of the month will be
reduced or a refund will be made to the Trust so that at no time will
there be any accrued but unpaid liabilities under this expense
limitation.
V. Duration, Revisions and Term
A. This Agreement shall go into effect on the date set forth above and
with respect to any Portfolio shall, unless terminated as herein
provided, continue in effect from year to year so long as such
continuance is specifically approved, with respect to such Portfolio,
at least annually by the Trust's Board of Trustees, including a
majority of Trustees who are not parties to this Agreement, or
"interested persons" (as defined in the Act) of any such party. Such
vote must be cast in person at a meeting of the Board of Trustees
called for the purpose of voting on such approval.
B. Revisions to this Agreement with respect to any Portfolio may be
made, subject to the provisions of the Act and the Trust's Declaration
of Trust, by a vote of the holders of a majority (as defined in the
Act) of the then issued and outstanding shares of beneficial interest
of that Portfolio, provided however, that only Shareholders of
Portfolios which will be affected will be entitled to vote on the
proposed revision.
C. This Agreement may be terminated with respect to any Portfolio
without penalty by either party upon 60 days written notice, provided
that such termination by the Trust shall be directed and approved by a
majority of all its Trustees in office at that time or upon the vote of
the holders of a majority (as defined in the Act) of the then issued
and outstanding shares of beneficial interest of the Portfolio. This
Agreement shall automatically terminate in the event of its assignment.
VI. Binding Only on Trust Property
The Manager acknowledges that the obligations of the Trust under this Agreement
are binding only on Trust property and not upon any Shareholder personally. The
Manager is aware that the
<PAGE>
Trust's Declaration of Trust disclaims individual Shareholder liability for acts
and obligations of the Trust.
In witness whereof, the parties have caused the foregoing instrument to be
executed by duly authorized persons and their seals to be affixed, all as of the
day and year first above written.
CITIZENS INVESTMENT TRUST CITIZENS ADVISERS, INC.
By: /s/ William D. Glenn II By: /s/ Sophia Collier
----------------------- ----------------------
Co-Chair President
By: /s/ Azie Taylor Morton
----------------------
Co-Chair
<PAGE>
EXHIBIT A
COMPENSATION OF THE MANAGER
All fees are expressed as a percentage of average net assets:
1. Working Assets Money Market Portfolio: 0.35%
2. Citizens Income Portfolio: 0.65%
3. Citizens Emerging Growth Portfolio: 1%
4. Citizens Global Portfolio: 1%
5. Muir California Tax Free Income Portfolio: 0.65%
6. Citizens Index Portfolio: 0.50%
7. E[bullet]fund: 0.10%, or, if less, the aggregate amount of fees
paid by financial institutions in connection with shareholder
redemption transactions effected through use of debit cards.
8. Muir National Tax Free Income Portfolio: 0.65%
<PAGE>
EXHIBIT B
EXPENSE LIMITATIONS
1. Working Assets Money Market Portfolio: 1.50 of 1% of the first
$40 million of assets and 1% thereafter
2. Citizens Income Portfolio: 1.75 of 1% of the first $100 million and
1.25 of 1% thereafter
3. Citizens Emerging Growth Portfolio: No contractual limit
4. Citizens Global Portfolio: No contractual limit
5. Muir California Tax Free Income Portfolio: No contractual limit
6. Citizens Index Portfolio: No contractual limit
7. Working Assets Money Market Portfolio-Institutional Shares: No
contractual limit
8. Citizens Index Portfolio - Institutional Shares: No contractual
limit
9. E[bullet]fund: No contractual limit
10. Muir National Tax Free Income Portfolio: No contractual limit
Exhibit 9(a)
CITIZENS INVESTMENT TRUST
CITIZENS SECURITIES & CITIZENS ADVISERS
ADMINISTRATION AND SHAREHOLDER SERVICES
FEE SCHEDULE
==============================================================================
ADMINISTRATIVE SERVICES
Citizens Advisers, Inc. ("the Administrator") assumes a number of general
administrative services for each Portfolio of Citizens Investment Trust ("the
Portfolios") for which the Adviser is paid a monthly fee based on an annual rate
of each Portfolio's average net assets for providing such services.
The fees are as follows:
<TABLE>
<CAPTION>
Portfolio Fee effective
- --------- --- ---------
<S> <C> <C>
Working Assets Money Market Portfolio - Retail Class 15/100 of 1% 7/1/96
Working Assets Money Market Portfolio-Institutional Class no fee assessed
Citizens Income Portfolio 10/100 of 1% 7/1/95
Citizens Emerging Growth Portfolio 10/100 of 1% 7/1/95
Citizens Global Equity Portfolio 10/100 of 1% 7/1/95
Muir California Tax-Free Income Portfolio 10/100 of 1% 7/1/95
Citizens Index Portfolio - Retail Class 20/100 of 1% 1/25/96
Citizens Index Portfolio - Institutional Class 30/100 of 1% 7/1/96
Muir National Tax-Free Income Portfolio 10/100 of 1% 7/1/95
</TABLE>
The Adviser provides the following services to the Funds:
1) Administration of certain daily fund expense accounting duties,
including but not limited to payment and budgeting of operating
expenses of all Funds, calculation of expense accruals.
2) Administration of annual Fund audit with Fund Auditors.
3) Supervision of printed annual and semi-annual reports.
4) Administrative services in connection with Custody and Transfer
Agents, including daily monitoring of net asset value and dividend
factors, contract and fee negotiations, and quality control.
5) Administration of Funds' compliance systems with Federal and State
regulatory requirements.
6) Other similar services.
In addition to the above services, the Adviser provides other day to day
services. Out of pocket expenses incurred by the Adviser in relation to such
services will be reimbursed to the Adviser by the Funds at cost.
These services include:
1) Blue Sky reporting services as required for the issuer of securities
in the states and territories.
2) Vendor relations.
3) Special projects including but not limited to:
a. Organization 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
<PAGE>
documents, soliciting proxies, and clerical duties associated with the
filing of any such documents.
b. Supervision of special projects including shareholder statement
production, shareholder tax filings, and other printed shareholder
communication.
SHAREHOLDER SERVICES
Citizens Securities assumes a number of general administrative services for the
Funds relating primarily to shareholder communications for which the Adviser is
reimbursed the cost of providing such service. Citizens Securities provides the
Funds with the following 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 a computer interface with the Fund transfer agent.
5) Execution of appropriate shareholder requests.
6) Retention, maintenance, and research of shareholder records.
7) Facilities and equipment to perform all such duties.
8) Other similar services.
As per Proxy, a monthly fee based on an annual rate of 45/100 of 1% of the
Citizens Index Portfolio Retail Class's average net assets shall also be paid by
the Fund to Citizens Advisers.
Agreed and Accepted:
CITIZENS TRUST CITIZENS ADVISERS
BY:/s/ William D. Glenn II BY: /s/ Sophia Collier
----------------------- ------------------
William D. Glenn II Sophia Collier
Co-Chair President
BY:/s/ Azie Taylor Morton Dated: 1/19/97
----------------------
Azie Taylor Morton
Co-Chair
Dated: 1/19/97
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 001
<NAME> Working Assets Money Market Portfolio
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 91,747,629
<INVESTMENTS-AT-VALUE> 91,747,629
<RECEIVABLES> 735,011
<ASSETS-OTHER> 1,461,260
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93,943,900
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,078,887
<TOTAL-LIABILITIES> 1,078,887
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92,865,013
<SHARES-COMMON-STOCK> 92,865,013
<SHARES-COMMON-PRIOR> 97,611,309
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 92,865,013
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,518,126
<OTHER-INCOME> 0
<EXPENSES-NET> 1,102,966
<NET-INVESTMENT-INCOME> 4,415,160
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 4,415,160
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,415,160)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 107,693,890
<NUMBER-OF-SHARES-REDEEMED> 116,738,793
<SHARES-REINVESTED> 4,298,607
<NET-CHANGE-IN-ASSETS> (4,746,296)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 423,731
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,132,103
<AVERAGE-NET-ASSETS> 91,160,942
<PER-SHARE-NAV-BEGIN> 1.000
<PER-SHARE-NII> 0.045
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0.045
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.000
<EXPENSE-RATIO> 1.21
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 002
<NAME> Citizens Income Portfolio
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 31,902,163
<INVESTMENTS-AT-VALUE> 31,764,109
<RECEIVABLES> 504,287
<ASSETS-OTHER> 645,749
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 32,914,145
<PAYABLE-FOR-SECURITIES> 540,634
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 97,659
<TOTAL-LIABILITIES> 638,293
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,845,364
<SHARES-COMMON-STOCK> 3,140,161
<SHARES-COMMON-PRIOR> 2,901,743
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (431,458)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (138,054)
<NET-ASSETS> 32,275,852
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,436,440
<OTHER-INCOME> 0
<EXPENSES-NET> 440,650
<NET-INVESTMENT-INCOME> 1,995,790
<REALIZED-GAINS-CURRENT> 53,207
<APPREC-INCREASE-CURRENT> (422,710)
<NET-CHANGE-FROM-OPS> 1,626,287
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,995,790
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 960,101
<NUMBER-OF-SHARES-REDEEMED> 888,785
<SHARES-REINVESTED> 167,102
<NET-CHANGE-IN-ASSETS> 2,153,497
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (484,665)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 207,386
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,083
<AVERAGE-NET-ASSETS> 31,903,060
<PER-SHARE-NAV-BEGIN> 10.38
<PER-SHARE-NII> 0.66
<PER-SHARE-GAIN-APPREC> (0.10)
<PER-SHARE-DIVIDEND> 0.66
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.28
<EXPENSE-RATIO> 1.43
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 003
<NAME> Citizens Index Portfolio
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<INVESTMENTS-AT-COST> 115,517,115
<INVESTMENTS-AT-VALUE> 143,810,136
<RECEIVABLES> 292,299
<ASSETS-OTHER> 550,870
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 144,653,305
<PAYABLE-FOR-SECURITIES> 38,348
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 110,979
<TOTAL-LIABILITIES> 149,327
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115,183,733
<SHARES-COMMON-STOCK> 10,211,416
<SHARES-COMMON-PRIOR> 9,698,368
<ACCUMULATED-NII-CURRENT> 690,075
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 337,149
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 28,293,021
<NET-ASSETS> 144,503,978
<DIVIDEND-INCOME> 3,074,950
<INTEREST-INCOME> 18,406
<OTHER-INCOME> 0
<EXPENSES-NET> 2,208,429
<NET-INVESTMENT-INCOME> 884,927
<REALIZED-GAINS-CURRENT> 337,150
<APPREC-INCREASE-CURRENT> 24,446,708
<NET-CHANGE-FROM-OPS> 25,668,785
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 289,938
<DISTRIBUTIONS-OF-GAINS> 535,008
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,939,049
<NUMBER-OF-SHARES-REDEEMED> 1,809,007
<SHARES-REINVESTED> 66,739
<NET-CHANGE-IN-ASSETS> 38,408,171
<ACCUMULATED-NII-PRIOR> 95,086
<ACCUMULATED-GAINS-PRIOR> 535,007
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 689,466
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2,246,916
<AVERAGE-NET-ASSETS> 122,191,193
<PER-SHARE-NAV-BEGIN> 10.94
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 2.47
<PER-SHARE-DIVIDEND> 0.03
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.41
<EXPENSE-RATIO> 1.82
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 004
<NAME> Citizens Emerging Growth Portfolio
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<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 005
<NAME> Citizens Global Equity Portfolio
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<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 006
<NAME> Muir California Tax-Free Income Portfolio
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<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
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</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711202
<NAME> Citizens Investment Trust
<SERIES>
<NUMBER> 007
<NAME> E-Fund
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<S> <C>
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</TABLE>
