As filed with the Securities and Exchange Commission on August 28, 1998
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. 42
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No.37
CITIZENS FUNDS*
(Exact name of Registrant as specified in charter)
230 Commerce Way, Suite 300, Portsmouth, NH 03801
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (603) 436-5152
Sophia Collier
230 Commerce Way, Suite 300
Portsmouth, NH 03801
(Name and Address of Agent for Service)
It is proposed that this filing become effective:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On (date) pursuant to paragraph (b)
[ ] 75 days after filing pursuant to paragraph (a)
[X] On October 27, 1998 pursuant to paragraph (a) of Rule 485
_______________________________________________________________________________
*Formerly known as Citizens Investment Trust
<PAGE>
CITIZENS FUNDS
CROSS INDEX PAGE
PART A: INFORMATION REQUIRED IN THE PROSPECTUS
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Item 1. Cover Page Cover Page
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Item 2. Synopsis; Fee Information Introduction; Fee
Information
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Item 3. Condensed Financial Financial Highlights
Information
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Item 4. General Description of Organization and
Registrant Management of the Trust
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Item 5. Management of the Fund Organization and
Management of the Trust
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Item 5A. Management's Discussion Not Applicable
of Fund Performance
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Item 6. Capital Stock and Other How to Purchase and
Securities Redeem Shares; Dividends,
Distributions and Taxes
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Item 7. Purchase of Securities How to Purchase and
Being Offered Redeem Shares;
Shareholder Services
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Item 8. Redemption or Repurchase How to Purchase and
Redeem Shares;
Shareholder Services
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Item 9. Legal Proceedings None
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PART B: INFORMATION REQUIRED IN THE STATEMENT OF ADDITIONAL INFORMATION
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Item 10. Cover Page Cover Page
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Item 11. Table of Contents Table of Contents
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Item 12. General Information and Introduction; How We
History Select Our Investments;
Organization and
Management of the Trust
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Item 13. Investment Objectives and How We Select Our
Policies Investments; Policies and
Risk Factors; Other
Investment Techniques
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Item 14. Management of the Organization and
Registrant Management of the Trust;
Trustee Profiles
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<PAGE>
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Item 15. Control Persons and Organization and
Principal Holders of Management of the Trust
Securities
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Item 16. Investment Advisory and Organization and
Other Services Management of the Trust
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Item 17. Brokerage Allocation and Organization and
Other Practices Management of the Trust
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Item 18. Capital Stock and Other Dividends, Distributions
Securities and Taxes
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Item 19. Purchase, Redemption and How to Purchase and
Pricing of Securities Redeem Shares;
Shareholder Services;
Dividends, Distributions
and Taxes
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Item 20. Tax Status Federal Taxes
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Item 21. Underwriters Organization and
Management of the Trust
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Item 22. Calculation of Yield Dividends, Distributions
Quotations of Money and Taxes
Market Funds
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Item 23. Financial Statements Financial Highlights
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PART C: OTHER INFORMATION
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PART A: INFORMATION REQUIRED IN A PROSPECTUS
The Talking Prospectus
October 27, 1998
Dear Friend,
Since our inception in 1982, our goal has been to earn money for our
shareholders by investing in companies that show both strong financial promise
and corporate responsibility.
We believe there is a revolution going on in business today and only
certain companies will thrive in this new, faster paced, environmentally
concerned and diverse global business environment. At Citizens Funds, we invest
in these companies - businesses with the potential to produce strong financial
results today while creating the type of world we want to live in tomorrow. We
strongly believe that our social investment strategy helps us identify
better-managed companies, and that better-managed companies make for better
investments.
We hope you will read this prospectus carefully and retain it for
future reference. We look forward to serving you at Citizens Funds.
Sincerely,
Sophia Collier
Chair, Citizens Advisers
Our Funds
Working Assets Money Market Fund's objective is current income consistent with
safety and liquidity. We seek to maintain a stable $1.00 Net Asset Value per
share at all times, although there is no assurance we will be able to do so.
Shares are neither insured nor guaranteed by the U.S. Government.
Citizens Income Fund invests primarily in fixed-income securities with the
objective of generating current income and paying a dividend each month.
Citizens Index Fund invests in a market-weighted portfolio of stocks of 300
companies with the objective of long-term capital appreciation.
Citizens Emerging Growth Fund invests primarily in promising small- and
medium-sized companies with the objective of aggressive growth.
Citizens Global Equity Fund invests in U.S. and foreign stocks with the
objective of capital appreciation.
Both the Working Assets Money Market Fund and the Citizens Index Fund offer
Institutional Class Shares, which offer lower expense ratios to investors who
maintain their accounts at or above the $100,000 level.
<PAGE>
Our Statement of Additional Information, dated October 27, 1998, and
incorporated by reference, is filed with the Securities and Exchange Commission
and is available on their website (http:\www.sec.gov). If you would like a
printed copy, please call us toll-free.
All funds are no load and subject to 12b-1 fees. The minimum initial investment
in each portfolio is $2,500. Institutional Class Shares of the Working Assets
Money Market Fund and the Citizens Index Fund require a minimum initial
investment of $100,000.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION, OR BY 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.
Fee Information
<TABLE>
<CAPTION>
Working
Assets Citizens Citizens Emerging Global
Money Income Index Growth Equity
Market Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C>
Annual Portfolio
Operating Expenses
(as a percentage of
Average Net Assets)
Shareholder
Transaction Expenses None None None None None
Management Fees .35% .65% .50% 1.00% 1.00%
Distribution
Expenses (12b-1 Fees) .20% .25% .25% .25% .25%
Other Expenses
(after waiver and
reimbursement) .66% .84+% .84% .71% .95%
Total Fund
Operating Expenses* 1.21% 1.74% 1.59% 1.96% 2.20%
Institutional Class Shares Working
Assets Citizens
Money Index
Market Fund
Shareholder Transaction Expenses None None
Management Fees .35% .50%
Distribution Expenses (12b-1 fees) None None*
Other Expenses
(after waiver and
reimbursement) .21% .38%
Total Fund Operating Expenses .56% .88%
</TABLE>
<PAGE>
*The Citizens Index Fund, Institutional Class Shares, may be charged a fee of
up to 0.07% for distribution expenses but this fee was not assessed in 1998 and
we do not expect it to be in 1999. +The Adviser waived certain fees and
reimbursed certain expenses. The ratio prior to reimbursement for the year
ended June 30, 1998 for the Citizens Income Fund was 1.86%.
Example: You would have paid the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each
period:
1 Year 3 Years 5 Years 10 Years
Working Assets Money Market Fund* $12 $38 $66 $147
Institutional Class Shares 6 18 31 70
Citizens Income Fund** 18 55 94 205
Citizens Index Fund 16 50 87 189
Institutional Class Shares 9 28 49 108
Citizens Emerging Growth Fund 20 62 106 229
Citizens Global Equity Fund 22 69 118 253
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.
*Expenses reflect reimbursement by the Adviser without which the expenses would
have been $13, $39, $68 and $149 respectively.
**Expenses reflect reimbursement by the Adviser without which the expenses
would have been $19, $58, $101 and $218 respectively.
<TABLE>
<CAPTION>
<S> <C>
Costs For Other Services
Returned checks $15.00
Returned Electronic Purchase/Payment - ACH $15.00
Outgoing wire transfer $10.00
International wire transfer $20.00
Per check fee (waived with the Eofund Account) $0.50
Stop payments $10.00
Checks first 20 free
Box of 200 checks for the Eofund Account $15.95
ATM cost $0.65 each/cash advance: $2.50
Annual fee for the Eofund Account $35.00
Debit Card replacement for the Eofund Account $10.00
Copies of statements, checks and tax forms $2.00
Below $2,500.00 minimum balance fee (except for the Eofund Account) $3.00 each month
</TABLE>
Escrow and Account Policies
We reserve the right to wait up to 7 business days to redeem any investments
made by check, and 5 business days for purchases made by ACH transfer. We also
reserve the right to close your account for any lawful reason, including, but
<PAGE>
not limited to, reasonable suspicion of fraud or other illegal activity in
connection with the account. Please make all checks payable to "Citizens
Funds". We are unable to accept third-party checks.
How We Select Our Investments
Financially Sound and Socially Responsible
Our investment strategy is to invest in companies we believe are
financially attractive and managed in a socially responsible manner. To find
them, we favor companies that make good and useful products and have positive
environmental, community and workplace records. We avoid companies that engage
in workplace 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.
Citizens Funds has certain policies we consider fundamental, such as
consistently applying both social and financial screens to all our investment
decisions. These, together with each fund's investment objective and other
technical investment policies described in the Statement of Additional
Information, cannot be changed without the approval of a majority of the
outstanding shares of each fund that would be affected by the change. In
addition to the specific policies for each fund, we also have some general
policies for all our funds.
General Investment Policies
We try not to put all our eggs in one basket. This means that 75% of a
fund's assets will never hold more than 5% of any one company. We do not invest
more than 25% of the value of any one fund in one industry, with the exception
of securities of U.S. Government agencies or enterprises, or in our money
market fund, domestic banks.
Citizens Funds' role is to be a conscientious and alert investor, not a
controlling manager; therefore, across all our funds, 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 fund's
assets.
Each of our funds may, from time to time, invest in money market
securities such as the ones we use in our money market fund.
Each fund may temporarily borrow money from banks (and pledge its assets
to secure such borrowing) to meet redemption requests or for other purposes. We
will keep this borrowing down to no more than 10% of the value of each fund's
total assets and make no purchases while we have any outstanding loans.
Repurchase Agreements
Sometimes we invest our surplus cash in repurchase agreements with
financially strong stockbrokers or banks that are members of the Federal
Reserve. We 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 may be a useful tool in managing a fund, 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.
<PAGE>
Financial Highlights
[To be added by amendment]
Working Assets Money Market Fund
Objective: Current income consistent with safety and liquidity In our money
market fund, we only invest in short-term money market instruments (short-term
debt issued by branches of the government, corporations, banks or other
financial institutions) that we believe present minimal risk, and we maintain a
weighted average maturity of 90 days or less for the fund as a whole. Checking
services are available.
U.S. Government Securities
When we look at government securities, we only buy those that are issued
or guaranteed, as to both interest and principal, by agencies or other
enterprises of the United States Government.
Commercial Paper
We will also buy high quality "commercial paper," which is short-term
debt issued by well-established corporations. One hundred percent of this
short-term debt must be rated A-1 by Standard & Poor's Rating Services or have
a comparably high rating by another nationally recognized rating service. If a
security is rated by only one agency, it must be rated in the highest rating
category by that agency. If a security is not rated, it must be as good as A-1
in our judgment. We also use our own research and experience to help assure our
money market securities have only a minimal credit risk.
Banks sometimes issue other types of debt that offer us a yield
advantage. These include certificates of deposit, time deposits and bankers'
acceptances of U.S. banks or thrift institutions.
Risk Factors
The shares of Working Assets Money Market Fund are neither insured nor
guaranteed by the U.S. Government, and there is no assurance the fund will be
able to maintain a stable Net Asset Value of $1.00 per share, despite our care
and caution.
Citizens Income Fund
Objective: Current income
Citizens Income Fund lends money to the agencies and enterprises of the
government and to companies in exchange for interest payments. The Citizens
Income Fund invests most of its money in bonds or mortgages that are due within
2 to 30 years, although at times it will hold short-term securities as well.
Our average maturity in the Citizens Income Fund is usually between 5 and 15
years. By committing money for this longer period, we generally can earn higher
interest than in the money market fund.
At least 65% of the Citizens Income Fund's assets are invested in
securities rated "investment grade" (BBB or above). Up to 35% may be invested
in bonds or other debt instruments rated as below investment grade. Although
bonds rated below BBB are considered speculative (and are referred to as "junk
bonds") and therefore add risk, we believe by limiting the overall fund
exposure to a maximum level of 35%, the higher yield usually available in these
securities can benefit the fund and more than compensate for the greater risk.
<PAGE>
Occasionally we buy securities that are not rated. In these cases, the
security must be of comparable quality, in our judgment, to the rated
securities we buy for the applicable fund.
In our Statement of Additional Information, we give more detailed
information about each rating agency and its system of ratings.
Risk Factors
Bond prices, like stock prices, go up and down in value. These market
price fluctuations will be reflected in the value of the Citizens Income Fund.
When interest rates rise, the market value of our Income Fund will decline, and
when interest rates fall, the market value of our Income Fund will rise.
Citizens Index Fund
Objective: Long-term capital appreciation
The Citizens Index Fund is invested in 300 companies that make up the Citizens
Index. We believe these companies best represent their industries.
Approximately 200 of these are very large companies that also are included in
the S&P 500. The others are companies selected in order to provide industry
diversity, which we believe is essential to a sound investment program.
On a day-to-day basis, the fund is run by purchasing and holding common
stock of all the companies in the Index in a percentage, as closely as
possible, equal to each security's total market value divided by the total
market value of all the companies in the Index. In addition, under normal
circumstances the fund will usually hold a small amount of cash or money market
instruments (no more than 5%) resulting from shareholder purchase and
redemption activity and as a provision for operating expenses. Holding this
cash, together with the costs of operations, will prevent us from ever
perfectly tracking the theoretical performance of the underlying Index. Payment
of our operating expenses will reduce returns. Our small allocation to cash
will improve returns when the market is heading down and hurt them when the
market is moving up.
Companies will be deleted from the Index and divested from the fund if
they fail our annual social responsibility review. If a company is removed, we
will replace it with another company from the same industry that meets all
social criteria. In addition, from time to time we may make other small changes
in the Index to include, for example, exceptional companies, or to reflect
changes in the composition of the S&P 500. We do not expect these changes to
exceed 10% of the members of the Index on an annual basis.
Risk Factors
Like all stock funds, the Net Asset Value of the Citizens Index Fund will
fluctuate based on market and economic conditions, or other factors that affect
particular companies or industries.
We are always pleased to send interested investors a current list of the
members of our Index.
Citizens Emerging Growth Fund
Objective: Aggressive growth
Our Citizens Emerging Growth Fund looks for aggressive gains with long-term
investing in mid-cap companies. During normal market conditions, at least 65%
of this fund's assets will be invested in the common or preferred stock of
companies that average at least $2 billion in market capitalization.
<PAGE>
Risk Factors
While many of these companies will have strong businesses, some still
will be unseasoned and therefore may have some speculative characteristics.
Investing in smaller companies is a long-term process with the potential for
significant gains. However, the value of this fund can have significant
fluctuation, because smaller companies have unique risks. They may be dependent
on individual managers or have a harder time obtaining financing and market
share. Further, their shares are more volatile and thinly traded. To moderate
this risk, we typically plan to hold between 30 and 50 companies in the fund.
Since most of the companies we will purchase for the Citizens Emerging
Growth Fund are relatively new, we don't expect much, if any, dividend income.
At times, we may also buy short-term, fixed-income securities for the fund.
Citizens Global Equity Fund
Objective: Capital appreciation
In the Citizens Global Equity Fund, we invest primarily in common stocks of
both U.S. domestic and foreign companies. We seek companies with growing
sustainable earnings; innovative products, services and business strategies;
revised corporate strategies; or those which are beneficiaries of political or
economic conditions. We plan to allocate more than half our assets to foreign
markets, in most circumstances in a minimum of three countries. From time to
time, we also may buy other securities, such as convertible or preferred stocks
and short-term debt securities.
Risk Factors
Foreign stock markets are generally less efficient and more volatile than
those in the United States. This creates opportunities, but also risk.
Settlement and trading costs are generally higher on foreign exchanges than in
the U.S. The economies and governments of some countries the fund may invest in
may be less mature and stable than those of the U.S., and when political or
economic changes occur, there can be an adverse impact on the fund. Adverse
impacts may come from exchange control regulation, expropriation, confiscatory
taxation and political or social instability. The risks of investing in
emerging market countries are even greater and can involve risk of higher
inflation, high sensitivity to commodity prices and economic dependence on a
few industries or government-owned industries.
To moderate these risks and gain potential benefits, we use a number of
investment techniques. One of these is country selection. We restrict our
investments in riskier emerging nations (such as Argentina or Singapore) to no
more than 25% of the assets of the Citizens Global Equity Fund.
When we invest in securities listed on foreign exchanges, we buy them in
the currency of the local country. Often the local currency will fluctuate
against the U.S. dollar. To moderate this risk, we sometimes use currency
"hedging." We do this by entering into arrangements to buy or sell a particular
currency, security or securities index for a stated value against the U.S.
dollar at a given time. While there is a cost involved in hedging, as well as a
risk that our hedging strategy may not work and will add cost or reduce our
potential gains, we still think hedging can be a valuable tool.
Organization and Management of Citizens Funds
Citizens Funds commenced operations on November 24, 1982; up until August
1995, it was known as Working Assets Common Holdings, and then later as
Citizens Trust, until changing its name to Citizens Funds in July 1998. We are
a Massachusetts business trust and an open-end investment company registered
<PAGE>
under the Investment Company Act of 1940 as a diversified management company.
Citizens Funds is also a "series" company, which means we can have several
funds, each with its own investment objective, assets and liabilities. A board
of trustees supervises Citizens Funds.
In order to manage the Funds on a day-to-day basis, we have signed a
Management Agreement with Citizens Advisers, with offices at 230 Commerce Way,
Suite 300, Portsmouth, NH, 03801. Citizens Advisers has managed the Citizens
Funds' assets since the Funds' inception in 1982. Citizens Securities, a
subsidiary of Citizens Advisers, serves as the Citizens Funds distributor.
Both Citizens Advisers and Citizens Securities are California
corporations. Sophia Collier is the 60% beneficial 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
In its role as investment adviser to the Fund, Citizens Advisers
determines which companies meet the Fund's investment criteria and will be
carried on our "Approved List." It also selects which securities will be bought
and sold for the Working Assets Money Market Fund and the Citizens Index Fund.
To assist with portfolio management for the other funds, Citizens Advisers has
retained, at its own expense, two sub-advisers.
Seneca Capital Management LLC
Our sub-adviser for the Citizens Income Fund and the Emerging Growth
Fund, Seneca Capital Management LLC, is a registered investment adviser
established in 1990. It is the successor to our prior sub-adviser, GMG/Seneca
Capital Management, 74.9% of which was purchased by Phoenix, Duff and Phelps in
1997. Seneca Capital Management LLC manages more than $3 billion from its
offices at 909 Montgomery Street, San Francisco, CA.
Clemente Capital, Inc.
Our sub-adviser for the Citizens Global Equity Fund, Clemente Capital,
Inc., is a registered investment adviser organized in 1979. It is owned by
Lilia Clemente, with 61.15%; Wilmington Trust of Wilmington, DE, with 24%; and
Diaz-Verson Capital Investments, Inc., of Columbus, GA, 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, NY.
<PAGE>
Citizens Funds' Management Agreement
Citizens Funds' Management Agreement with Citizens Advisers specifies
fees as follows (based on average annual net assets of the respective funds):
Trust Adviser
Pays Pays
Adviser Sub-Adviser
Working Assets
Money Market Fund .35% -
Institutional Class Shares .35% -
Income Fund .65% .175%
Index Fund .50% -
Institutional Class Shares .50% -
Emerging Growth Fund 1.00% .35%
Global Equity Fund 1.00% .35%
Citizens Advisers performs a wide variety of administrative duties for
Citizens Funds under a separate administrative contract which provides for
reimbursement of out of pocket expenses as well as fees for services rendered.
These fees and expenses are payable monthly and include fees based on the
annual rate of average daily net assets in the following amounts: Working
Assets Money Market Fund, Standard Shares - 0.15%; Citizens Income Fund,
Emerging Growth Fund and Global Equity Fund - 0.10%; Citizens Index Fund,
Standard Shares - 0.20%; Citizens Index Fund, Institutional Shares - 0.30%. In
addition, Citizens Securities provides a number of administrative services to
Citizens Funds relating primarily to shareholder services and communications,
and is reimbursed a flat rate approximating the "market price" of such
services. Citizens Index Fund, Standard Shares also may be charged a fee of up
to 0.45% based on the average daily net assets of the class for shareholder
services, and for the year ended June 30, 1998 paid a fee of 0.31%. Citizens
Advisers sometimes will perform services under this administrative contract
directly, or may 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 Fund.
Administrative and shareholder service fees paid by the funds include 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
<PAGE>
cost of typesetting, printing and distributing shareholder reports and
prospectuses sent to shareholders. Under the administrative contract for the
year ending June 30, 1998, we paid $2,297,371 to Citizens Advisers for
administrative and shareholder services, of which institutional classes paid
$19,257.
Institutional Class Shareholders in the Working Assets Money Market Fund
and Citizens Index Fund pay their pro rata portion of fund expenses, as well as
any expenses attributable to Institutional Class Shares only ("Class
Expenses"). Class expenses include, but are not limited to, transfer agent fees
and administrative and shareholder fees and expenses such as the cost of
registering shares under state laws, the cost of typesetting, printing and
distributing shareholder reports and prospectuses, administrative expenses
necessary to support the Institutional Class Shares, and legal costs and
Trustees' fees directly related to institutional shares.
When a cost is shared by several funds, the staff at Citizens Advisers
will allocate the expense in a reasonable manner under the supervision of the
Board of Trustees. For the year ended June 30, 1998, the following expense
ratios were paid by the funds after waivers and reimbursements (based on
average annual net assets of the respective portfolios): Working Assets Money
Market Fund, 1.21%; Income Fund, 1.74%; Index Fund, 1.59%; Emerging Growth
Fund, 1.96%; Global Equity Fund, 2.20%; Working Assets Money Market Fund
(Institutional Class Shares), 0.56%; Citizens Index Fund (Institutional Class
Shares), 0.88%.
For the Working Assets Money Market Fund (Standard Shares) and Citizens
Income Fund, Citizens Advisers has agreed to reimburse the Funds if costs
exceed a specified limit in the ordinary course of business. Please see the
Statement of Additional Information for a full description.
12b-1 Fees
Citizens Funds has a 12b-1 plan which allows us to reimburse Citizens
Securities and other distributors of the Funds' shares for sales-related costs.
These costs include the printing of prospectuses and reports sent to
non-shareholders, as well as other sales material, advertising and salaries for
salespeople and other personnel. We also will 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.
Amounts reimbursed to Citizens Securities for fiscal year ended June 30, 1998:
Working Assets Money Market Fund $188,875
Income Fund 111,606
Index Fund 672,502
Emerging Growth Fund 185,324
Global Equity Fund 92,998
During 1998 there were no 12b-1 expenses assessed to Institutional Class
Shares and we do not expect there to be in 1999.
<PAGE>
How to Purchase and Redeem Shares
How to Buy Shares
It's easy to buy shares in any of our funds. Just fill out an application
and send in your payment by check, wire transfer, exchange from another mutual
fund or through arrangement with your investment adviser or broker dealer. All
checks must be made payable to "Citizens Funds". Foreign checks drawn in U.S.
dollars are accepted but must be held in escrow for at least 20 days.
Shares in Working Assets Money Market Fund cost $1.00 per share. For all
other funds, your cost will be the Net Asset Value next determined after your
payment is received. You can purchase both full and fractional shares, which
will be rounded to the nearest 1/1000th of a share. If your payment is returned
for any reason, you will be assessed a fee of $15.00.
Investment Minimums
We encourage every investor to make a minimum investment of $2,500 per
fund ($1,000 for the Eofund Account holders). 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. If your account falls below
the minimum per fund, you will be assessed a monthly fee of $3.00 until you
bring your balance back up over the minimum. If you do not bring your balance
up to the minimum, we may close your account by sending you a check for your
balance.
The minimum initial investment in Institutional Class Shares (Working
Assets Money Market Fund and Index Fund only) is $100,000. With respect to
accounts that fall below $100,000, Citizens Funds reserves the right to
transfer these accounts from the institutional class and convert them to
standard shares. We will give adequate notice to the shareholder, allowing the
opportunity to bring the account up to the $100,000 level.
Automatic Investment Plan
To enroll in our Automatic Investment Plan, simply check off that box on
the account application and provide us with your bank information, as well as
the amount and frequency of your investment into your chosen fund. We will do
the rest.
Payroll Deduction
Setting up direct payroll deposit is very easy. Call us for the necessary
information and steps to follow. 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.
How to Redeem Shares
We offer you several convenient ways to redeem your shares in any of the
Citizens Funds.
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
<PAGE>
us to redeem. Depending upon your instructions, we will then deposit your
redemption into another Citizens Funds account, mail you a check or
electronically transfer your redemption to your pre-designated account. One-day
wired funds cost $10, or we offer free 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 it may increase the risk of error or of an unauthorized party gaining
access to your account. For added security you may provide us with a Personal
Identification Number (PIN) which must be verified before processing your
telephone transactions. To keep these problems to a minimum, we record all
telephone calls. But please remember, neither Citizens Funds, 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.
Write a Check
When you open an account in the Working Assets Money Market Fund, we will
send you a free book of 20 checks. Although these checks are payable through a
banking agent of Citizens Funds, your account is not FDIC insured, and your
shares are subject to fluctuations in value. You may write a check for any
amount. There is a $0.50 fee per check written in the Working Assets Money
Market Fund. There will be a $15.00 charge for any checks returned for any
reason. Remember, if you attempt to write a check against unavailable shares,
your check may be returned for uncollected funds.
The Working Assets Money Market Fund offers the Eofund as an account
option. The Eofund Account offers enhanced transactional features, including
free check writing and a debit card.
Written Request for Redemption
If you do not use the 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 medallion signature guarantee. We may require
further documentation from corporations, fiduciaries, retirement plans and/or
institutional investors.
Redeem Your Shares in Person
You may also redeem your shares through participating broker-dealers (who
may charge a fee for this service). Certain broker-dealers may have
arrangements with the Fund that permit them to order redemption of shares by
telephone or other electronic communication.
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 wait up to seven business days to redeem any
investments made by check and five business days for purchases made by ACH
transfer. Therefore, if you need your redemption proceeds within seven business
days of your purchase, please invest by wire.
<PAGE>
Shareholder Services and Policies
Exchange Privilege
Since people's investment needs change over time, we provide for easy
exchanges among our funds at no charge. You may make an exchange at any time
and to any fund. Just call us or write us with your request.
Excessive Exchanges and Market Timing
Because excessive trading can lower a fund's performance and harm
shareholders, we reserve the right to temporarily suspend or permanently
terminate, with or without advance notice, the exchange privilege of any
investor who makes excessive use of the privilege (e.g. more than five
exchanges within a one year period). Your exchanges may also be restricted or
refused if we perceive a pattern of simultaneous orders affecting significant
portions of a fund's assets. In particular, a pattern of exchanges or other
transactions evidencing a so-called "market timer" investment strategy, because
they may be particularly disruptive to a fund, will likely result in a
termination of exchange privileges or closure of your account. You may still
redeem your shares or purchase new shares in the event that your exchange
privileges are suspended or terminated.
Systematic Withdrawal Plan
You can send us a written request to automatically redeem a portion of
your shares and make a regular monthly, quarterly or annual payment on your
behalf.
Making a Change in Your Account
After your account is set up, you may want to make a change in one of the
options or in the account title. We are pleased to assist, but to protect both
you and Citizens Funds from fraud, we may require a medallion 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 funds are also suitable for other types of
retirement plans as well.
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
payable date.
We also can pay your dividends and distributions to you by check or
electronic transfer through the Automated Clearing House to your bank account.
The details of your dividends and other distributions will be included on your
statement. Payments of dividends and distribution of capital gains, if any, are
declared and paid on the following schedule:
<PAGE>
<TABLE>
<CAPTION>
Dividend Capital Gains Paid
Declared Paid Long-term Short-term
<S> <C> <C> <C> <C>
Working Assets
Money Market Fund Daily Monthly None None
Citizens Income Fund Monthly Monthly Annually Annually
Citizens Emerging
Growth Fund Annually Annually Annually Annually
Citizens Index Fund Annually Annually Annually Annually
Citizens Global Equity Fund Annually Annually Annually Annually
</TABLE>
How We Report Yields
There are a number of ways of reporting performance, and we'll walk you
through each one we use; when you look at any mutual fund's past performance,
remember actual mileage may vary.
Working Assets Money Market Yield
Every business day, the Working Assets Money Market Fund quotes a "7-day
yield" and a "7-day effective yield." To calculate the 7-day yield, we take our
net investment income per share for the most recent 7 days, annualize it and
then divide by the net asset value per share (expected always to be $1.00) to
get a percentage. The "effective yield" assumes you have reinvested your
dividends.
Citizens Income Fund's Yield
To calculate 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, then annualize the result assuming a semi-annual compounding.
Total Return and Other Quotations
For all portfolios except the Working Assets Money Market Fund, we start
with the total number of shares you can buy for $1,000 at the beginning of the
period. We then add all the additional shares you would have purchased within
the period with reinvested dividends and distributions (this takes into account
the particular fund's income, if any). Finally, we multiply the number of these
shares by the net asset value on the last day of the period and divide the
result by the initial $1,000 investment to see our percentage gain or loss. For
periods of more than one year, we adjust the cumulative total return to get an
average annual total return.
When we quote our investment results, we sometimes will compare them to
unmanaged market indices such as the Dow Jones Industrial Average and Standard
& Poor's 500, as well as other data and rankings from recognized independent
publishers or sources such as Donoghue's Money Fund Report, Money Magazine,
Mutual Funds Magazine, Kiplinger's Personal Finance Magazine, Co-Op America
Quarterly, The Green Money Journal, Bloomberg News, Morningstar, Inc. and
Lipper Analytical Services.
Valuation of Shares
To calculate our net asset value, we add up the total assets of the
particular fund, subtract all liabilities, then divide by the number of shares
outstanding. To value money market securities, we use an accounting system
called the amortized cost method. This system is described in the Statement of
Additional Information.
<PAGE>
Equity Securities are valued at the closing price on the primary exchange
on which such securities are traded or on the principal over-the-counter market
on which such securities are traded, or, lacking any sales, at the last
available bid price for domestic securities and halfway between the bid and the
asked price for international securities. If no market quotation is available
for a given security (including restricted securities which are subject to
limitations on their sale), our Adviser will fairly value that security in good
faith pursuant to the policies established by the Funds' board of trustees.
Fixed income investments are generally valued at the bid price for securities.
Securities maturing within 60 days normally are valued at amortized cost,
adjusted for market fluctuation, if any.
Tax Matters
The dividends you receive, whether paid in cash or reinvested in shares,
generally will be subject to federal income tax (and any applicable state or
local taxes) unless you are otherwise exempt from such taxes. Some dividends
received from non-money market funds may qualify for the dividends received
deduction for corporate shareholders. We will send you a complete statement
each January as to the federal tax status of dividends and distributions paid
by each fund during the previous calendar year.
Distributions of non-money market funds will reduce the portfolio's Net
Asset Value per share. If you purchase shares just before a fund makes a
distribution, therefore, you will pay the full purchase price for the shares
and then receive a portion of the purchase price back as a taxable
distribution.
A redemption of shares or an exchange for shares of another Citizens fund
ordinarily will be a taxable event and will give rise to a taxable gain or
loss.
Please consult your own tax adviser for further information regarding the
federal, state and local tax consequences of an investment in Citizens Funds.
Trustee Profiles
Azie Taylor Morton, chair of the board of trustees, operates an investment
management firm and was the 36th Treasurer of the United States.
*Sophia Collier is Citizens Funds' former president and principal owner of our
investment adviser, Citizens Advisers.
*John Shields is Citizens Funds' current president and president and chief
executive officer of Citizens Advisers.
Lokelani Devone is assistant general counsel at DFS Group Limited, an
international retail business group.
Juliana Eades is the executive director of the New Hampshire Community Loan
Fund, one of the country's oldest local community economic development
institutions.
William D. Glenn II is the executive director of Continuum HIV Day Services in
San Francisco. Mitchell Johnson is president of M.A.J. Capital Management, a
money management firm. Previously, he spent 21 years in a variety of executive
positions at the Student Loan Marketing Association (Sallie Mae).
*J.D. Nelson is the chief executive officer of RhumbLine Advisers, an
investment advisory firm specializing in institutional and pension assets.
*Robert Reich is a University Professor at Brandeis University and was the 22nd
United States Secretary of Labor.
<PAGE>
Ada Sanchez is the former director of the Public Service and Social Change
Program at Hampshire College.
*Interested person (inside trustee)
<PAGE>
PAGE 1 SIDEBAR.1
Citizens Funds
230 Commerce Way, Suite 300
Portsmouth, NH
03801
603-436-5152
For Broker-Dealer Sales & Service:
800-982-7200
Table of Contents
Fee Information 2
How We Select Our
Investments 3
Financial Highlights 4
Working Assets Money
Market Fund 6
Citizens
Income Fund 6
Citizens
Index Fund7
Citizens Emerging
Growth Fund 8
Citizens Global Equity
Fund 8
Organization and
Management of
the Fund 9
How to Purchase and
Redeem Shares 11
Shareholder Services
and Policies 13
<PAGE>
Dividends, Distributions
and Taxes 13
Mailing Address
Wiring Instructions 14
Trustee Profiles 15
[CITIZENS FUNDS LOGO]
800-223-7010
www.citizensfunds.com
PAGE 3 SIDEBAR
[PHOTO}
Joseph Keefe, Secretary to the Fund, explains the table on the next page:
"On the next pages you will find detailed financial information on the funds
described in this prospectus, including the total return of each fund over its
years of operation. If you want further information, including a detailed
discussion of each fund's recent performance, you can call Citizens Funds'
toll-free number and request the 1998 Annual Report to Shareholders, which we
will send to you right away."
<PAGE>
PAGE 6 SIDEBAR
[PHOTO}
Laura Provost is the lead manager of the team that manages our money market
fund. She joined Citizens Advisers in 1997. Previously, she was a portfolio
manager with John Hancock Mutual Funds. "Our money market can be a good vehicle
for short-term cash management and for investors who need stability of
principal."
[PHOTO]
The managing partner of our sub-adviser, Seneca Capital Management LLC, Gail
Seneca is the primary manager of the Citizens Income Fund.
PAGE 7 SIDEBAR
"Since our goal is to achieve a reliable stream of monthly income, we analyze
carefully the credit quality of the debt we purchase."
[PHOTO}
Sophia Collier is the creator of the Citizens Index(TM), a member of our board
of trustees and chairman of the board of our advisor, Citizens Advisers.
"We believe our social screening process helps us identify better-managed
companies, and that over time this will be reflected in the returns of the
Citizens Index Fund. The fund is also highly diversified, both by industry and
by holding some 300 individual companies. We think it presents a good core
holding for the long-term investor."
<PAGE>
PAGE 8 SIDEBAR
[PHOTO}
Part of the team that manages the Citizens Emerging Growth Fund, Rick Little
has worked in the investment field for 24 years. He has been with Seneca
Capital Management LLC since its inception in 1990 and was previously a senior
vice president at NatWest Securities. He explains the investment approach used
to manage the Emerging Growth Fund.
"We are looking to build a portfolio of companies that have special
characteristics, and therefore have the ability to grow in their sales and
earnings at a rapid rate. These are the companies we hope can become 'the next
Microsoft,' developing new and innovative products and services."
PAGE 9 SIDEBAR
[PHOTO}
Lilia Clemente is the Chairman of Clemente Capital, Inc., and lead member of
the team that manages the Citizens Global Equity Fund. "As a person who was
born in the Philippines and who has traveled throughout the world as a global
investor, I believe global investment offers an opportunity to reduce risk and
increase returns by linking security and prosperity to the performance of an
array of markets and companies, instead of concentrating only in the U.S."
<PAGE>
PAGE 10 SIDEBAR
[PHOTO}
Azie Taylor Morton, Chair of our Board of Trustees, explains the Fund's
relationship with its adviser.
"One of the Fund's most important contracts is our Management Agreement with
Citizens Advisers. It states that Citizens Advisers has authority to manage our
funds and will provide all necessary office space, facilities, equipment and
personnel to do so."
PAGE 11 SIDEBAR
Use the Eofund(R)
Debit Card:
Working Assets Money Market Fund offers a transaction account, the Eofund,
which is available through the Fund's distributor, Citizens Securities.
Shareholders who use this account may request an optional MasterCard(R) debit
card and use it to redeem shares for cash at ATM machines, or to make purchases
at any retail location which accepts the debit card.
Escrow:
Shares purchased by check or ACH transfer are unavailable for redemption for a
period of time; however, they are fully invested.
PAGE 12 SIDEBAR
Common Transactions That Require Medallion Signature Guarantees:
o Written request for redemption
o Changing your account title in any way
o Authorizing a telephone transaction for
the first time
o Changing your predesignated
wire or ACH instructions
o Establishing or modifying a systematic
withdrawal plan
o Exchanges between accounts which do
not have identical titles
<PAGE>
Eligible Guarantors:
o Commercial Bank
o Trust Company
o Savings Associations
o Credit Unions
o Members of domestic stock exchange
Note:
Notaries public are not eligible guarantors.
PAGE 13 SIDEBAR
Voting Rights
Shareholders are entitled to one vote for each full share owned and a
fractional vote for fractional shares. If you have a joint account, each of the
account holders has authority to vote on behalf of the joint account. Shares of
each fund or class generally vote separately on matters of concern to that fund
or class. However, all shareholders of Citizens Funds vote together on the
selection of trustees and other matters as required by the Investment Company
Act of 1940, as amended. The holders of shares have no preemptive, conversion
or subscription rights, and voting rights are not cumulative. To save money, we
do not hold annual meetings. However, a meeting may be called by our trustees
or at the request of 10% of the Fund's shares. We will assist shareholders in
communicating with one another to arrange such a meeting.
PAGE 14 SIDEBAR
Mailing and
Wiring Instructions
Regular U.S. Mail:
Please use the business reply envelope
provided with this prospectus, or mail to:
Citizens Funds
c/o PFPC Inc.
PO Box 8962
Wilmington, DE
19899-8962
<PAGE>
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 Funds
c/o PFPC Inc.
400 Bellevue Parkway Suite 108
Wilmington, DE 19809
Phone: 800-223-7010
Please send overnight delivery packages only to the above address. Regular U.S.
Mail will not be accepted at this address and may be returned to you.
PAGE 15 SIDEBAR
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
<PAGE>
PAGE 16 SIDEBAR
[CITIZENS FUNDS LOGO]
Printed on recycled paper with soy-based ink.
(C)1998 Citizens Advisers
Working Assets is a registered trademark of Working Assets Funding Service.
Used under license.
The Talking Prospectus(TM) and Citizens Index(TM) are trademarks of Citizens
Advisers. Eofund(R) is a registered trademark of Citizens Advisers.
<PAGE>
PART B: INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF ADDITIONAL INFORMATION
OCTOBER 27, 1998
This Statement is not a prospectus and should be read in
conjunction with the Prospectus dated October 27, 1998, as may be
amended from time to time. A copy of the current Prospectus can be
obtained by calling (800) 223-7010, or by writing Citizens Funds,
230 Commerce Way, Suite 300, Portsmouth, NH 03801. This Statement
and the Citizens Funds Prospectus may be supplemented from time to
time.
CITIZENS FUNDS
Working Assets Money Market Fund
(includes Institutional Class Shares)
Citizens Income Fund
Citizens Emerging Growth Fund
Citizens Global Equity Fund
Citizens Index Fund
(includes Institutional Class Shares)
- -------------------------------------------------------------------------------
TABLE OF CONTENTS PAGE
Citizens Funds 2
Investment Objectives and Policies 2
The Funds 4
Other Investment Techniques 7
Factors that Affect the Value of Our Investment 9
Turnover and Fund Transactions 9
The Value of Our Shares 11
Information About Our Yield and Total Return 12
Dividends and Distributions 15
Federal Taxes 16
Redemption Information 18
Trustees and Officers 19
Additional Information Regarding Citizens Advisers 21
Investment Advisory and Other Services 22
Additional Information 25
Voting Rights 25
Shareholder and Trustee Liability 26
Custodian 26
Auditors 26
Legal Counsel 26
Financial Statements 27
Appendix: Description of Ratings 28
<PAGE>
- -------------------------------------------------------------------------------
CITIZENS FUNDS
Citizens Funds (the "Fund") presently consists of five separate mutual
funds: Working Assets Money Market Fund (inception date 8/30/83), Citizens
Income Fund (inception date 6/10/92), Citizens Emerging Growth Fund (inception
date 2/8/94), Citizens Global Equity Fund (inception date 2/8/94), and the
Citizens Index Fund (inception date 3/3/95). On May 28, 1992 the Fund, which
had operated as a money market fund since 1983, changed its name from Working
Assets Money Fund to Working Assets Common Holdings. On October 5, 1995 the
Fund changed its name from Working Assets Common Holdings to Citizens
Investment Trust, and on July 14, 1998 it changed its name to Citizens Funds.
This Statement of Additional Information relates to all five funds; with
respect to the Working Assets Money Market Fund and the Citizens Index Fund ,
it relates both to standard shares and to institutional class shares.
- -------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND POLICIES
The following are fundamental investment policies followed by each of the
series of the Fund (each a "fund," and collectively, the "Funds") which
supplement those listed in the Prospectus. Any policy identified as a
fundamental investment policy of a fund may be amended only with approval of
the holders of a majority of the outstanding shares of that fund as defined by
the Investment Company Act of 1940, as amended (the "1940 Act").
Each Fund:
1. May not buy the securities of any company if the fund 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 fund 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. May not invest in limited partnerships, including those which own
commodities, oil, gas and mineral leases or real estate. This restriction
is not interpreted to prevent a fund from investing in fixed income
securities or other debt instruments issued by limited partnerships
provided that it does not become a general or limited partner.
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.
<PAGE>
8. May borrow only under special circumstances. We do not normally borrow
money, but for temporary purposes a fund may borrow from banks up to 10%
of the fund's total assets. If we borrow, we can pledge our assets up to
the amount borrowed. A fund 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
fund will not purchase any securities while the fund 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 fund's net assets and
we will buy no such securities for a fund unless the assets in the fund
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
fund invests in restricted securities that are deemed liquid, the general
level of illiquidity in the fund 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 fund's ability to loan fund securities. If a
fund 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
Fund, Citizens Income Fund, Citizens Global Equity Fund and Citizens Index Fund
and does not apply to the Citizens Emerging Growth Fund:
A fund 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 funds will invest in real estate assets
or interests therein. This policy does not preclude a fund from investing in
debt instruments secured by real estate or holding interests in real estate
investment trusts or other real estate companies.
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.
- -------------------------------------------------------------------------------
THE FUNDS
The following discussion elaborates on the description of each fund's
investment objectives and policies as contained in the Prospectus, including
any fundamental investment policies of a fund that supplement the fundamental
policies of the Funds in the Prospectus.
<PAGE>
WORKING ASSETS MONEY MARKET FUND
The Working Assets Money Market Fund, as a fundamental investment policy,
may not buy any securities other than money market securities. Thus, the fund
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. The fund also 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 present policies of the Working Assets Money
Market Fund, but may be changed by our Trustees without a vote of the
shareholders of the fund:
1. The fund may invest in variable amount master demand notes, which are
obligations that permit us to invest fluctuating amounts at varying rates
of interest pursuant to direct arrangements between us and the borrower,
subject to the 10% limitation referred to in paragraph 3 below. The
interest rates and amounts involved may change daily. We have the right
to increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount; and the
borrower may repay up to the full amount of the note without penalty.
Because these types of notes are direct lending arrangements between us
and the borrower, they generally will not be traded and there is no
active secondary market for these notes. However, they are redeemable on
demand, and thus immediately repayable by the borrower, at face value
plus accrued interest at any time. Our right to redeem is dependent on
the borrower's ability to pay principal and interest on demand.
Accordingly, our Adviser will consider and continuously monitor the
earning power, cash flow and other liquidity ratios of the borrower to
assess its ability to meet its obligations on demand. We will invest in
these notes only if the Board of Trustees or its designee determines that
they present minimal credit risks and are of comparable quality to
commercial paper having the highest rating of Moody's Investors Service,
Inc. ("Moody's") or Standard & Poor's Rating Services ("Standard &
Poor's").
2. The fund 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. The fund 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. The fund 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 fund has valued the instrument.
Subject to this limitation, our Trustees have authorized the fund to
invest in restricted securities, specifically privately placed commercial
paper, where such investment is consistent with the fund'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 Objectives and
Policies" above.
5. The fund may not sell short or buy on margin and may not write put or
call options.
QUALITY AND MATURITY OF SECURITIES. Because the Working Assets Money
Market Fund uses the amortized cost method of valuation (see "The Value of Our
Shares"), the fund will not purchase any instruments with a remaining maturity
<PAGE>
of more than 397 days (13 months) or maintain a dollar-weighted average
maturity of the entire Fund in excess of 90 calendar days. Except as provided
below, the maturity of a security is deemed to be the period remaining until
the date on which, in accordance with the terms of the security, the principal
amount must unconditionally be paid or, if called for redemption, the date on
which the redemption must be made. Obligations of U.S. Government agencies and
instrumentalities ("Government Securities") with variable rates of interest
which are adjusted no less frequently than every 762 calendar days are deemed
to have a maturity equal to the period remaining until the next readjustment.
Government Securities that are Floating Rate Securities, or securities whose
terms provide for adjustment of their interest rates when a specified rate
changes and whose market value can reasonably be expected to approximate
amortized cost, are deemed to have a remaining maturity of one day. Variable
Rate Securities, which are securities whose terms provide for adjustment of
their interest rate on set dates and whose market value can be reasonably
expected to approximate amortized cost, wherein the principal amount must
unconditionally be paid in 397 calendar days or less, are deemed to have a
maturity equal to the period remaining until the next readjustment of the
interest rate or the period remaining until the principal amount can be
recovered through demand, whichever is earlier. A Variable Rate Security
subject to a demand feature, wherein the principal amount is scheduled to be
paid in more than 397 calendar days, is deemed to have a maturity equal to the
longer of the period remaining until the next readjustment of the interest rate
or the period remaining until the principal amount can be recovered through
demand. A Floating Rate Security wherein the principal amount must
unconditionally be paid in 397 calendar days or less is deemed to have a
maturity of one day. A Floating Rate Security subject to a demand feature
wherein the principal amount is scheduled to be paid in more than 397 days, is
deemed to have a maturity equal to the period remaining until the principal
amount can be recovered through demand. A repurchase agreement is deemed to
have a maturity equal to the period remaining until the date on which the
repurchase of the securities is scheduled to occur or, where the agreement is
subject to demand, the notice period applicable to a demand for repurchase of
the securities. A fund lending agreement is deemed to have a maturity equal to
the period remaining until the date on which the loaned securities are
scheduled to be returned or, where the agreement is subject to a demand, the
notice period applicable to the demand.
The Working Assets Money Market Fund may not invest more than 5% of its
assets in securities of any one issuer, except for U.S. Government securities.
With respect to securities subject to a guarantee or demand feature, the Fund
may not invest more than 10% of its assets in the institution that issued the
guarantee or demand feature unless the same was issued by a person who does not
control or is not controlled by that institution.
The Working Assets Money Market Fund also may only invest in securities
which are rated in the top rating category by at least two nationally
recognized statistical rating organizations ("NRSROs"). Such securities are
called First Tier Securities. If only one NRSRO has rated a security, the Fund
may purchase that security only if it is rated in that NRSRO's top rating
category and the acquisition is approved or ratified by the Fund's Board of
Trustees. If a security is not rated by any NRSRO, the Fund may purchase that
security only if the Fund's Board of Trustees determines that it is of
comparable quality to a First Tier Security and the Board approves or ratifies
the acquisition. If a security is rated by more than two NRSROs, the Fund may
purchase that security if it is rated in the top rating category by any two
NRSROs and no more than one other NRSRO rates it in the second highest category
or lower. If a security is subject to a guarantee or a conditional demand
feature, the Fund may purchase the security only if the guarantee or
conditional demand feature meets the criteria set forth above or, in the case
of a security subject to a conditional demand feature and issued after February
10, 1998, only if the Adviser determines and periodically confirms that there
is minimal risk that the conditions preventing exercise of the demand feature
will occur and either (a) the conditions limiting exercise can be readily
monitored by the Fund or relate to the taxability of interest payments on the
security or (b) the terms of the conditional demand feature require that the
Fund will receive notice of the occurrence of the condition and the opportunity
to exercise the demand feature.
CITIZENS INCOME FUND
The objective of Citizens Income Fund is to provide as high a level of
current income as we believe to be consistent with prudent investment risk. We
<PAGE>
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.
We plan to invest at least 65% of the value of the Citizens Income Fund'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
Fund's total assets may be invested in fixed-income 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 Fund because the portfolio
manager may determine that exercise of the option will not benefit the Fund 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 Fund 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 FUND
The objective of the Citizens Emerging Growth Fund is aggressive growth
through investment in small and medium sized companies. Up to 100% of this
fund'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 fund 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 fund, under normal conditions.
At times we will also buy short-term fixed income securities for the
Citizens Emerging Growth Fund. Since most of the companies we will purchase are
relatively new, we expect dividend income to be negligible to accomplishing the
fund's objective.
CITIZENS GLOBAL EQUITY FUND
The objective of the Citizens Global Equity Fund 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 Fund 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
<PAGE>
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 Fund.
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 fund. 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 FUND
The objective of the Citizens Index Fund is long-term capital
appreciation.
The Citizens Index Fund invests primarily in the securities comprising
the Citizens Index(TM), a market-weighted index of 300 companies, approximately
200 of which are included in the Standard & Poor's Composite Index of 500
Stocks ("S&P 500") that have passed Citizens' social screens, plus an
additional 100 companies that are not part of the S&P 500 but which pass our
social and financial screens. Companies outside the S&P 500 are included in the
Citizens Index to add industry diversity and other financial characteristics
which we believe are essential to a sound investment program, and enable the
Index to roughly track the returns of the S&P 500 as a whole.
Securities will be purchased in a proportion approximately equal to the
weight of each company to the total Index. At times we will also buy short-term
fixed income securities for the Citizens Index Fund. Under normal circumstances
these short-term investments will amount to no more than 5% of the fund's total
assets. Our investment results will usually lag the performance of the
underlying Citizens Index due to short-term cash investments and the deduction
of fund expenses and transaction costs.
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OTHER INVESTMENT TECHNIQUES
MONEY MARKET INSTRUMENTS AND REPURCHASE AGREEMENTS
During periods of unusual market conditions, or for liquidity purposes or
pending the investment of the proceeds of the sale of its shares, we may invest
all or a portion of assets of the Citizens Income Fund, Citizens Emerging
Growth Fund, Citizens Global Equity Fund, Citizens Index Fund, and Working
Assets Money Market Fund 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 fund, or the purchase and repurchase prices may be the same, with
interest at a standard rate due to the fund together with the repurchase price
on repurchase. In either case, the income to the fund 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 fund, other than Working Assets Money Market Fund, may from time to
time buy and write (sell) call and put options on securities, security indices,
<PAGE>
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 fund 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 fund's total assets at the time of each purchase. The premium that a
fund 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 funds 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 fund 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 fund.
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 fund 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 Fund 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 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 fund 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 fund may hold such
currencies for an indefinite period of time. A fund may also hold foreign
currency in anticipation of purchasing foreign securities. While the holding of
currencies will permit the fund to take advantage of favorable movements in the
applicable exchange rate, such strategy also exposes the fund to risk of loss
if exchange rates move in a direction adverse to the fund's position. Such
losses could reduce any profits or increase any losses sustained by the fund
from the sale or redemption of securities and could reduce the dollar value of
interest or dividend payments received.
<PAGE>
WHEN-ISSUED SECURITIES
Each fund, other than the Working Assets Money Market fund , may purchase
securities on a "when-issued" or on a "forward delivery" basis. It is expected
that, in many cases, a fund purchasing securities on a when-issued basis, will
take delivery of such securities. When a fund 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 fund 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 fund, the fund 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 fund will meet its obligations from the then-available
cash flow on the sale of securities, or, although it would not normally expect
to do so, from the sale of the when-issued or forward delivery securities
themselves (which may have a value greater or less than the fund's payment
obligation).
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FACTORS THAT AFFECT THE VALUE OF OUR INVESTMENTS
MONEY MARKET INSTRUMENTS AND FIXED INCOME SECURITIES
The value of the fixed income securities in which we invest will
fluctuate depending in large part on changes in prevailing interest rates.
Fixed income securities comprise all assets in the Working Assets Money Market
Fund and Citizens Income Fund and a portion of assets in the Citizens Emerging
Growth Fund, Citizens Index Fund and Citizens Global Equity Fund under normal
conditions. If these rates go up after we buy a security, its value may go
down. On the other hand, if the rates go down, the security's value may go up.
Changes in value and yield based on changes in interest rate may have different
effects on short-term obligations than on long-term obligations. Long-term
obligations, which often have higher yields, may fluctuate in value more than
short-term ones. We do not expect changes in interest rates to significantly
affect the value of our shares in the Working Assets Money Market 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 Funds 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 Working Assets Money Market 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 Fund we purchase fixed income securities and for
Citizens Emerging Growth Fund, Citizens Global Equity Fund and the Citizens
<PAGE>
Index Fund, we may purchase both equity and fixed income securities and hold
them until such time as we believe it is advisable to sell them in order to
realize a gain or loss whereupon we reinvest these assets in other securities.
Portfolio turnover rates will vary, depending on the type of fund and its
particular investment objective. For example, the Citizens Index Fund seeks to
have a turnover rate of less than 25% per year, whereas the Global Equity
Fund's turnover rate may be in the vicinity of 200%. Higher portfolio turnover
rates increase transaction costs and may increase taxable gains. For the fiscal
years ended June 30, 1996, 1997 and 1998, the Funds had the following portfolio
turnover rates: Citizens Income Fund -- 41.36%, 64.56% and 80.14%; Citizens
Emerging Growth Fund -- 337.41%, 228.66% and 245.30%; Citizens Global Equity
Fund -- 85.92%, 69.34% and 72.33%; Citizens Index Fund -- 6.44%, 18.64% and
13.64%, respectively.
Our Adviser seeks to obtain for us the best net price and the most
favorable execution of orders. Purchases are made from issuers, underwriters,
dealers or brokers, and banks who specialize in the types of securities we buy.
Purchases from underwriters include a commission or concession paid by the
issuer to the underwriters. Purchases from dealers include the spread between
the bid and asked prices and purchase from brokers include commissions paid to
the broker based upon the transaction size. If the execution and price offered
by more than one dealer are comparable, the order may be given to a dealer who
has provided research advice, quotations on portfolio securities or other
services. Our Adviser will comply with Rule 17e-1 under the 1940 Act in regards
to brokerage transactions with affiliates, to assure that commissions will be
fair and reasonable to the shareholders.
Our Adviser may allocate transactions to broker/dealers in exchange for
services. By allocating transactions to obtain services, the Adviser is able to
supplement its own efforts. While it is not possible to place a dollar value on
these services, it is the opinion of the Adviser that the receipt of these
services does not materially reduce the Adviser's overall expenses. These
services may or may not be useful to us or to our Adviser and its affiliates
which engage in securities activities. For the fiscal years ended June 30,
1996, 1997 and 1998, all portfolio purchases, as described above, were made
directly from issuers or from dealers, and we paid commissions in aggregate as
follows: 1996-$171,957, 1997-$323,948 and 1998-$417,008.
It is the policy of Citizens Advisers and Citizens Funds to seek to
obtain the benefit of "soft dollar" payments for the Funds and other clients of
Citizens Advisers when consistent with obtaining best execution and when doing
so is within the "safe harbor" created by Section 28(e) of the Securities
Exchange Act of 1934. To that end, Citizens Advisers will maintain an account
with one or more broker-dealers who agree to provide or pay for brokerage and
research services which benefit the Funds. Sub-advisers will be informed in
writing of the names of the broker-dealers and provided with account
information to allow the execution of trades through those broker-dealers. In
the event that best execution of an equity transaction is available through a
broker-dealer which has been so identified, Citizens Advisers or a sub-adviser,
as the case may be, may place the transaction with that broker-dealer after
determining in good faith that the amount of the commission is reasonable in
relation to the value of the brokerage and research services provided.
Any "soft dollars" generated in this fashion shall be used solely to
purchase brokerage and research services within the meaning of Section 28(e),
and must be of benefit to the fund on whose behalf the transaction is made.
Such brokerage and research services, however, need not exclusively benefit the
fund on whose behalf the transaction is made, and may also benefit other funds
within Citizens Funds or other clients of Citizens Advisers or its
sub-advisers. For these purposes, brokerage and research services mean those
which provide assistance to Citizens Advisers, or a sub-adviser, in the
performance of decision-making responsibilities. If a product or service serves
non-research as well as research functions, "soft dollars" shall be used to pay
for the product or service only to the extent that it constitutes research.
The investment management or advisory fee that Citizens Funds pays to the
Adviser will not be reduced as a consequence of the Adviser's receipt of
brokerage and research services. While such services are not expected to reduce
<PAGE>
the expenses of the Adviser, the Adviser would, through the use of such
services, avoid the additional expenses which would be incurred if it should
attempt to develop comparable information through its own staff or obtain such
services independently.
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THE VALUE OF OUR SHARES
The value of our shares is expressed as net asset value. The net asset
value per share is computed by subtracting total liabilities from total assets
and dividing that number by the total number of our outstanding shares. All
expenses are accrued daily and taken into account in determining net asset
value.
We attempt to keep the net asset value of our Working Assets Money Market
Fund fixed at $1.00 per share, while we expect the net asset value per share in
our other funds to fluctuate.
The value of our shares for each fund, other than the Working Assets
Money Market Fund, is determined at the time the New York Stock Exchange closes
on each day on which the New York Stock Exchange is open for regular trading
and at such other times as we feel may be necessary or appropriate.
The value of our shares for the Working Assets Money Market Fund is
determined at 4:00 p.m. Eastern Time on each day that the fund is open. The
Funds are currently open on each day, Monday through Friday, except New Year's
Day, Martin Luther King, Jr's. Birthday (observed), Presidents' Day (observed),
Good Friday, Memorial Day (observed), Independence Day, Labor Day, Columbus
Day, Veterans Day, Thanksgiving Day, the Friday following Thanksgiving Day and
Christmas Day.
WORKING ASSETS MONEY MARKET FUND
Our Trustees have determined that it is appropriate for us to value our
Working Assets Money Market Fund using the amortized cost method and that this
method represents the fair value of the fund'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 fund value on a particular day, a
prospective investor in our shares would be able to obtain a somewhat higher
yield from us than he would from investment in the other fund, and existing
investors in our shares would receive less investment income. The converse
would apply in a period of rising interest rates.
To use the amortized cost method, our Board of Trustees must establish
procedures designed to stabilize the net asset value of the Working Assets
Money Market Fund at $1.00 per share, to the extent reasonably possible. These
procedures must include review of the fund by the Board at intervals it deems
appropriate and reasonable in the light of market conditions to determine how
much the net asset value using available market quotations deviates from the
net asset value based on amortized cost. For this purpose, when market
quotations are available, securities are valued at bid price. If market
quotations are not available, investments are valued at their fair value as
determined in good faith under procedures established by and under the general
supervision and responsibility of our Board of Trustees, including being valued
at prices based on market quotations for investments of similar type, yield and
maturity.
Under the procedures which our Trustees have adopted in connection with
the valuation of our securities using the amortized cost method, the Fund,
through its Custodian, conducts weekly mark-to-market appraisals to compare its
determination of Net Asset Value per share with the amortized cost-based net
<PAGE>
asset value. In the event of a deviation between the market value and the
amortized cost value in excess of 0.10%, or if the Adviser believes the
deviation may result in dilution or other unfair results to shareholders or
investors, daily mark-to-market appraisals will be conducted until the
deviation falls below 0.10%. If the deviation exceeds 0.30%, the Board of
Trustees must be notified and may consider taking remedial action. If the
deviation exceeds 0.50%, the Board of Trustees will take such action as it
deems appropriate to eliminate or reduce any material dilution of shares or
other unfair results to shareholders or investors, including without
limitation: redeeming shares in kind; selling securities prior to maturity to
realize capital gains or losses or to shorten the average maturity of the Fund;
withholding dividends or payment of distributions; determining Net Asset Value
per share utilizing market quotations or equivalents; reducing or increasing
the number of shares outstanding on a pro rata basis; offsetting each
shareholder's pro rata portion of the deviation from their accrued dividend
account or from future dividends; or some combination of the foregoing.
We also limit our investments, including repurchase agreements, to those
U.S. Dollar-denominated securities which the Adviser determines to present
minimal credit risks to the Fund, which are First Tier Securities and which
meet the maturity and diversification requirements set forth in Rule 2a-7 and
included herein (see pages 5-6 above).
CITIZENS INCOME FUND, CITIZENS EMERGING GROWTH FUND, CITIZENS GLOBAL
EQUITY FUND AND THE CITIZENS INDEX FUND
As described in the Prospectus, the Citizens Income Fund, Citizens
Emerging Growth Fund, Citizens Global Equity Fund and Citizens Index Fund are
generally valued on the basis of market values. Equity securities, if any, in a
fund 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 fund 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" our funds
may be published in advertisements and sales material. For the Working Assets
Money Market Fund, the yield is usually quoted for a seven day period. For
Citizens Income Fund 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.
<PAGE>
Our yield is calculated by using the SEC formula:
Yield = 2[(a-b + 1)6 - 1]
------------
cd
where:
a = interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period that were
entitled to receive income distributions
d = the maximum offering price per share on the last day of the period
Compounded effective yield, which we may also quote, is determined by
taking the base period return (computed as described above) and calculating the
effect of assumed compounding.
The formula for effective yield is:
[(base period return + 1) 365/7 - 1]
Current yield and effective yield which are calculated according to a
formula prescribed by the SEC are not indicative of the amounts that actually
may be paid to our shareholders. Amounts paid to shareholders are reflected in
the quoted current distribution rate. The current distribution rate is computed
by dividing the total amount of dividends per share we paid during the past
twelve months by a current maximum offering price. Under certain circumstances,
such as when there has been a change in the amount of dividend payout, or a
fundamental change in investment policies, it might be appropriate to annualize
the dividends paid over the period such policies were in effect, rather than
using the dividends during the past twelve months. The current distribution
rate differs from the current yield computation because it may include
distributions to shareholders from additional sources (i.e., sources other than
dividends and interest, such as short-term capital gains), and is calculated
over a different period of time.
The following table sets forth various measures of performance for the
funds as of June 30, 1998:
<TABLE>
<CAPTION>
FUND 7-DAY YIELD EFFECTIVE YIELD 30-DAY YIELD
<S> <C> <C> <C>
Working Assets Money Market Fund 5.49% 5.64% NA
(standard shares)
Working Assets Money Market Fund 5.85% 6.02% NA
(Institutional Class Shares)
Citizens Income Fund NA NA 4.23%
</TABLE>
The current yield of the Working Assets Money Market 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.
<PAGE>
The "compounded effective yield" for the Working Assets Money Market 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 Working Assets Money Market Fundsince the
yield is calculated on the same basis as those of other money market funds.
However, shareholders should take a number of factors into account in using our
yield information as a basis for comparison with other investments.
Since the Working Assets Money Market Fund is 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 funds.
The yield quotation for the Citizens Income Fund is based on the
annualized net investment income per share of the fund over a 30 day period.
The yield is calculated by dividing the net investment income per share of the
fund earned during the period by the public offering price per share of the
fund on the last day of that period. The resulting figure is then annualized.
Net investment income per share is determined by dividing (i) the dividends and
interest earned by the fund during the period, minus accrued expenses for the
period, by (ii) the average number of the fund's shares entitled to receive
dividends during the period multiplied by the public offering price per share
on the last day of the period. Income is calculated for the purposes of yield
calculations in accordance with standardized methods applicable to all stock
and bond funds. In general, interest income is reduced with respect to bonds
trading at a premium over their par value by subtracting a portion of the
premium from income on a daily basis and is increased with respect to bonds
trading at a discount by adding a portion of the discount to daily income.
Capital gains and losses are generally excluded from the calculation as these
are reflected in the fund'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 Fund, Citizens Emerging Growth Fund, Citizens
Global Equity Fund and Citizens Index Fund 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 fund 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
<PAGE>
For the period ended June 30, 1998 the funds had the following
performance:
<TABLE>
<CAPTION>
HYPOTHETICAL
INVESTMENT
5 YEAR AVERAGE ANNUAL RETURN ON $1,000
1 YEAR AVERAGE ANNUAL TOTAL RETURN FOR THE
FUND TOTAL RETURN TOTAL RETURN SINCE INCEPTION 1 YEAR PERIOD
---- ------------- -------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Citizens Income Fund 10.49% 7.12% 7.67% $1,104.90
(6/10/92)
Citizens Emerging 33.05% N/A 22.21% $1,330.50
Growth Fund (2/8/94)
Citizens Global 21.75% N/A 14.23% $1,217.50
Equity Fund (2/8/94)
Citizens Index Fund 36.50% N/A 31.76% $1,365.00
(standard shares) (3/3/95)
Citizens Index Fund 37.38% N/A 34.88% $1,373.80
(Institutional (1/25/96)
Class Shares)
</TABLE>
When we quote each fund's yield or total return we are referring to its
past results and not predicting our future performance. We quote total return
for the most recent one year period as well as average annual total return for
the most recent five- and ten-year periods, or from the time when we first
offered shares, whichever is shorter. Sometimes we advertise our actual return
quotations for annual or quarterly periods or quote cumulative return for
various periods. When we do this, we also always present the standardized total
return quotations at the same time.
When we quote our investment results we sometimes will compare them to
unmanaged market indices such as the Dow Jones Industrial Average and the S&P
500, and other data and rankings from recognized independent publishers,
sources such as Donoghue's Money Fund Report, Money Magazine, Mutual Funds
Magazine, Kiplinger's Personal Finance Magazine, Co-Op America Quarterly, The
Green Money Journal, Bloomberg News, Morningstar, Inc., Lipper Analytical
Services and others.
- -------------------------------------------------------------------------------
DIVIDENDS AND DISTRIBUTIONS
WORKING ASSETS MONEY MARKET 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
<PAGE>
(including any discount or premium ratably amortized to the date of maturity or
determined in such other manner as the Trustees may determine); and (b) minus
all liabilities accrued, including interest, taxes and other expense items,
amounts determined and declared as dividends or distributions and reserves for
contingent or undetermined liabilities, all determined in accordance with
generally accepted accounting principles; and (c) plus or minus all realized
and unrealized gains or losses on investments.
CITIZENS INCOME FUND
The Citizens Income Fund distributes to its shareholders monthly
dividends substantially equal to all of its net investment income. The fund'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 fund at least annually. Dividends and
capital gains distributions are automatically reinvested at net asset value in
additional shares, unless a shareholder elects cash distributions. Cash
distributions will be paid at the close of the appropriate monthly or annual
period.
CITIZENS EMERGING GROWTH FUND, CITIZENS GLOBAL EQUITY FUND AND CITIZENS
INDEX FUND
The Citizens Emerging Growth Fund, Citizens Global Equity Fund and the
Citizens Index Fund 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 funds 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 funds has elected to be treated and intends to qualify as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). We plan to continue this election in the
future for all funds of the Fund.
To qualify for the tax treatment afforded a "regulated investment
company" under the Code, a fund 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 fund elects and qualifies for such tax
treatment, the fund will not be subject to federal income tax with respect to
amounts distributed. Under current law, in order to qualify, a fund must (a)
derive at least 90% of its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock
or securities, and income from certain other sources; and (b) diversify its
holdings so that, at the end of each fiscal quarter, (i) at least 50% of the
market value of the fund's assets is represented by cash, U.S. Government
securities, and other securities, limited, in respect of any one issuer, to an
amount not greater than 5% of the fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of
its assets is invested in the securities of any one issuer (other than U.S.
Government securities).
A fund that qualifies as a "regulated investment company" may nonetheless
be subject to certain federal excise taxes unless the fund 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
<PAGE>
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 fund from the fund's current year's ordinary income
and capital gain net income and (ii) any amount on which the fund 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 funds. As long as a fund
maintains its status as a regulated investment company and distributes all of
its income, the fund will not be subject to any Massachusetts income or excise
tax. If a portfolio should fail to qualify as a regulated investment company in
any year, the fund wold incur federal and Massachusetts income taxes upon its
taxable income and distributions from the portfolio would generally be taxable
as ordinary dividend income to shareholders.
DISTRIBUTIONS OF NET INVESTMENT INCOME
Dividends derived from net investment income and any excess of net
short-term capital gains over net long-term capital losses will be taxable to
shareholders as ordinary income. For each of the funds other than Working
Assets Money Market Fund and the Citizens Income Fund, 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 fund's shares. Availability of the
deduction to particular corporate shareholders is subject to certain
limitations and deducted amounts may be subject to the alternative minimum tax
and result in certain basis adjustments. Since the investment income of the
Working Assets Money Market Fund and the Citizens Income Fund is derived from
interest rather than dividends, no portion of the dividends received from these
funds will be eligible for the dividends received deduction. Moreover, the
portion of any fund's dividends that is derived from investments in foreign
corporations will not qualify for such deduction. Distributions of net capital
gains (i.e., the excess of net long-term capital gains over net short-term
capital losses) will be taxable to shareholders as long-term capital gains
without regard to the length of time that shareholders have held their shares.
Shareholders will be taxed for federal income tax purposes on dividends in the
same manner whether such dividends are received as shares or in cash. Any
dividend that is declared in October, November or December of any calendar
year, that is payable to shareholders of record in such a month and that is
paid the following January, will be treated as if received by shareholders on
December 31 of the year in which the dividend is declared.
Any dividend or distribution from a fund other than the Working Assets
Money Market Fund will have the effect of reducing the per share net asset
value of shares in the fund by the amount of the dividend or distribution.
Shareholders purchasing shares in such a fund shortly before the record date of
any taxable dividend or other distribution may thus pay the full price for the
shares and then effectively receive a portion of the purchase price back as a
taxable distribution.
In general, any gain or loss realized upon a taxable disposition of
shares of a fund by a shareholder that holds such shares as a capital asset
will be treated as a long-term capital gain or loss if the shares have been
held for more than twelve months and otherwise as a short-term capital gain or
loss. However, any loss realized upon a disposition of the shares in a fund
held for six months or less will be treated as a long-term capital loss to the
extent of any distributions of net capital gain made with respect to those
shares. Any loss realized upon disposition of shares may also be disallowed
under the rules relating to wash sales.
<PAGE>
Special tax considerations apply with respect to foreign investments of
those funds which permit such investments. For example, foreign exchange gains
and losses realized by a fund generally will be treated as ordinary income or
losses. In addition, investment income received by a fund from sources within
foreign countries may be subject to foreign income taxes withheld at the
source; none of the funds other than the Global Equity Fund expects to be able
to pass through to shareholders foreign tax credits with respect to such
foreign taxes. If the Global Equity Fund holds more than 50% of its assets in
foreign stock and securities at the close of its taxable year, it may elect to
"pass through" to its shareholders foreign income taxes paid. If the Global
Equity Fund so elects, its shareholders will be required to treat their pro
rata portions of the foreign income taxes paid by the fund as part of the
amounts distributed by them from the fund and thus includable in their gross
income for federal income tax purposes. Shareholders who itemize deductions
would then be allowed to claim a deduction or credit (but not both) on their
federal income tax returns for such amounts, subject to certain limitations.
Shareholders who do not itemize deductions would (subject to such limitations)
be able to claim a credit but not a deduction. No deduction for such amounts
will be permitted to individuals in computing their alternative minimum tax
liability. If the Global Equity Fund does not qualify or elect to "pass
through" to its shareholders foreign income taxes that it pays, shareholders
will not be able to claim any deduction or credit for any part of such taxes.
The United States has entered into tax treaties with many foreign countries
which may entitle a fund to a reduced rate of tax or an exemption from tax on
foreign income.
NON-U.S. SHAREHOLDERS
Dividends and certain other payments to persons who are not citizens or
residents of the United States or U.S. entities ("Non-U.S. Persons") are
generally subject to U.S. tax withholding at the rate of 30%. The funds intend
to withhold U.S. federal income tax at the rate of 30% (or at such lower rate
as may be permitted under an applicable treaty) on taxable dividends and other
payments to Non-U.S. Persons that are subject to such withholding. Any amounts
overwithheld may be recovered by such persons by filing a claim for refund with
the U.S. Internal Revenue Service within the time period appropriate to such
claims. Distributions from a fund to a Non-U.S. Person also may be subject to
tax under the laws of the Non-U.S. Person's jurisdiction.
The funds are also required in certain circumstances to apply backup
withholding at the rate of 31% on taxable dividends and (except in the case of
the Working Assets Money Market Fund) redemption proceeds paid to any
shareholder (including a Non-U.S. Person) who does not furnish to the fund
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments that
have been subject to 30% withholding.
<PAGE>
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.
- -------------------------------------------------------------------------------
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, Martin Luther King, Jr's. Birthday (observed), Presidents' Day
(observed), Good Friday, Memorial Day (observed), Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. In addition, to the above mentioned
holidays, Working Assets Money MarketFund is also closed on Columbus Day and
Veterans Day. All funds are closed on the Friday following Thanksgiving Day. We
pay redemption proceeds in cash, except that our Board of Trustees has the
power to decide that conditions exist which would make cash payments
undesirable. In that case, we could send redemption payments in securities from
our portfolio, valued in the same method as we used to determine our net asset
value. There might then be brokerage or other costs to the shareholder in
selling these securities. We have elected to be governed by Rule 18f-1 under
the 1940 Act, which requires us to redeem shares solely in cash up to the
lesser of $250,000 or 1% of our total net assets during any 90 day period for
any one shareholder. Your redemption proceeds may be more or less than your
cost, depending on the value or our shares.
If any of the shares being redeemed were recently purchased by check or
electronic funds transfer, we may delay sending the redemption proceeds for up
to seven business days while we determine whether the check or electronic funds
transfer used to purchase the shares has been honored by the bank on which it
was drawn or made. You can eliminate any possible delay by making your
investment by wire.
We have the right to compel the redemption of shares of each fund 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. With
respect to Institutional Class Shares, we also have the right to transfer these
accounts and to convert them to standard shares if the aggregate net asset
value of the shares in the account is less than $100,000.
<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 230 Commerce Way, Suite 300, Portsmouth, New
Hampshire 03801.
The Trustees who are "interested persons," as defined in the 1940 Act
("Interested Trustees"), are indicated by an asterisk.
Azie Taylor Morton (2/1/36), Chair of the Board and Trustee, was
Treasurer of the United States during the Carter Administration. From 1984 -
1989, she owned and operated the Stami Corporation, a franchisee of Wendy's Old
Fashioned Hamburgers. Her 30 year career began as a teacher at the State School
for Girls in Crockett, Texas. She went on to work at the AFL-CIO, the White
House Conference on Civil Rights and U.S. Equal Employment Opportunity
Commission. She has served as the Commissioner of the Virginia Department of
Labor and Industry as well as Executive Director of the Human Rights Project,
Inc. From 1990 - 1992 she was Director of Resource Coordination at Reading is
Fundamental, Inc. She is currently an investment adviser. Address: 10910
Medfield Court, Austin, Texas 78739.
William D. Glenn, II (9/9/48), Trustee, has been a shareholder of
Citizens Trust since 1983. He is a psychotherapist and the Executive Director
of Continuum HIV Day Services in San Francisco. He is a past President of the
San Francisco AIDS Foundation and former member of the Board of Directors of
the Gay Rights Chapter of the Northern California American Civil Liberties
Union. From 1981 to 1988, Mr. Glenn was the Assistant Principal and Dean of
Students at Mercy High School in San Francisco. He currently serves on the
boards of San Francisco's KQED and the 18th St. Services Chemical Dependency
Recovery Center. Address: 915 Las Ovejas, San Rafael, California 94903.
Sophia Collier* (3/13/56), Trustee, is the former president of Citizens
Funds and of its investment advisor, Citizens Advisers, where she is the
principal owner and chairman of the board of directors. Please see the section
entitled "Additional Information Regarding The Management Company" for more
information regarding Ms. Collier.
John L. Shields* (1/4/53), Trustee, became the President and Chief
Executive Officer of Citizens Funds on September 1, 1998. Prior to joining
Citizens Funds, Mr. Shields was a senior management consultant at Cerulli
Associates in Boston, Massachusetts (1995-1998) and prior to that was employed
by State Street Research Investment Services, Inc., where he held positions as
Senior Vice President and Chief Administrative Officer, Chief Operating Officer
and Chief Financial Officer (1991-1995). Mr. Shields also held a number of
positions at Fidelity Investments (1987-1991) and was a Senior Audit Manager at
Deloitte & Touche in New York City (1974-1987). He is a 1974 graduate of St.
Peters College and a member of the American Institute of Certified Public
Accountants.
Juliana Eades (2/2/53), Trustee, has served as Executive Director of the
$6 million New Hampshire Community Loan Fund since its inception in 1984. In
this capacity she has been a leading force in the creation of jobs and
affordable housing in New Hampshire. Prior to accepting her position at the
Loan Fund, Ms. Eades was Program Manager at the N.H. Governor's Council on
Energy. In other community activities, Ms. Eades is a member of the Campaign
for Rate Payers' Rights and the Society for the Protection of New Hampshire
Forests. Address: 79 South State Street, Concord, New Hampshire 03301.
<PAGE>
Lokelani Devone (4/8/57), Trustee, is the Assistant General Counsel at
DFS Group Limited, an international retail business group where she has worked
since 1989. Prior to that, she was an aide to Congresswoman Nancy Pelosi,
D-California. She is also a member of the Board of Continuum HIV Day Services
in San Francisco, where Trustee William Glenn is employed. Ms. Devone is a
graduate of the University of California at Berkeley (B.A. 1978) and the
University of California, Davis (J.D. 1983) and was an International Research
Fellow at the University of Tokyo from 1983 to 1985. Address: 525 Market
Street, 33rd floor, San Francisco, California 94105.
J.D. Nelson* (3/28/38), Trustee, is the founder and C.E.O. of RhumbLine
Advisers Corp., a minority-owned investment firm specializing in the management
of institutional pension assets using indexed and quantitative techniques. Mr.
Nelson was formerly Senior Vice President and Director of Public Funds Services
at State Street Bank and Trust Company in Boston. Prior to his twelve years at
State Street, he was the Administrator of the Democratic National Committee. He
currently serves on the Board of the City of Boston's Economic Development
Industrial Corporation. He is a former Chairman of the Roxbury MultiService
Center (Mass.), a past director of the United Way and has taught at the School
of Banking at Williams College. Address: RhumbLine Advisers, 50 Rowes Wharf,
Boston, Massachusetts 02110.
Ada Sanchez (8/17/52), Trustee, is the former Director of the Public
Service and Social Change Program at Hampshire College. From 1985 - 1987 she
was the National Toxic Waste Campaign Coordinator for Greenpeace USA. Prior to
that Ms. Sanchez was involved with a number of activist organizations including
Western States Field Consultant for the Disarmament Program for the National
Fellowship of Reconciliation, co-director and founder of Viewpoint Syndicate,
lecturer for Progressive Foundation Speakers Bureau, national coordinator for
Supporters of Silkwood and outreach coordinator for Coalition for a Non-Nuclear
World. Address: 5416 Delette Avenue South, Gulfport, Florida 33707.
Robert B. Reich* (6/24/46), is University Professor and the Maurice B.
Hexter Professor of Social and Economic Policy at Brandeis University and its
Heller Graduate School. Before joining Brandeis, he served as the nation's 22nd
Secretary of Labor during President Bill Clinton's first term. Before heading
the Labor Department, Secretary Reich was on the faculty of Harvard
University's John F. Kennedy School of Government. He served as an assistant to
the Solicitor General in the Ford Administration, where he represented the
United States before the Supreme Court, and he headed the policy planning staff
of the Federal Trade Commission in the Carter Administration. Professor Reich
is the author of seven books, including The Work of Nations which has been
translated into 17 languages and most recently, Locked in the Cabinet, as well
as more than 200 articles on the global economy, the changing nature of work
and the centrality of human capital.
Mitchell Johnson (3/1/42), is President of M.A.J. Capital Management,
Inc., a money management firm which he organized in August 1994. Prior to
forming M.A.J. Capital, Mr. Johnson was employed for 21 years at the Student
Loan Marketing Association ("Sallie Mae"), where he served as Senior Vice
President of Corporate Finance (1987-1994); Vice President of Corporate Finance
(1984-1987); Vice President and Fiscal Agent (1982-1984); Manager of Banking
and Investments (1978-1982); and Portfolio Manager (1978-1978). Prior to
joining Sallie Mae, Mr. Johnson served as Financial Analyst for the Federal
Home Loan Bank Board, Office of Finance, from 1970-1973. Mr. Johnson is a
Director on the Board of Bank Commerce Security Bancorp, Inc., a Director of
the Federal Agricultural Mortgage Association (Farmer Mac) and a Trustee of the
District of Columbia Retirement Board. Mr. Johnson eared his B.A. degree from
the University of California at Los Angeles in 1965 and has attended American
University.
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
Citizens Funds, as defined in the 1940 Act, and who have no direct or indirect
<PAGE>
financial interest in the operation of the Distribution Plan or any agreement
relating to the Plan ("Qualified Trustees") shall have primary responsibility
for the selection and nomination of other Qualified Trustees. This agreement
will continue for so long as our Distribution Plan is in effect.
The following compensation table discloses the aggregate compensation from the
Fund for services provided through June 30, 1998.
CITIZENS FUNDS- COMPENSATION TABLE
- -------------------------------------------------------------------------------
NAME OF PERSON AND POSITION AGGREGATE COMPENSATION FROM
THE FUND
Azie Taylor Morton $41,942.50
Juliana Eades $10,000
William D. Glenn, Jr. $11,750.00
Ada Sanchez $11,000.00
Lokelani Devone $10,000.00
Mitchell Johnson $5,000.00
Sophia Collier* 0
J.D. Nelson* 0
Robert B. Reich* 0
- -------------------------------------------------------------------------------
* Sophia Collier, J.D. Nelson and Robert B. Reich are Interested Trustees and
received no compensation from Citizens Funds.
The Trustees who are not "interested persons" received aggregate fees
from us of $89,692.50 for services provided through June 30, 1998 and were also
reimbursed for out-of-pocket expenses. ur Trustees and officers as a group
owned less than 1% of the outstanding shares of each fund and class as of June
30, 1998, except for the Citizens Index Fund, Institutional Class Shares, where
a single trustee owned 7.21% of the outstanding shares.
OTHER OFFICERS OF THE FUND
Crescentia True (12/16/63), Vice President, is the Vice President and
Director of Operations of Citizens Advisers, where she has been employed since
1994. Sam Pierce (4/21/68), Assistant Vice President, is Senior Analyst at
Citizens Advisers, which he joined in 1998. Susan Barry (5/21/63), Treasurer,
is Controller of Citizens Advisers where she has been employed since 1992.
Joseph F. Keefe (9/30/53), Secretary, is Executive Vice President and General
Counsel of Citizens Advisers. Prior to joining Citizens Advisers in 1997, Mr.
Keefe was in private law practice for 16 years. John P. Hathaway (1/27/65),
Assistant Secretary, is Vice President of Compliance and Finance at Citizens
Advisers.
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ADDITIONAL INFORMATION REGARDING CITIZENS ADVISERS
Sophia Collier individually owns 60% of the outstanding stock of Citizens
Advisers, Inc. Ms. Collier is the founder of American Natural Beverage Corp.,
the maker of Soho Natural Soda, a company which Ms. Collier co-founded in her
Brooklyn kitchen when she was 21 years old and built up over the next 12 years
to an enterprise with 52 employees and retail sales of $25 million. Soho Soda
was the first natural soda in America and was created as an alternative to
unhealthful mass market sodas. Ms. Collier and her partners sold American
Natural Beverage Corp. in 1989.
Four other individuals own the remaining 40% of the outstanding stock of
Citizens Advisers, Inc., as follows: John F. Dunfey (12%); Robert J. Dunfey,
Sr. (12%); Gerald F. Dunfey (12%); and William B. Hart, Jr. (4%). John, Robert
and Gerald Dunfey, brothers, now serve as directors of the Dunfey Group, a
venture capital and investment company. The Dunfey family has been associated,
over a number of years, with progressive social and political causes and has
actively participated in organizations dedicated to world peace, human and
civil rights, and economic justice. The family founded and continues to sponsor
New England Circle, a forum for the "discussion of social, political, literary
and educational topics that can lead to constructive change in our lives, our
nation and our world."
<PAGE>
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INVESTMENT ADVISORY AND OTHER SERVICES
We are advised by Citizens Advisers, Inc. (the "Adviser") under a
contract known as the Management Agreement. The Adviser's office is at 230
Commerce Way, Suite 300, Portsmouth, New Hampshire 03801. The Adviser is a
California corporation. Citizens Securities, Inc., a wholly-owned subsidiary of
the Adviser and a California corporation, serves as Citizens Funds'
distributor.
The Management Agreement provides that the Adviser, which is subject to
the control of our Board of Trustees, will decide which securities will be
bought and sold, and when, and requires the Adviser to place purchase and sale
orders. At the Adviser's discretion and sole expense, these duties may be
delegated to a sub-adviser.
SENECA CAPITAL MANAGEMENT, LLC
Our sub-adviser for the Citizens Income and Emerging Growth Funds is
Seneca Capital Management, LLC, a registered investment adviser which manages
over $4 billion from its offices at 909 Montgomery Street, San Francisco,
California. It is majority owned by Phoenix, Duff & Phelps Corporation
("Phoenix"), with a 74.9% ownership interest. Phoenix is a diversified
financial services organization engaged primarily in investment management of
institutional and individual accounts, with over $33 billion in assets under
management. Gail Seneca, who with her partners founded Seneca's predecessor
company, GMG/Seneca Capital Management, L.P. in 1990, continues, along with her
key staff members, to be the owners of the minority interests in Seneca. Ms.
Seneca and her key staff members entered into long term employment contracts
with Phoenix when it purchased Seneca in 1997. The day to day business and
affairs of Seneca, including its investment management activities, remain under
the control of Ms. Seneca and her staff.
CLEMENTE CAPITAL, INC.
Our sub-adviser for the Citizens Global Equity Fund, 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.
The Adviser (or the sub-adviser) provides us, at the Adviser's expense,
with all office space, facilities and equipment and clerical personnel
necessary to carry out its duties under the Management Agreement. Some of our
Trustees and our officers are employees of our Adviser and receive their
compensation from the Adviser. Our custodian bank maintains, as part of its
services for which we pay a fee, many of the books and records that we are
required to have and computes our net asset value and dividends per share.
We pay the Adviser a fee for its services at a percentage of each fund's
average annual net assets as follows:
Working Assets Money Market Fund--0.35%; Citizens Income Fund--65%; Citizens
Emerging Growth Fund--1.00%; Citizens Global Equity Fund--1.00%; and Citizens
Index Fund--0.50%. The fee is accrued daily and paid at least monthly. The
Adviser has agreed to limit our expenses each year. If expenses exceed this
limit, the Adviser will reduce its fee by, or refund, the amount of the excess.
The limit on our expenses, pursuant to the Management Agreement, is as follows:
Working Assets Money Market Fund: 1.50% of the first $40 million or our average
annual net assets and 1% thereafter; and Citizens Income Fund: 1.75% of the
first $100 million of average net assets and 1.25% thereafter. There is no
limit on expenses for Citizens Emerging Growth Fund, Citizens Global Equity
Fund, Citizens Index Fund or Working Assets Money Market Fund, Institutional
Class Shares.
<PAGE>
Not all our expenses are subject to the limits described above. 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.
For the fiscal years ended June 30, 1996, 1997 and 1998, the Adviser
received the following fees: Working Assets Money Market Fund, 1996-$423,731,
1997-$341,144 and 1998-$392,811; Citizens Income Fund, 1996-$207,386,
1997-$218,016 and 1998-$290,174; Citizens Emerging Growth Fund, 1996-$197,492,
1997-$503,188 and 1998-$741,296; Citizens Global Equity Fund, 1996-$118,662,
1997-$206,581 and 1998-$372,017; and Citizens Index Fund, 1996-$689,466,
1997-$878,074 and 1998-$1,439,749.
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 AND SHAREHOLDER SERVICES AGREEMENT
Citizens Advisers also performs a wide variety of administraive duties
for Citizens Funds under a separate administrative and shareholder services
contract which provides for reimbursement of out of pocket expenses as well as
fees for services rendered. These fees and expenses are payable monthly and
include fees based on the annual rate of the average daily net assets in the
following amounts: Working Assets Money Market Fund, Standard Shares - 0.15%;
Citizens Income Fund, Emerging Growth Fund and Global Equity Fund - 0.10%;
Citizens Index Fund, Standard Shares - 0.20%; Citizens Index Fund,
Institutional Class Shares - 0.30%. The administrative services provided to
Citizens Funds include but are not limited to the following: daily fund
accounting duties including payment and budgeting of fund operating expenses
and calculation of expense accruals; administration of annual Fund audit with
Fund Auditors; supervision of drafting and printing of annual and semi annual
reports; administrative and contractural interface with Custodian and Transfer
Agent including daily monitoring of net asset value, sales, redemptions,
dividends and quality control; and compliance with federal and state regulation
requirements. Citizens Advisers is also reimbursed at cost for state Blue Sky
filing and reporting services; vender regulations; organization of new series;
drafting and filing of prospectuses, statements of additional information,
proxies, and other regulatory filings; and special projects.
In addition, Citizens Securities provides a number of administrative
services to Citizens Funds relating primarily to shareholder services and
communications, and is reimbursed a flat fee approximating the "market price"
of such services. These include but are not limited to answering calls from
existing shareholders in a timely manner; maintenance of a toll-free number;
responding to shareholder inquiries and requests; maintenance of computer
interface with Transfer Agent; retention, maintenance and research of
shareholder records; maintenance of facilities and equipment to perform all
such duties; and similar services.
The Citizens Index Fund, Standard Shares may also be charged a
shareholder service fee of up to 0.45% of average daily net assets.
For the fiscal years ended June 30, 1996, 1997 and 1998, the Advisor
accrued the following administrative and shareholder service fees: Working
Assets Money Market Fund, 1996-$186,145, 1997-$293,217 and 1998-$278,850;
Citizens Income Fund, 1996-$74,254, 1997-$78,340 and 1998-$101,909; Citizens
Emerging Growth Fund, 1996-$117,910, 1997-$172,422 and 1998-$193,896; Citizens
Global Equity Fund, 1996-$68,745, 1997-$71,181 and 1998-$86,805; and Citizens
Index Fund1996-$903,081 1997-$1,104,684 and 1998-$1,635,911 .
<PAGE>
DISTRIBUTION PLAN
Pursuant to a Distribution Agreement, Citizens Securities, Inc. (the
"Distributor"), a wholly owned subsidiary of the Adviser, acts as the
distributor of our shares. There is no sales charge imposed on any of the
funds, either when you purchase or redeem shares.
Broker-dealer and other organizations, known as Service Organizations,
which assist in the distribution of our shares may receive fees from us or our
Distributor. Our Board of Trustees has adopted a Distribution Plan under
Section 12(b) of the 1940 Act and Rule 12b-1 thereunder (the "Plan"). In
approving the Plan, the Trustees determined, in the exercise of their business
judgment and in light of their fiduciary duties, that there is a reasonable
likelihood that the Plan will benefit us and our shareholders. Pursuant to this
Plan, Service Organizations that enter into written agreements with us and our
Distributor may receive, for administration, shareholder service and
distribution assistance, fees at rates determined by our Trustees. In addition,
our Distributor is authorized to purchase advertising, sales literature and
other promotional material and to pay its own salespeople. We will reimburse
the Distributor for these expenditures and for fees paid to Service
Organizations, up to a limit of 0.25% on an annual basis of our average daily
net assets for the Income Fund, Emerging Growth Fund, Global Equity Fund and
Citizens Index Fund (Standard Shares); and up to a limit of 0.20% for the
Working Assets Money Market Fund (Standard Shares) and 0.07% for the Citizens
Index Fund, Institutional Class Shares. (There is no provision under our
Distribution Plan for reimbursing Citizens Securities for expenditures on
behalf of the Working Assets Money Market Fund, Institutional Shares.). 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 will continue in effect if such continuance is specifically
approved at least annually 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."
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 fund 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 Trustees
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, 1996-$683,515,
1997-$838,348 and 1998-$1,250,855. The major categories of expenses for 1998
were as follows: marketing, advertising and public relations, printing and
mailing prospectuses to other than current shareholders, compensation to
broker/dealers and compensation to sales personnel.
<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 Citizens Funds. Each share
represents an interest in Citizens Funds. 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 Citizens Funds which will
function as separate funds, 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 and expenses. 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 funds in such a way as to be a "diversified" investment
company, as defined in the 1940 Act. As of June 30, 1998, there were
150,669,880 outstanding shares of our Common Stock, representing all the shares
of all five funds comprising Citizens Funds. The following are the shareholders
who owned beneficially or of record 5% or more of the outstanding shares:
Working Assets Money Market Fund (standard class), Fund - no holders of 5% or
more. Working Assets Money Market Fund (Institutional Class Shares) - Bankers
Trust, 20.85%. Citizens Index Fund (standard class) - Charles Schwab & Co.,
Inc., 9.25%. Citizens Index Fund (Institutional Class Shares) - Regence
Blueshield of Idaho, 16.08%; Sophia Collier, 7.21%; and Gloria Steinem Trustee,
6.932%. Citizens Income Fund - Charles Schwab & Co., Inc., 9.66%. Citizens
Emerging Growth Fund - Charles Schwab & Co, Inc., 11.23%. Citizens Global
Equity Fund - Charles Schwab & Co, Inc., 29.16%.
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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. Citizens Funds 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,
Citizens Funds will continue indefinitely.
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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 fund out of the fund's property for any shareholder held personally
liable for the fund'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.
<PAGE>
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 &Trust, One Heritage Drive, North Quincy,
Massachusetts, is the custodian of the assets of Citizens Funds. The custodian
takes no part in determining the investment policies of Citizens Funds 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
The Funds' Independent Accountants are PricewaterhouseCoopers LLP, One
Post Office Square, Boston, MA, 02109. PricewaterhouseCoopers LLP will conduct
an annual audit of the financial statements of the Funds, will prepare the
Funds' federal and state income tax returns and consult with management of the
Funds as to matters of accounting, regulatory filings, and federal and state
income taxation.
The audited financial statements of the Funds are incorporated here by
reference.
The statements of assets and liabilities, including the schedules of
investments, and the related statements of operations and of changes in net
assets and the financial highlights for the year ended June 30, 1998 have been
examined by PricewaterhouseCoopers LLP, as stated in their opinion which is
incorporated by reference and has been so incorporated in reliance of such
report given upon their authority as experts in accounting and auditing.
The statements of changes in net assets for the year ended June 30, 1997
and the financial highlights for the periods ended on or before June 30, 1997
have been examined by Tait Weller & Baker, as stated in their opinion which is
incorporated by reference and has been so incorporated in reliance of such
report given upon their authority as experts in accounting and auditing.
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LEGAL COUNSEL
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts.
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FINANCIAL STATEMENTS
The following financial statements of Citizens Funds and the opinion of
its independent auditors, included in the Annual Report to the shareholders for
the year ended June 30, 1998 are incorporated herein by reference and are
provided to each person to whom the Statement of Additional Information is sent
or given:
Statement of Investments - June 30, 1998
Statement of Assets and Liabilities - June 30,1998
Statement of Operations for the year ended - June 30, 1998
Statement of Changes in Net Assets for the years ended June 30, 1997 and 1998.
Financial Highlights for the years ended June 30, 1997 and 1998.
Notes to Financial Statements
Report of Independent Certified Public Accountants
<PAGE>
MANAGEMENT DISCUSSION
It is the policy of Citizens Funds to provide a management discussion of
the strategy and performance of each fund in the Annual Report.
<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
with the same maturity and coupon with different ratings may have the same
yield.
MOODY'S
AAA: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
BAA: Bonds which are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
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.
<PAGE>
RATING REFINEMENTS: Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through B. The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and modifier 3 indicates a ranking in
the lower end of that generic rating category.
STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS
AAA: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA: An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC AND C: Obligations rated BB, B, CCC, CC and C are regarded as
having significant speculative characteristics. BB indicates the least degree
of speculation and C the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure
to adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The rating C may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this
obligation are being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
<PAGE>
R: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk--such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
FITCH INVESTORS SERVICE, INC., INVESTMENT GRADE BOND AND PREFERRED STOCK RATINGS
AAA: Bonds and preferred stock considered to be investment grade and of the
highest credit quality. The obligor has an exceptionally strong ability to pay
interest and/or dividends and repay principal, which is unlikely to be affected
by reasonably foreseeable events.
AA: Bonds and preferred stock considered to be investment grade and of very
high credit quality. The obligor's ability to pay interest and/or dividends and
repay principal is considered very strong, although not quite as strong as
bonds rated AAA. Because bonds and preferred stock rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+ (i.e., Exceptionally
Strong Credit Quality).
A: Bonds and preferred stock considered to be investment grade and of high
credit quality. The obligor's ability to pay interest and/or dividends and
repay principal is considered to be strong, but may be more vulnerable to
adverse changes in economic conditions and circumstances than debt or preferred
securities with higher ratings.
BBB: Bonds and preferred stock considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay interest or dividends
and repay principal is considered to be adequate. Adverse changes in economic
conditions and circumstances, however, are more likely to have adverse impact
on these securities and, therefore, impair timely payment. The likelihood that
the ratings of these bonds or preferred stock will fall below investment grade
is higher than for securities with higher ratings.
PLUS (+) OR MINUS (-): Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit quality within the rating category.
Plus and minus signs, however, are not used in the AAA category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM--TAXABLE DEBT & DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. The obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2: Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
<PAGE>
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protections measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
NOTE: Moody's ratings are opinions, not recommendations to buy or sell, and
their accuracy is not guaranteed. A rating should be weighed solely as one
factor in an investment decision and you should make your own study and
evaluation of any issuers whose securities or debt obligations you consider
buying or selling.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
Standard & Poor's short-term issue credit ratings are a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded as follows:
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period had not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
<PAGE>
PART C: OTHER INFORMATION
Item 24 (a) Financial Statements
To be filed by amendment.
(b) Exhibits
(1) Declaration of Trust
(2) By-Laws*
(5) Management Agreement
(a) Management Agreement
(b) Renewal of Management Agreement
(c) Form of Sub-Investment Advisory Agreement**
(d) Amended Sub-Investment Advisory Agreement*****
(6) Distribution Agreement:
(a) Distribution Agreement, as amended*
(b) Renewal of Distribution Agreement**
(c) Amendment to Distribution Agreement dated May 6, 1996**
(d) Amendment to Distribution Agreement dated May 30, 1996**
(8) Custodian Agreement***
(9) Other Material Contracts:
(a) Administrative Agreement as amended
(b) Amendment to Administrative Agreement**
(10) Opinion and Consent of Counsel as to the legality of the
securities being registered****
(15) Rule 12b-1 Distribution Plan
(25) Powers of Attorney*****
* Incorporated by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on June 21, 1996.
** Incorporated by reference to Post-Effective Amendment No. 34 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on June 21, 1996.
*** Incorporated by reference to Post-Effective Amendment No. 35 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on September 27, 1996.
**** Incorporated by reference to the Registrant's Registration Statement on
N-14 (File No. 2-80886), as filed with the Securities and Exchange
Commission on September 5, 1997.
<PAGE>
***** Incorporated by reference to Post-Effective Amendment No. 40 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on December 11, 1997.
Item 25. Persons Controlled by or under Common Control with Registrant
o See the Prospectus and the Statement of Additional Information
regarding the Registrant's control relationships.
o Citizens Funds is a Massachusetts business trust.
o Citizens Advisers, Inc., the investment adviser to the Registrant,
is a California corporation, which also controls the distributor
of the Registrant, Citizens Securities, which is also a California
corporation.
Item 26. Number of Holders of Securities
- -------------------------------------------------------------------------------
Number of Record Holders
Title of Class as of August 26, 1998
- -------------------------------------------------------------------------------
Working Assets Money Market Fund 13,428
- -------------------------------------------------------------------------------
Working Assets Money Market Fund --
Institutional Class 121
- -------------------------------------------------------------------------------
Citizens Income Fund 4,323
- -------------------------------------------------------------------------------
Citizens Index Fund 20,168
- -------------------------------------------------------------------------------
Citizens Index Fund-- Institutional Class 106
- -------------------------------------------------------------------------------
Citizens Emerging Growth Fund 9,988
- -------------------------------------------------------------------------------
Citizens Global Equity Fund 4,355
- -------------------------------------------------------------------------------
Item 27. Indemnification
Article Seventh of the Declaration of Trust filed as Exhibit 1 to
the Registration Statement is incorporated by reference. Citizens
Funds participates in a group liability policy under which it and
its trustees, officers and affiliated persons, the adviser and the
distributor are insured against certain liabilities.
Item 28. Business and other Connections of Investment Adviser
Other businesses, professions, vocations, or employment of a
substantial nature in which each director or principal officer of
Citizens Advisers, Inc. is or has been, at any time during the last
two fiscal years, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee are as
follows:
<PAGE>
<TABLE>
<CAPTION>
Name and Position Connection with and
With Investment Adviser Name of Other Company Adviser
<S> <C>
John L. Shields, Trustee, Citizens Funds
President
Sophia Collier, Trustee, Citizens Funds
Partner Chair of Board, Citizens Advisers
President, Northpoint Technology, LTD
President, NPT, Inc.
John P. Dunfey, Chairman and Director, Dunfey Brothers Capital Group
Partner President, Treasurer & Director, DA-TRIAD, Inc.
Trustee and Governor, Dana-Farber Cancer Inst., Boston
Chair, Human Rights Project, Inc.
Chair, New England Circle, Inc.
Director, International League for Human Rights, NY
Robert J. Dunfey, Sr. Treasurer & Founding Director, Dunfey Brothers Capital
Partner Group
Trustee, the Jackson Laboratory, Bar Harbor, Maine
Past Director, KeyBank of Maine
Trustee, University of Maine System
Treasurer and Director, New England Circle, Inc.
Director, American Ireland Fund, Boston
Founder & Honorary Director, Susan L. Curtis
Foundation, Portland, Maine
Gerald Dunfey, Vice President & Founding Director, Dunfey Brothers
Partner Capital Group
Director, DA-TRIAD, Inc.
President, New England Circle, Inc.
Director, Martin Luther King Center for Nonviolent Social
Change
Board of Advisors, Fund for a Free South Africa
Board of Incorporators, Joslin Diabetes Center
William Hart, Director, SIS Bank, Springfield, MA
Partner Director, Blue Cross/Blue Shield of NH
President, Dunfey Brothers Capital Group
Director, DA-TRIAD, Inc.
Director, National Trust for Historic Preservation
Director, American Academy in Rome
Director, Currier Gallery of Art
Director, Berwick Academy, Berwick, Maine
</TABLE>
<PAGE>
Item 29. Principal Underwriters
(a) Not applicable.
(b) The following are directors and officers of Citizens Funds'
distributor, Citizens Securities: John L. Shields, President,
230 Commerce Way, Suite 300, Portsmouth, NH. Ms. Collier is
also an interested trustee of the Registrant and Chair of the
investment adviser or management company, Citizens Advisers,
Inc.
(c) Not applicable.
Item 30. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and
the rules under that act are kept at Citizens Funds' Transfer and
Dividend Distributing Agent, PFPC, Inc., 400 Bellevue Pkwy.,
Wilmington, DE 19808, and at Citizens Funds' Custodian and Fund
Accounting Agent, State Street Bank and Trust, One Heritage Drive,
North Quincy, MA 02171.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable.
(b) The Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting upon the question of removal
of one or more of the Registrant's trustees when requested in
writing to do so by the holders of at least 10% of the Registrant's
outstanding shares, and in connection therewith to comply with the
provisions of Section 16(c) of the Investment Company Act of 1940
relating to shareholder communications.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus of Citizens Funds is delivered with a copy of its latest
Annual Report to Shareholders, upon request without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Portsmouth and State of New Hampshire on the 27th day of August, 1998.
CITIZENS FUNDS
By /s/ Joseph F. Keefe
--------------------------
Joseph F. Keefe, Secretary
Sophia Collier*
- -------------------------- Trustee, President,
(Sophia Collier) Principal Executive,
Financial and
Accounting Officer
Azie Taylor Morton*
- -------------------------- Trustee
(Azie Taylor Morton)
William Glenn*
- -------------------------- Trustee
(William Glenn)
Ada Sanchez*
- -------------------------- Trustee
(Ada Sanchez)
J.D. Nelson*
- -------------------------- Trustee
(J.D. Nelson)
Juliana Eades*
- -------------------------- Trustee
(Juliana Eades)
Lokelani Devone*
- -------------------------- Trustee
(Lokelani Devone )
Robert B. Reich*
- -------------------------- Trustee
(Robert B. Reich)
<PAGE>
Mitchell Johnson*
- -------------------------- Trustee
(Mitchell Johnson)
* By Joseph F. Keefe Attorney in Fact /s/ Joseph F. Keefe
------------------------
See Powers of Attorney dated December 1, 1997, filed with the commission on
December 11, 1997.
<PAGE>
EXHIBIT INDEX
(1) Declaration of Trust
(2) By-Laws*
(5) Management Agreement
(a) Management Agreement
(b) Renewal of Management Agreement
(c) Form of Sub-Investment Advisory Agreement**
(d) Amended Sub-Investment Advisory Agreement*****
(6) Distribution Agreement:
(a) Distribution Agreement, as amended*
(b) Renewal of Distribution Agreement**
(c) Amendment to Distribution Agreement dated May 6, 1996**
(d) Amendment to Distribution Agreement dated May 30, 1996**
(8) Custodian Agreement***
(9) Other Material Contracts:
(a) Administrative Agreement as amended
(b) Amendment to Administrative Agreement**
(10) Opinion and Consent of Counsel as to the legality of the securities
being registered****
(15) Rule 12b-1 Distribution Plan
(25) Powers of Attorney*****
* Incorporated by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on June 21, 1996.
** Incorporated by reference to Post-Effective Amendment No. 34 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on June 21, 1996.
*** Incorporated by reference to Post-Effective Amendment No. 35 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on September 27, 1996.
**** Incorporated by reference to the Registrant's Registration Statement on
N-14 (File No. 2-80886), as filed with the Securities and Exchange
Commission on September 5, 1997.
***** Incorporated by reference to Post-Effective Amendment No. 40 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on December 11, 1997.
Exhibit 1
CITIZENS INVESTMENT TRUST
AMENDED AND RESTATED DECLARATION OF TRUST
DECLARATION OF TRUST, dated November 19, 1982, as amended and restated as
of July 2, 1998, by and among the individuals executing this Declaration of
Trust as the Trustees:
WHEREAS, the Trustees desire to establish a trust fund under the
laws of the Commonwealth of Massachusetts, for the investment and reinvestment
of funds contributed thereto;
WHEREAS, the Trustees now desire to amend and restate this
Declaration of Trust to change the name of the Trust and to incorporate all
prior amendments hereto; and
WHEREAS, the Trustees desire to amend and restate, in the form
attached as Appendix I hereto, the Establishments and Designations of Series of
Shares of Beneficial Trust in order to change the name of each series of the
Trust and to terminate certain series of the Trust;
NOW THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust IN TRUST as herein set forth below and that this
Declaration of Trust is hereby amended and restated in full as follows:
FIRST: This Trust shall be known as Citizens Funds.
SECOND:Whenever used herein, unless otherwise required by the
context or specifically provided:
1. All terms used in this Declaration of Trust which are defined in
the 1940 Act shall have the meanings given to them in the 1940 Act.
2. The "Trust" refers to Citizens Funds.
3. "Shareholder" means a record owner of Shares of the Trust.
4. The "Trustees" refer to the individual trustees in their capacity
as trustees hereunder of the Trust and their successor or successors for
the time being in office as such trustees.
<PAGE>
5. "Shares" means the equal proportionate units of interest into
which the beneficial interest in the Trust shall be divided from time to
time and includes fractions of Shares as well as whole Shares.
6. The "1940 Act" refers to the Investment Company Act of 1940, as
amended from time to time.
7. "Commission" means the Securities and Exchange Commission.
8. "Board" or "Board of Trustees" means the Board of Trustees of the
Trust.
THIRD: The purpose or purposes for which the Trust is formed and the
business or objects to be transacted, carried on and promoted by it are as
follows:
1. To hold, invest and reinvest its funds, and in connection
therewith to hold part or all of its funds in cash, and to purchase or
otherwise acquire, hold for investment or otherwise, sell, sell short,
assign, negotiate, transfer, exchange or otherwise dispose of or turn to
account or realize upon, securities (which term "securities" shall for
the purposes of this Declaration of Trust, without limitation of the
generality thereof, be deemed to include any stocks, shares, bonds,
debentures, notes, mortgages or other obligations, and any certificates,
receipts, warrants or other instruments representing rights to receive,
purchase or subscribe for the same, or evidencing or representing any
other rights or interests therein, or in any property or assets) created
or issued by any issuer (which term "issuer" shall for the purpose of
this Declaration of Trust, without limitation of the generality thereof
be deemed to include any persons, firms, associations, corporations,
syndicates, combinations, organizations, governments, or subdivisions
thereof); and to exercise, as owner or holder of any securities, all
rights, powers and privileges in respect thereof; and to do any and all
acts and things for the preservation protection, improvement and
enhancement in value of any or all such securities.
2. To borrow money and pledge assets in connection with any of the
objects or purposes of the Trust, and to issue notes or other obligations
evidencing such borrowings, to the extent permitted by the 1940 Act and
by the Trust's fundamental investment policies under the 1940 Act.
3. To issue and sell its Shares in such amounts and on such terms
and conditions, for such purposes and for such amount or kind of
<PAGE>
consideration (including without limitation thereto, securities) now or
hereafter permitted by the laws of the Commonwealth of Massachusetts and
by this Declaration of Trust, as the Trustees may determine.
4. To purchase or otherwise acquire, hold, dispose of, resell,
transfer, reissue or cancel (all without the vote or consent of the
Shareholders of the Trust) its Shares, in any manner and to the extent
now or hereafter permitted by the laws of Massachusetts and by this
Declaration of Trust.
5. To conduct its business in all its branches at one or more
offices in Massachusetts and elsewhere in any part of the world, without
restriction or limit as to extent.
6. To carry out all or any of the foregoing objects and purposes as
principal or agent, and alone or with associates or, to the extent now or
hereafter permitted by the laws of Massachusetts, as a member of, or as
the owner or holder of any stock of, or share of interest in, any issuers
and in connection therewith to make or enter into such deeds or contracts
with any issuers and to do such acts and things and to exercise such
powers, as a natural person could lawfully make, enter into, do or
exercise.
7. To do any and all such further acts and things and to exercise
any and all such further powers as may be necessary, incidental,
relative, conducive, appropriate or desirable for the accomplishment,
carrying out or attainment of all or any of the foregoing purposes or
objects.
The foregoing objects and purposes shall, except as otherwise
expressly provided, be in no way limited or restricted by reference to, or
inference from, the terms of any other clause of this or any other Articles of
this Declaration of Trust, and shall each be regarded as independent and
construed as powers as well as objects and purposes, and the enumeration of
specific purposes, objects and powers shall not be construed to limit or
restrict in any manner the meaning of general terms or the general powers of
the Trust now or hereafter conferred by the laws of the Commonwealth of
Massachusetts nor shall the expression of one thing be deemed to exclude
another, though it be of like nature, not expressed; provided, however, that
the Trust shall not carry on any business, or exercise any powers, in any
state, territory, district or country except to the extent that the same may
lawfully be carried on or exercised under the laws thereof.
<PAGE>
FOURTH:The beneficial interest in the Trust shall at all times be
divided into an unlimited number of transferable Shares, without par value,
which may be divided into one or more series, the number of relative rights,
privileges and preferences of which shall be designated by the Trustees in
accordance with the following provisions:
1. All Shares shall be identical except that there may be such
variation as shall be fixed and determined by the Trustees between
different series as to purchase price, right of redemption and price and
terms and manner of redemption and special and relative rights as to
dividends and upon liquidation.
2. The number of authorized Shares and the number of Shares in each
series that may be issued shall be unlimited. The Trustees may classify
or reclassify any unissued Shares or any Shares previously issued and
required of any series into one or more series that may be established
and designated from time to time. The Trustees may hold as treasury
shares (of the same or some other series), reissue for such consideration
and on such terms as they may determine, or cancel any Shares of any
series required by the Trust at their discretion from time to time.
3. Each series shall be authorized to hold cash, invest in
securities, instruments and other property and use investment techniques
as from time to time described in the Trust's then currently effective
registration statement under the Securities Act of 1933, as amended, to
the extent pertaining to the offering of Shares of such series. Each
Share of each series shall be redeemable, shall be entitled to one vote
(or a fraction thereof in respect of a fractional Share) on matters on
which Shares of each series shall be entitled to vote, shall represent a
pro rata beneficial interest in the assets allocated or belonging to each
series, and shall be entitled to receive its pro rata share of the net
assets of each series upon liquidation of each series.
4. All consideration received by the Trust for the issuance or sale
of Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income thereon, profits
therefrom or proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall irrevocably belong to that series for all purposes, subject
only to the rights of creditors of such series and shall be so recorded
on the books of account of the Trust. In the event there are any assets,
income, earnings, profits, proceeds, funds or payments which are not
readily identifiable as belonging to any particular series, the Trustees
shall allocate them among any one or more of the series established and
designated from time to time and in such manner as the Trustees in their
<PAGE>
sole discretion deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all
series for all purposes. No Shareholder of any particular series shall
have any claim on or right to any assets allocated to any other series.
5. The assets belonging to each particular series shall be charged
with the liabilities of the Trust with respect to that series and all
expenses, costs, charges and reserves attributable to that series, and
any general liabilities, expenses, charges or reserves of the Trust which
are not readily identifiable as belonging to a particular series shall be
allocated and charged by the Trustees to and among one or more of the
series established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all series for all purposes. The
Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act to determine which items will be treated as income and which
items as capital; and each such determination shall be conclusive and
binding upon Shareholders. Under no circumstances shall the assets
allocated or belonging to a particular series be charged with the
liabilities, expenses, costs, charges or reserves attributable to any
other series. All persons who have been extended credit which has been
allocated to a particular series shall look only to the assets of that
particular series for payment of such credit claim or contract.
6. Each Share of a series will represent a beneficial ownership
interest in the net assets allocated or belonging to such series only and
such interest shall not extend to the assets of the Trust generally.
Dividends and distributions on Shares of a particular series may be paid
with such frequency as the Trustees determine, which may be monthly or
otherwise, pursuant to a standing vote or votes adopted only once or with
such frequency as the Trustees may determine, to the Shareholders of that
series only, from such of the income and capital gains, accrued and
realized, from the assets belonging to that series, as the Trustees
determine after providing for actual and accrued liabilities belonging to
that series. All dividends and distributions on Shares of a particular
series shall be distributed pro rata to the Shareholders of that series
in proportion to the number of Shares of that series held by such
Shareholders at the date and time of record established for payment of
such dividends and distributions. Shares of any particular series of the
Trust may be redeemed solely out of the Trust property allocated or
belonging to that series. Upon liquidation or termination of a series of
<PAGE>
the Trust, Shareholders of such series shall be entitled to a pro rata
share of the net assets of such series only.
7. Shareholders of each series shall vote separately as a class on
any matter to the extent required by, and any matter shall have been
deemed effectively acted upon with respect to such series as provided in,
Rule 18f-2, as from time to time in effect, under the 1940 Act, and this
Declaration of Trust.
8. The establishment and designation of any series of Shares shall
be effective upon the execution by a majority of the Trustees of an
instrument setting forth such establishment and designation and the
relative rights and preferences of such series or as otherwise provided
in such instrument. At any time that there are no Shares outstanding of
any particular series previously established and designated, the Trustees
may by an instrument executed by a majority of their number abolish that
series and the establishment and designation thereof. Each instrument
referred to in this section shall have the status of an amendment to this
Declaration.
9. The names of the series of Shares of the Trust that are currently
established and designated as of the date of this Amended and Restated
Declaration of Trust are contained in the Amended and Restated
Establishment and Designation of Series attached as Appendix I hereto.
10. The Trustees may, in their discretion, authorize the division of
Shares of any series into one or more classes or sub-series. All Shares
of a class or sub-series shall be identical with each other and with the
Shares of each other class or sub-series of the same series except for
such variations between classes or sub-series as may be approved by the
Board of Trustees and permitted by the 1940 Act or pursuant to any
exemptive order issued by the Commission.
11. As of the date of this Amended and Restated Declaration of
Trust, the Trustees have authorized the division of Shares of the series
designated as Working Assets Money Market Fund and Citizens Index Fund
into classes as follows:
Working Asset Money Market Fund
Working Asset Money Market Fund - Institutional Class
Citizens Index Fund
Citizens Index Fund - Institutional Class
<PAGE>
FIFTH: The following provisions are hereby adopted with respect to
voting Shares of the Trust and certain other rights:
1. The Shareholders shall have power to vote (i) for the election of
Trustees to the extent provided in the By-Laws, (ii) for the amendment of
this Declaration of Trust except that Trustees are specifically empowered
to amend this Declaration without the vote of the Shareholders in order
to designate a new series in the manner provided herein, to change the
name of the Trust, to supply any omission, to cure, correct or supplement
any ambiguous, defective or inconsistent provision hereof, or to conform
this Declaration to the requirements of applicable laws and regulations
or to the requirements of the regulated investment company provisions of
the Internal Revenue Code as it may be amended, but Trustees shall not be
liable for failing to do so, and the Trustees are specifically empowered
without the vote of the Shareholders to divide any series into one or
more classes or sub-series as provided herein, (iii) to the same extent
as the shareholders of a Massachusetts business corporation, as to
whether or not a court action, proceeding or claim should be brought or
maintained derivatively or as a class action on behalf of the Trust or
the Shareholders, and (iv) with respect to such additional matters
relating to the Trust as may be required by the 1940 Act or by law, by
this Declaration of Trust, or the By-Laws of the Trust or any
registration statement of the Trust with the Commission or any State, or
as the Trustees may consider desirable.
2. On any matter submitted to a vote of the Shareholders of the
Trust, all Shares then entitled to vote shall be voted by the individual
series, except that (i) when required by the 1940 Act to be voted in the
aggregate, Shares shall not be voted by individual series and (ii) when
the Trustees have determined that the matter affects only the interests
of Shareholders of one or more series, only Shareholders of such series
shall be entitled to vote thereon. At all meetings of Shareholders each
Shareholder entitled to vote shall have one vote for each Share standing
in his name on the books of the Trust on the date, fixed in accordance
with the By-Laws, for determination of Shareholders entitled to vote at
such meeting except (if so determined by the Board of Trustees) for
Shares redeemed prior to the meeting. Any fractional Share shall carry
proportionately all the rights of a whole Share, including the right to
vote and the right to receive dividends. The presence in person or by
proxy of the holders of one-third of the Shares outstanding and entitled
to vote shall constitute a quorum at any meeting of the Shareholders. If
at any meeting of the Shareholders there shall be less than a quorum
present, the Shareholders present at such meeting may, without further
notice, adjourn the same from time to time until a quorum shall attend,
but no business shall be transacted at any such adjourned meeting except
<PAGE>
such as might have been lawfully transacted had the meeting not been
adjourned.
3. Each Shareholder, upon request to the Trust in proper form
determined by the Trust, shall be entitled to require the Trust to redeem
all or any part of the Shares standing in the name of such Shareholder.
The method of computing such net asset value, the time at which such net
asset value shall be computed and the time within which the Trust shall
make payment therefor, shall be determined as hereinafter provided in
Article SEVENTH of this Declaration of Trust. Notwithstanding the
foregoing, the Trustees, when permitted or required to do so by the 1940
Act, may suspend the right of the Shareholders to require the Trust to
redeem Shares.
4. No Shareholder shall, as such holder, have any right to purchase
or subscribe for any security of the Trust which it may issue or sell,
other than such right, if any, as the Trustees, in their discretion, may
determine.
5. Notwithstanding anything elsewhere contained in this Declaration
of Trust or in the By-Laws of the Trust, the Shareholders of the Trust
shall have such rights, and the Trust, the Board of Trustees, and the
Trustees shall have such obligations as would exist if the Trust were a
common law trust covered by Section 16(c) of the 1940 Act. In the event
that the Trust has outstanding two or more series of Shares pursuant to
Article FOURTH of this Declaration of Trust, each such series shall be
considered as if it were a separate common law trust covered by said
Section 16(c). However, the Trust may at any time or from time to time
apply to the Commission for one or more exemptions from all or part of
said Section 16(c) and, if an exemptive order or orders are issued by the
Commission, such order or orders shall be deemed part of said Section
16(c) for the purpose of this paragraph 5.
6. All persons who shall acquire Shares shall acquire the same
subject to the provisions of this Declaration of Trust.
SIXTH: The By-Laws of the Trust may fix the number of Trustees at
any number and may authorize the Trustees to increase or decrease the number of
Trustees, to fill the vacancies created by any such increase in the number of
Trustees, to set and alter the terms of office of the Trustees and to lengthen
or lessen their own terms or make their terms of indefinite duration, all
subject to the 1940 Act. Unless otherwise provided by the By-Laws of the Trust,
the Trustees need not be Shareholders.
SEVENTH: The following provisions are hereby adopted for the purpose
of defining, limiting and regulating the powers of the Trust and of the
Trustees and Shareholders.
1. As soon as any Trustee is duly elected by the Shareholders or the
Trustees and shall have accepted this Trust, the Trust estate shall vest
<PAGE>
in the new Trustee or Trustees, together with the continuing Trustees,
without any further act or conveyance, and he shall be deemed a Trustee
hereunder.
2. The death, declination, resignation, retirement, removal, or
incapacity of the Trustees, or any one of them shall not operate to annul
the Trust or to revoke any existing agency created pursuant to the terms
of this Declaration of Trust.
3. The assets of the Trust shall be held separate and apart from any
assets now or hereafter held in any capacity other than as Trustee
hereunder by the Trustees or any successor Trustees. All of the assets of
the Trust shall at all times be considered as vested in the Trustees.
Except as provided in this Declaration of Trust, no Shareholder shall
have, as such holder of beneficial interest in the Trust, any authority,
power or right whatsoever to transact business for or on behalf of the
Trust, or on behalf of the Trustees, in connection with the property or
assets of the Trust, or in any part thereof, except the rights to receive
the income and distributable amounts arising therefrom as set forth
herein.
4. The Trustees in all instances shall act as principals, and are
and shall be free from the control of the Shareholders. The Trustees
shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust.
The Trustees shall not in any way be bound or limited by present or
future laws or customs in regard to Trust investments, but shall have
full authority and power to make any and all investments which they, in
their uncontrolled discretion, shall deem proper to accomplish the
purposes of this Trust. Subject to any applicable limitation in this
Declaration of Trust or in the By-Laws of the Trust, the Trustees shall
have power and authority:
(a) to adopt By-Laws not inconsistent with this Declaration of
Trust providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders;
(b) to elect and remove such officers and appoint and terminate
such officers as they consider appropriate with or without cause;
(c) to employ a bank or trust company as custodian of any assets
of the Trust subject to any conditions set forth in this Declaration of
Trust or in the By-Laws;
(d) to retain a transfer agent and Shareholder servicing agent,
or both;
(e) to provide for the distribution of Shares either through a
principal underwriter or the Trust itself or both;
<PAGE>
(f) to set record dates in the manner provided for in the
By-Laws of the Trust;
(g) to delegate such authority as they consider desirable to any
officers of the Trust and to any agent, custodian or underwriter;
(h) to vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property held in Trust
hereunder; and to execute and deliver powers of attorney to such person
or persons as the Trustees shall deem proper, granting to such person or
persons such power and discretion with relation to securities or property
as the Trustees shall deem proper;
(i) to exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities held in trust
hereunder;
(j) to hold any security or property in a form not indicating
any trust, whether in bearer, unregistered or other negotiable form; or
either in its own name or in the name of a custodian or a nominee or
nominees, subject in either case to proper safeguards according to the
usual practice of Massachusetts business trusts or investment companies;
(k) to consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation or concern,
any security of which is held in the Trust; to consent to any contract,
lease, mortgage, purchase, or sale of property by such corporation or
concern, and to pay calls or subscriptions with respect to any security
held in the Trust;
(l) to compromise, arbitrate, or otherwise adjust claims in
favor of or against the Trust or any matter in controversy including, but
not limited to, claims for taxes;
(m) to make, in the manner provided in the By-Laws,
distributions of income and of capital gains to Shareholders;
(n) to borrow money to the extent and in the manner permitted by
the 1940 Act and the Trust's fundamental policy thereunder as to
borrowing; and
(o) to enter into investment advisory or management contracts,
subject to the 1940 Act, with any one or more corporations, partnerships,
trusts, associations or other persons; if the other party or parties to
any such contract are authorized to enter into securities transactions on
behalf of the Trust, such transactions shall be deemed to have been
authorized by all of the Trustees.
5. No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to
<PAGE>
the application of any payments made or property transferred by the
Trustees or upon their order.
6. (a) The Trustees shall have no power to bind any Shareholder
personally or to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the Shareholder may at
any time personally agree to pay by way of subscription to any Shares or
otherwise. Every note, bond, contract or other undertaking issued by or
on behalf of the Trust or the Trustees relating to the Trust shall
include a recitation limiting the obligation represented thereby to the
Trust and its assets (but the omission of such a recitation shall not
operate to bind any Shareholder).
(b) Except as otherwise provided in this Declaration of Trust or
the By-Laws, whenever this Declaration of Trust calls for or permits any
action to be taken by the Trustees hereunder, such action shall mean that
taken by the Board of Trustees by vote of the majority of a quorum of
Trustees as set forth from time to time in the By-Laws of the Trust or as
required pursuant to the provisions of the 1940 Act and the rules and
regulations promulgated thereunder.
(c) The Trustees shall possess and exercise any and all such
additional powers as are reasonably implied from the powers herein
contained such as may be necessary or convenient in the conduct of any
business or enterprise of the Trust, to do and perform anything
necessary, suitable, or proper for the accomplishment of any of the
purposes, or the attainment of any one or more of the objects, herein
enumerated, or which shall at any time appear conducive to or expedient
for the protection or benefit of the Trust, and to do and perform all
other acts or things necessary or incidental to the purposes herein
before set forth, or that may be deemed necessary by the Trustees.
(d) The Trustees shall have the power to determine conclusively
whether any moneys, securities, or other properties of the Trust property
are, for the purposes of this Trust, to be considered as capital or
income and in what manner any expenses or disbursements are to be borne
as between capital and income whether or not in the absence of this
provision such moneys, securities, or other properties would be regarded
as capital or income and whether or not in the absence of this provision
such expenses or disbursements would ordinarily be charged to capital or
to income.
7. The By-Laws of the Trust may divide the Trustees into classes and
prescribe the tenure of office of the several classes, but no class shall
be elected for a period shorter than that from the time of the election
following the division into classes until the next meeting of
shareholders.
8. The Shareholders shall have the right to inspect the records,
documents, accounts and books of the Trust, subject to reasonable
regulations of the Trustees, not contrary to Massachusetts law, as to
<PAGE>
whether and to what extent, and at what times and places, and under what
conditions and regulations, such right shall be exercised.
9. Any Trustee, or any officer elected or appointed by the Trustees
or by any committee of the Trustees or by the Shareholders or otherwise,
may be removed at any time, with or without cause, in such lawful manner
as may be provided in the By-Laws of the Trust.
10. If the By-Laws so provide, the Trustees shall have power to hold
their meetings, to have an office or offices and, subject to the
provisions of the laws of Massachusetts, to keep the books of the Trust
outside of said Commonwealth at such places as may from time to time be
designated by them.
11. Securities held by the Trust shall be voted in person or by
proxy by the President or Vice-President, or such officer or officers of
the Trust as the Trustees shall designate for the purpose, or by proxy or
proxies thereunto duly authorized by the Trustees, except as otherwise
ordered by vote of the holders of a majority of the Shares outstanding
and entitled to vote in respect thereto.
12. (a) Subject to the provisions of the 1940 Act, any Trustee,
officer or employee, individually, or any partnership of which any
Trustee, officer or employee may be a member, or any corporation or
association of which any Trustee, officer or employee may be an officer,
director, trustee, employee or stockholder, may be a party to, or may be
pecuniarily or otherwise interested in, any contract or transaction of
the Trust, and in the absence of fraud no contract or other transaction
shall be thereby affected or invalidated; provided that in case a
Trustee, or a partnership, corporation or association of which a Trustee
is a member, officer, director, trustee, employee or stockholder is so
interested, such fact shall be disclosed or shall have been known to the
Trustees or a majority thereof; and any Trustee who is so interested, or
who is also a director, officer, trustee, employee or stockholder of such
other corporation or association or a member of such partnership which is
so interested, may be counted in determining the existence of a quorum at
any meeting of the Trustees which shall authorize any such contract or
transaction, and may vote thereat to authorize any such contract or
transaction, with like force and effect as if he were not such director,
officer, trustee, employee or stockholder of such other trust or
corporation or association or a member of a partnership so interested.
(b) Specifically, but without limitation of the foregoing, the
Trust may enter into a management or investment advisory contract or
underwriting contract and other contracts with, and may otherwise do
business with any manager or investment adviser and/or any sub-adviser
for the Trust and/or principal underwriter of the Shares of the Trust or
any subsidiary or affiliate of any such manager or investment adviser
and/or sub-adviser and/or principal underwriter and may permit any such
firm or corporation to enter into any contracts or other arrangements
<PAGE>
with any other firm or corporation relating to the Trust notwithstanding
that the Trustees of the Trust may be composed in part of partners,
directors, officers or employees of any such firm or corporation, and
officers of the Trust may have been or may be or become partners,
directors, officers or employees of any such firm or corporation, and in
the absence of fraud, the Trust and any such firm or corporation may deal
freely with each other, and no such contract or transaction between the
Trust and any such firm or corporation shall be invalidated or in any way
affected thereby, nor shall any Trustee or officer of the Trust be liable
to the Trust or to any Shareholder or creditor thereof or to any other
person for any loss incurred by it or him solely because of the existence
of any such contract or transaction; provided that nothing herein shall
protect any Trustee or officer of the Trust against any liability to the
Trust or to its security holders to which he would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office.
(c) (1) As used in this paragraph the following terms shall have
the meanings set forth below:
(i) the term "indemnitee" shall mean any present or former
Trustee, officer or employee of the Trust, any present or
former Trustee or officer of another trust or corporation
whose securities are or were owned by the Trust or of which
the Trust is or was a creditor and who served or serves in
such capacity at the request of the Trust, any present or
former investment adviser, sub-adviser or principal
underwriter of the Trust and the heirs, executors,
administrators, successors and assigns of any of the
foregoing; however, whenever conduct by an indemnitee is
referred to, the conduct shall be that of the original
indemnitee rather than that of the heir, executor,
administrator, successor or assignee;
(ii) the term "covered proceeding" shall mean any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, to
which an indemnitee is or was a party or is threatened to be
made a party by reason of the fact or facts under which he
or it is an indemnitee as defined above;
(iii) the term "disabling conduct" shall mean willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the
office in question;
(iv) the term "covered expenses" shall mean expenses
(including attorney's fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by an
indemnitee in connection with a covered proceeding; and
<PAGE>
(v) the term "adjudication of liability" shall mean, as to
any covered proceeding and as to any indemnitee, an adverse
determination as to the indemnitee whether by judgment,
order, settlement, conviction or upon a plea of nolo
contendere or its equivalent.
(d) The Trust shall not indemnify any indemnitee for any covered
expenses in any covered proceeding if there has been an adjudication of
liability against such indemnitee expressly based on a finding of
disabling conduct.
(e) Except as set forth in (d) above, the Trust shall indemnify
any indemnitee for covered expenses in any covered proceeding, whether or
not there is an adjudication of liability as to such indemnitee, if a
determination has been made that the indemnitee was not liable by reason
of disabling conduct by (i) a final decision of the court or other body
before which the covered proceeding was brought; or (ii) in the absence
of such decision, a reasonable determination, based on a review of the
facts, by either (a) the vote of a majority of a quorum of Trustees who
are neither "interested persons", as defined in the 1940 Act nor parties
to the covered proceeding or (b) an independent legal counsel in a
written opinion; provided that such Trustees or counsel, in reaching such
determination, may, but need not, presume the absence of disabling
conduct on the part of the indemnitee by reason of the manner in which
the covered proceeding was terminated.
(f) Covered expenses incurred by an indemnitee in connection
with a covered proceeding shall be advanced by the Trust to an indemnitee
prior to the final disposition of a covered proceeding upon the request
of the indemnitee for such advance and the undertaking by or on behalf of
the indemnitee to repay the advance unless it is ultimately determined
that the indemnitee is entitled to indemnification thereunder, but only
if one or more of the following is the case: (i) the indemnitee shall
provide a security for such undertaking; (ii) the Trust shall be insured
against losses arising out of any lawful advances; or (iii) there shall
have been a determination, based on a review of the readily available
facts (as opposed to a full trial-type inquiry), that there is a reason
to believe that the indemnitee ultimately will be found entitled to
indemnification by either independent legal counsel in a written opinion
or by the vote of a majority of a quorum of trustees who are neither
"interested persons" as defined in the 1940 Act nor parties to the
covered proceeding.
(g) Nothing herein shall be deemed to affect the right of the
Trust and/or any indemnitee to acquire and pay for any insurance covering
any or all indemnitees to the extent permitted by the 1940 Act or to
affect any other indemnification rights to which any indemnitee may be
entitled to the extent permitted by the 1940 Act.
<PAGE>
13. For purposes of the computation of net asset value, as in this
Declaration of Trust referred to, the following rules shall apply:
(a) The net asset value of each Share of the Trust tendered to
the Trust for redemption shall be determined as of the close of business
on the New York Stock Exchange next succeeding the tender of such Share;
(b) The net asset value of each Share of the Trust for the
purpose of the issue of such Shares shall be determined as of the close
of business on the New York Stock Exchange next succeeding the receipt of
an order to purchase such Shares;
(c) The net asset value of each Share of the Trust, as of the
time of valuation on any day, shall be the quotient obtained by dividing
the value, as at such time, of the net assets of the Trust (i.e., the
value of the assets of the Trust less its liabilities exclusive of its
surplus) by the total number of Shares outstanding at such time. The
assets and liabilities of the Trust shall be determined in accordance
with generally accepted accounting principles; provided, however, that in
determining the liabilities of the Trust there shall be included such
reserves for taxes or contingent liabilities as may be authorized or
approved by the Trustees, and provided further that in determining the
value of the assets of the Trust for the purpose of obtaining the net
asset value, each security listed on the New York Stock Exchange shall be
valued on the basis of the closing sale at the time of valuation on the
business day as of which such value is being determined; if there be no
sale on such day, then the security shall be valued on the basis of the
mean between closing bid and asked prices on such day; if no bid and
asked prices are quoted for such day, then the security shall be valued
by such method as the Trustees shall deem in good faith to reflect its
fair market value; securities not listed on the New York Stock Exchange
shall be valued in like manner on the basis of quotations on any other
stock exchange which the Trustees may from time to time approve for that
purpose; readily marketable securities traded in the over-the-counter
market shall be valued at the mean between their bid and asked prices,
or, if the Trustees shall so determine, at their bid prices; and all
other assets of the Trust and all securities as to which the Trust might
be considered an "underwriter" (as that term is used in the Securities
Act of 1933), whether or not such securities are listed or traded in the
over-the-counter market, shall be valued by such method as they shall
deem in good faith to reflect their fair market value. In connection with
the accrual of any fee or refund payable to or by an investment adviser
of the Trust, the amount of which accrual is not definitely determinable
as of any time at which the net asset value of each Share of the Trust is
being determined due to the contingent nature of such fee or refund, the
Trustees are authorized to establish from time to time formulae for such
accrual, on the basis of the contingencies in question to the date of
such determination, or on such other basis as the Trustees may establish.
<PAGE>
(1) Shares to be issued shall be deemed to be outstanding
as of the time of the determination of the net asset value per
Share applicable to such issuance and the net price thereof
shall be deemed to be an asset of the Trust;
(2) Shares to be redeemed by the Trust shall be deemed to
be outstanding until the time of the determination of the net
asset value applicable to such redemption and thereupon and
until paid the redemption price thereof shall be deemed to be a
liability of the Trust; and
(3) Shares voluntarily purchased or contracted to be
purchased by the Trust pursuant to the provision of paragraph
13(d) of this Article SEVENTH shall be deemed to be outstanding
until whichever is the later of (i) the time of the making of
such purchase or contract of purchase; and (ii) the time as of
which the purchase price is determined, and thereupon and until
paid, the purchase price thereof shall be deemed to be a
liability of the Trust.
(d) The net asset value of each Share of the Trust, as of any
time other than the close of business on the New York Stock Exchange on
any day, may be determined by applying to the net asset value as of the
close of business on that Exchange on the preceding business day,
computed as provided in this Article SEVENTH, such adjustments as are
authorized by or pursuant to the direction of the Trustees and designed
reasonably to reflect any material changes in the market value of
securities and other assets held and any other material changes in the
assets or liabilities of the Trust and in the number of its outstanding
Shares which shall have taken place since the close of business on such
preceding business day.
(e) In addition to the foregoing, the Trustees are empowered, in
their absolute discretion, to establish other bases or times, or both,
for determining the net asset value of each Share of the Trust in
accordance with the 1940 Act and to authorize the voluntary purchase by
the Trust, either directly or through an agent, of Shares of the Trust
upon such terms and conditions and for such consideration as the Trustees
shall deem advisable in accordance with any such provision, rule or
regulation.
(f) Payment of the net asset value of Shares of the Trust
properly surrendered to it for redemption shall be made by the Trust
within seven days after tender of such Shares to the Trust for such
purpose plus any period of time during which the right of the holders of
the Shares of the Trust to require the Trust to redeem such Shares has
been suspended. Any such payment may be made in portfolio securities of
the Trust and/or in cash, as the Trustees shall deem advisable, and no
Shareholder shall have a right, other than as determined by the Trustees,
to have his Shares redeemed in kind.
<PAGE>
EIGHTH:
1. In case any Shareholder or former Shareholder shall be held to be
personally liable solely by reason of his being or having been a
Shareholder and not because of his acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general successor)
shall be entitled out of the Trust estate to be held harmless from and
indemnified against all loss and expense arising from such liability.
This Trust shall, upon request by the Shareholder, assume the defense of
any claim made against any Shareholder for any act or obligation of the
Trust and satisfy any judgement thereon.
2. It is hereby expressly declared that a trust and not a
partnership is created hereby. No Trustee hereunder shall have any power
to bind personally either the Trust's officers or any Shareholder. All
persons extending credit to, contracting with or having any claim against
the Trust or the Trustees shall look only to the assets of the Trust for
payment under such credit, contract or claim; and neither the
Shareholders nor the Trustees, nor any of their agents, whether past,
present or future, shall be personally liable therefor. Nothing in this
Declaration of Trust shall protect a Trustee against any liability to
which such Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of the office of Trustee hereunder.
3. The exercise by the Trustees of their powers and discretion
hereunder in good faith and with reasonable care under the circumstances
then prevailing, shall be binding upon everyone interested. Subject to
the provisions of paragraph 2 of this Article EIGHTH, the Trustees shall
not be liable for errors of judgement or mistakes of fact or law. The
Trustees may take advice of counsel or other experts with respect to the
meaning and operations of this Declaration of Trust, and subject to the
provisions of paragraph 2 of this Article EIGHTH, shall be under no
liability for any act or omission in accordance with such advice or for
failing to follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
4. This Trust shall continue without limitation of time but subject
to the provisions of sub-sections (a) and (b) of this paragraph 4.
(a) The Trustees may at any time sell, including any sale to
another issuer for a consideration which may be or may include securities
of such issuer, or otherwise transfer all the assets of the Trust or any
of its series, with the vote of a majority of the outstanding voting
securities of the Trust or such series, as the case may be (which sale
may be subject to the retention of assets for the payment of liabilities
and expenses). The vote of a majority of the outstanding voting
<PAGE>
securities means the vote, at a duly called meeting of the Shareholders
of the Trust or such series, of the lesser of (i) 67% or more of the
outstanding voting securities of the Trust or such series present at such
meeting, if the holders of more than 50% of the outstanding voting
securities of the Trust or such series are present or represented by
proxy; or (ii) more than 50% of the outstanding voting securities of the
Trust or such series. Upon making provision for the payment, by
assumption or otherwise, of all outstanding obligations, taxes and other
liabilities, accrued or contingent, of the Trust, the Trustees shall
distribute any remaining proceeds and/or assets of the Trust or such
series ratably among the holders of the Shares of the Trust or such
series then outstanding. .
(b) Upon completion of the distribution of the remaining
proceeds or the remaining assets of the Trust as provided in sub-sections
(a) and (b), the Trust shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder and
the right, title and interest of all parties shall be cancelled and
discharged.
5. The original or a copy of this instrument and of each declaration
of trust supplemental hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this instrument
and of each supplemental declaration of trust shall be filed with the
Massachusetts Secretary of State, as well as any other governmental
office where such filing may from time to time be required. Anyone
dealing with the Trust may rely on a certificate by an officer of the
Trust as to whether or not any such supplemental declarations of trust
have been made and as to any matters in connection with the Trust
hereunder, and with the same effect as if it were the original, may rely
on a copy certified by an officer of the Trust to be a copy of this
instrument or of any such supplemental declaration of trust. In this
instrument or in any such supplemental declaration of trust, references
to this instrument, and all expressions like "herein", "hereof" and
"hereunder" shall be deemed to refer to this instrument as amended or
affected by any such supplemental declaration of trust. This instrument
may be executed in any number of counterparts, each of which shall be
deemed an original.
6. The Trust set forth in this instrument is created under and is to
be governed by and construed and administered according to the laws of
the Commonwealth of Massachusetts. The Trust shall be of the type
commonly called a Massachusetts business trust, and without limiting the
provisions hereof, the Trust may exercise all powers which are ordinarily
exercised by such a trust.
7. The Board of Trustees is empowered to cause the redemption of the
Shares held in any account if the aggregate net asset value of such
Shares (taken at cost or value, as determined by the Board) has been
reduced by a Shareholder to $1,000 or less upon such notice to the
<PAGE>
Shareholder in question, with such permission to increase the investment
in question and upon such other terms and conditions as may be fixed by
the Board of Trustees in accordance with the 1940 Act.
8. In the event that a person advances the organizational expenses
of the Trust, such advances shall become an obligation of the Trust,
subject to such terms and conditions as may be fixed by, and on a date
fixed by, or determined in accordance with criteria fixed by the Board of
Trustees, to be amortized over a period or periods to be fixed by the
Board.
9. Whenever any action is taken under this Declaration of Trust
under any authorization to take action which is permitted by the 1940
Act, such action shall be deemed to have been properly taken if such
action is in accordance with the construction of the 1940 Act then in
effect as expressed in "no action" letters of the staff of the Commission
or any release, rule, regulation or order under the 1940 Act or any
decision of a court of competent jurisdiction, notwithstanding that any
of the foregoing shall later be found to be invalid or otherwise reversed
or modified by any of the foregoing.
10. Any action which may be taken by the Board of Trustees under
this Declaration of Trust or its By-Laws may be taken by the description
thereof in the then effective prospectus relating to the Shares under the
Securities Act of 1933 or in any proxy statement of the Trust rather than
by formal resolution of the Board.
11. Whenever under this Declaration of Trust, the Board of Trustees
is permitted or required to place a value on assets of the Trust, such
action may be delegated by the Board, and/or determined in accordance
with a formula determined by the Board, to the extent permitted by the
1940 Act.
12. Subject to paragraph number 1 of Article FIFTH, the Trustees may
amend or otherwise supplement this Declaration of Trust by making a
Declaration of Trust supplemental hereto, which thereafter shall form a
part hereof, by a vote of a majority of the outstanding voting securities
of the Trust, or, if such amendment or supplement does not affect all
series of the Trust, of the affected series. The vote of a majority of
the outstanding voting securities means the vote, at a duly called
meeting of the Shareholders of the Trust or such series, of the lesser of
(i) 67% or more of the outstanding voting securities of the Trust or such
series present at such meeting, if the holders of more than 50% of the
outstanding voting securities of the Trust or such series are present or
represented by proxy; or (ii) more than 50% of the outstanding voting
securities of the Trust or such series. Any such supplemental Declaration
of Trust may be executed by and on behalf of the Trust or such series and
the Trustees by any officer or officers of the Trust.
<PAGE>
13. The name of the registered agent of the Trust is CT Corporation
System at 2 Oliver Street, Boston, Massachusetts. The principal office of
the Trust is 230 Commerce Way, Suite 300, Portsmouth, New Hampshire.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Declaration of Trust this 2nd day of July, 1998.
Azie Taylor Morton Lokelani Devone
- --------------------------- ---------------------------
Trustee Trustee
Azie Taylor Morton Lokelani Devone
10910 Medfield Court 424 Collingswood Street
Austin, TX 78739 San Francisco, CA 94114
William Glenn Robert B. Reich
- --------------------------- ---------------------------
Trustee Trustee
William Glenn Robert B. Reich
915 Las Ovejas 4 Mercer Circle
San Rafael, CA 94903 Cambridge, MA 02138
Ada Sanchez Mitchell A. Johnson
- --------------------------- ---------------------------
Trustee Trustee
Ada Sanchez Mitchell A. Johnson
1020 59th Street South 2753 Unicorn Lane NW
Gulfport, FL 33707 Washington, DC 20015
J.D. Nelson Sophia Collier
- --------------------------- ---------------------------
Trustee Trustee
J.D. Nelson Sophia Collier
RhumbLine Advisers Citizens Trust
30 Rowes Wharf 230 Commerce Way, Suite 300
Boston, MA 02110-3326 Portsmouth, NH 03801
Juliana Eades
- ---------------------------
Trustee
Juliana Eades
98 Baptist Road
Canterbury, NH 03224
<PAGE>
APPENDIX I
<PAGE>
CITIZENS FUNDS
AMENDED AND RESTATED
ESTABLISHMENT AND DESIGNATION OF SERIES OF
SHARES OF BENEFICIAL INTEREST
Pursuant to paragraph (8) of Article Fourth of the Declaration of Trust,
dated November 19, 1982, as amended and restated as of July 2, 1998 (the
"Declaration of Trust"), of Citizens Funds (the "Trust"), the undersigned,
being a majority of the Trustees of the Trust hereby amend and restate the
Trust's existing Establishments and Designations of Series of Shares of
Beneficial Trust in order to change the names of seven series of Shares (as
defined in the Declaration of Trust) which were previously established and
designated and to eliminate the establishment and designation of six series of
Shares which were previously established and designated. No other changes to
the special and relative rights of the existing series are intended by this
amendment and restatement.
1 The series shall be as follows:
The series previously designated as Citizens Social Index Portfolio
shall be redesignated as "Citizens Index Fund."
The series previously designated as Working Assets Money Market
Portfolio shall be redesignated as "Working Assets Money Market
Fund".
The series previously designated as Citizens Income Portfolio shall
be redesignated as "Citizens Income Fund".
The series previously designated as Citizens Global Equity Portfolio
shall be redesignated as "Citizens Global Equity Fund".
The series previously designated as Citizens Emerging Growth
Portfolio shall be redesignated as "Citizens Emerging Growth Fund".
The series previously designated as Muir National Tax Free Income
Portfolio, shall be redesignated as "Muir National Tax Free Income
Fund".
<PAGE>
The series previously designated as Citizens Index Institutional
Portfolio shall be redesignated as "Citizens Small Cap Index Fund."
The series previously designated as Citizens Growth Portfolio, no
Shares thereof being outstanding, is hereby eliminated.
The series previously designated as Citizens Balanced Portfolio, no
Shares thereof being outstanding, is hereby eliminated.
The series previously designated as Muir California Tax Free Income
Portfolio, no Shares thereof being outstanding, is hereby
eliminated.
The series previously designated as E(fund, no Shares thereof being
outstanding, is hereby eliminated.
The series previously designated as Working Assets Money Market
Portfolio - Institutional Shares, no Shares thereof being issued, is
hereby eliminated.
The series previously designated as Citizens Index Portfolio
Institutional Shares, no Shares thereof being issued, is hereby
eliminated.
2. Each series shall be authorized to hold cash, invest in securities,
instruments and other property and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933, as amended, to the extent pertaining to the
offering of Shares of such series. Each Share of each series shall be
redeemable, shall be entitled to one vote (or a fraction thereof in respect of
a fractional Share) on matters on which Shares of each series shall be entitled
to vote, shall represent a pro rata beneficial interest in the assets allocated
or belonging to each series, and shall be entitled to receive its pro rata
share of the net assets of each series upon liquidation of each series, all as
provided in Article Fourth of the Declaration of Trust.
3. All consideration received by the Trust for the issuance or sale of
Shares of a particular series, together with all assets in which such
consideration is invested or reinvested, all income thereon, profits therefrom
or proceeds thereof, including any proceeds derived from the sale, exchange or
liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall
irrevocably belong to that series for all purposes, subject only to the rights
of creditors of such series and shall be so recorded on the books of account of
<PAGE>
the Trust. In the event there are any assets, income, earnings, profits,
proceeds, funds or payments which are not readily identifiable as belonging to
any particular series, the Trustees shall allocate them among any one or more
of the series established and designated from time to time and in such manner
as the Trustees in their sole discretion deem fair and equitable. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all series for all purposes. No Shareholder of any particular
series shall have any claim on or right to any assets allocated to any other
series.
4. The assets belonging to each particular series shall be charged with
the liabilities of the Trust with respect to that series and all expenses,
costs, and reserves attributable to that series, and any general liabilities,
expenses, charges or reserves of the Trust which are not readily identifiable
as belonging to a particular series shall be allocated and charged by the
Trustees to and among one or more of the series established and designated from
time to time in such manner and on such basis the Trustees in their sole
discretion deem fair and equitable. Each such allocation by the Trustees shall
be conclusive and binding upon the Shareholders of all series for all purposes.
The Trustees shall have full discretion, to the extent not inconsistent with
the 1940 Act to determine which items will be treated as income and which items
as capital; and each such determination shall be conclusive and binding upon
Shareholders. Under no circumstances shall the assets allocated or belonging to
a particular series be charged with the liabilities, expenses, costs, charges
or reserves attributable to any other series. All persons who have been
extended credit which has been allocated to a particular series shall look only
to the assets of that particular series for payment of such credit claim or
contract.
5. Each Share of a series will represent a beneficial ownership interest
in the net assets allocated or belonging to such series only and such interest
shall not extend to the assets of the Trust generally. Dividends and
Distributions on Shares of a particular series may be paid with such frequency
as the Trustees determine, which may be monthly or otherwise, pursuant to a
standing vote or votes adopted only once or with such frequency as the Trustees
may determine, to the Shareholders of that series only, from such of the income
and capital gains, accrued and realized, from the assets belonging to that
series, as the Trustees determine after providing for actual and accrued
liabilities belongs to that series. All dividends and distributions on Shares
of a particular series shall be distributed pro rata to the Shareholders of
that series in proportion to the number of Shares of that series held by such
Shareholders at the date and time of record established for payment of such
dividends and distributions. Shares of any particular series of the Trust may
<PAGE>
be redeemed solely out of the Trust property allocated or belonging to that
series. Upon liquidation or termination of a series of the Trust, Shareholders
of such series shall be entitled to a pro rata share of the net assets of such
series only.
6. Shareholders of each series shall vote separately as a class on any
matter to the extent required by, and any matter shall have deemed effectively
acted upon with respect to such series as provided in, Rule 18f-2, as from time
to time in effect, under the Investment Company Act of 1940, as amended, or any
successor rule, and the Declaration of Trust.
7. The Trustees may, in their discretion, authorize the division of
Shares of any series into one or more classes or sub-series. All Shares of a
class or sub-series shall be identical with each other and with the Shares of
each other class or sub-series of the same series except for such variations
between classes or sub-series as may be approved by the Board of Trustees and
permitted by the Investment Company Act of 1940, as amended, or pursuant to any
exemptive order issued by the Commission.
IN WITNESS WHEREOF, the undersigned have executed this Establishment and
Designation of Series this 2nd day of July, 1998.
<PAGE>
Azie Taylor Morton Lokelani Devone
- --------------------------- ---------------------------
Trustee Trustee
Azie Taylor Morton Lokelani Devone
10910 Medfield Court 424 Collingswood Street
Austin, TX 78739 San Francisco, CA 94114
William Glenn Robert B. Reich
- --------------------------- ---------------------------
Trustee Trustee
William Glenn Robert B. Reich
915 Las Ovejas 4 Mercer Circle
San Rafael, CA 94903 Cambridge, MA 02138
Ada Sanchez Mitchell A. Johnson
- --------------------------- ---------------------------
Trustee Trustee
Ada Sanchez Mitchell A. Johnson
1020 59th Street South 2753 Unicorn Lane NW
Gulfport, FL 33707 Washington, DC 20015
J.D. Nelson Sophia Collier
- --------------------------- ---------------------------
Trustee Trustee
J.D. Nelson Sophia Collier
RhumbLine Advisers Citizens Trust
30 Rowes Wharf 230 Commerce Way, Suite 300
Boston, MA 02110-3326 Portsmouth, NH 03801
Juliana Eades
- ---------------------------
Trustee
Juliana Eades
98 Baptist Road
Canterbury, NH 03224
<PAGE>
VOTES ADOPTED AT A MEETING OF THE BOARD OF TRUSTEES OF CITIZENS FUNDS (FORMERLY
KNOWN AS CITIZENS INVESTMENT TRUST) ON FEBRUARY 2, 1998:
VOTED: That the series of the Trust designated as Citizens Growth
Portfolio, Citizens Balanced Portfolio, Muir California Tax Free
Income Portfolio, E(fund, Working Asset Money Market Portfolio -
Institutional Shares and Citizens Index Portfolio - Institutional
Shares (collectively, the "Portfolios") be and hereby are terminated
in accordance with the terms of the Trust's Declaration of Trust,
such termination to be effective as of February 2, 1998.
FURTHER
VOTED: That each officer of the Trust be and hereby is authorized and
directed to take or cause to be taken all actions necessary to
terminate each of the Portfolios, including, but not limited to: (a)
any and all acts as such officer may deem necessary or advisable in
order to wind up the affairs of the Portfolios and to liquidate the
business of the Portfolios pursuant to the Trust's Declaration of
Trust, (b) the preparation, execution and delivery of appropriate
notices of termination of any and all agreements with service
providers to the Portfolios, and the negotiation, execution and
delivery of agreements and instruments terminating such agreements
and releasing any party or parties thereto from its or their
obligations thereunder, and (c) the filing of any instruments or
certificates relating to the termination of the Portfolios with the
Secretary of State of the Commonwealth of Massachusetts, as well as
any other governmental office where such filing may be required or
otherwise deemed desirable.
<PAGE>
I, Joseph F. Keefe, hereby certify that I am the duly elected, qualified
and acting Secretary of Citizens Investment Trust, a Massachusetts business
trust, and do hereby further certify that attached hereto is a complete and
correct copy of certain resolutions duly adopted by the Board of Trustees of
Citizens Investment Trust at a meeting held on February 2, 1998, which
resolutions have not been subsequently amended or otherwise modified and are in
full force and effect on the date hereof.
IN WITNESS WHEREOF, I have hereunto signed by name this 2nd day of
February, 1998.
Joseph F. Keefe
-----------------------------
Joseph F. Keefe
Secretary
Exhibit 5(a)
MANAGEMENT AGREEMENT
Agreement made the first day of June, 1992, and restated as of 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;
<PAGE>
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.
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
<PAGE>
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;
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
<PAGE>
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 Trust's Declaration of Trust disclaims individual
Shareholder liability for acts and obligations of the Trust.
<PAGE>
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: William Glenn By: Sophia Collier
------------------------ ------------------------
Chair President
<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. Citizens Index Portfolio: 0.50%
<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. 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
Exhibit 5(b)
RENEWAL OF MANAGEMENT AGREEMENT
THIS AGREEMENT, made this 18th day of May, 1998, between Citizens
Investment Trust, an open end investment company organized and existing under
the laws of the Commonwealth of Massachusetts, (the "Trust") and Citizens
Advisers, Inc., a California Corporation (the Adviser").
WITNESSETH
WHEREAS, there is now in effect a Management Agreement dated May 30, 1995
and restated as of January 19, 1997, to be in effect through May 31, 1998,
between the Trust and the Adviser providing the research, portfolio management
services and certain administrative services to be furnished to the Trust by
the Adviser on certain terms and conditions and subject to certain provision
set forth therein; and
WHEREAS, said Agreement was reapproved by the vote of the holders of a
majority of the outstanding shares of the capital stock of the Trust at the
Special Meeting of Stockholders held May 18, 1992, and said Agreement provides
for year to year renewals by mutual consent, upon certain specified conditions,
and the renewal of such agreement has been approved by the Board of Trustees of
the Trust on May 18, 1998; and
NOW, THEREFORE, such parties agree as follows:
1. The Management Agreement dated May 30, 1995 and restated as of January
19, 1997, is hereby renewed for the additional 12 month period beginning
June 1, 1998 and ending at the close of business on May 31, 1999.
2. In all other respects said Management Agreement, as now amended and in
effect, is reaffirmed and shall continue in effect for the period
provided by such Agreement as renewed by this Agreement.
3. This Agreement may be executed in several counterparts, each of which
shall be original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized officers as of the
day and year first above written.
Citizens Investment Trust Citizens Advisers, Inc.
By Azie Taylor Morton By Sophia Collier
------------------ --------------
Azie Taylor Morton Sophia Collier
Chair President
Exhibit 6(a)
DISTRIBUTION AGREEMENT
This Agreement, made as of the 16th day of May, 1992 between WORKING
ASSETS Common Holdings, a Massachusetts business trust (the "Fund"), and
Working Assets Capital Management, a California Corporation (the "Distributor")
for one year June 1, 1992 - May 31, 1993.
WHEREAS, the Fund proposes to engage in business as an open-end
management investment company and is registered as such under the Investment
Company Act of 1940, as amended (the "'40 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "'34 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
'NASD');
WHEREAS, the Fund intends to commence a continuous offering of its Shares
of Beneficial Interest, no par value (the 'Shares'), and
WHEREAS, the Fund desires the Distributor to act as distributor of its
shares in connection with the continuous offering thereof, in the manner and on
the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the Distributor
as its exclusive agent to sell and to arrange for the sale of the Fund's
Shares, on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder. It is
understood and agreed that the services of the Distributor hereunder are not
exclusive, and the Distributor may act as principal underwriter for the shares
of any other registered investment company.
2. Offering and Sale of Shares.
(a) Solicitation of Orders. The Distributor shall use its best
efforts (but only in those states in which the Distributor may lawfully do so)
<PAGE>
to obtain from investors unconditional orders for the sale of Shares authorized
for issuance by the Fund and which are registered under the Securities Act of
1933 (the "'33 Act"). The Distributor shall not be obligated, however, to
register or maintain its registration as a broker or dealer under the states
securities laws of any jurisdiction if, in the judgment of the Distributor,
such registration is not practicable or feasible. The Distributor may in its
discretion reject any order to purchase Shares.
(b)Sale of Shares. The Distributor agrees to sell the Fund's Shares,
as agent for the Fund, upon the terms described in the Fund's then current
prospectus. This may include the imposition of a sales charge, also known as a
sales load, which be retained by the Distributor or paid to others as provided
in the then current prospectus. The Distributor shall not be obligated to sell
any certain number of Shares. Upon acceptance by the Distributor of an order
for the purchase of Fund Shares, the Distributor shall promptly transmit such
order to the Fund's shareholder servicing agent. A purchase order shall be
deemed effective at the time and in the manner set forth in the Fund's then
current prospectus. The Distributor shall not make any short sales of Shares.
(c)Transmission of Purchase Price. The Distributor shall promptly
transmit any funds received by it from investors in payment of the purchase
price or Shares sold through it to the Fund's shareholder servicing agent.
3. Duties of the Fund.
(a) Maintenance of Federal Registration. The Fund shall take, from
time to time, all necessary action and such steps, including payment of the
related filing fee, as may be necessary to register and maintain registration
of an indefinite number of a Shares under the '33 Act. The Fund agrees to file
from time to time such amendments, reports and other documents as may be
necessary in order that there may be no untrue statement of a material fact in
a registration statement or prospectus, or necessary in order that there may be
no untrue statement of a material fact in a registration statement or
prospectus, or necessary in order that there may be no untrue statement of a
material fact in a registration statement or prospectus, or necessary in order
that there may be no omission to state a material fact in the registration
statement or prospectus which omission would make the Statements therein
misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Fund shall use its
best efforts to qualify and maintain the qualification of an appropriate number
of Shares for sale under the securities laws of such states as the Distributor
<PAGE>
and the Fund may approve, and, if necessary or appropriate in connection
therewith, to qualify and maintain the qualification of the Fund as a broker or
dealer in such states; provided that the Fund shall not be required to amend
its Declaration of Trust or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of the
Shares in any state, to change the terms of the offering of the Shares in any
state from the terms set forth in its then current prospectus, to qualify as a
foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering and sale of
the Shares. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
(c) Copies of Reports and Prospectus. The Fund shall keep the
Distributor fully informed with regard to its affairs and shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared for the Fund by independent
public accountants and such reasonable number of copies of its most current
prospectus and annual and interim reports as the Distributor may request and
shall cooperate fully in the efforts of the Distributor to sell and arrange for
the sale of the Shares and in the performance of the Distributor under this
Agreement.
4. Expenses.
(a) Expenses Paid by the Fund. The Fund shall pay all expenses:
(i) in connection with the preparation, setting in type and
filing of any registration statement and prospectus under the '33 Act and/or
the '40 Act, and any amendments or supplements that may be made from time to
time;
(ii) in connection with the registration and qualification of
Shares for sale in the various states in which the fund shall determine it
advisable to qualify such Shares for sale (including registering of the Fund as
broker or dealer or any officer or the Fund or other person as agent or
salesman of the Fund in any state.);
(iii) of preparing, setting in type, printing and mailing any
report or other communication to shareholders of the Fund in their capacity as
such;
(iv) of preparing, setting in type, printing and mailing
prospectuses annually to existing shareholders (if the Fund shall elect to do
so);
<PAGE>
(v) in connection with the issue and transfer of Shares
resulting from the acceptance by the Distributor or orders to purchase Shares
placed with the Distributor by investors; including the expenses of confirming
such purchase orders; and (vi) of any issue taxes or (in the case of Shares
redeemed) any initial transfer taxes.
(b) Expenses Paid by the Distributor. The Distributor will (unless
such expenses are to be paid by the Fund under any plan adopted by the Fund
pursuant to Rule 12b-1 under the '40 Act) pay or cause to be paid all expenses:
(i) of printing and distributing any prospectus or reports
prepared for its use in connection with the distribution of Shares to the
public;
(ii) of preparing, setting in type, printing and mailing any
other literature used by the Distributor in connection with distribution of the
Shares to the public;
(iii) of advertising in connection with the distribution of such
Shares to the public;
(iv) incurred in connection with its registration as a broker or
dealer or the registration or qualification of its officers, partners,
directors or representatives under Federal and state laws; and
(v) incurred in connection with the sale and offering for sale
of Shares which have not been herein specifically allocated as between the Fund
and Distributor.
5. Conformity with Applicable Laws and Rules. The Distributor agrees that
in selling Shares hereunder it shall conform in all respects with the laws of
the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
6. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, partners, directors, employees, or representatives is or
shall be an employee of the Fund in the performance of the Distributors duties
hereunder. The Distributor shall be responsible for its own conduct and the
employment, control, and conduct of its agents and employees and for injury to
<PAGE>
such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employee taxes thereunder.
7. Indemnification.
(a) Indemnification of Fund. The Distributor agrees to indemnify and
hold harmless the Fund and each of its trustees, officers, employees,
representatives and each person, if any, who controls the Fund within the
meaning of Section 15 of the '33 Act against any and all losses, liabilities,
damages, claims or expenses (including the reasonable costs or investigating or
defending any alleged loss, liability, damage, claims or expense and reasonable
legal counsel fees incurred in connection therewith) to which the Fund or such
of its trustees, officers, employees, representatives or controlling person may
become subject under the '33 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Distributor or any of the
Distributors partners, directors, officers, employees or representatives, or
(ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, shareholder
report or other information covering Shares filed or made public by the Fund or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon information furnished to the Fund by the
Distributor. In no case (i) is the Distributor's indemnity in favor of the
Fund, or any person indemnified to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund or such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement or (ii) is the Distributor to be
liable under its indemnity agreement contained in this Paragraph in respect to
any claim made against the Fund or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Fund or upon such person
(or after the Fund or such person shall have received notice to such service on
any designated agent). However, failure to notify the Distributor of any such
claim shall not relieve the Distributor from any liability which the
Distributor may have to the Fund or any person against whom such action is
brought otherwise than on account of the Distdbutor's indemnity agreement
contained in this Paragraph.
The Distributor shall be entitled to participate, at its own expense, in
the defense, or, if the Distributor so elects, to assume to defense of any suit
<PAGE>
brought to enforce any such claim, but, if the Distributor elects to assume the
defense, such defense shall be conducted by legal counsel chosen by the
Distributor and satisfactory to the Fund, to its trustees, officers, employees
or representatives, or to any controlling person or persons, defendant or
defendants, in the suit. In the event that the Distributor elects to assume the
defense of any such suit and retain such legal counsel, the Fund, its trustees,
officers, employees, representatives or controlling person or persons,
defendant or defendants in the suit, shall bear the fees and expenses of any
additional legal counsel retained by them. If the Distributor does not elect to
assume the defense of any such suit, the Distributor will reimburse the Fund,
such trustees, officers, employees, representatives or controlling person or
persons, defendant or defendants in such suit for the reasonable fees and
expenses of any legal counsel retained by them. The Distributor agrees to
promptly notify the Fund of the commencement of any litigation of proceedings
against it or any of its partners, officers, employees or representatives in
connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Fund agrees to indemnify
and hold harmless the Distributor and each of its partners, officers,
employees, representatives and each person, if any, who controls the
Distributor within the meaning of Section 15 of the '33 Act against any and all
losses, liabilities, damages, claims or expenses (including the reasonable
costs of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable legal counsel fees incurred in connection therewith)
to which the Distributor or such of its partners, officers, employees,
representatives or controlling person may become subject under the '33 Act,
under any other statute, at common law, or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any
wrongful act by the Fund or any of the Fund's trustees, officers, employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, shareholder report or other information covering Shares filed or
made public by the Fund or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
unless such statement or omission was made in reliance upon information
furnished to the Fund by the Distributor. In no case (i) is the Fund's
indemnity in favor of the Distributor, or any person indemnified to be deemed
to protect the Distributor or such indemnified person against any liability to
which the Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of his obligations and duties
under this Agreement, or (ii) is the Fund to be liable under its indemnity
agreement contained in this Paragraph with respect to any claim made against
Distributor, or person indemnified unless the Distributor, or such person, as
the case may be, shall have notified the Fund in writing of the claim within a
<PAGE>
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or upon such person (or after the Distributor or such person shall
have received notice of such service on any designated agent). However, failure
to notify the Fund of any such claim shall not relieve the Fund of any
liability which the Fund may have to the Distributor or any person against whom
such action is brought otherwise than on account of the Fund's indemnity
agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own expense, in the
defense, or, if the Fund so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Fund elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Fund and satisfactory
to the Distributor, to its partners, officers, employees or representatives, or
to any controlling person or persons, defendant or defendants, in the suit. In
the event that the Fund elects to assume the defense of any such suit and
retain such legal counsel, the Distributor, its partners, officers, employees,
representatives or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the defense of any such
suit, the Fund will reimburse the Distributor, such partners, officers,
employees, representatives or controlling person or persons, defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them. The Fund agrees to promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
trustees, officers, employees or representatives in connection with the issue
or sale or any Shares.
9. Authorized representations. The Distributor is not authorized by the
Fund to give on behalf of the Fund any information of to make any
representations in connection with the sale of Shares other than the
information and representations contained in a registration statement of
prospectus filed with the Securities and Exchange Commission ("SEC") under the
'33 Act and/or the '40 Act, covering Shares, as such registration statement and
prospectus may be amended or supplemented from time to time, or contained in
shareholder reports or other material that may be prepared by or on behalf of
the Fund for the Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing tombstone ads and sales literature
or other material as it may deem appropriate. No person other than Distributor
is authorized to act as principal underwriter (as such term is defined in the
'40 Act) for the Fund.
l0. Term of Agreement. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect until May 1987. Thereafter, this Agreement
<PAGE>
shall continue in effect from year to year, subject to the termination
provisions and all other terms and conditions thereof, so long as: (a) such
continuation shall be specifically approved at least annually by the Board of
Trustees or by vote of a majority of the outstanding voting securities of the
Fund and, concurrently with such approval by the Board of Trustees or poor to
such approval by the holders of the outstanding voting securities of the Fund,
as the case may be, by the vote, cast in person at a meeting called for the
purpose of voting on such approval, of a majority of the trustees of the Fund
who are not parties to this Agreement or interested persons of any such party;
and (b) the Distributor shall not have notified the Fund, in writing, at least
60 days prior to June 30, 1985 or poor to June 30 of any year thereafter, that
it does not desire such continuation. The Distributor shall furnish to the
Fund, promptly upon its request, such information as may reasonably be
necessary to evaluate the terms of this Agreement or any extension, renewal or
amendment hereof.
11. Amendment and Assignment of Agreement. This Agreement may not be
amended or assigned without the affirmative vote of a majority of the
outstanding voting securities of the Fund, and this Agreement shall
automatically and immediately terminate in the event of its assignment.
12. Termination of Agreement. This Agreement may be terminated by either
party hereto, without the payment of any penalty, upon 60 days prior notice in
writing to the other party; provided, that in the case of termination by the
Fund such action shall have been authorized by resolution of a majority of the
trustees of the Fund who are not parties to this Agreement or interested
persons of any such party, or by vote of a majority of the outstanding voting
securities of the Fund.
13. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Fund to take any
action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Fund of its
responsibility for and control of the conduct of the affairs of the Fund.
14. Definition of Terms. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
<PAGE>
term or provision of the '40 Act shall be resolved by reference to such term or
provision of the '40 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the Securities and Exchange Commission
validly issued pursuant to the '40 Act. Specifically, the terms "vote of a
majority of the outstanding voting securities", "interested persons",
"assignment', and "affiliated person", as used in Paragraphs 10, 11 and 12
hereof, shall have the meanings assigned to them by Section 2(a) of the '40
Act. In addition, where the effect of a requirement of the '40 Act reflected in
any provision of this Agreement is relaxed by a rule, regulation or order of
the Securities and Exchange Commission, whether of special or of general
application, such provision shall be deemed to incorporate the effect of such
rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.
Working Assets Common Holdings
By: Sophia Collier
--------------------------
Sophia Collier, Treasurer
Attest:
- ------------------------------
Secretary
Working Assets Capital Management
By: Joe Lyons
--------------------------
Joe Lyons
<PAGE>
Addendum to Distribution Agreement
Paragraph 3(b) to the Distribution Plan is amended as follows:
The Distributor may make Permitted Payments in any amount to any Qualified
Recipient, provided that (i) the aggregate of (A) the total amount of all
Permitted Payments to all Qualified Recipients (whether made under (a) and/or
(b) above) and (B) the total of Permitted Expenses (as hereinafter defined) do
not exceed in any fiscal year of the Fund the percentage provided in the then
current prospectus.
Paragraph 4 to the Distribution Plan is amended as follows:
4. Expenses Authorized. The Distributor is authorized, pursuant to this Plan,
to purchase advertising of shares of the Fund, to pay for sales literature and
other promotional material, including items, such as books, that may be given
to purchasers of fund shares, and to make payments to the salesmen of the
Distributor. Any such advertising and sales material may include references to
other open-end investment companies or other investments and any salesmen so
paid are not required to devote their time solely to the sale of Fund shares.
Any such expenses ("Permitted Expenses") shall be reimbursed or paid by the
Fund, except that the amount of reimbursement or payment of Permitted Expenses
by the Fund plus the amount of Permitted Payments to Qualified Recipients shall
not in any fiscal year exceed the percentage provided in the then current
prospectus.
Exhibit 6(b)
RENEWAL OF DISTRIBUTION AGREEMENT
THIS AGREEMENT, made this 18th day of May, 1998, between Citizens
Investment Trust, a Massachusetts Business Trust (hereinafter called the
"Trust") and Citizens Securities, Inc., a California Corporation (hereinafter
called the "Distributor").
WITNESSETH:
WHEREAS, there is now in effect a Distribution Agreement dated May 30,
1995, to be in effect through May 31, 1998, between the Trust and the
Distributor, to act as distributor for the shares of the Trust, to solicit
orders for the sale of shares and to sell the Trust's Shares, to be furnished
to the Trust by the Distributor on certain terms and conditions and subject to
certain provisions set forth therein; and
WHEREAS, said Agreement was reapproved by the vote of the holders of a
majority of the outstanding shares of the capital stock of the Trust at the
Special Meeting of Stockholders held May 18, 1992, and said Agreement provides
for year to year renewals by mutual consent, upon certain specified conditions,
and the renewal of such agreement has been approved by the Board of Trustees of
the Trust on May 18, 1998; and
NOW, THEREFORE, such parties agree as follows:
1. The Distribution Agreement dated May 30, 1995, is hereby renewed for the
additional period of 12 months, beginning June 1, 1998 and ending at the
close of business on May 31, 1999.
2. In all other respects said Distribution Agreement, as now amended and in
effect, is reaffirmed and shall continue in effect for the period
provided by such Agreement as renewed by this Agreement.
3. This Agreement may be executed in several counterparts, each of which
shall be original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized officers as of the
day and year first above written.
Citizens Investment Trust Citizens Securities, Inc.
By Azie Taylor Morton By Sophia Collier
------------------- ---------------
Azie Taylor Morton Sophia Collier
Chair President
Exhibit 9(a)
ADMINISTRATIVE SERVICES AGREEMENT
To: Working Assets Capital Management
The Undersigned, Working Assets Common Holding (the "Fund"), requests
that you, Working Assets Capital Management, the Investment Advisor to the Fund
("WACM"), assume a number of general administrative services on our behalf.
I Description of Services. WACM agrees to provide the Fund 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 a computer interface with the Fund 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.
7 Blue Sky reporting services as required for the issuer of securities in
the states and territories.
Procedures as to who shall provide certain of these services may be
established from time to time by agreement between the Fund and WACM per an
attached service responsibility schedule. The Fund may at times perform only a
portion of these services and the Fund may choose to have these services
provided by others on the Fund's behalf.
The foregoing list of services does not list all possible
administrative services that may be provided by WACM. The foregoing list may be
supplemented as agreed to in writing between the Fund and WACM.
Fees and Expenses. For performance by WACM pursuant to this agreement, the Fund
agrees on behalf of each of the Portfolios to pay WACM on the basis of the
market price of the service.
In addition to the fee paid pursuant to the foregoing, the Fund agrees
on behalf of each of the Portfolios to reimburse WACM of out-of-pocket
<PAGE>
expenses, including but not limited to postage, forms, telephone, and records
storage. In addition, any other expenses incurred by WACM at the request or
with the consent of the Fund, will be reimbursed by the Fund on behalf of the
applicable portfolio.
The Fund agrees on behalf of each of the Portfolios to pay all fees and
reimbursable expenses within five days following the mailing of the respective
billing notice.
Indemnification. You (WACM) shall not be responsible for, and the Fund shall on
behalf of the applicable Portfolio, indemnify and hold WACM harmless from and
against, any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liability arising out of or attributable to:
(a) All actions of WACM or its agent or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are
taken in good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct
which arise out of the breach of any representation or warranty of
the Fund hereunder.
(c) The reliance on or use by WACM or its agents or subcontractors of
information, records, documents or services which (i) are received
by WACM or its agents or subcontractors, and (ii) have been
prepared, maintained or performed by the Fund or any other person or
firm on behalf of the Fund including but not limited to any previous
transfer agent or registrar.
(d) The reliance on, or the carrying out by WACM or its agents or
subcontractors of any instructions or requests of the Fund on behalf
of the applicable portfolio.
(e) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws or
regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the offer
or sale of any such shares in such state.
At any time, you may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by WACM under this
agreement, and WACM and its agent or subcontractors shall not be liable and
shall be indemnified by the Fund on behalf of the applicable Portfolio for any
action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. WACM, its agents, and subcontractors shall be
protected and indemnified in acting upon any paper or document furnished by or
on behalf of the Fund, reasonably believed to be genuine and to have been
signed by the proper person or persons, or upon any instruction, information,
data, records, or documents, provided WACM or its agents or subcontractors by
<PAGE>
machine readable input, telex, CRT data entry or other similar means authorized
by the Fund, and shall not be held to have notice of any change of authority of
any person, until receipt of written notice thereof from the Fund.
In order that the indemnification provisions contained in this Article shall
apply, upon the assertion of a claim for which the Fund may be required to
indemnify WACM, WACM shall promptly notify the Fund of such assertion, and
shall keep the fund advised with respect to all developments concerning such
claim. The Fund shall have the option to participate with WACM in the defense
of such claim or to defend against such claim in its own name or in the name of
WACM. WACM shall in no case confess any claim or make any compromise in any
case in which the Fund may be required to indemnify WACM except with the Fund's
prior written consent.
This agreement may be terminated by either party upon one-hundred twenty (120)
days written notice to the other. Should the Fund exercise its right to
terminate, all out of pocket expenses associated with the movement or transfer
of records and material will be borne by the Fund on behalf of the applicable
Portfolio(s). Additionally, WACM reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge equivalent
to the average of three (3) months' fees.
Additional Funds. In the event that the fund establishes one or more series of
Shares in addition to Working Assets Money Market Portfolio, Citizens Income
Portfolio, Citizens Growth and Income, and Citizens Growth Portfolio with
respect to which it desires to have WACM render services under the terms of
this agreement, it shall so notify WACM in writing, and if WACM agrees in
writing to provide such services, such series of Shares shall become a
Portfolio hereunder.
Assignment of the Agreement. Unless this contract is amended as described
below, neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party.
This Agreement shall inure to the benefit and bind the parties and their
respective permitted successors and assigns.
Amendment. This Agreement may be amended or modified by a written agreement,
executed by both parties and authorized or approved by a resolution of the
Trustees of the Fund.
Law to Apply. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of California.
Acts of God. In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, such party shall
not be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
<PAGE>
Consequential Damages. Neither party to this Agreement shall be liable to the
other party for consequential damages under any provision of this Agreement or
for any consequential damages arising out of any act or failure to act
hereunder.
A copy of the Declaration of Trust of the Trust is on file with the Secretary
of the Commonwealth of Massachusetts, and notice is hereby given that this
instrument is executed on behalf of the Trustees of the Trust as Trustees and
not individually and that the obligations of this instrument are not binding
upon any of the Trustees or Shareholders individually but are binding only upon
the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
Aileen Hernandez
-----------------------
Aileen Hernandez
Chair
Working Assets Common Holdings
Accepted:
Mitchell A. Rofsky
-----------------------
Mitchell A. Rofsky
President
Working Assets Capital Management
Date: February 1, 1993
<PAGE>
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 Administrator is paid a monthly fee based on an
annual rate of each Portfolio's average net assets for providing such services.
<TABLE>
<CAPTION>
The fees are as follows:
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
Citizens Index Portfolio - Retail Class 20/100 of 1% 1/25/96
Citizens Index Portfolio - Institutional Class 30/100 of 1% 7/1/96
</TABLE>
The Administrator provides the following services to the Portfolios:
1) Administration of certain daily fund expense accounting duties,
including but not limited to payment and budgeting of operating
expenses of all Portfolios, 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 Portfolios' compliance systems with Federal and
State regulatory requirements.
6) Other similar services.
In addition to the above services, the Administrator provides other day to day
services. Out of pocket expenses incurred by the Administrator in relation to
such services will be reimbursed to the Administrator by the Portfolios 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:
<PAGE>
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 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
Portfolios relating primarily to shareholder communications for which the
Administrator is reimbursed the cost of providing such service. Citizens
Securities provides the Portfolios 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, INC.
BY: William D. Glenn II BY: Sophia Collier
---------------------- -------------------------
William D. Glenn II Sophia Collier
Chair President
Dated: January 19, 1997 Dated: January 19, 1997
<PAGE>
ASSUMPTION OF ADMINISTRATIVE AGREEMENT
THIS AGREEMENT, made this 8th day of August, 1994, between Working
Assets Common Holdings, a Massachusetts business Trust (hereinafter called the
"Fund"), Working Assets Capital Management, a California corporation
(hereinafter called "WACM"), and Working Asset Management Company, a California
corporation (hereinafter called the "Assuming Adviser").
WITNESSETH:
WHEREAS, there is now in effect an Administrative Agreement dated
February 1, 1993, to be in effect through ______________, 1995, between the
Fund and WACM (the "Administrative Services Agreement"), providing certain
administrative services to be furnished to the Fund by WACM on certain terms
and conditions and subject to certain provisions set forth therein; and
WHEREAS, said Agreement was reapproved by the vote of the holders of
a majority of the outstanding shares of the capital stock of the Fund at the
Special Meeting of Stockholders held May 18, 1992, and said Agreement provides
for year to year renewals by mutual consent, upon certain specified conditions,
and the renewal of such Agreement has been approved by the Board of Directors
of the Fund on August 8, 1994; and
WHEREAS, the Assuming Adviser wishes to assume all of WACM's rights
and obligations under said Agreement, and WACM wishes to transfer to the
Assuming Adviser all such rights and obligations.
NOW, THEREFORE, for good and valuable consideration given by
Assuming Adviser, the receipt of which is hereby acknowledged by WACM, the
parties agree as follows:
1. The Administrative Services Agreement dated ____________,
1994, is hereby assumed for the remaining period of the
term, beginning ____________, 1994, and ending at the
close of business on _____________, 1994.
2. In all other respects said Agreement, as now amended and in
effect, is reaffirmed and shall continue in effect for the
period provided by such Agreement as renewed by this
Agreement.
3. This Agreement shall be executed in several counterparts,
each of which shall be original.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in their corporate names by their duly authorized officers as of
the day and year first above written.
Working Assets Common Holdings Working Assets Capital Management
By Aileen Hernandez By Sophia Collier
------------------------ ------------------------
Aileen Hernandez Sophia Collier
Chair of the Board President
Working Assets Management Company
By Sophia Collier
------------------------
Sophia Collier
President
Exhibit 15
DISTRIBUTION PLAN
1 The Plan. This Plan (the "Plan") is the written plan contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "Act") of
Working Assets Money Fund (the "Fund").
2 Definitions. As used in this Plan, the following terms shall have the
following meanings:
a "Qualified Recipient" shall mean any broker-dealer or other "person" (as
that term is defined in the Act) which (i) has entered into a written
agreement (a "related agreement") that complies with the Rule with the
Fund's Distributor and (ii) has rendered distribution assistance
(whether direct, administrative or both) in the distribution of the
Fund's shares.
b "Qualified Holdings" shall mean all shares of the Fund beneficially
owned by (i) a Qualified Recipient, (ii) the customers (brokerage or
other) of a Qualified Recipient, (iii) the clients (investment advisory
or other) of a Qualified Recipient, (iv) the accounts as to which a
Qualified Recipient has a fiduciary or custodial relationship, and (v)
the members of a Qualified Recipient, if such Qualified Recipient is an
association or union; provided that the Qualified Recipient shall have
been instrumental in the purchase of Fund shares by, or shall have
provided administrative assistance to, such customers, clients, accounts
or members in relation thereto. The Distributor may make final and
binding decisions as to all matters relating to Qualified Holdings and
Qualified Recipients, including but not limited to (i) the identity of
Qualified Recipients; (ii) whether or not any fund shares are to be
considered as Qualified Holdings of any particular Qualified Recipient;
and (iii) what Fund shares, if any, are to be attributed to a particular
Qualified Recipient, to a different Qualified Recipient or to no
Qualified Recipient.
c "Qualified Trustees" shall mean the Trustees of the Fund who are not
interested persons, as defined in the Act, of the Fund and who have no
direct or indirect financial interest in the operation of this Plan or
any agreement related to this Plan. While this Plan is in effect, the
selection and nomination of Qualified Trustees shall be committed to the
discretion of such Qualified Trustees. Nothing herein shall prevent the
involvement of others in such selection and nomination if the final
decision on any such selection and nomination is approved by a majority
of such Qualified Trustees.
d "Permitted Payments" shall mean payments by the Distributor to Qualified
Recipients as permitted by this Plan.
3 Payments Authorized. The Distributor is authorized, pursuant to this plan,
to make Permitted Payments to any Qualified Recipient under a related
agreement on either or both of the following bases:
a as reimbursement of direct expenses incurred in the course of
distributing Fund shares or providing administrative assistance to the
Fund or its shareholders, including, but not limited to, advertising,
printing and mailing promotional material, telephone calls and lines,
computer terminals, and personnel; and/or
<PAGE>
b at a rate specified in the related agreement with the Qualified
Recipient in question based on the average value of the Qualified
Holdings of such Qualified Recipient.
The Distributor may make Permitted Payments in any amount to any
Qualified Recipient, provided that (i) the aggregate of (A) the total
amount of all Permitted Payments to all Qualified Recipients (whether
made under (a) and/or (b) above) and (B) the total of Permitted Expenses
(as hereinafter defined) do not exceed, in any fiscal year of the Fund,
one-quarter of one percent of the average annual net assets of the Fund
in that fiscal year; and (ii) a majority of the Fund's Qualified
Trustees may at any time decrease or limit the aggregate amount of all
Permitted Payments or decrease or limit the amount payable to any
Qualified Recipient. The Fund will reimburse the Distributor for such
Permitted Payments within such limit, but the Distributor shall bear any
Permitted Payments beyond such limits.
4 Expenses Authorized. The Distributor is authorized, pursuant to this Plan,
to purchase advertising of shares of the Fund, to pay for sales literature
and other promotional material, including items, such as books, that may be
given to purchasers of Fund shares, and to make payments to the salesmen of
the Distributor. Any such advertising and sales material may include
references to other open-end investment companies or other investments and
any salesmen so paid are not required to devote their time solely to the
sale of Fund shares. Any such expenses ("Permitted Expenses") shall be
reimbursed or paid by the Fund, except that the amount of reimbursement or
payment of Permitted Expenses by the Fund plus the amount of Permitted
Payments to Qualified Recipients shall not in any fiscal year of the Fund
exceed one-quarter of one percent of the average net assets of the Fund in
such year and the Distributor shall bear any such expenses beyond such
limit.
5 Certain Other Payments Authorized. If and to the extent that any of the
payments by the Fund listed below are considered to be "primarily intended
to result in the sale of shares" issued by the Fund within the meaning of
the Rule, such payments by the Fund are authorized without limit under this
Plan and shall not be included in the limitations contained in this Plan:
(i) the costs of the preparation, printing and mailing of all required
reports and notices to shareholders, irrespective of whether such reports
or notices contain or are accompanied by material intended to result in the
sale of shares of the Fund or other funds or investments; (ii) the costs of
preparing, printing and mailing of all prospectuses; (iii) the costs of
preparing, printing and mailing of any proxy statements and proxies,
irrespective of whether any such proxy statement includes any item relating
to, or directed toward, the sale of the Fund's shares; (iv) all legal and
accounting fees relating to the preparation of any such reports,
prospectuses, proxies and proxy statements; (v) all fees and expenses
relating to the qualification of the Fund and/or its shares under the
securities or "Blue-Sky" law of any jurisdiction; (vi) all fees under the
Act and the Securities Act of 1933, including fees in connection with any
application for exemption relating to or directed toward the sale of the
Fund's shares; (vii) all fees and assessments of the Investment Company
Institute or any successor organization, irrespective of whether some of
its activities are designed to provide sales assistance; (viii) all costs
of preparing and mailing confirmations of shares sold or redeemed or share
certificates, and reports of share balances; and (ix) all costs of
responding to telephone or mail inquiries of investors or prospective
investors.
6 Investment Advisory Fees. It is recognized that the costs of distribution
of the Fund's shares in excess of Permitted Payments and Permitted Expenses
("Excess Distribution Costs") are not offset by any sales charges on the
<PAGE>
Fund's shares and that the profits, if any, of the Fund's Distributor are
dependent primarily on the advisory fees paid by the Fund to the
Distributor in its capacity as the Fund's Advisor and such fees paid by any
other funds which may be advised by the Distributor. If and to the extent
that any investment advisory fees paid by the Fund might, in view of any
Excess Distribution Costs be considered as indirectly financing any
activity which is primarily intended to result in the sale of shares issued
by the Fund, the payment of such fees is authorized under the Plan. In
taking any action contemplated by Section 15 of the Act as to any
investment advisory contract to which the Fund is a part, the Fund's Board
of Trustees including its Trustees who are not "interested persons", as
defined by the Act, shall, in acting on the terms of any such contract,
apply the "fiduciary duty" standard contained in Section 36(b) of the Act.
7 No Admission of Authority. The adoption of this Plan does not constitute
any admission that the adoption of the Rule or any particular provisions
thereof represented an authorized exercise of authority by the Securities
and Exchange Commission.
8 Reports. While this Plan is in effect, the Distributor shall report at
least quarterly to the Fund's Board of Trustees in writing for its review
on the following matters: (i) the amounts of all payments made pursuant to
Section 3 of this Plan, the identity of the recipients of each such
payment; the basis of which each such recipient was chosen as a Qualified
Recipient and the basis on which the amount of the Permitted Payment to
such Qualified Recipient was made; and (ii) all costs of each item
specified in Sections 4 and 5 of this Plan (making estimates of such costs
where necessary or desirable) during the preceding calendar or fiscal
quarter.
9 Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved (i) by a vote of the Board of Trustees of the Fund and of the
Qualified Trustees, cast in person at a meeting called for the purpose of
voting on this Plan; and (ii) by a vote of holders of at least a "majority"
(as defined in the Act) of the outstanding voting securities of the Fund.
This Plan shall be submitted to the shareholders of the Fund for approval
or disapproval at the first shareholders meeting held after the Fund
commences the public sale of its shares; if approved, the Plan, unless
terminated as hereinafter provided, shall continue in effect for one year
from the date of such shareholder approval and from year to year thereafter
only so long as such continuance is specifically approved at least annually
by the Fund's Board of Trustees and its Qualified Trustees cast in person
at a meeting called for the purpose of voting on such continuance. This
Plan may be terminated at any time by a vote of a majority of the Qualified
Trustees or by the vote of the holders of a "majority" (as defined in the
Act) of the outstanding voting securities of the Fund. This Plan may not be
amended to increase materially the amount of payments to be made without
shareholder approval, as set forth in (ii) above, and all amendments must
be approved in the manner set forth under (i) above.
