Rule 497(c)
File Nos. 2-80886
811-3626
Supplement dated November 1, 1999 to the
Prospectus of Citizens Funds dated
November 1, 1999:
Shares of the Citizens Small Cap Index Fund
referenced herein are not currently being offered.
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Rule 497(c)
File Nos. 2-80886
811-3626
November 1, 1999
PROSPECTUS
Citizens Index Fund
Citizens Emerging
Growth Fund
Citizens Small Cap Index Fund
Citizens Global Equity Fund
Citizens Income Fund
Working Assets
Money Market Fund
[LOGO] Citizens Fund
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Table of Contents
OVERVIEW ................................................ 2
Citizens Index Fund THE FUNDS
Investment Objectives and Principal Investment Strategies 3
Principal Risks ......................................... 8
Citizens Emerging Growth Fund Performance ............................................. 11
Fees and Expenses ....................................... 17
Citizens Small Cap Index Fund ADDITIONAL FUND DETAILS
Socially Responsible Investing .......................... 21
Citizens Index Fund ..................................... 22
Citizens Emerging Growth Fund ........................... 23
Citizens Global Equity Fund Citizens Small Cap Index Fund ........................... 23
Citizens Global Equity Fund ............................. 24
Citizens Income Fund Citizens Income Fund .................................... 25
Working Assets Money Market Fund ........................ 26
MANAGEMENT OF CITIZENS FUNDS
Working Assets Money Market Fund The Role of Investment Adviser .......................... 27
Our Sub-Advisers ........................................ 28
Citizens Funds' Fees .................................... 29
12b-1 Fees and Classes .................................. 30
SHAREHOLDER INFORMATION
Investment Minimums ..................................... 30
How We Value Our Shares ................................. 31
How to Buy and Sell Shares .............................. 32
Shareholder Services and Policies ....................... 35
Costs for Services ...................................... 37
Mailing Address and Wiring Instructions ................. 37
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................... 38
THE YEAR 2000 ........................................... 39
FINANCIAL HIGHLIGHTS .................................... 41
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Citizens Funds Prospectus
================================================================================
OVERVIEW
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Citizens Funds(TM)
Our goal at Citizens Funds is to achieve strong financial results while
investing in companies we deem to be socially and environmentally responsible.
For a description of Citizens' social and environmental screening process, see
pages 21-22 of this prospectus.
Our Funds
Citizens Index Fund invests primarily in the companies that make up the Citizens
Index(TM) and has the objective of long-term capital appreciation.
Citizens Emerging Growth Fund invests primarily in the common stock of
medium-sized companies with the objective of aggressive growth.
Citizens Small Cap Index Fund invests primarily in the companies that make up
the Citizens Small Cap Index(TM) and has the objective of capital appreciation.
Citizens Global Equity Fund invests primarily in U.S. and foreign stocks with
the objective of capital appreciation.
Citizens Income Fund invests primarily in fixed income securities with the
objective of generating current income and paying a dividend each month.
Working Assets Money Market Fund's objective is current income consistent with
safety and liquidity. The fund seeks to maintain a stable $1.00 Net Asset Value
per share at all times, although there is no assurance it will be able to do so.
Risks
There are certain risks common to all of our funds:
o The stock and bond markets are sometimes volatile and may change
dramatically and unpredictably in response to political, regulatory, market
or economic developments.
o The stocks or bonds our funds purchase may go up or down more or less than
the markets as a whole.
o As with all mutual funds, you could lose money by investing in any of the
Citizens Funds.
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Citizens Funds Prospectus
Who May Want to Invest
Our four equity funds (Citizens Index Fund, Citizens Emerging Growth Fund,
Citizens Small Cap Index Fund and Citizens Global Equity Fund) are designed for
long-term investors who can accept the greater risks associated with common
stock investments.
Citizens Emerging Growth Fund and Citizens Small Cap Index Fund are also
designed for investors who can accept the more erratic share price fluctuations
associated with investing in medium- and small-sized companies.
Citizens Global Equity Fund is designed for investors who want to invest a
portion of their portfolio in the securities of non-U.S. companies and who are
willing to accept the greater risks associated with non-U.S. investing.
Citizens Income Fund is designed for investors seeking current income and who
can accept the share price fluctuations associated with investments in the bond
markets.
Working Assets Money Market Fund is designed for investors who require stability
of principal and are seeking current income.
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THE FUNDS
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Investment Objectives and Principal Investment Strategies
All of our funds invest only in companies which we deem to be socially
responsible - meaning that they have positive environmental, community and
workplace records.
Citizens Index Fund
Objective
Citizens Index Fund's investment objective is long-term capital appreciation.
Principal Investment Strategies
The Citizens Index Fund follows a passive approach to investing. What this means
is that the fund does not actively purchase and sell stocks based on the
expectation that share prices will go up or down. Instead, the fund tries to
match the performance of the Citizens Index(TM) by purchasing and holding the
stock of all the companies that make up the Citizens Index. The Citizens Index
was created and is maintained by the fund's investment adviser, Citizens
Advisers. Citizens Advisers decides on any changes in the composition of the
Citizens Index. The Index consists of approximately 300, mostly large-sized,
U.S. companies that have passed Citizens' financial, social and environmental
screens. The fund invests in these companies in proportion to their market
capitalizations, which means that relatively larger companies have greater
representation in the fund than smaller ones. The fund will
3
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Citizens Funds Prospectus
buy and sell securities as the composition of the Citizens Index changes.
During normal market conditions, at least 65% of the companies that make up the
Citizens Index will have market capitalizations in the capitalization range of
the S&P 500 Index ($479 million to $456 billion as of October 1, 1999). At all
times there will be at least an 80% match between the fund's holdings and those
of the Citizens Index, and the fund tries to achieve a 95% correlation, before
expenses, with the performance of the Citizens Index.
Risks
The fund is subject to the following principal risks (for more details see pages
8-9 below):
o Market Risk o Company Risk
o Industry Risk o Passive Investing Risk
Citizens Emerging Growth Fund
Objective
Citizens Emerging Growth Fund's investment objective is aggressive growth.
Principal Investment Strategies
The Citizens Emerging Growth Fund looks for capital appreciation by investing
mainly in young, growing companies that offer the potential for accelerated
earnings, revenue growth and increased share prices. The fund follows an
earnings momentum strategy by seeking to invest in companies that have displayed
recent earnings surprises and/or are projected to attain increased earnings in
the near term. In addition to earnings growth, the fund seeks companies whose
share prices are undervalued in comparison to the fund managers' assessment of
their growth prospects, and ordinarily sells companies when they meet targeted
share prices.
During normal market conditions, at least 65% of the fund's assets will be
invested in the common stock of medium-sized companies whose market
capitalizations, at the time the fund invests in them, are in the capitalization
range of the S&P MidCap 400 Index ($243 million to $12.6 billion as of October
1, 1999). The fund also may invest in the common stock of smaller or larger
companies and may invest in U.S. and foreign companies.
Risks
The fund is subject to the following principal risks (for more details see pages
8-9 below):
o Market Risk o Foreign Investing
o Industry Risk o Portfolio Turnover
o Company Risk
o Small- and Medium-
Sized Company Risk
4
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Citizens Funds Prospectus
Citizens Small Cap Index Fund
Objective
Citizens Small Cap Index Fund's investment objective is capital appreciation.
Principal Investment Strategies
The Citizens Small Cap Index Fund follows a passive approach to investing. The
fund does not actively purchase and sell stocks based on the expectation that
share prices will go up or down. Instead, the fund tries to match the
performance of the Citizens Small Cap Index(TM)by purchasing and holding the
stock of all the companies that make up the Citizens Small Cap Index. The
Citizens Small Cap Index was created and is maintained by the fund's investment
adviser, Citizens Advisers. Citizens Advisers decides on any changes in the
composition of the Citizens Small Cap Index. The Index consists of approximately
300 small-sized, U.S. companies that have passed Citizens' financial, social and
environmental screens. The fund invests in these companies in proportion to
their market capitalizations, which means that relatively larger companies have
greater representation in the fund than smaller ones. The fund will buy and sell
securities as the composition of the Citizens Small Cap Index changes.
During normal market conditions, at least 65% of the companies that make up the
Citizens Small Cap Index will have market capitalizations in the capitalization
range of the S&P SmallCap 600 Index ($33 million to $3 billion as of October 1,
1999). At all times, there will be at least an 80% match between the fund's
holdings and those of the Citizens Small Cap Index, and the fund tries to
achieve a 95% correlation, before expenses, with the performance of the Citizens
Small Cap Index.
Risks
The fund is subject to the following principal risks (for more details see pages
8-9 below):
o Market Risk o Passive Investing Risk
o Industry Risk o Small- and Medium-Sized
o Company Risk Company Risk
Citizens Global Equity Fund
Objective
Citizens Global Equity Fund's investment objective is capital appreciation.
Principal Investment Strategies
Citizens Global Equity Fund invests primarily in the common stock of U.S. and
foreign companies. During normal market conditions, more than 50% of the fund's
assets will be invested in foreign markets, in a minimum of three countries. In
selecting investments, the
5
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Citizens Funds Prospectus
investment management team is guided by analyses of the global economy and
regional economies, countries and industries in which the fund may invest, and
individual companies.
The fund seeks to invest in economies that exhibit strong growth potential and
in industries that the fund managers expect to be the main beneficiaries of that
growth. In determining whether to invest in a particular country or region, the
investment management team looks at a number of factors, including a country's
(or region's):
o Prospects for growth o Liquidity
o Economic imbalances o Currency movements
(e.g., inflation, o Government economic policy
trade deficits, public debt)
With respect to individual companies, the investment management team analyzes
factors such as:
o Growing, sustainable earnings o Whether the company is
o Return on equity positioned to benefit from
o Financial condition important industry or
o Innovative products, services economy-wide trends
or business strategies o Whether the company's share
prices are undervalued based
on an assessment of its growth
prospectus
The fund also invests in sponsored American Depository Receipts (ADRs), which
are shares of foreign companies held in U.S. banks or a local branch of a
foreign bank.
Risks
The fund is subject to the following principal risks (for more details see pages
8-9 below):
o Market Risk o Company Risk
o Industry Risk o Foreign Investing
Citizens Income Fund
Objective
Citizens Income Fund's investment objective is generating current income and
paying a dividend each month.
Principal Investment Strategies
Citizens Income Fund invests primarily in bonds or mortgage-backed securities
that have expected maturities of two to 30 years, although it will occasionally
hold short-term securities (such as discount notes and commercial paper) as
well. The fund normally maintains an average maturity of between five and 15
years. At least 65% of the fund's assets are invested in investment grade
securities. Up to 35% of the fund's assets may be invested in high yield, or
"junk bond," securities.
6
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Citizens Funds Prospectus
Risks
The fund is subject to the following principal risks (for more details see pages
10-11 below):
o Market Risk o High Yield/Junk Bond Risk
o Interest Rate Risk o Liquidity Risk
o Credit Risk o Mortgage-Backed Securities Risk
Working Assets Money Market Fund
Objective
Working Assets Money Market Fund's investment objective is current income
consistent with safety and liquidity.
Principal Investment Strategies
Working Assets Money Market Fund invests in high quality, short-term money
market instruments (short-term debt issued by U.S. government agencies,
corporations, banks or other financial institutions) that the fund's portfolio
managers believe present minimal risk. The fund invests in debt securities that
call for payment in U.S. dollars, maintains a dollar-weighted average maturity
of 90 days or less and will not purchase securities with maturities greater than
397 days. With respect to government securities, the fund only invests in those
that are issued by agencies or other enterprises of the U.S. government and does
not invest in general obligations of the U.S. government, such as Treasury
bills, notes and bonds. The fund seeks to maintain a stable $1.00 Net Asset
Value per share at all times, although there is no assurance it will be able to
do so.
Risks
The fund is subject to the following principal risks (for more details see pages
10-11 below):
o Market Risk o Credit Risk
o Interest Rate Risk o Money Market Instruments
Change in Investment Objective
The investment objective of a fund cannot be changed without the approval of a
majority of the outstanding shares of that fund.
Percentage and Rating Restrictions
If a percentage or rating 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 or a subsequent downgrade in rating will not constitute a
violation of that restriction.
Defensive Positions
In an attempt to protect themselves from adverse market or economic conditions,
all of our funds may on occasion take temporary defensive positions in cash,
money market instruments
7
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Citizens Funds Prospectus
or other high quality fixed income securities. These positions may prevent a
particular fund from achieving its investment objective or otherwise adversely
affect fund performance.
Principal Risks
The principal risks of investing in each of our funds are described below.
Equity Funds
The principal risks of investing in our equity funds (Citizens Index Fund,
Citizens Emerging Growth Fund, Citizens Small Cap Index Fund and Citizens Global
Equity Fund) include:
Market Risk. The stock market is sometimes volatile and may change dramatically
and unpredictably in response to political, regulatory, market or economic
developments. The stock of growth companies - as compared to older, more
established companies - tend to be extra sensitive to these developments in the
market because their share prices are based more on expectations about the
futures of these companies. Stock prices have historically gone up and down more
than the value of fixed income securities. The value of your investment in the
equity funds will go up and down based on market conditions.
Industry Risk. Although none of our funds invest more than 25% of their assets
in a particular industry, our equity funds will at times be invested more
heavily in some industries than in others, and may be over-weighted in certain
industries in comparison to the market as a whole or to the S&P 500 or other
market indexes. Since the outlook for particular industries will differ due to
unique regulatory or competitive environments, there is always the possibility
that the value of a group of related stocks will go down because of developments
in a specific industry. These fluctuations may cause the value of your
investment to go down.
Company Risk. The value of the stock of an individual company varies with the
prospects of that company and can be more or less volatile than the market as a
whole. The success or failure of companies in which the equity funds invest will
cause the value of your investment to go up and down.
Passive Investing Risk. Because they are passively managed, the Citizens Index
Fund and Citizens Small Cap Index Fund generally will not sell stocks of
companies even though they may be experiencing financial trouble or their share
prices are declining. These funds may invest more heavily in some companies
because those companies make up a larger portion of the particular Index. Also,
tracking error (which occurs when the fund's holdings and the composition of the
Index do not completely match up), cash positions, fees and
8
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Citizens Funds Prospectus
expenses will prevent these funds from exactly duplicating or matching the
performance of the underlying Index.
Small- and Medium-Sized Company Risk. The small- and medium-sized companies that
the Citizens Emerging Growth Fund and Citizens Small Cap Index Fund invest in
may have speculative characteristics. Small companies in particular have unique
risks. They may be dependent on individual, sometimes inexperienced managers,
have limited product lines or have a difficult time obtaining financing or
market share. Their shares are also more volatile, and may not be traded as
frequently or in as large a volume as shares of larger companies. Medium-sized
companies generally involve less risk than smaller companies but their shares
are still more volatile and more subject to changes in the market than are
larger companies.
Foreign Investing. The Citizens Emerging Growth Fund may invest in foreign
markets. The Citizens Global Equity Fund will invest in foreign markets. Foreign
markets are generally less efficient and more volatile than those in the United
States. Foreign economies and governments may be less mature and stable than
those in the U.S. and foreign securities may be more significantly impacted by
political and economic events. Settlement and trading costs are generally
higher, and foreign companies may be adversely affected by excessive (or
inadequate) government regulation, excessive taxation, nationalization,
expropriation or political, economic or social instability. There is also the
risk of currency regulation and exchange controls or fluctuations in exchange
rates between foreign currencies and the U.S. dollar, which could cause the
value of a fund's investments in foreign markets to go down. The risks of
investing in emerging market economies are even greater and can include high
inflation, high sensitivity to commodity prices and economic dependence on a few
industries or government-owned industries. The funds also may be adversely
affected if the conversion to a single European currency, the Euro, does not
continue as planned or if the funds' service providers are not capable of
processing transactions related to the Euro.
Portfolio Turnover. The Citizens Emerging Growth Fund has a relatively high
portfolio turnover rate (in excess of 100%). Funds with high turnover may incur
higher transaction costs, such as brokerage fees, than funds that buy and sell
securities less often. High portfolio turnover may therefore negatively impact
the fund's performance. Frequent sales of securities held by the fund may also
cause shareholders to realize higher amounts of taxable ordinary income or
capital gains (including short-term capital gains which are generally taxed to
shareholders at ordinary income tax rates).
9
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Citizens Funds Prospectus
Fixed Income Funds
The principal risks of investing in our fixed income funds (Citizens Income Fund
and Working Assets Money Market Fund) include:
Market Risk. The fixed income market, like the stock market, is sometimes
volatile and may change dramatically and unpredictably in response to political,
regulatory, market or economic developments. The value of your investment in the
Citizens Income Fund will go up and down based on market conditions.
Interest Rate Risk. When interest rates rise, the prices of fixed income
securities generally fall. This interest rate risk will affect the price of a
debt security more if the security has a longer maturity. A rise in interest
rates generally will cause the value of the Citizens Income Fund's shares to
decline. A significant rise in interest rates may even cause the value of your
investment in the Working Assets Money Market Fund to go down.
Credit Risk. Prices of debt securities also go up and down based on how
creditworthy investors perceive issuers of these securities to be. The prices of
debt securities with lower ratings tend to go up and down more than those of
securities with higher ratings. It is possible that some issuers will not be
able to make payments to a fund on debt securities that the fund holds, and as a
result the fund may not receive the income it expected from these securities or
repayment of capital on the due date. If an issuer of a debt security is viewed
as unable to make timely payments on its securities, the value of these
securities may go down.
High Yield/Junk Bond Risk. The Citizens Income Fund may invest up to 35% of its
assets in bonds or other debt instruments that are rated below investment grade
and are considered speculative. These investments are known as "junk bond" or
high yield securities. Debt securities offering higher yields, such as junk
bonds, tend to have more risk of default than securities with higher ratings.
Also, the prices of junk bonds may go up and down more than the prices of
securities with higher ratings. Lower-rated securities tend to react more to
economic changes, industry trends, legislative and regulatory developments and
changes in perceptions about their issuer's creditworthiness than securities
with higher ratings. In the past, economic downturns or increases in interest
rates have under certain circumstances caused lower-rated securities to default
at higher than usual rates. Future problems with the economy and increases in
interest rates could have a similar effect.
Liquidity Risk. The Citizens Income Fund may not be able to sell its lower-rated
securities as quickly as those with higher ratings, especially if investor
perceptions about the issuer
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Citizens Funds Prospectus
worsen. In this case, the fund's investment adviser or sub-adviser may play a
role in determining a fair value for these securities. During certain economic
downturns it may be more difficult for the fund to sell its lower-rated
securities at their fair value to meet requests for redemptions by shareholders
or to respond to changes in the market.
Mortgage-Backed Securities Risk. The Citizens Income Fund may invest in
mortgage-~backed securities. The value of these investments may be adversely
affected by prepayment of mortgages or extension of the expected maturity of the
securities. When interest rates go down, mortgage-backed securities experience
higher rates of prepayment and the fund may experience an unpredicted loss of
interest income. The fund will then have to reinvest the money at lower interest
rates. Therefore, mortgage-backed securities may not be an effective means of
locking in a particular interest rate. When interest rates go up,
mortgage-~backed securities generally experience lower rates of prepayment which
lengthens the expected maturity of a mortgage-backed security. As a result,
prices of mortgage-backed securities may decrease more than prices of other debt
obligations when interest rates go up.
Money Market Instruments. Money market securities generally involve less risk --
but a lower return -- than lower quality or longer term fixed income securities.
An investment in the Working Assets Money Market Fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Working Assets Money Market Fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the fund.
Performance
The bar charts and tables on the following pages provide some indication of the
risks of investing in a fund by showing changes in a fund's performance from
year to year and by showing how a fund's average annual returns for certain
periods compare with those of a widely recognized index of market performance.+
How a fund performed in the past is not necessarily an indication of how the
fund will perform in the future.
+ Because the Institutional Class shares of all but the Citizens Index Fund
and the Working Assets Money Market Fund and the Administrative Class
shares of each fund are newly-offered, average annual total returns for
these newly-offered classes are not shown.
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Citizens Funds Prospectus
Citizens Index Fund
Calendar Year Returns as of December 31 (Standard shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1996 23.07%
1997 34.96%
1998 42.75%
The Citizens Index Fund, Standard shares, year-to-date return as of September
30, 1999 was 6.09%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 27.49% (4th quarter 1998)
Worst quarter return: -7.89% (3rd quarter 1998)
Average Annual Total Returns (through December 31, 1998)
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One Year Return Since Inception
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Citizens Index Fund -
Standard shares 42.75% 32.51%(3/3/95)
- --------------------------------------------------------------------------------
Citizens Index Fund -
Institutional Class shares 43.79% 35.53%(1/25/96)
- --------------------------------------------------------------------------------
S&P 500* 28.75% 30.88%(3/3/95)
28.93%(1/25/96)
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* The S&P 500 is a widely recognized, unmanaged index of the common stock
prices of 500 of the largest companies in the U.S. market.
12
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Citizens Funds Prospectus
Citizens Emerging Growth Fund
Calendar Year Returns as of December 31 (Standard shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 40.73%
1996 13.91%
1997 17.69%
1998 42.71%
The Citizens Emerging Growth Fund, Standard shares, year-to-date return as of
September 30, 1999 was 17.99%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 35.96% (4th quarter 1998)
Worst quarter return: -12.08% (3rd quarter 1998)
Average Annual Total Returns (through December 31, 1998)
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One Year Return Since Inception
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Citizens Emerging Growth Fund - 42.71% 24.15%(2/8/94)
Standard shares
- --------------------------------------------------------------------------------
S&P MidCap 400* 19.09% 19.24%(2/8/94)
- --------------------------------------------------------------------------------
* The S&P MidCap 400 is an unmanaged index of common stock prices of mid-size
companies in the U.S. market.
Citizens Small Cap Index Fund
Citizens Small Cap Index Fund had not commenced operations as of December 31,
1998 and does not have annual returns for a full calendar year. For this reason,
a bar chart and table showing performance information and information on best
and worst calendar quarter performance are not provided in this prospectus.
13
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Citizens Funds Prospectus
Citizens Global Equity Fund
Calendar Year Returns as of December 31 (Standard shares)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 13.74%
1996 13.16%
1997 19.91%
1998 32.26%
The Citizens Global Equity Fund, Standard shares, year-to-date return as of
September 30, 1999 was 19.18%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 23.47% (4th quarter 1998)
Worst quarter return: -10.32% (3rd quarter 1998)
Average Annual Total Returns (through December 31, 1998)
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One Year Return Since Inception
================================================================================
Citizens Global Equity Fund - 32.26% 15.05%(2/8/94)
Standard shares
- --------------------------------------------------------------------------------
Financial Times World Index* 23.04% 14.54%(2/8/94)
- --------------------------------------------------------------------------------
* The Financial Times World Index is an unmanaged index of common stocks of
domestic and foreign companies.
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Citizens Funds Prospectus
Citizens Income Fund
Calendar Year Returns as of December 31
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1993 9.96%
1994 -3.08%
1995 17.38%
1996 4.85%
1997 10.48%
1998 5.81%
The Citizens Income Fund year-to-date return as of September 30, 1999 was
- -1.31%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 5.08% (1st quarter 1995)
Worst quarter return: -2.24% (1st quarter 1994)
Average Annual Total Returns (through December 31, 1998)
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One Year Return Five Year Return Since Inception
================================================================================
Citizens Income Fund 5.81% 6.87% 7.40%(6/10/92)
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Lehman U.S. Aggregate Index* 8.69% 7.27% 8.16%(6/10/92)
- --------------------------------------------------------------------------------
* The Lehman U.S. Aggregate Index is an unmanaged index of taxable,
investment grade fixed-income securities, including government, corporate,
mortgage and asset-backed securities.
For up-to-date yield information please call 1-800-223-7010.
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Citizens Funds Prospectus
Working Assets Money Market Fund
Calendar Year Returns as of December 31 (Standard shares)*
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1991 5.57%
1992 3.09%
1993 2.22%
1994 3.24%
1995 5.01%
1996 4.29%
1997 4.44%
1998 4.43%
* The inception date for the Working Assets Money Market Fund, Standard
shares, is August 30, 1983. Complete data for periods prior to 1991 is not
available.
The Working Assets Money Market Fund, Standard shares, year-to-date return as of
September 30, 1999 was 2.90%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 1.58% (1st quarter 1991)
Worst quarter return: 0.54% (2nd and 3rd quarters 1993)
Average Annual Total Returns (through December 31, 1998)
================================================================================
One Year Return Five Year Return Since Inception
================================================================================
Working Assets 4.43% 4.28% 4.03%(1/1/91)**
Money Market Fund -
Standard shares
- --------------------------------------------------------------------------------
Working Assets 5.05% N/A 5.06%(2/1/96)
Money Market Fund -
Institutional Class shares
- --------------------------------------------------------------------------------
** The inception date for the Working Assets Money Market Fund, Standard
shares, is August 30, 1983. Complete data for periods prior to 1991 is not
available.
The 7-day yield for the Working Assets Money Market Fund, Standard shares, was
3.94% and for Institutional Class shares was 4.41% for the period ended December
31, 1998.
The current 7-day yield can be obtained by calling Citizens Funds, toll free, at
1-800-223-7010.
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Citizens Funds Prospectus
Fees and Expenses
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of Citizens Funds. Annual fund operating expenses are paid out
of the assets of the funds. The funds do not have a sales charge (load).
Shareholder Fees
(fees paid directly from your investment)*
<TABLE>
<CAPTION>
Maximum Maximum
Maximum Sales Account Fee
Sales Maximum Charge (Charged only
Charge Deferred (Load) if account
(Load) Sales Imposed on falls below
Imposed on Charge Reinvested Redemption Exchange a minimum
Purchases (Load) Dividends Fee Fee balance)**
==============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Citizens Index Fund None None None None None $3.00/month
- --------------------------------------------------------------------------------------------------------------
Citizens Emerging
Growth Fund None None None None None $3.00/month
- --------------------------------------------------------------------------------------------------------------
Citizens Small Cap
Index Fund None None None None None $3.00/month
- --------------------------------------------------------------------------------------------------------------
Citizens Global
Equity Fund None None None None None $3.00/month
- --------------------------------------------------------------------------------------------------------------
Citizens Income Fund None None None None None $3.00/month
- --------------------------------------------------------------------------------------------------------------
Working Assets
Money Market Fund None None None None None $3.00/month
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* See "Costs for Services," on page 37.
** A fee of $3.00/month currently is charged on accounts that fall below a
minimum balance of $2,500 ($1,000 ~for Individual Retirement Accounts
(IRAs), Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) accounts and
Automatic Investment Plan accounts). This fee does not apply to Eofund
accounts.
17
<PAGE>
Citizens Funds Prospectus
Annual Fund Operating Expenses
(expenses that are deducted from assets)
<TABLE>
<CAPTION>
Total Annual
Management Distribution Other Operating Fee Net
Fund Fees Fees Expenses Expenses Waiver* Expenses
<S> <C> <C> <C> <C> <C> <C>
====================================================================================================================================
Citizens Index Fund
====================================================================================================================================
Standard shares 0.50% 0.25% 0.83% 1.58% 0.09% 1.49%
Administrative Class shares 0.50% 0.25% 0.24% 0.99% 0.00% 0.99%
Institutional Class shares 0.50% N/A 0.33% 0.83% 0.09% 0.74%
====================================================================================================================================
Citizens Emerging Growth Fund
====================================================================================================================================
Standard shares 1.00% 0.25% 0.58% 1.83% N/A 1.83%
Administrative Class shares 1.00% 1.00% 0.25% 0.41% 1.66% 0.11% 1.55%
Institutional Class shares 1.00% N/A 0.40% 1.40% 0.10% 1.30%
====================================================================================================================================
Citizens Small Cap Index Fund
Standard shares 0.50% 0.25% 3.66% 4.41% 2.86% 1.55%
====================================================================================================================================
Citizens Global Equity Fund
====================================================================================================================================
Standard shares 1.00% 0.25% 0.71% 1.96% 0.00% 1.96%
Administrative Class shares 1.00% 0.25% 0.55% 1.80% 0.12% 1.68%
Institutional Class shares 1.00% N/A 0.49% 1.49% 0.10% 1.39%
====================================================================================================================================
Citizens Income Fund
Standard shares 0.65% 0.25% 0.59% 1.49% 0.04% 1.45%
====================================================================================================================================
Working Asset Money Market Fund
====================================================================================================================================
Standard shares 0.35% 0.20% 0.69% 1.24% 0.05% 1.19%
Institutional Class shares 0.35% N/A 0.35% 0.70% N/A 0.70%
</TABLE>
* See opposite page.
18
<PAGE>
Citizens Funds Prospectus
For the fiscal year commencing July 1, 1999 and ending June 30, 2000, the
investment adviser to the funds has contractually agreed to waive certain fees
and/or reimburse certain expenses such as Distribution Fees and Other Expenses
(other than interest expenses, taxes, brokerage commissions and extraordinary
expenses, such as litigation, that do not usually occur in the operations of a
mutual fund). If a fund's aggregate expenses for the relevant class would exceed
on a per annum basis the percentage of average daily net assets specified below,
the adviser will waive certain fees and/or reimburse certain expenses for the
amount of the excess.
Net
Fund Expenses
================================================================================
Citizens Index Fund
================================================================================
Standard shares 1.49%
Administrative Class shares 0.99%
Institutional Class shares 0.74%
================================================================================
Citizens Emerging Growth Fund
================================================================================
Administrative Class shares 1.55%
Institutional Class shares 1.30%
================================================================================
Citizens Small Cap Index Fund
================================================================================
Standard shares 1.55%
================================================================================
Citizens Global Equity Fund
================================================================================
Standard shares 2.05%
Administrative Class shares 1.68%
Institutional Class shares 1.39%
================================================================================
Citizens Income Fund
================================================================================
Standard shares 1.45% of the first $100 million
of assets and 1.25% thereafter
================================================================================
Working Asset Money Market Fund
================================================================================
Standard shares 1.50% of the first $40 million
of assets and 1% thereafter
19
<PAGE>
Citizens Funds Prospectus
Example: This Example is intended to help you compare the cost of investing in
the funds with the cost of investing in other mutual funds. The Example assumes
that you invest $10,000 in a fund for the time periods indicated and then redeem
all of your shares at the end of those periods. The Example also assumes that
your investment has a 5% return each year, the funds' operating expenses remain
the same and all dividends and distributions are reinvested. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
One Three Five Ten
Fund Year Years Years Years
================================================================================
Citizens Index Fund
================================================================================
Standard shares $ 152 $ 499 $ 860 $1,878
Administrative Class shares $ 101 $ 315 $ 547 $1,213
Institutional Class shares $ 76 $ 265 $ 460 $1,025
================================================================================
Citizens Emerging Growth Fund
================================================================================
Standard shares $ 186 $ 576 $ 990 $2,148
Administrative Class shares $ 158 $ 523 $ 902 $1,965
Institutional Class shares $ 132 $ 443 $ 766 $1,680
================================================================================
Citizens Small Cap Index Fund
================================================================================
Standard shares $ 158 $1,335 $2,238 $4,542
================================================================================
Citizens Global Equity Fund
================================================================================
Standard shares $ 199 $ 615 $1,057 $2,285
Administrative Class shares $ 171 $ 566 $ 975 $2,116
Institutional Class shares $ 142 $ 471 $ 813 $1,779
================================================================================
Citizens Income Fund
================================================================================
Standard shares $ 148 $ 471 $ 813 $1,779
================================================================================
Working Assets Money Market Fund
================================================================================
Standard shares $ 121 $ 393 $ 681 $1,500
Institutional Class shares $ 72 $ 224 $ 390 $ 871
20
<PAGE>
Citizens Funds Prospectus
================================================================================
ADDITIONAL FUND DETAILS
================================================================================
More information about the funds' investment strategies and risks appears below
and in the funds' Statement of Additional Information. Of course a fund may not,
and is not required to, invest in all of the investments or engage in all of the
investment techniques listed in this prospectus or in the Statement of
Additional Information.
Socially Responsible Investing
Our goal at Citizens Funds is to achieve strong financial results while
investing in companies that are managed in a socially responsible manner. The
funds will invest only in companies we deem to be socially and environmentally
responsible.
To find these investments, we seek companies that have positive
environmental, community and workplace records. At the same time, we avoid
companies whose primary business is the manufacture or distribution of alcohol,
tobacco, nuclear power, oil or conventional or nuclear weaponry. We also avoid
companies on the AFL-CIO's national boycott list and companies that lack
diversity (i.e., representation by women or people of color) on their corporate
boards or in upper management. Finally, we avoid companies that use animals to
test personal-care products or otherwise treat animals in an inhumane manner.
Some of the social and environmental screens we use to assess a company's
environmental record, community involvement and workplace practices include the
following:
Environment We try to avoid investing in companies with consistent or
significant violations of environmental laws and regulations, companies with
below average environmental records for their industry and companies whose
products or processes are particularly damaging to the environment. We seek
companies, on the other hand, that are committed to recycling, waste reduction,
energy efficiency and other sustainable business practices.
Workplace
We try to avoid investing in companies that discriminate on the basis of gender,
race, religion, disability or sexual orientation, that engage in unfair labor
practices or that lack diversity on their board of directors or in upper
management. Instead, we seek companies that have positive records with respect
to employee health, safety, compensation and other benefits, and that
proactively work to eliminate sweatshop conditions among their overseas
subsidiaries, vendors and contract suppliers.
Community
We try to avoid investing in companies with less than satisfactory records under
the
21
<PAGE>
Citizens Funds Prospectus
Community Reinvestment Act, or companies that have displayed insensitivity to
community priorities and concerns. Rather, we seek companies with positive
records of local involvement, charitable giving and support for community
development initiatives.
Companies that pass our social and environmental screens are placed on the
Citizens Funds "Approved List" and are eligible for investment; those that fail
to pass our screens are placed on a "Rejected List" and are not eligible for
investment.
Citizens Index Fund
The Citizens Index Fund invests primarily in stocks included in the Citizens
Index, which was created and is maintained by the fund's investment adviser,
Citizens Advisers. The Citizens Index is a market-weighted index consisting of
approximately 300, mostly large-sized, U.S. companies. Roughly 200 of the
companies in the Citizens Index are included in the S&P 500. The others are
companies selected in order to provide appropriate industry and sector
diversity, which we believe is essential to a sound indexing strategy. All of
these companies have passed our rigorous social and environmental screens, and
we believe these companies best represent their industries.
There will be at least an 80% match between the holdings of the fund and the
composition of the Citizens Index, and the fund tries to achieve a 95%
correlation, before expenses, with the performance of the Index. A 100%
correlation would mean that the fund and the Citizens Index are perfectly
matched. Although the fund seeks at all times to duplicate the performance of
the Citizens Index by investing in the companies that make up the Index, fees
and expenses associated with operating the fund will prevent exact correlation
and will generally result in the fund slightly underperforming the Citizens
Index.
Companies will be deleted from the Citizens Index and sold by the fund if they
fail our annual social responsibility review. If a company is removed, we will
replace it with another company or companies, usually from the same industry,
that meet all our social criteria. In addition, from time to time we may make
other changes in the Index and in the fund to include, for example, companies
that are exceptional based on our screening criteria, or to reflect changes in
the composition of the S&P 500. Citizens Advisers decides on any changes in the
Citizens Index. The "Financial Highlights" section of this prospectus shows the
fund's portfolio turnover rate.
In addition, under normal circumstances the fund will usually hold a small
amount of cash or money market instruments (usually no more than 5% of assets)
resulting from shareholder purchase and redemption activity and to be used for
operating expenses. Holding this cash, together with the costs of operations,
will prevent us from ever perfectly tracking the theoretical performance of the
Citizens Index. Payment of our operating expenses will
22
<PAGE>
Citizens Funds Prospectus
reduce returns. Our small allocation to cash may improve returns when the market
is heading down and hurt them when the market is moving up.
Citizens Emerging Growth Fund
Citizens Emerging Growth Fund looks for capital appreciation by investing mainly
in young, growing companies that offer the potential for accelerated earnings,
revenue growth and share price appreciation. The fund follows an earnings
momentum strategy by seeking to invest in companies that have displayed recent
earnings surprises and/or are projected to attain increased earnings in the near
term. In addition to earnings growth, the fund seeks companies with attractive
share prices and ordinarily will sell companies when they meet targeted share
prices. Since many of the companies the fund invests in are relatively new, we
don't expect much, if any, dividend income.
The fund is very actively managed with a significant turnover rate. The fund
usually sells its investments in companies if their valuations are higher than
the fund's managers find attractive, if their earnings are disappointing or if
their growth slows. This active and frequent trading may create tax consequences
for shareholders in the form of capital gains and losses. Capital gains, when
distributed, are taxable to shareholders. The trading costs associated with
active management may also lower fund performance. The "Financial Highlights"
section of this prospectus shows the fund's portfolio turnover rate.
Citizens Small Cap Index Fund
The Citizens Small Cap Index Fund invests primarily in stocks included in the
Citizens Small Cap Index, which was created and is maintained by the fund's
investment adviser, Citizens Advisers. The Citizens Small Cap Index is a
market-weighted index consisting of approximately 300 small-sized companies.
During normal market conditions, at least 65% of the companies that make up the
Citizens Small Cap Index will have market capitalizations in the capitalization
range of the S&P SmallCap 600 Index. All of the companies in the Citizens Small
Cap Index have passed our rigorous social and environmental screens, and we
believe these are the smaller companies that best represent their industries.
There will be at least an 80% match between the holdings of the fund and the
composition of the Citizens Small Cap Index, and the fund tries to achieve a 95%
correlation, before expenses, with the performance of the Index. A 100%
correlation would mean that the fund and the Citizens Small Cap Index are
perfectly matched. Although the fund seeks at all times to duplicate the
performance of the Citizens Small Cap Index by investing in the companies that
make up the Index, fees and expenses associated with operating the fund will
prevent exact correlation and will generally result in the fund slightly
underperforming the Citizens Small Cap Index. Initially, the fund may be of such
a size that it is not
23
<PAGE>
Citizens Funds Prospectus
practical for the fund to invest in all of the companies that make up the
Citizens Small Cap Index. As the fund's asset size increases, the adviser will
add stocks to the fund. Since many of the companies the fund invests in are
relatively new, we do not expect much, if any, dividend income.
Companies will be deleted from the Citizens Small Cap Index and sold by the fund
if they fail our annual social responsibility review. If a company is removed,
we will replace it with another company or companies, usually from the same
industry, that meet all our social criteria. In addition, from time to time we
may make other changes in the Index and in the fund to include, for example,
companies that are exceptional based on our social criteria. Citizens Advisers
decides on any changes in the Citizens Small Cap Index. The fund's turnover rate
is not expected to exceed 20% annually.
In addition, under normal circumstances the fund will usually hold a small
amount of cash or money market instruments (usually no more than 5% of assets)
resulting from shareholder purchase and redemption activity and to be used for
operating expenses. Holding this cash, together with the costs of operations,
will prevent us from ever perfectly tracking the theoretical performance of the
Citizens Small Cap Index. Payment of our operating expenses will reduce returns.
Our small allocation to cash may improve returns when the market is heading down
and hurt them when the market is moving up.
Citizens Global Equity Fund
The Citizens Global Equity Fund invests primarily in common stocks of both U.S.
and foreign companies. We seek companies with growing sustainable earnings;
innovative products, services and business strategies; revised corporate
strategies; or those which are benefiting from political or economic conditions.
Under normal market conditions, the fund will allocate more than half of its
assets to foreign markets, in most circumstances in a minimum of three
countries. From time to time, the fund may buy securities other than common
stocks, such as convertible or preferred stocks and short-term debt securities.
To moderate the risks of foreign investing, the fund restricts its investments
in emerging market countries (such as Russia, Malaysia or Pakistan) to no more
than 25% of its assets.
The fund may invest in sponsored American Depository Receipts (ADRs), which are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities of foreign companies that have agreed to have their
securities traded as depository receipts.
The fund is actively managed. This active trading may create tax consequences
for shareholders in the form of increased capital gains and losses. Capital
gains, when distributed, are taxable to shareholders. The trading costs
associated with active management may
24
<PAGE>
Citizens Funds Prospectus
also lower fund performance. The "Financial Highlights" section of this
prospectus shows the fund's portfolio turnover rate.
Citizens Income Fund
Citizens Income Fund invests in fixed income or debt securities issued by
agencies and enterprises of the U.S. government or by private companies. By
issuing such debt securities, these agencies and enterprises of the U.S.
government and private companies raise money in exchange for agreeing to make
interest payments. The Citizens Income Fund invests primarily in bonds or
mortgage-backed securities that have expected maturities of two to 30 years,
although at times it will hold short-term securities as well. The fund's average
maturity usually is between five and 15 years. By committing money for this
longer period, we generally can earn higher interest than in a money market
fund, but we are taking more risk. The fund may purchase the securities of U.S.
and non-U.S. issuers.
When we invest in government securities, we buy only those that are issued by
agencies or other enterprises of the U.S. government. These securities may not
be backed by the full faith and credit of the U.S. government. We do not invest
in general obligations of the U.S. government, such as Treasury bills, notes and
bonds.
The fund also may invest in convertible debt securities, convertible preferred
and preferred stock and real estate investments trusts (REITs). REITs pool
investors' funds for investment primarily in income-producing real estate or
real estate-related loans or other interests.
At least 65% of the Citizens Income Fund's assets are invested in securities
rated "investment grade" (Baa or above by Moody's or BBB or above by Standard &
Poor's, or their equivalent as determined by the fund's investment adviser or
sub-adviser). Up to 35% may be invested in bonds or other debt instruments rated
below investment grade, known as "junk bonds." Although junk bonds are
considered to be speculative and add risk, we believe by limiting the overall
fund exposure to a maximum level of 35%, the higher yield often available from
these securities has the potential to compensate for the greater risk.
Occasionally we buy securities that are not rated. In these cases, the security
must be of comparable quality, in the judgment of the fund's investment adviser
or sub-adviser, to the rated, investment grade securities we buy for the fund.
If they are not, they are treated as junk bonds and are subject to the 35%
limitation on investing in junk bonds.
The fund may invest in mortgage-backed securities, or securities that represent
interests in a pool of mortgage loans. These investments entitle the fund to a
share of the principal and interest payments made on the underlying mortgages.
When homeowners make interest and principal payments, these payments, net of any
fees paid to the issuer or guarantor of mortgage-backed securities, are passed
on to the investors in the pool. The
25
<PAGE>
Citizens Funds Prospectus
fund receives additional payments, net of fees or any costs incurred, from
prepayments of principal that result when property is sold, refinanced or
foreclosed upon. The market value and interest yield of these instruments can
vary due to changes in interest rates and early prepayments of underlying
mortgages, as described under "Mortgage-Backed Securities Risk," on page 11 of
this prospectus.
The fund also may invest in interest-only and principal-only securities.
Interest-only securities are the interest-only component of stripped
mortgage-backed securities and principal-only securities are the principal-only
component of stripped mortgage-backed securities.
Citizens Income Fund may invest in warrants, or instruments that entitle the
holder to buy the underlying equity securities at a specific price for a
specific period of time. The fund may also agree to purchase debt securities at
a fixed price before they have been issued. The fund takes a risk that the
market value of these "when-issued" securities will go down before they are
delivered to the fund.
The fund is actively managed. This active trading may create tax consequences
for shareholders in the form of increased capital gains and losses. Capital
gains, when distributed, are taxable to shareholders. The trading costs
associated with active management may also lower fund performance. The
"Financial Highlights" section of this prospectus shows the fund's portfolio
turnover rate.
Working Assets Money Market Fund
Working Assets Money Market Fund invests only in short-term money market
instruments (short-term debt issued by branches of the government, corporations,
or banks or other financial institutions) that we believe present minimal risk
and that call for payment in U.S. dollars. The fund maintains a dollar-weighted
average maturity of 90 days or less and will not purchase securities with
maturities greater than 397 days.
When we invest in government securities, we buy only those that are issued by
agencies or other enterprises of the U.S. government. These securities may not
be backed by the full faith and credit of the U.S. government. We do not invest
in general obligations of the U.S. government, such as Treasury bills, notes and
bonds.
We will also buy "First Tier" commercial paper, which is high quality,
short-term debt issued by corporations.
Banks sometimes issue other types of debt that the fund may invest in and that
may offer the fund a yield advantage. These investments include certificates of
deposit, time deposits and bankers' acceptances of U.S. banks or thrift
institutions.
Checking services are available for this fund.
26
<PAGE>
Citizens Funds Prospectus
================================================================================
MANAGEMENT OF CITIZENS FUNDS
================================================================================
The Role of Investment Adviser
In order to manage the funds on a day-to-day basis, Citizens Funds has signed a
Management Agreement with Citizens Advisers, Inc., with offices at 230 Commerce
Way, Suite 300, Portsmouth, NH, 03801. Citizens Advisers has managed Citizens
Funds' assets since the funds commenced operations in 1982. Citizens Securities,
Inc., a subsidiary of Citizens Advisers, serves as Citizens Funds' distributor.
Citizens Funds, Citizens Advisers and Citizens Securities are not affiliated
with any bank.
In its role as investment adviser to Citizens Funds, Citizens Advisers
determines which companies meet our funds' social criteria and will be carried
on Citizens Funds "Approved List" of investments. Citizens Advisers also selects
which securities will be included in the Working Assets Money Market Fund,
Citizens Index Fund and Citizens Small Cap Index Fund.
Citizens Advisers performs a wide variety of administrative 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. 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 Citizens Funds.
Working Assets Money Market Fund. Laura Provost is lead manager of the team that
manages the Working Assets Money Market Fund. Prior to joining Citizens Advisers
as Manager of its Investment Management Department in 1997, Ms. Provost was a
member of the fund management team for the Patriot Group of John Hancock Mutual
Funds, a family of closed-end mutual funds comprising $1 billion in assets. Ms.
Provost served in various capacities at John Hancock, including Junior Portfolio
Officer (1993-95), Senior Portfolio Officer (1995-96) and Portfolio Manager
(1996-97), where she co-managed five closed-end income funds investing primarily
in the common and preferred stock of electric utilities.
Citizens Index Fund and Citizens Small Cap Index Fund. Sophia Collier has been
the lead manager of the team that manages the Citizens Index Fund and the
Citizens Small Cap Index Fund since each fund was started. Ms. Collier was the
president of Citizens Funds and its investment adviser, Citizens Advisers, from
1991 until September, 1998. Currently she is the principal owner and chair of
the board of directors of Citizens Advisers. Ms. Collier is assisted by Ms.
Provost and Citizens Advisers' investment management staff in the day-to-day
management of these funds.
27
<PAGE>
Citizens Funds Prospectus
Our Sub-Advisers
To assist with portfolio management for the other funds, Citizens Advisers has
retained, at its own expense, two sub-advisers.
Citizens Income Fund and Citizens Emerging Growth Fund. Seneca Capital
Management LLC. Our sub-adviser for the Citizens Income Fund since 1993 and the
Citizens Emerging Growth Fund since the fund commenced operations in 1994,
Seneca Capital Management LLC, is a registered investment adviser. It is the
business successor to our prior sub-adviser, GMG/Seneca Capital Management,
which was established in 1990. Phoenix, Duff and Phelps purchased 74.9% of
Seneca Capital Management LLC in 1997. Seneca Capital Management LLC manages
more than $6 billion from its offices at 909 Montgomery Street, San Francisco,
CA.
Gail Seneca has been the lead manager of the team that manages the Citizens
Income Fund since November of 1993. Ms. Seneca is the founder and has been the
Chief Investment Officer and Managing Partner of Seneca Capital Management since
its founding in 1990. Rick Little is the lead manager of the team that manages
the Citizens Emerging Growth Fund. Mr. Little has worked in the investment field
for 25 years. He has been with Seneca Capital Management or its predecessor
since 1990 and was previously a senior vice president at NatWest Securities.
Citizens Global Equity Fund. 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 Capital 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.
Ms. Clemente is the Chair, Chief Executive Officer and Global Strategist at
Clemente Capital, which she has led for over two decades. She is the lead
manager of the team that manages the Citizens Global Equity Fund.
Sevgi Ipek is the portfolio manager responsible for day-to-day management of the
Citizens Global Equity Fund, a position she assumed in 1995. Since joining
Clemente Capital in 1994, Ms. Ipek has also been responsible for Continental and
Eastern European asset allocation, investment strategy and stock selection for
all portfolios under management at Clemente. Prior to joining Clemente, Ms. Ipek
worked as an analyst and international economist for The WEFA Group, Inc.
28
<PAGE>
Citizens Funds Prospectus
Citizens Funds' Fees
For the services the adviser and sub-advisers provided to Citizens Funds during
the fiscal year ended June 30, 1999, the adviser received the following fees
(based on the average annual net assets of the respective funds):
Aggregate
Management and
Management Administrative Administrative
Fee Fee Fees*
================================================================================
Citizens Index Fund
================================================================================
Standard shares 0.50% 0.20% 0.70%
Administrative Class shares** 0.50% 0.20% 0.70%
Institutional Class shares 0.50% 0.09%+ 0.59%
================================================================================
Citizens Emerging Growth Fund
================================================================================
Standard shares 1.00% 0.10% 1.10%
Administrative Class shares** 1.00% 0.10% 1.10%
Institutional Class shares** 1.00% 0.10% 1.10%
================================================================================
Citizens Small Cap Index Fund
================================================================================
Standard shares** 0.50% 0.10% 0.60%
================================================================================
Citizens Global Equity Fund
================================================================================
Standard shares 1.00% 0.10% 1.10%
Administrative Class shares** 1.00% 0.10% 1.10%
Institutional Class shares** 1.00% 0.10% 1.10%
================================================================================
Citizens Income Fund
================================================================================
Standard shares 0.65% 0.10% 0.75%
================================================================================
Working Assets Money Market Fund
================================================================================
Standard shares 0.35% 0.15%+ 0.50%
Institutional Class shares 0.35% 0.00%+ 0.35%
- -------------------------
* The adviser also is reimbursed for the cost of providing shareholder
services to each fund, except in the case of the Citizens Index Fund,
Standard shares, where Citizens Advisers is paid a shareholder servicing
fee of up to 0.40% of average annual net assets. For the year ended June
30, 1999, this shareholder servicing fee for Citizens Index Fund, Standard
shares, was 0.31% of average annual net assets.
** Because the class of shares was not in existence for the fiscal year ended
June 30, 1999, the fees reflected are the contractual fees provided for
under the Management Agreement and Administrative and Shareholder Services
Agreement with the adviser.
+ The current administrative fees (based on the average annual net assets of
the respective funds) are as follows: Citizens Index Fund, Institutional
Class shares, up to 0.20%; Working Assets Money Market Fund, Standard
shares, up to 0.10%; Working Assets Money Market Fund, Institutional Class
shares, up to 0.10%.
29
<PAGE>
Citizens Funds Prospectus
12b-1 Fees and Classes
Citizens Funds offers Standard shares, Administrative Class shares and
Institutional Class shares. (Working Assets Money Market Fund does not offer
Administrative Class shares; Citizens Small Cap Index Fund and Citizens Income
Fund offer only Standard shares.) The minimum initial investments and
distribution fees for these classes differ. Administrative Class shares and
Institutional Class shares require higher minimum investments and carry lower
expense ratios than Standard shares. Each of the classes is no-load.
Citizens Funds has a 12b-1 Plan which allows us to pay Citizens Securities and
other distributors of the funds' shares distribution fees for the sale and
distribution of its shares. These fees reimburse these parties for sales-related
expenses including the printing of prospectuses and reports sent to
non-shareholders, as well as other sales material, advertising, communications
and salaries for salespeople and other personnel. We will also pay commissions
to outside brokers or service organizations for similar services. Because these
costs are paid out of each fund's net assets on an on-going basis, over time
these fees will increase the cost of your investment and may cost you more than
paying other types of sales charges. Institutional Class shares are not subject
to 12b-1 (distribution) fees.
With respect to the Standard shares and Administrative Class shares of each
fund, 0.25% of the applicable fund's net assets is payable under Citizens Funds'
12b-1 Plan and the related Distribution Agreement with Citizens Securities
(0.20% for the Working Assets Money Market Fund, Standard shares). No
distribution fees are payable with respect to the Institutional Class shares of
the funds.
================================================================================
SHAREHOLDER INFORMATION
================================================================================
All funds are no load. The Standard shares and Administrative Class shares of
each fund are subject to 12b-1 fees.
Investment Minimums
Standard Shares
o Minimum Initial Investment. The minimum initial investment in the
Standard shares of each fund is $2,500 ($1,000 for IRA, UGMA/UTMA and
Automatic Investment Plan accounts).
o Minimum Subsequent Investment. The minimum subsequent investment for
all accounts, including Automatic Investment Plan accounts, is $50.
30
<PAGE>
Citizens Funds Prospectus
o Minimum Balance. If your account falls below the minimum for the fund,
you will be assessed a monthly fee of $3 until you bring your balance
above the minimum. (This fee will also be applied to inactive
Automatic Investment Plan accounts.) If you do not bring your balance
up to the minimum, we may close your account by sending you a check
for your balance. Before closing your account, we will give you 30
days notice and an opportunity to bring the account up to the
applicable minimum.
Institutional and Administrative Class Shares
o Minimum Initial Investment. The minimum initial investment in
Administrative Class and Institutional Class shares is $1 million
($250,000 for registered investment advisers, and retirement plans at
the discretion of Citizens Funds).
o Minimum Subsequent Investment. There is no minimum subsequent
investment.
o Minimum Balance. With respect to accounts that fall below $1 million
(or $250,000 for registered investment advisers and retirement plans,
at the discretion of Citizens Funds), Citizens Funds reserves the
right to transfer these accounts from the Administrative Class or
Institutional Class and convert them to Standard shares. Before
converting an account to Standard shares, we will give you 30 days
notice and an opportunity to bring the account up to the required
minimum balance.
IRAs
There is an annual fee of $10 for each Individual Retirement Account (IRA), with
a maximum IRA account fee of $20 per shareholder. This fee is waived for total
IRA balances of $25,000 and higher and total account balances of $50,000 and
higher. There is also an IRA closure fee of $15.
In addition to different minimum investments, Standard shares, Institutional
Class shares and Administrative Class shares of the same fund also may differ in
amounts paid under the administrative and shareholder services contract with
Citizens Advisers and under Citizens Funds' 12b-1 Plan.
How We Value Our Shares
The price of shares in any of our funds is called the Net Asset Value. To
calculate Net Asset Value, we add up the total assets of the particular fund,
subtract all liabilities, then divide by the number of shares outstanding. Since
expenses differ among the classes of shares of the funds, the Net Asset Values
for Standard, Institutional Class and Administrative Class shares vary and are
computed separately.
31
<PAGE>
Citizens Funds Prospectus
Equity securities are valued at the closing sale price on the primary exchange
on which those 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.
Fixed income investments are generally valued at the bid price for securities.
Debt securities maturing within 60 days (and all securities held by the Working
Assets Money Market Fund) are normally valued at amortized cost. Amortized cost
is approximately equal to market value, and is described in the Statement of
Additional Information.
Securities may also be valued on the basis of valuations furnished by a pricing
service that uses both dealer-supplied evaluations and evaluations based on
analysis of market data or other factors, if these valuations are believed to
more accurately reflect the fair value of the securities.
If no market quotation is available for a given security (including restricted
securities that are subject to limitations on their sale), the funds' adviser or
sub-adviser will fairly value that security in good faith pursuant to the
policies established by Citizens Funds' board of trustees.
The values of foreign securities are converted from the local currency into U.S.
dollars using current exchange rates. If trading in the currency is restricted,
a fund will use a rate believed to reflect the currency's fair value in U.S.
dollars. Trading may take place in foreign securities held by a fund on days
when the fund is not open for business. As a result, the fund's Net Asset Value
may change on days on which shareholders are not able to purchase or sell fund
shares. If events materially affecting the value of foreign securities occur
between the time when the exchange on which they are traded closes and the time
when the fund's Net Asset Value is calculated, the securities may be valued at
fair value.
The value of our shares is determined on each day the New York Stock Exchange is
open for trading, at 4 p.m. Eastern time, or, if the New York Stock Exchange
closes earlier, at the close of business of the Exchange.
How to Buy and Sell 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 Citizens
mutual fund or through arrangements with your investment adviser or
broker-dealer. All checks must be made payable to "Citizens Funds." Citizens
Funds is unable to accept third-party checks. Foreign checks drawn on U.S.
dollars are accepted but shares purchased with foreign checks may 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,
32
<PAGE>
Citizens Funds Prospectus
your cost will be the Net Asset Value next determined after your payment is
received by the fund's transfer agent. You can purchase both full and fractional
shares, which will be rounded to the nearest 1/1000th of a share. If your check
is returned for any reason, you will be assessed a fee of $20.
Citizens Funds has authorized certain brokers, and these brokers have also been
authorized to designate intermediaries, to accept on its behalf purchase and
redemption orders. A fund will be deemed to have received such an order when the
broker or broker designee accepts the order, which shall be priced at the Net
Asset Value next computed after the broker or designee accepts the order.
Purchases and sales of fund shares through broker dealers may involve higher
fees.
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 Center at 1-800-223-7010.
Funds will be deposited into your Citizens Funds 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 Sell Shares
Telephone Redemption
We have a Telephone Exchange and Redemption option on your account application.
Under this option, you can call and tell us how much (up to $25,000) you want to
sell (redeem). Certain redemptions under $25,000 also may require a Medallion
Signature Guarantee (see information below), at the discretion of Citizens
Funds. Depending upon your instructions, we will deposit the amount of your
redemption into another Citizens Funds account, mail you a check or
electronically transfer your redemption to your pre-designated account.
Normally, we will send you your redemption on the next business day after we
receive your request. 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
33
<PAGE>
Citizens Funds Prospectus
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 all
telephone transactions, including balance verification. To keep these problems
to a minimum, we record all telephone calls. But please remember, Citizens Funds
will not be responsible nor will our adviser or transfer agent if we follow the
above precautions and act on telephone instructions we reasonably believe to be
genuine.
During periods of unusual market activity, severe weather or other abnormal
circumstances, it may be difficult for you to reach a representative of Citizens
Funds by telephone. Under such circumstances, please consider sending written
instructions.
Requests for Redemption
If you do not use the Telephone Exchange and Redemption option, you can redeem
your shares by sending us a written request at any time, although the process
will take longer. Requests for redemption of shares worth more than $25,000 must
be accompanied by an original Medallion Signature Guarantee, which is a
signature guarantee provided by an eligible guarantor (see list below). We may
require further documentation from corporations, fiduciaries, retirement plans
and/or institutional investors.
Certain requests for redemption under $25,000 also may require a Medallion
Signature Guarantee, at the discretion of Citizens Funds. To avoid delays, have
all written requests for redemption Medallion Signature Guaranteed.
We reserve the right to wait up to seven business days before paying the
proceeds of any redemption on any investments made by check and five business
days for purchases made by ACH transfer. If you pay by check, you will not
receive your redemption proceeds until after your check clears. Therefore, if
you need your redemption proceeds within seven business days of your purchase,
please invest by wire.
Redeem Your Shares through Broker-Dealers
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 Citizens Funds that permit them to order redemption of shares by telephone
or other electronic communication. Purchases and sales of fund shares through
broker-dealers may involve higher fees.
Redemption in Kind
The funds will normally redeem shares for cash, but may pay the redemption price
partly with portfolio securities where the redemption is for more than $250,000.
If portfolio securities are distributed instead of cash, shareholders may incur
brokerage commissions or other costs in converting the securities to cash.
34
<PAGE>
Citizens Funds Prospectus
Transactions Requiring Medallion Signature Guarantee
o All requests for redemption over $25,000 (and certain requests under
$25,000)
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
Eligible Guarantors
o Commercial Banks
o Trust Companies
o Savings Associations
o Credit Unions
o Broker-Dealers
o Members of domestic stock exchanges
Note: Notaries Public are not eligible guarantors.
You may sell (redeem) your shares on any business day. The redemption price for
your shares will be the Net Asset Value the next time it is calculated after
your redemption request, in proper form, has been received.
Shareholder Services and Policies
We try to demonstrate our commitment to your investment success by offering a
full family of socially responsible mutual funds and providing you with a
complete range of convenient services including the following retirement
services:
o Traditional and Roth IRAs
o SEP and SIMPLE IRAs
o 401(k), 403(b) and 457 plans
o Rollover and transfer services
Please call our Shareholder Service Center for more information at
1-800-223-7010.
Exchange Privilege
Since peoples' 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. (An exchange is considered a purchase and sale of shares for tax
purposes.) Just call us or write us with your request. The investment minimums
and monthly below minimum balance fee remain applicable to exchange purchases
into other funds.
35
<PAGE>
Citizens Funds Prospectus
Excessive Exchanges and Market Timing
Because excessive trading can lower a fund's performance and harm shareholders,
we reserve the right to suspend or terminate 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, may result in a termination of
exchange privileges or closure of your account. Before terminating exchange
privileges or closing an account, we ordinarily will give you 30 days notice and
an opportunity to respond and discuss the matter with one of our Shareholder
Service representatives. You may still redeem your shares in the event that your
exchange privileges are suspended or terminated.
We also reserve the right to close your account for any lawful reason,
including, but not limited to, reasonable suspicion of fraud or other illegal
activity in connection with the account.
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 you, but to protect
both you and Citizens Funds from fraud, we may require an original Medallion
Signature Guarantee, which is a signature guarantee from an eligible guarantor
(see list above) from all registered owners of the accounts.
Tax-Sheltered Retirement Plans
Our distributor, Citizens Securities, has arranged for shareholders to have
access to qualified IRAs, Roth IRAs, SIMPLE IRAs and 403(b) plans (for employees
of non-profit organizations). Our funds are suitable for 401(k) plans and other
types of retirement plans as well. Call us for a brochure and application.
Write a Check
When you open an account in the Working Assets Money Market Fund, we will send
you a 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 (waived with Eofund account). There will be a
$20.00 charge for any checks returned for any reason.
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<PAGE>
Citizens Funds Prospectus
Escrow
Redemption proceeds of shares purchased by check or ACH transfer are unavailable
for a period of time. See "How to Sell Shares Requests for Redemption," on page
34.
The Eofund(R) Account
Working Assets Money Market Fund offers a transaction account, the Eofund
Account, which is available through Citizens Funds' distributor, Citizens
Securities. The Eofund Account offers enhanced transactional features, including
free check writing and a MasterCard(R) debit card. It is available for an annual
fee of $35.00 and is not subject to the minimum balance fee. The MasterCard(R)
debit card may be used to redeem shares for cash at ATM machines, or to make
purchases at any retail location which accepts the debit card.
Costs for Services
Below $2,500/ $1,000 minimum balance fee $ 3.00/mo.
Annual IRA fee (per account) $ 10.00
Maximum Annual IRA fee (for all accounts) $ 20.00
IRA Closure Fee $ 15.00
Returned checks $ 20.00
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
Box of 200 checks for the Eofund Account $ 15.95 (first 20 free)
ATM withdrawal/cash withdrawal at bank $ 0.65 each/$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/each (free if
obtained through our
audio response system)
Mailing Address 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
37
<PAGE>
Citizens Funds Prospectus
Wiring Instructions: Transfer Agent and Dividend Paying Agent:
Citizens Funds PFPC Inc.
c/o PNC Bank, N.A. 400 Bellevue Parkway, Suite 108
Philadelphia, PA Wilmington, DE 19809
ABA#: 031000053
For Further Credit
A/C# 86-1030-3646
Shareholder name/fund name/account number
Overnight Delivery Packages (e.g., Federal Express, UPS, Airborne Express):
Citizens Funds
c/o PFPC Inc.
400 Bellevue Parkway, Suite 108
Wilmington, DE 19809
Please send only overnight delivery packages to the above address. Regular U.S.
Mail will not be accepted at this address and may be returned to you.
Please make all checks payable to "Citizens Funds." We are unable to accept
third-party checks.
================================================================================
DIVIDENDS, DISTRIBUTIONS AND TAXES
================================================================================
Unless you give us other instructions when you fill out your account application
- - or by telephone (1-800-223-7010) or in writing thereafter - we will
automatically reinvest your dividends and distributions from a fund into
additional shares of that fund, at the Net Asset Value calculated on the date
the dividends or distributions are payable.
We also can pay your dividends and distributions to you by check or electronic
transfer through the Automated Clearing House to your bank account. Information
regarding dividends and other distributions will be included on your statement.
Dividends and distributions of capital gains, if any, normally are declared and
paid on the following schedule:
Capital Gains
Dividend Distributions
--------------------- ------------------------
Declared Paid Long-term Short-term
================================================================================
Citizens Index Fund Annually Annually Annually Annually
================================================================================
Citizens Emerging
Growth Fund Annually Annually Annually Annually
================================================================================
Citizens Small Cap
Index Fund Annually Annually Annually Annually
================================================================================
Citizens Global
Equity Fund Annually Annually Annually Annually
================================================================================
Citizens Income Fund Monthly Monthly Annually Annually
================================================================================
Working Assets
Money Market Fund Daily Monthly None None
38
<PAGE>
Citizens Funds Prospectus
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. Dividends designated as capital gains
dividends are taxable as long-term capital gains. All other dividends are
generally taxable as ordinary income. We will send you a complete statement each
January as to the federal tax status of dividends and distributions paid by each
fund with respect to the previous calendar year.
Distributions of non-money market funds will reduce the fund'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.
When you redeem, sell or exchange shares of a Citizens fund, it is generally
considered a taxable event. Depending on the purchase price and the sale price
for the shares redeemed, sold or exchanged, you may have a gain or loss on the
transaction. You are responsible for any tax liabilities generated by your
transactions.
The account application asks each new investor to certify that the investor's
Social Security or taxpayer identification number is correct and that the
shareholder is not subject to 31% backup withholding for failing to report
income to the IRS. The funds may be required to withhold (and pay over to the
IRS for your credit) 31% of certain distributions and proceeds it pays you if
you fail to provide this information or otherwise violate IRS regulations.
Please consult your tax adviser for further information regarding the federal,
state and local tax consequences of an investment in Citizens Funds.
================================================================================
THE YEAR 2000
================================================================================
At Citizens Funds, we take Y2K preparedness very seriously and have endeavored
to focus the entire company on Y2K awareness and readiness. Our Y2K efforts to
date have included forming a Y2K committee and attendance at conferences and
seminars related to Y2K preparedness; preparation of a written Y2K Plan;
adoption of Y2K budgets for 1999 and 2000; preparation of a written contingency
plan; communications and coordination with our transfer agent, custodian,
sub-advisers, vendors and other third parties with whom our systems interface;
and reporting to our Board of Trustees on Y2K preparedness.
39
<PAGE>
Citizens Funds Prospectus
Our Y2K Plan includes inventory and assessment of all internal and external
systems, both mission-critical and non mission-critical; training; internal
testing; point-to-point testing; correction and replacement of systems; vendor
and third party assessment and monitoring; contingency planning and
implementation. Vendor and third party assessment and monitoring includes
written requests for information and statements, periodic reporting and
regularly scheduled teleconferences.
As of the date of this prospectus, we believe all of Citizens Funds' business
critical computer hardware is fully Y2K compliant as certified by the National
Software Testing Laboratories (NSTL) YMARK2000 program (www.nstl.com). Moreover,
we designed our internal software with Y2K in mind. Our remaining software is
compliant to the extent of each software manufacturer's compliance.
With respect to all systems with external connections, the following calendar
and deadlines have been adhered to: Assessment of all mission-critical systems
was completed by December 31, 1998 and all testing was completed by June 30,
1999. With respect to non-mission-critical systems, assessment was completed by
March 31, 1999 and all testing has been completed. With respect to vendor and
third party assessment and monitoring, it is our belief, based on statements we
have received from those entities, that all mission-critical services and
relationships will be Y2K compliant prior to January 1, 2000.
Although many companies have made significant progress and are confident that
their systems will be ready, no fund company (including Citizens Funds) can
guarantee that its operations will be free of all problems. This is partly
because of the interconnected nature of the financial industry and its computer
systems. Even if a fund company's internal systems are ready, a breakdown of any
systems belonging to its business partners can potentially disrupt operations.
For example, if there is a problem in the systems of one of the major stock
exchanges, mutual fund shareholders may be temporarily unable to obtain the
price of their fund. If the phone company has a problem with its phone lines,
shareholders may not be able to conduct transactions by phone or through the
Internet. As a result of this uncertainty, Citizens Funds has prepared a Y2K
contingency plan to respond to, and hopefully minimize the impact of, failures
in essential services, just as we would in the case of a power failure or
weather-related problems. Our Y2K contingency plan, which covers
mission-critical systems and communications, was recently completed and will
undergo ongoing review prior to year end.
As a security measure, we recommend keeping all printed statements from all your
financial institutions (including Citizens Funds) from now into the 21st
century. This will enable you to compare records after January 1, 2000 to verify
an accurate record of your information.
40
<PAGE>
Citizens Funds Prospectus
================================================================================
FINANCIAL HIGHLIGHTS
================================================================================
The financial highlights table starting on the next page is intended to help you
understand each fund's financial performance for the past five years or, if
shorter, the period of the fund's operations. Certain financial information
reflects financial results for a single fund share of the applicable class. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in a fund class (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP for the fiscal years ending June 30, 1998 and June
30, 1999, whose reports, along with the funds' financial statements, are
included in the annual report, which is available upon request. Financial
highlight information for periods prior to June 30, 1998 was audited by other
auditors.
41
<PAGE>
Citizens Funds Prospectus
Financial Highlights
Per Share Data
<TABLE>
<CAPTION>
Income (Loss) from
Investment Operations Less Distributions
---------------------------------------- ------------------------------------------
Year Net Asset Net Net Gain Total From Dividends Distributions Total Net Asset
Ended Value, Income (Loss) on Investment (from Net (from Net Distributions Value,
June 30 Beginning (Loss) Securities Operations Income) Realized End of
of Period (both Gains) Period
Realized &
Unrealized)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citizens Index Fund-Standard shares
====================================================================================================================================
1995(1) $10.00 $ 0.01 $ 0.93 $ 0.94 $ 0.00 $ 0.00 $ 0.00 $10.94
1996 10.94 0.08 2.47 2.55 (0.03) (0.05) (0.08) 13.41
1997 13.41 0.00 4.78 4.78 (0.06) (0.09) (0.15) 18.04
1998 18.04 (0.07) 6.44 6.37 0.00 (0.95) (0.95) 23.46
1999 23.46 (0.15) 7.52 7.37 0.00 (0.31) (0.31) 30.52
====================================================================================================================================
Citizens Index Fund-Institutional Class shares
====================================================================================================================================
1996(4) $10.00 $ 0.08 $ 0.92 $ 1.00 $ 0.00 $ 0.00 $ 0.00 $11.00
1997 11.00 0.08 3.94 4.02 (0.09) (0.09) (0.18) 14.84
1998 14.84 0.11 5.21 5.32 (0.08) (0.95) (1.03) 19.13
1999 19.13 0.01 6.19 6.20 0.00 (0.31) (0.31) 25.02
====================================================================================================================================
Citizens Emerging Growth Fund-Standard shares
====================================================================================================================================
1995 $ 9.93 $ 0.07 $ 2.18 $ 2.25 $(0.09) $(0.22) $(0.31) $11.87
1996 11.87 (0.13) 4.72 4.59 0.00 (1.59) (1.59) 14.87
1997 14.87 (0.16) 0.68 0.52 0.00 (1.25) (1.25) 14.14
1998 14.14 (0.20) 4.61 4.41 0.00 (1.00) (1.00) 17.55
1999 17.55 (0.19) 6.19 6.00 0.00 (1.79) (1.79) 21.76
====================================================================================================================================
Citizens Global Equity Fund-Standard shares
====================================================================================================================================
1995 $ 9.80 $(0.01) $ 0.96 $ 0.95 $ 0.00 $(0.06) $(0.06) $10.69
1996 10.69 (0.10) 1.43 1.33 0.00 (0.13) (0.13) 11.89
1997 11.89 (0.07) 2.65 2.58 0.00 0.00 0.00 14.47
1998 14.47 (0.20) 3.24 3.04 0.00 (0.56) (0.56) 16.95
1999 16.95 (0.12) 3.86 3.74 0.00 (0.47) (0.47) 20.22
</TABLE>
(1) Period from March 3, 1995 (commencement of operations)
(2) Annualized
(3) Not annualized
(4) Period from January 25, 1996 (commencement of operations)
42
<PAGE>
Citizens Funds Prospectus
Ratios And Supplemental Data
<TABLE>
<CAPTION>
Portfolio Net Assets Ratio of Ratio of Ratio of Net Total
Turnover End of Period Expenses to Expenses to Income (Loss) Return
Rate (in 000's) Average Net Average Net to Average
Assets Net of Assets Prior to Net Assets
Reimbursement Reimbursement
or Fee Waiver or Fee Waiver
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Citizens Index Fund - Standard shares
=======================================================================================================
64.95% $106,096 1.75%(2) 1.75%(2) 0.98%(2) 9.40%(3)
6.44 136,980 1.79 1.82 0.68 23.41
18.64 211,116 1.59 1.59 0.02 35.88
13.64 341,395 1.59 1.59 (0.39) 36.50
18.04 578,286 1.58 1.58 (0.68) 31.58
=======================================================================================================
Citizens Index Fund - Institutional Class shares
=======================================================================================================
6.44% $ 7,524 0.98%(2) 1.01%(2) 2.37%(2) 10.00%(3)
18.64 13,001 0.88 0.88 0.76 36.93
13.64 31,673 0.88 0.88 0.28 37.38
18.04 98,705 0.83 0.83 0.05 32.62
=======================================================================================================
Citizens Emerging Growth Fund - Standard shares
=======================================================================================================
231.30% $ 10,638 1.90% 2.93%. 0.53% 23.24%
337.41 36,409 2.02 2.34 (1.64) 42.43
228.66 60,341 1.99 2.01 (1.32) 4.03
245.30 87,892 1.96 1.96 (1.37) 33.05
208.49 136,137 1.82 1.83 (1.20) 36.04
=======================================================================================================
Citizens Global Equity Fund - Standard shares
=======================================================================================================
22.10% $ 9,503 2.50% 2.99% 0.00% 9.77%
85.92 15,595 2.55 2.72 (1.01) 12.52
69.34 29,573 2.10 2.33 (0.70) 21.70
72.33 49,045 2.20 2.20 (0.76) 21.75
64.07 90,549 1.96 1.96 (0.88) 22.34
</TABLE>
43
<PAGE>
Citizens Funds Prospectus
Financial Highlights
Per Share Data
<TABLE>
<CAPTION>
Income (Loss) from
Investment Operations Less Distributions
---------------------------------------- ------------------------------------------
Year Net Asset Net Net Gain Total From Dividends Distributions Total Net Asset
Ended Value, Income (Loss) on Investment (from Net (from Net Distributions Value,
June 30 Beginning (Loss) Securities Operations Income) Realized End of
of Period (both Gains) Period
Realized &
Unrealized)
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Citizens Income Fund
====================================================================================================================================
1995 $10.04 $ 0.65 $ 0.36 $ 1.01 $(0.65) $(0.02) $(0.67) $10.38
1996 10.38 0.66 (0.10) 0.56 (0.66) 0.00 (0.66) 10.28
1997 10.28 0.67 0.28 0.95 (0.67) 0.00 (0.67) 10.56
1998 10.56 0.60 0.49 1.09 (0.60) (0.02) (0.62) 11.03
1999 11.03 0.59 (0.50) 0.09 (0.59) (0.02) (0.61) 10.51
====================================================================================================================================
Working Assets Money Market Fund - Standard shares
====================================================================================================================================
1995 $ 1.00 $0.044 $0.000 $0.044 $(0.044) $0.000 $(0.044) $ 1.00
1996 1.00 0.045 0.000 0.045 (0.045) 0.000 (0.045) 1.00
1997 1.00 0.042 0.000 0.042 (0.042) 0.000 (0.042) 1.00
1998 1.00 0.045 0.000 0.045 (0.045) 0.000 (0.045) 1.00
1999 1.00 0.040 0.000 0.040 (0.040) 0.000 (0.040) 1.00
====================================================================================================================================
Working Assets Money Market Fund- Institutional Class shares
====================================================================================================================================
1996(1) $ 1.00 $0.021 $0.000 $0.021 $(0.021) $0.000 $(0.021) $ 1.00
1997 1.00 0.049 0.000 0.049 (0.049) 0.000 (0.049) 1.00
1998 1.00 0.051 0.000 0.051 (0.051) 0.000 (0.051) 1.00
1999 1.00 0.045 0.000 0.045 (0.045) 0.000 (0.045) 1.00
</TABLE>
(1) Period from February 1, 1996 (commencement of operations)
(2) Annualized
(3) Not annualized
44
<PAGE>
Citizens Funds Prospectus
Ratios And Supplemental Data
<TABLE>
<CAPTION>
Portfolio Net Assets Ratio of Ratio of Ratio of Net Total
Turnover End of Period Expenses to Expenses to Income (Loss) Return
Rate (in 000's) Average Net Average Net to Average
Assets Net of Assets Prior to Net Assets
Reimbursement Reimbursement
or Fee Waiver or Fee Waiver
=======================================================================================================
<S> <C> <C> <C> <C> <C>
Citizens Income Fund
=======================================================================================================
46.03% $ 30,122 1.35% 1.48% 6.47% 10.45%
41.36 32,276 1.38 1.48 6.26 5.48
64.56 33,230 1.41 1.47 6.44 9.57
80.14 51,366 1.74 1.86 5.55 10.49
44.07 62,837 1.45 1.49 5.50 0.78
=======================================================================================================
Working Assets Money Market Fund - Standard shares
=======================================================================================================
N/A $ 97,611 1.16% 1.16% 4.39% 4.51%
N/A 78,326 1.18 1.21 4.56 4.60
N/A 85,179 1.25 1.39 4.23 4.30
N/A 103,597 1.21 1.23 4.46 4.54
N/A 105,740 1.19 1.24 4.00 4.07
=======================================================================================================
Working Assets Money Market Fund- Institutional Class shares
=======================================================================================================
N/A $14,539 0.47% (2) 0.47% (2) 5.16%(2) 2.09%(3)
N/A 17,504 0.60 0.60 4.92 5.01
N/A 18,178 0.56 0.56 5.11 5.23
N/A 22,464 0.70 0.70 4.47 4.58
</TABLE>
45
<PAGE>
Citizens Funds ProspectusCitizens Funds ProspectusCitizens Funds ProspectusNote:
IBCCitizens Funds' Statement of Additional Information, which is available free
upon request, contains more detailed information about the funds and their
management and operations. The Statement of Additional Information is
incorporated by reference into this prospectus and is legally part of it.
Additional information about the funds' investments is available in Citizens
Funds' Annual and Semi-Annual Reports to Shareholders. In Citizens Funds' Annual
Report, you will find a discussion of the market conditions and investment
strategies that significantly affected the funds' performance during their last
fiscal year. Citizens Funds' Semi-Annual Report updates information in the
Annual Report for the subsequent six months.
To make inquiries about the funds or get a copy of the Statement of Additional
Information or Annual or Semi-Annual Reports, call 1-800-223-7010 or visit
Citizens Funds' web site at www.citizensfunds.com.
Information about Citizens Funds (including the Statement of Additional
Information) can be reviewed and copied at the Securities and Exchange
Commission's Public Reference Room in Washington, D.C. For more information
about the operation of the Public Reference Room you may call the Commission at
1-800-SEC-0330. Reports and other information about Citizens Funds are available
on the Commission's Internet site at www.sec.gov and copies may be obtained,
upon payment of a duplicating fee, by writing the Public Reference Section of
the Commission, Washington, D.C. 20549-6009.
SEC File No. 811-3626.
[LOGO] CITIZENS
FUNDS
1-800-223-7010
www.citizensfunds.com
Citizens Funds are available through such mutual fund supermarkets as
Charles Schwab's Mutual Fund OneSource and Fidelity Investments Funds Network.
Working Assets is a registered trademark of Working Assets Funding Service.
Used under license.
Citizens Funds(TM), Citizens Index(TM) and Citizens Small Cap Index(TM)
are trademarks of Citizens Advisers.
Eofund(R) is a registered trademark of Citizens Advisers.
(C)1999 Citizens Advisers
[LOGO] Printed on recycled paper with soy-based inks.
<PAGE>
Rule 497(c)
File Nos. 2-80886
811-3626
Citizens Funds
Statement of Additional Information
November 1, 1999
This Statement is not a prospectus and should be read in conjunction with the
Citizens Funds' Prospectus dated November 1, 1999. 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, New Hampshire 03801. This
Statement of Additional Information and the Prospectus may be amended or
supplemented from time to time.
Citizens Funds
Citizens Index Fund
Citizens Emerging Growth Fund
Citizens Small Cap Index Fund
Citizens Global Equity Fund
Citizen Income Fund
Working Assets Money Market Fund
Table of Contents Page
Citizens Funds............................................................. 2
Investment Strategies, Risks and Fundamental Policies ..................... 2
Trustees, Officers and Beneficial Owners...................................11
Investment Advisory and Other Services.....................................15
Brokerage Allocation and Soft Dollars......................................22
Ownership of Shares and Shareholder Rights.................................23
How We Value Fund Shares...................................................27
Tax Matters................................................................30
How We Calculate Performance...............................................33
Financial Statements.......................................................37
Appendix A: Description of Ratings.........................................38
<PAGE>
Citizens Funds
Citizens Funds (the "Trust"), a Massachusetts business trust organized on
November 19, 1982, is an open-end investment company registered under the
Investment Company Act of 1940 as a diversified management company. Citizens
Funds presently consists of six separate series, each with its own investment
objective, assets and liabilities: 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), Citizens Index Fund (inception date 3/3/95) and Citizens Small Cap
Index Fund (inception date 10/28/99). On May 28, 1992 the Trust, 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 Trust
changed its name from Working Assets Common Holdings to Citizens Investment
Trust, and on July 14, 1998 it changed its name to Citizens Funds. Each of the
series of Citizens Funds is referred to herein as a "fund," or, collectively,
the "funds."
This Statement of Additional Information relates to all six funds and to
Standard, Administrative and Institutional Class shares.
Investment Strategies, Risks and Fundamental Policies
Investment Strategies and Risks
In addition to the principal investment strategies and risks described in
the Prospectus, Citizens Funds will from time to time employ other investment
strategies which are described below.
The funds may, but need not, invest in any or all of the investments and
use any or all of the investment techniques described below and in the
Prospectus. The choice of investments and use of investment techniques depend
on, among other things, a particular fund's investment strategies, conditions
and trends in the economy and financial markets and investments being available
on terms that are acceptable to the fund.
Money Market Instruments
During periods of unusual market conditions, or for liquidity purposes or
pending the investment of the proceeds of the sale of a fund's shares, a fund
may invest all or a portion of its assets in money market instruments,
including, but not limited to:
o obligations of agencies and enterprises of the U.S. Government ;
o certificates of deposit of banks; and
o commercial paper or other corporate notes of investment grade
quality.
Repurchase Agreements
Our funds may also enter into repurchase agreements with primary dealers or
banks which are members of the Federal Reserve, secured by instruments issued or
guaranteed by agencies or instrumentalities of the U.S. Government, the values,
including accrued interest, of 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 particular 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 a fund is unrelated to the interest rate on securities
collateralizing the repurchase.
The Trust requires all vendors of repurchase agreements to set aside
collateral in the applicable fund's 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 greater risk than directly investing in securities. If a bank
or stockbroker becomes bankrupt, or otherwise defaults after selling a fund a
repurchase agreement, the fund may suffer some delay and expense in liquidating
the securities, decline in the value of the securities and loss of principal or
interest.
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<PAGE>
Derivative Securities
Derivative securities such as futures, options and warrants are financial
instruments whose values depend on or derive from underlying investments,
indexes or currencies. Derivatives involve special risks and may result in
losses.
Options. Each fund, other than Working Assets Money Market Fund, may from
time to time buy and write (sell) options on securities, securities indexes, and
foreign currencies that are traded on recognized securities exchanges and
over-the-counter markets. The value of options is determined by the performance
of the underlying financial benchmarks or indexes to which they are tied. 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 a 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).
Warrants. Each fund, other than Working Assets Money Market Fund, may
invest in warrants. Warrants are instruments that entitle the holder to buy
underlying equity securities at a specific price for a specific period of time.
Such warrants are typically held on a fund's books at zero value when market
quotations are unavailable, as the value of these warrants can only be realized
upon their exercise.
Structured Securities. Our non-money market funds 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. In the
most extreme cases, some classes of stripped mortgage-backed securities may
receive only interest payments (called IOs because they receive interest only)
and other classes of stripped mortgage-backed securities may receive only
principal payments (called POs because they receive principal only).
Risks. The use of derivative securities depends on the fund manager's or a
sub-adviser's ability to predict correctly the direction of interest rates,
securities prices or other factors. Risks include:
o 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;
o an imperfect correlation between the price of derivatives and the
movements of the securities prices, interest rates or currency
exchange rates being hedged;
o the possible absence of a liquid secondary market for any particular
derivative at any time;
o the potential loss if the counterparty to the transaction does not
perform as promised; and
o the possible need to defer closing out certain positions to avoid
adverse tax consequences.
3
<PAGE>
Options may present additional risks because the fund managers may
determine that exercise of the option will not benefit the fund, and therefore
the amount invested to acquire the option will be lost. Also, the fund may be
required to purchase at a loss a security on which it has sold a put option.
Warrants tend to be more volatile than the underlying securities on which
they are based and cease to have value if they are not exercised prior to their
expiration date. In addition, changes in the value of a warrant do not
necessarily correspond to changes in the value of the underlying securities.
Structured Securities, or Strips may be affected by changes in interest
rates. The value of an interest-only strip generally will go down as interest
rates go up. A rapid rate of principal payments (including prepayments) may
cause an interest-only strip to mature before a fund receives the money it
initially invested in the security. This may happen if interest rates go down. A
fund's ability to collect interest payments also will end if an interest-only
strip defaults. Conversely, a fund's investment in principal-only strips may be
adversely affected by a lower than expected rate of principal payments
(including prepayments) on the underlying pool of mortgage loans. A lower rate
of principal payments (including prepayments) effectively extends the maturity
of a principal-only strip, making it worth less money in today's dollars.
Securities with longer maturities are more susceptible to changes in interest
rates. Changes in interest rates affect the value of principal-only strips more
than traditional mortgage-backed securities or other debt obligations that pay
interest at regular intervals.
Foreign Securities
Each fund may invest in foreign securities which meet the Trust's social
and financial criteria. Investing in foreign securities generally presents a
greater degree of risk than investing in domestic securities due to possible
exchange rate fluctuations or controls, 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 a
fund believes that the applicable exchange rate is unfavorable at the time the
currencies are received or anticipates, for any other reason, that the exchange
rate will improve - the 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 would permit the fund to
take advantage of favorable movements in the applicable exchange rate, such
strategy also would expose 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.
The Citizens Global Equity Fund and the Citizens Emerging Growth Fund may
invest in foreign companies through investments in American Depositary Receipts
("ADRs"). These securities are not usually denominated in the same currency as
the securities into which they may be converted. ADRs are receipts typically
issued by a U.S. bank or trust company evidencing ownership of the underlying
securities. ADRs are subject to many of the same risks that apply to other
investments in non-U.S. securities.
When-Issued Securities
Each fund, other than 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 will take delivery of securities it has purchased on
a "when-issued" basis. When a fund commits to purchase a security on a
when-issued or forward delivery basis it will set up procedures consistent with
current policies of the Securities and Exchange Commission (the "SEC")
concerning such purchases. Since those policies currently recommend 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, the Trust intends 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 the Trust does not intend to make such
4
<PAGE>
purchases for speculative purposes and intends 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, a fund may
have to sell assets which have been set aside to cover its commitments in order
to meet redemptions. Also, if the funds' adviser, Citizens Advisers, Inc.
("Citizens Advisers" or the "Adviser"), 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 the 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).
Private Placements and Illiquid Investments
Each fund may invest up to 10% of its net assets in securities for which
there is no readily available market. A fund will not buy these illiquid
securities unless the assets in the fund exceed $10 million at the time of
purchase. Illiquid securities may include privately placed restricted securities
for which no institutional market exists. The absence of a trading market can
make it difficult to determine a market value for illiquid securities. Disposing
of illiquid securities may involve time-consuming negotiation and legal
expenses, and it may be difficult or impossible for a fund to sell them promptly
at an acceptable price.
Rule 144A Securities
Each fund may purchase securities that are not registered ("restricted
securities") under the Securities Act of 1933, but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act.
However, a fund will not invest more than 10% of its net assets (taken at market
value) in illiquid investments, which include securities for which there is no
readily available market, securities subject to contractual restrictions on
resale and restricted securities. Restricted securities which may be traded
pursuant to Rule 144A will not be subject to these limitations, if the funds'
Board of Trustees finds that a liquid trading market exists for these
securities. The Trustees have adopted guidelines and, subject to oversight by
the Trustees, have delegated to the Adviser and to any applicable sub-adviser
the daily function of determining and monitoring liquidity of restricted
securities. See "Fundamental Policies" below.
Real Estate Securities
The Citizens Income Fund may invest in equity securities of companies in
the real estate industry, including real estate investment trusts ("REITs").
These securities are sensitive to changes in real estate values, property taxes,
interest rates, real estate asset cash flows, occupancy rates, governmental
regulations and the management skill and creditworthiness of the issuer. REITs
also may be subject to liability under environmental and hazardous waste laws.
Hedging Risk
The Citizens Global Equity Fund may (but is not required to) enter into
hedging transactions, or 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. Hedging may not achieve its objective of reducing the effects of
currency fluctuations on the fund, and may create losses or reduce the fund's
potential gains.
Euro Conversion Risk
The Citizens Global Equity Fund may invest in securities of European
issuers. Certain European countries that are a part of the European Economic
Union have agreed to participate in the conversion to a single European
currency, the euro. This conversion is to be completed by July 1, 2002 and its
effects on investments in the securities of European issuers and foreign
currencies is currently unclear. The fund may be adversely affected if the
conversion to the euro is not successfully completed or if the
5
<PAGE>
computer or other data processing systems used in European financial markets or
by the fund are not able to process transactions involving the euro.
Fundamental Policies
The following are fundamental investment policies followed by each of the
funds (unless otherwise noted below) which supplement those listed in the
Prospectus. Any policy identified as a fundamental investment policy of a fund
may be amended with respect to the fund only with approval of the holders of a
majority of the outstanding shares of that fund (a "Majority Shareholder Vote"),
which as used herein means the vote of the lesser of (a) 67% or more of the
outstanding voting securities of the fund present at a meeting at which the
holders of more than 50% of the outstanding voting securities of the fund are
present or represented by proxy, or (b) more than 50% of the outstanding voting
securities of the fund. The term "voting securities" has the same meaning as in
the Investment Company Act of 1940, as amended (the "1940 Act").
1. Subject to the provisions of the funds' Declaration of Trust, which
provides that we may issue several classes of shares in any one fund,
the funds may not issue senior securities. They may not issue
securities that have priority over others in dividends, redemption
rights, or have other privileges.
2. The funds must limit their 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 that 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
the funds' Board of Trustees finds that a liquid trading market exists
for these securities. The funds' 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 the funds' 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 a 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 the funds' Trustees.
3. The funds may borrow only under special circumstances. The funds 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 a fund does
borrow, it can pledge its 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. A fund will not purchase any
securities while the fund has borrowings above 5% of assets
outstanding. The interest paid on a fund's borrowings would reduce
that fund's net income.
4. The funds may not underwrite securities, which means they may not sell
securities for others.
5. The funds may not buy the securities of any company if the particular
fund would then own more than 10% of the total value of all of the
company's outstanding voting securities, or if the Trust 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
6
<PAGE>
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.
6. As a general policy, the funds will not 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.
7. The funds 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.
8. The funds may not make loans other than pursuant to repurchase
agreements. When a fund buys money market instruments or loan
participation interests, it is investing, not making a loan.
9. The funds may not invest for the purpose of exercising control or
management of other companies.
10. The funds may not buy or continue to hold securities if the funds'
Trustees or officers or the Directors or officers of 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.
11. The funds may not participate with others on a joint, or a joint and
several, basis in any trading account in any securities.
12. The funds may not, in managing 75% of its assets, invest more than 5%
in any one company; however, obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities are not included
in this limit.
13. 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.
14. The following is a fundamental policy for the Citizens Index Fund,
Citizens Global Equity Fund, Citizens Income Fund and the Working
Assets Money Market Fund but does not apply to the Citizens Emerging
Growth Fund or the Citizens Small Cap Index 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.
15. The Working Assets Money Market Fund 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.
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.
7
<PAGE>
Temporary Defensive Positions
Each fund may invest in cash, cash equivalents, money market instruments
and repurchase agreements as temporary defensive positions during volatile or
other adverse or unusual market, economic, political or economic conditions.
Such temporary defensive positions would be inconsistent with a fund's principal
investment strategies and may adversely impact fund performance.
Portfolio Turnover
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 the Adviser or a
sub-adviser.
For the Citizens Income Fund we purchase fixed income securities and for
the Citizens Index Fund, Citizens Emerging Growth Fund, Citizens Global Equity
Fund and the Citizens Small Cap 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 20% per year, whereas the Citizens Emerging
Growth Fund's turnover rate may be in excess of 200%. Higher portfolio turnover
rates increase transaction costs and may increase taxable gains. For the fiscal
years ended June 30, 1997, 1998 and 1999, the funds had the following portfolio
turnover rates: Citizens Index Fund -- 18.64%, 13.64% and 18.04%; Citizens
Emerging Growth Fund -- 228.66%, 245.30% and 205.78%; Citizens Global Equity
Fund -- 69.34%, 72.33% and 64.07%; and Citizens Income Fund -- 64.56%, 80.14%
and 43.65%, respectively. The Citizens Small Cap Index Fund is newly-organized
and did not offer shares during these periods.
There were no significant variations in fund turnover rates over the past
two fiscal years and none are anticipated in fiscal year 2000.
More Details on the Working Assets Money Market Fund
The following are present policies of the Working Assets Money Market Fund,
but may be changed by the Trust's 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. If
the principal of a variable amount master demand note cannot be demanded
within 7 days, the note is treated as illiquid and subject to the 10%
limitation referred to in paragraph 4 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
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. The fund's right to redeem is
dependent on the borrower's ability to pay principal and interest on
demand. Accordingly, the fund's 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. The fund
will invest in these notes only if the Board of Trustees or the Adviser
determines that they present minimal
8
<PAGE>
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 Ratings Group ("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 "Investment Strategies,
Risks and Fundamental Policies - Investment Strategies and Risks -
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, the fund's 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 funds under "Investment Strategies, Risks and Fundamental Policies -
Fundamental 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 "How We Value Fund
Shares"), the fund will not purchase any instruments with a remaining maturity
of more than 397 days (approximately 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
9
<PAGE>
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 portfolio 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 underlying security 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 Adviser 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.
Trustees, Officers and Beneficial Owners
A Board of Trustees oversees and monitors the management of the Trust.
These oversight responsibilities include selection of the investment adviser and
election of officers, who are in turn responsible for the day to day operations
of the Trust. The Trustees and officers are listed below. The Trustees who are
"interested persons" of the Trust, as defined in the 1940 Act ("Interested
Trustees"), are indicated by an asterisk.
- --------------------------------------------------------------------------------
Name, Address Position(s) Held Principal Occupation(s)
And Age With Trust During Past 5 Years
- --------------------------------------------------------------------------------
Azie Taylor Morton, Chair of the Investment adviser;
10910 Medfield Court, Board and Consultant/Director of Marketing,
Austin, TX 78739 Trustee GRW Capital Corporation (since 1992)
63 years
- --------------------------------------------------------------------------------
William D. Glenn, II Trustee Psychotherapist and Executive
915 Las Ovejas, Director of Continuum HIV Day
San Rafael, CA 94903 Services, a non-profit corporation
51 years promoting AIDS awareness, treatment
and research (since 1993)
- --------------------------------------------------------------------------------
Sophia Collier* Trustee Portfolio Manager Citizens Funds
230 Commerce Way, (since 1995);
Suite 300 Chair of the Board of Directors,
Portsmouth, NH 03801 Citizens Advisers (since 1991);
43 years
- --------------------------------------------------------------------------------
10
<PAGE>
President, Citizens Funds and
Citizens Advisers (1991 to
September 1998)
- --------------------------------------------------------------------------------
John L. Shields* Trustee and President and Chief Executive
230 Commerce Way, President Officer of Citizens Advisers (since
Suite 300 September 1998);
Portsmouth, NH 03801 Senior Management Consultant,
46 years Cerulli Associates, a mutual
fund consulting firm (1995 to
1998); Senior Vice President
and Chief Administrative
Officer, Chief Operating
Officer and Chief Financial
Officer, State Street Research
Investment Services, Inc.
(1991 to 1995)
- --------------------------------------------------------------------------------
Juliana Eades Trustee Executive Director, New Hampshire
98 Baptist Rd., Community Loan Fund (since 1984),
Canterbury, NH 03224 a non-profit corporation promoting
46 years community investment and development
- --------------------------------------------------------------------------------
Lokelani Devone Trustee Associate General Counsel, Levi
424 Collingwood St. Strauss & Co. (since August 1999);
San Francisco, CA 94114 Assistant General Counsel, DFS
42 years Group Limited (international retail
business group) (1989 to 1999)
- --------------------------------------------------------------------------------
Ada Sanchez Trustee Student (since 1996);
501 116th Avenue North Director of Public Service and
#148 Social Change Program, Hampshire
St. Petersburg, FL 33716 College (1987 to 1996)
47 years
- --------------------------------------------------------------------------------
Robert B. Reich* Trustee University Professor and the
4 Mercer Circle, Maurice B. Hexter Professor of
Cambridge, MA 02138 Social and Economic Policy,
53 years Brandeis University and its Heller
Graduate School (since 1997);
U.S. Secretary of Labor (1993 to
1997)
- --------------------------------------------------------------------------------
Mitchell Johnson, Trustee Retired (since 1995);
2753 Unicorn Lane NW, Director, Eldorado Bancshares, Inc.
Washington, DC 20015 (since 1997);
57 years President, M.A.J. Capital
Management, Inc. (money
management firm) (1994 to
1995); Senior Vice President
of Corporate Finance, Student
Loan Marketing Association
(1987 to 1994)
- --------------------------------------------------------------------------------
Joseph F. Keefe Secretary Executive Vice President and
230 Commerce Way, General Counsel, Citizens Advisers
Suite 300 (since May 1997);
Portsmouth, NH 03801 Partner, Hall, Hess, Kenison,
45 years Stewart, Murphy & Keefe (law firm)
(1984 to 1997)
- --------------------------------------------------------------------------------
Sean Driscoll Treasurer Director of Fund Accounting and
230 Commerce Way, Compliance, Citizens Advisers
Suite 300 (since November 1998);
Portsmouth, NH 03801 Director of Fund Administration,
34 years State Street Bank and Trust Company
(March 1998 to November 1998);
- --------------------------------------------------------------------------------
11
<PAGE>
Vice President of Compliance,
Putnam Investments (January 1997 to
March 1998);
Fund Accountant and Director of
Fund Administration, State Street
Bank and Trust Company (1987 to
1997)
- --------------------------------------------------------------------------------
Crescentia True Vice Executive Vice President,
230 Commerce Way, President Operations, Citizens Advisers
Suite 300 (since 1994)
Portsmouth, NH 03801
35 Years
- --------------------------------------------------------------------------------
Samuel Pierce Assistant Senior Social Analyst, Citizens
230 Commerce Way, Vice Advisers (since July 1998);
Suite 300 President Assistant Vice President,
Portsmouth, NH 03801 Wellington Management Company, LLC
31 years (November 1992 to July 1998)
- --------------------------------------------------------------------------------
John M. O'Brien Assistant Director of Corporate Finance,
230 Commerce Way, Treasurer Citizens Advisers (since October
Suite 300 1998);
Portsmouth, NH 03801 Business Manager, Fidelity
34 Years Investments (October 1989 to
January 1998);
Services Manager, Bank Boston
(January 1998 to October 1998)
- --------------------------------------------------------------------------------
The Board of Trustees functions with a Nominating Committee comprised of
the whole Board, but pursuant to the Trust's Distribution Plan, the Trust has
agreed that Trustees who are not "interested persons," as defined in the 1940
Act, of the Trust and who have no direct or indirect financial interest in the
operation of the Distribution Plan or any agreement relating to the Plan (the
"Independent Trustees") shall have responsibility for the selection and
nomination of other Independent Trustees. This agreement will continue for so
long as the Distribution Plan is in effect.
The following compensation table discloses the aggregate compensation from
the Trust for services provided through June 30, 1999. None of the Trustees
receive pension or retirement benefits or any other compensation beyond that
listed below. Trustees were, however, reimbursed the costs of travel, meals and
lodging associated with attendance at meetings.
CITIZENS FUNDS- COMPENSATION TABLE
- --------------------------------------------------------------------------------
Name of Person and Aggregate Compensation
Position from Citizens Funds
Azie Taylor Morton $15,295
Juliana Eades $11,500
William D. Glenn, Jr $11,500
Ada Sanchez $11,500
Lokelani Devone $11,500
Mitchell Johnson $11,500
Sophia Collier* 0
John S. Shields* 0
Robert B. Reich* 0
* Sophia Collier, John Shields and Robert B. Reich are Interested Trustees and
received no compensation from Citizens Funds.
12
<PAGE>
As of October 1, 1999, there were 170,883,129 outstanding shares of
beneficial interest, representing all the shares of all the funds comprising
Citizens Funds. As of October 1, 1999 the following shareholders owned
beneficially or of record 5% or more of the outstanding shares of a fund:
- --------------------------------------------------------------------------------
Percentage
Fund: Shareholder: Address: Ownership:
- --------------------------------------------------------------------------------
Citizens Index Fund, Charles Schwab & Special Custody Account FBO 15.43%
Standard shares Co., Inc. Customers
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Citizens Index Fund, Northern Trust P.O. Box 92956 31.77%
Institutional Class Company 801 S. Canal St.
shares Chicago, IL 60675
- --------------------------------------------------------------------------------
Wendel & Co. Mutual Fund/Reorganization 15.06%
Dept.
P.O. Box 1066
New York, NY 10268
- --------------------------------------------------------------------------------
Citizens Emerging Charles Schwab & Special Custody Account FBO 12.62%
Growth Fund, Standard Co., Inc. Customers
shares 101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Citizens Global Charles Schwab & Special Custody Account FBO 33.33%
Equity Fund, Standard Co., Inc. Customers
shares 101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
National Financial 200 Liberty St., 5th Floor 5.97%
Services Corp. One World Financial Center
New York, NY 10281-1003
- --------------------------------------------------------------------------------
Citizens Income Fund Charles Schwab & Special Custody Account FBO 12.23%
Co., Inc. Customers
101 Montgomery St.
San Francisco, CA 94104-4122
- --------------------------------------------------------------------------------
Working Assets Money Bankers Trust Co. 34 Exchange Place, 6th Floor 23.46%
Market Fund, of Cattee Jersey City, NJ 07302
Institutional Class
shares
- --------------------------------------------------------------------------------
Our Trustees and officers as a group owned less than 1% of the outstanding
shares of each fund and class as of October 1, 1999, except for the Citizens
Index Fund, Institutional Class shares, where a single trustee owned 2.09% of
the outstanding shares.
Investment Advisory and Other Services
Adviser
13
<PAGE>
The funds are advised by Citizens Advisers, Inc. 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.
The Management Agreement provides that the Adviser, subject to the control of
the Trust's Board of Trustees, will decide which securities will be bought and
sold, and when, and requires the Adviser to place purchase and sale orders. The
Adviser also manages the day-to-day operations of the Trust.
Sophia Collier individually owns 60% of the outstanding stock and is Chair
of the Board of Directors of Citizens Advisers, Inc. She is the former President
of Citizens Funds and remains on the Board of Trustees, serving as an Interested
Trustee. 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 firm. John P. Dunfey is also a member of the Board of
Directors of Citizens Advisers. 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."
John Shields is the President and Chief Executive Officer of Citizens
Advisers, Inc. and President of Citizens Funds. He also serves on the Board of
Trustees of Citizens Funds as an Interested Trustee. Prior to joining Citizens
Advisers in 1998, Mr. Shields was a senior management consultant with Cerulli
Associates, a mutual fund consulting firm located in Boston, Massachusetts. He
also held executive and other managerial positions with State Street Research
Investment Services, Inc. and Fidelity Investments.
At the Adviser's discretion and sole expense, it may delegate certain of
its fund management duties to sub-advisers, and Citizens Advisers has retained
two sub-advisers to assist in the management of certain funds.
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 $6
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.
14
<PAGE>
Under a Sub-Advisory Agreement between the Adviser and Seneca Capital
Management, LLC, the Adviser pays Seneca the following sub-advisory fees based
on an annual rate of the applicable Fund's average net assets:
Citizens Income Fund
.175% of average net assets
Citizens Emerging Growth Fund
0.35% on the first $100 million
0.25% on remaining assets
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.
Under a Sub-Advisory Agreement between the Adviser and Clemente Capital,
Inc., the Adviser pays Clemente a sub-advisory fee based on an annual rate of
0.35% of the Citizens Global Equity Fund's average net assets.
Adviser Fees
The Adviser provides the Trust, at its own expense, with all office space,
facilities, equipment and clerical personnel necessary to carry out its duties
under the Management Agreement. Some of the Trust's Trustees and officers are
employees of the Adviser and receive their compensation from the Adviser. The
custodian bank for each fund maintains, as part of its services for which the
Trust pays a fee, many of the books and records that each fund is required to
have and computes each fund's 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:
Citizens Index Fund --0.50%; Citizens Emerging Growth Fund--1.00%; Citizens
Small Cap Index Fund--50%; Citizens Global Equity Fund--1.00%; Citizens Income
Fund--65%; and Working Assets Money Market Fund--0.35%. The fee is accrued daily
and payable monthly.
The Adviser has contractually agreed to limit expenses for the classes of
the funds listed below for the fiscal year ending June 30, 2000. If a fund's
aggregate expenses for the relevant class would exceed on a per annum basis the
percentage of average daily net assets specified below, the Adviser will reduce
its fee by, or refund, the amount of the excess. The limit on fund expenses,
pursuant to an Expense Reimbursement Agreement, is as follows:
15
<PAGE>
- --------------------------------------------------------------------------------
Citizens Index Fund, Standard shares 1.49%
- --------------------------------------------------------------------------------
Citizens Index Fund, Administrative Class shares 0.99%
- --------------------------------------------------------------------------------
Citizens Index Fund, Institutional Class shares 0.74%
- --------------------------------------------------------------------------------
Citizens Emerging Growth Fund, Administrative Class shares 1.55%
- --------------------------------------------------------------------------------
Citizens Emerging Growth Fund, Institutional Class shares 1.30%
- --------------------------------------------------------------------------------
Citizens Small Cap Index Fund, Standard shares 1.55%
- --------------------------------------------------------------------------------
Citizens Global Equity Fund, Standard shares 2.05%
- --------------------------------------------------------------------------------
Citizens Global Equity Fund, Administrative Class shares 1.68%
- --------------------------------------------------------------------------------
Citizens Global Equity Fund, Institutional Class shares 1.39%
- --------------------------------------------------------------------------------
Citizens Income Fund 1.45% of the first
$100 million of
assets and 1.25%
thereafter
- --------------------------------------------------------------------------------
Working Assets Money Market Fund, Standard shares 1.50% of the
first $40
million of
assets and 1%
thereafter
- --------------------------------------------------------------------------------
Not all fund 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, 1997, 1998 and 1999, the Adviser
received the following advisory fees: Citizens Index Fund, 1997-$878,074,
1998-$1,439,749, and 1999-$2,442,486; Citizens Emerging Growth Fund,
1997-$503,188, 1998-$741,296, and 1999-$983,324; Citizens Global Equity Fund,
1997-$206,581, 1998-$372,017, and 1999-$606,181; Citizens Income Fund,
1997-$218,016, 1998-$290,174, and 1999-$384,180; and Working Assets Money Market
Fund, 1997-$341,144, 1998-$392,811 and 1999-$440,357. The Citizens Small Cap
Index Fund is newly-organized and did not offer shares during these periods.
Citizens Securities, Inc.
Citizens Securities, Inc. ("Citizens Securities" or the "Distributor"), a
wholly-owned subsidiary of the Adviser and a California corporation, serves as
each fund's principal underwriter or distributor. Its offices are located at 230
Commerce Way, Suite 300, Portsmouth, New Hampshire 03801. John Shields, the
President and CEO of Citizens Advisers, is also President and CEO of Citizens
Securities.
Administrative and Shareholder Services
Citizens Advisers also performs a wide variety of administrative duties for
the Trust 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 (based on average annual net assets) and expenses
are payable monthly up to the following amounts:
- --------------------------------------------------------------------------------
Administrative
Fund Fee
- --------------------------------------------------------------------------------
Citizens Index Fund - Standard shares 0.20%
- --------------------------------------------------------------------------------
Citizens Index Fund - Institutional Class and Administrative Class
shares 0.20%
- --------------------------------------------------------------------------------
Citizens Emerging Growth Fund - Standard shares 0.10%
- --------------------------------------------------------------------------------
Citizens Emerging Growth Fund - Institutional Class and
Administrative Class shares 0.10%
- --------------------------------------------------------------------------------
Citizens Small Cap Index Fund - Standard shares 0.10%
- --------------------------------------------------------------------------------
Citizens Global Equity Fund - Standard shares 0.10%
- --------------------------------------------------------------------------------
Citizens Global Equity Fund - Institutional Class and Administrative
Class shares 0.10%
- --------------------------------------------------------------------------------
Citizens Income Fund - Standard shares 0.10%
- --------------------------------------------------------------------------------
Working Assets Money Market Fund - Standard shares 0.10%
- --------------------------------------------------------------------------------
Working Assets Money Market Fund - Institutional Class shares 0.10%
- --------------------------------------------------------------------------------
16
<PAGE>
The administrative services provided to the Trust 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 Trust audit with Trust Auditors; supervision of
drafting and printing of annual and semi annual reports; administrative and
contractual interface with the Custodian and Transfer Agent including daily
monitoring of Net Asset Value, sales, redemptions, dividends and quality
control; and compliance with federal and state regulatory requirements. Citizens
Advisers is also reimbursed at cost for state Blue Sky filing and reporting
services; vendor relations; drafting and filing of Prospectuses and statements
of additional information, proxies and other regulatory filings; and special
projects.
In addition, Citizens Securities provides a number of administrative
services to the Trust relating primarily to shareholder services and
communications, and is reimbursed a 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
the 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 also are charged a shareholder
service fee of up to 0.40% of average annual net assets.
For the fiscal years ended June 30, 1997, 1998 and 1999, the Adviser
accrued the following administrative and shareholder service fees: Citizens
Index Fund, 1997- $1,104,684, 1998- $1,635,911, and 1999- $2,556,669; Citizens
Emerging Growth Fund, 1997-$172,422, 1998-$193,896, and 1999- $227,489; Citizens
Global Equity Fund, 1997-$71,181, 1998-$86,805, and 1999- $120,167; Citizens
Income Fund, 1997- $78,340, 1998- $101,909, and 1999- $113,106; and Working
Assets Money Market Fund, 1997-$293,217, 1998-$278,850, and 1999-$308,642. The
Citizens Small Cap Index Fund is newly-organized and did not offer shares during
these periods.
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 funds' distributor, Citizens
Securities, pays the cost of printing and distributing copies of Prospectuses
and reports to non-shareholders, as well as the costs of supplemental sales
literature and advertising. The Trust pays all of the funds' other expenses not
expressly assumed by the Adviser such as interest, taxes, audit and legal fees
and expenses, charges of the funds' custodian, the funds' shareholder servicing,
transfer and record-keeping agent costs, insurance premiums, stock issuance and
redemption costs, certain printing costs, costs of registering shares of the
funds under federal and state laws, and dues and assessments of the Investment
Company Institute, as well as any non-recurring expenses, including litigation.
12b-1 Plan
Pursuant to a Distribution Agreement, Citizens Securities acts as the
distributor of each fund's shares.
The Trust's Board of Trustees has adopted a Distribution Plan under Section
12(b) of the 1940 Act and Rule 12b-1 thereunder. In approving the 12b-1 Plan,
the Trustees determined that there is a reasonable likelihood that the Plan will
benefit the Trust and its shareholders. Pursuant to this Plan, the Distributor
is authorized to purchase advertising, sales literature and other promotional
material and to pay its own salespeople. In addition, broker-dealers and other
service organizations that enter into written agreements with the Trust and its
Distributor may receive, for administration, shareholder service and
distribution assistance, fees at rates determined by the Trustees.
The Trust will reimburse Citizens Securities for distribution expenditures
and for fees paid to service organizations pursuant to the 12b-1 Plan, up to a
limit of 0.25% of average annual net assets for
17
<PAGE>
Standard shares and Administrative Class shares of each series of the Trust
offering the same (0.20% for the Working Assets Money Market Fund, Standard
shares). There is no provision under the Distribution Plan for reimbursing
Citizens Securities for expenditures on behalf of the Trust's Institutional
Class shares. In addition, if and to the extent that the fee the fund pays the
Distributor as well as other payments the fund makes are considered as
indirectly financing any activity which is primarily intended to result in the
sale of fund shares, such payments are authorized under the Plan.
The 12b-1 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 only permits reimbursement
of actual expenses and does not permit expenses to be carried forward from one
fiscal period to another. For the year ended June 30, 1999 the Trust approved
and paid to Citizens Securities $1,837,228 under its 12b-1 Plan, broken down by
category as follows:
Marketing, advertising and $972,543
public relations
Printing and mailing of Prospectuses $106,267
and sales literature to non-shareholders
Compensation to broker/dealers $105,518
and service organizations
Compensation to sales personnel $597,413
Interest, carrying or other finance charges $ 6,885
Other $ 48,602
The 12b-1 Plan will continue in effect if approved at least annually by the
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 with
respect to a fund at any time, without payment of any penalty, by a vote of the
majority of the Qualified Trustees or a vote of the majority of outstanding
securities of that fund, on not more than 60 days notice. 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, and all amendments must be
approved by the Trustees.
Expenses
Other expenses 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, insurance premiums, cost of registering
shares under federal and state laws, dues and any litigation costs, as well as
the cost of typesetting, printing and distributing shareholder reports and
Prospectuses sent to shareholders.
Administrative and Institutional Class shareholders in the funds pay their
pro rata portion of fund expenses, as well as any class expenses attributable to
that class of shares only. Class expenses include, but are not limited to,
transfer agent fees, distribution fees and administrative and shareholder fees
and expenses .
18
<PAGE>
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 Trust's
Board of Trustees. For the fiscal year ended June 30, 1999, the following
expense ratios were paid by the funds after waivers and reimbursements (based on
average annual net assets of the respective funds): Citizens Index Fund
(Standard shares), 1.58%; Citizens Index Fund (Institutional Class shares),
0.83%; Citizens Emerging Growth Fund (Standard shares), 1.82%; Citizens Global
Equity Fund (Standard shares), 1.96%; Citizens Income Fund (Standard shares),
1.45%; Working Assets Money Market Fund (Standard shares), 1.19%; and Working
Assets Money Market Fund (Institutional Class shares), 0.70%. Citizens Small Cap
Index Fund and the other classes of the funds did not incur or pay expenses
during the fiscal year ended June 30, 1999.
Other Service Providers
Custodian
State Street Bank and Trust Company, One Heritage Drive, North Quincy,
Massachusetts, is the custodian of the assets of the Trust. The custodian is
responsible for holding the securities and cash of each fund, receiving and
reporting all purchases and redemptions, calculating the daily Net Asset Value
of each fund and other accounting activities related to the management of the
Trust. The custodian takes no part in determining the investment policies of the
Trust or in deciding which securities are purchased or sold by the Trust. The
Trust, however, may invest in obligations of the custodian and may purchase or
sell securities from or to the custodian.
Transfer Agent
The transfer agent and dividend-paying agent for the Trust is PFPC Inc.,
400 Bellevue Parkway, Suite 108, Wilmington, DE 19809. In its capacity as
transfer agent and dividend-paying agent, PFPC is responsible for processing
daily purchases, redemptions and transfers of Trust shares, preparing and
mailing shareholder confirmations and account statements, paying dividends and
other distributions, and other shareholder and account activities.
Auditors
The financial highlights of each fund included in the funds' Prospectus and
the financial statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference in
reliance on the report of PricewaterhouseCoopers LLP, 160 Federal Street, Boston
Massachusetts 02110, independent accountants, given on the authority of said
firm as experts in auditing and accounting. PricewaterhouseCoopers LLP audits
the financial statements of each fund and provides other audit, tax and related
services.
Legal Counsel
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts.
Brokerage Allocation and Soft Dollars
The Adviser seeks to obtain for the Trust 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 the
funds 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 purchases 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.
The 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. There have been no brokerage commissions
paid to affiliated brokers during the past three fiscal years.
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In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, the Adviser or a sub-adviser may select
brokers or dealers who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) to a fund and/or the other accounts over which the Adviser or a
sub-adviser exercises investment discretion. The Adviser or a sub-adviser may
cause a fund to pay a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for a fund that is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which the Adviser or a sub-adviser has with respect
to accounts over which they exercise investment discretion.
The Adviser 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 that has been so
identified, the Adviser 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. These research services are sometimes referred
to as "soft dollars."
Any "soft dollars" generated by transactions on behalf of a fund 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 that fund. These
brokerage and research services, however, need not exclusively benefit that
fund, and may also benefit other series of the Trust or other clients of the
Adviser or its sub-adviser. For these purposes, brokerage and research services
mean those which provide assistance to the Adviser, 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 the Trust 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
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.
Ownership of Shares and Shareholder Rights
The Trust's Declaration of Trust permits its Trustees to issue an unlimited
number of full and fractional shares of beneficial interest and to divide or
combine the shares into a greater or lesser number of shares without thereby
changing the proportionate beneficial interests in the Trust. Certificates
representing shares are not issued. The Trust may create and issue series and
classes of shares. Each share of each class of each series represents an equal
proportionate interest in the series with each other share of that class. Shares
of each series participate equally in the earnings, dividends and distribution
of net assets of the particular series upon liquidation or dissolution (except
for any differences among classes of shares in a series). Income and operating
expenses are allocated fairly among the series and classes by the Trustees.
Shares of each class are entitled to vote as a class or series only to the
extent required by the 1940 Act, as provided in the Declaration of Trust, or as
permitted by the Trustees. The Trust intends to manage its series in such a way
as to be a "diversified" investment company, as defined in the 1940 Act.
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Voting Rights
Shareholders are entitled to one vote for each full share 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 and the Trust's Declaration of Trust. The Trust does not hold annual
shareholder meetings. However, 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 a Majority Shareholder Vote. The holders of shares
have no preemptive, conversion or subscription rights and votes are not
cumulative. Shares when issued are fully paid and non assessable, except as set
forth under "Shareholder and Trustee Liability" below. The Trust may be
terminated upon the sale or transfer of its assets, if such sale or transfer is
approved by a Majority Shareholder Vote. If not so terminated, the Trust will
continue indefinitely.
Dividends and Distributions
Citizens Index Fund, Citizens Emerging Growth Fund, Citizens Small Cap Index
Fund and Citizens Global Equity Fund
The Citizens Index Fund, Citizens Emerging Growth Fund, Citizens Small Cap
Index Fund and Citizens Global Equity 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.
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.
Working Assets Money Market Fund
Net income for the Working Assets Money Market Fund 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.
Dividends begin to accrue on the first day following the date of purchase,
provided that the payment is received by 4:00 p.m. Eastern time. When shares are
redeemed, the shares are entitled to a dividend declared on the day of the
redemption . 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, the funds'
daily net investment income consists of: (a) all interest income accrued on
investments (including any discount or premium ratably amortized to the date of
maturity or determined in such other manner as the Trustees may determine); and
(b) minus all expenses accrued, including interest, taxes and other expense
items, amounts determined and declared as dividends 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.
Shareholder and Trustee Liability
The Trust is 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. The Trust's Declaration of Trust contains an express
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disclaimer of shareholder liability for the Trust's acts or obligations and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Trust or the Trust's Trustees. The
Declaration of Trust provides for indemnification and reimbursement of expenses
by the relevant fund out of that fund's property for any shareholder held
personally liable for that fund's obligations. The Declaration of Trust also
provides that the Trust shall, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
the 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 the Trust would be unable to meet its
obligations.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
How to Purchase and Redeem Shares
How to Buy Shares
It's easy to buy shares of the funds. Just fill out an application and send
in your payment by check, wire transfer, exchange from another Citizens mutual
fund or through arrangements with your investment adviser or broker-dealer. All
checks must be made payable to "Citizens Funds." Citizens Funds is unable to
accept third-party checks. Foreign checks drawn in U.S. dollars are accepted but
shares purchased with foreign checks may be held in escrow for at least 20 days.
Shares in the 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. (Net Asset Value is determined at 4 p.m. Eastern time,
or, if the New York Stock Exchange closes earlier, at the close of business of
the Exchange.) You can purchase both full and fractional shares, which will be
rounded to the nearest 1/1000th of a share. If your check is returned for any
reason, you will be assessed a fee of $20.00.
The Trust has authorized certain brokers, and these brokers have also been
authorized to designate intermediaries, to accept on its behalf purchase and
redemption orders and such brokers are also authorized to designate
intermediaries to accept orders on the Trust's behalf. The Trust will be deemed
to have received such an order when the broker or broker designee accepts the
order, which shall be priced at the Net Asset Value next computed after the
broker or designee accepts the order.
Investors may be charged a fee if they buy, sell or exchange fund shares
through a broker or agent.
Investment Minimums
The minimum initial investment for Standard shares in each fund is $2,500
($1,000 for IRA, Uniform Gifts/Transfers to Minors Act (UGMA/UTMA) and Automatic
Investment Plan accounts). The minimum subsequent investment for all accounts,
including Automatic Investment Plan accounts, is $50. 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. (This fee will also be charged
to inactive Automatic Investment Plan accounts.) If you do not bring your
balance up to the minimum, we may close your account by sending you a check for
your balance. Before closing you account, we will give you 30 days notice and an
opportunity to bring the account up to the applicable minimum. The investment
minimums and monthly below minimum balance fee are applicable per account and
also apply to an exchange purchase of shares in another series of Citizens
Funds.
The minimum initial investment in Administrative Class and Institutional
Class shares is $1 million ($250,000 for registered investment advisers and
retirement plans, at the discretion of the Trust). There is no minimum
subsequent investment. With respect to accounts that fall below $1
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million (or $250,000 for registered investment advisers and retirement plans, at
the discretion of the Trust), the Trust reserves the right to transfer these
accounts from the Administrative or 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 required minimum balance.
There is an annual fee of $10 for each Individual Retirement Account (IRA),
with a maximum IRA account fee of $20 per shareholder. This fee is waived for
total IRA balances of $25,000 and higher and total account balances of $50,000
and higher. There is also an IRA closure fee of $15.
Automatic Investment Plan
To enroll in the Trust's 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 the Citizens' 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 Sell Shares
Telephone Exchange and Redemption. We have a Telephone Exchange and
Redemption option on your account application. Under this option, you can call
and tell us how much (up to $25,000) you want to redeem. Depending upon your
instructions, we will deposit the amount of your redemption into another
Citizens Funds account, mail you a check or electronically transfer your
redemption to your pre-designated account. Normally, we will send you your
redemption on the next business day after we receive your request. 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 all
telephone transactions, including balance verification. To keep these problems
to a minimum, we record all telephone calls. But please remember, neither the
Trust, the Adviser nor the fund's Transfer Agent will be responsible if we
properly act on telephone instructions we reasonably believe to be genuine.
Redeem Your Shares through Broker-Dealers. 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 Trust that permit them to
order redemption of shares by telephone or other electronic communication.
Requests for Redemption. If you do not use the Telephone Exchange and
Redemption option, you can redeem your shares by sending us a written request at
any time, although the process will take longer. Requests for redemption of
shares worth more than $25,000 must be accompanied by an original Medallion
Signature Guarantee. We may require further documentation from corporations,
fiduciaries, retirement plans and/or institutional investors.
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Certain requests for redemption under $25,000 - both written and telephonic
- - may also require a Medallion Signature Guarantee, at the discretion of the
Trust. To avoid delays, have all written requests for redemption Medallion
Signature Guaranteed.
We reserve the right to wait up to seven business days before paying the
proceeds of any redemption on 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.
Additional Redemption Information
The Trust pays redemption proceeds within five business days (seven
business days with respect to the proceeds of redemptions of investments made by
check) after we receive a proper redemption request so long as the redemption
request is received by 4 p.m., Eastern Time. A fund's 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 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.
The funds pay redemption proceeds in cash, except that the Board of
Trustees has the power to decide that conditions exist which would make cash
payments undesirable. In that case, a fund could send redemption payments in
securities from that fund, valued in the same way the fund's Net Asset Value is
determined. There might then be brokerage or other costs to the shareholder in
selling these securities. The funds have elected to be governed by Rule 18f-1
under the 1940 Act, which requires the funds to redeem shares solely in cash up
to the lesser of $250,000 or 1% of a fund's total net assets during any 90 day
period for any one shareholder. A shareholder's redemption proceeds may be more
or less than his or her original cost, depending on the value of the fund's
shares.
The Trust or its Adviser has 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 for Standard shares ($1,000 for IRA, UGMA/UTMA and Automatic
Investment Plan accounts). If the Adviser decides to do this, we will provide
notice to the shareholder, who will be given an opportunity to bring the account
up to the applicable minimum. With respect to Administrative Class and
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 $1 million ($250,000 for registered
investment advisers and retirement plans, at the discretion of the Trust).
How We Value Fund Shares
The value of the fixed income securities in which the funds may 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 may comprise a portion of assets in the Citizens
Index Fund, Citizens Emerging Growth Fund, Citizens Small Cap Index Fund and
Citizens Global Equity Fund under normal conditions. If interest rates go up,
the value of fixed income securities generally goes down. Conversely, if
interest rates go down, the value of fixed income securities generally goes up.
Long-term obligations, which often have higher yields, may fluctuate in value
more than short-term ones.
The value of equity securities held in the Citizens Index, Emerging Growth,
Small Cap Index and Global Equity Funds will fluctuate based upon market
conditions and matters 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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The Net Asset Value per share of a fund is determined for each class by
adding the market value of all securities and other assets attributable to the
class, then subtracting the liabilities attributable to that class, and then
dividing the result by the number of outstanding shares of the class. All
expenses are accrued daily and taken into account in determining Net Asset
Value. Since these expenses differ for Administrative and Institutional Class
shares, the Net Asset Value of Standard, Administrative Class and Institutional
Class shares will vary and are computed separately.
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 is determined at 4 p.m. Eastern time,
or, if the New York Stock Exchange closes earlier, at the close of business of
the Exchange on each day on which the New York Stock Exchange is open for
regular trading.
Citizens Index Fund, Citizens Emerging Growth Fund, Citizens Small Cap Index
Fund, Citizens Global Equity Fund and Citizens Income Fund
As described in the Prospectus, shares of the Citizens Index Fund, Citizens
Emerging Growth Fund, Citizens Small Cap Index Fund, Citizens Global Equity Fund
and Citizens Income Fund are generally valued on the basis of market values.
Equity securities are valued at the closing sale 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
asked price for international securities. Fixed income investments are generally
valued at the bid price for securities. Securities maturing within 60 days (and
all securities held by the Working Assets Money Market Fund) are normally valued
at amortized cost. 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 Trust'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 valuations based
upon analysis of market data or other factors if these valuations are believed
to more accurately reflect the fair value of such securities.
Use of a pricing service has been approved by the Trust's Board of
Trustees. There are a number of pricing services available, and the Trustees and
officers of the Trust acting on behalf of the Trustees, may use or discontinue
the use of any pricing service now, or in the future, employed.
The values of foreign securities are converted from the local currency into
U.S. dollars using current exchange rates. If trading in the currency is
restricted, a fund will use a rate believed to reflect the currency's fair value
in U.S. dollars. Trading may take place in foreign securities held by a fund on
days when the fund is not open for business. As a result, the fund's Net Asset
Value may change on days on which shareholders are not able to purchase or sell
fund shares. If events materially affecting the value of foreign securities
occur between the time when the exchange on which they are traded closes and the
time when the fund's Net Asset Value is calculated, the securities may be valued
at fair value.
Working Assets Money Market Fund
The Trust's Trustees have determined that it is appropriate for the Working
Assets Money Market Fund to value its shares using the amortized cost method and
that this method approximates 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 generally approximates the market value of
short-term securities, there may be periods during which value, as determined by
the amortized cost method, is
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higher or lower than the price the fund would receive if it sold the instrument.
During periods of declining interest rates, the daily yield on the fund's 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. Thus, if
the use of amortized cost by the fund on a particular day resulted in a lower
aggregate fund value than were the fund to value at market prices, a prospective
investor in the fund's shares would be able to obtain a somewhat higher yield
from the fund than he would from a fund valued at market price. The converse
would apply in a period of rising interest rates.
The Board of Trustees has established 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 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 the
mean between the bid and the asked 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 the Board of Trustees, including being valued at prices based
on market quotations for investments of similar type, yield and maturity.
Under the procedures which the Trustees have adopted in connection with the
valuation of the fund's 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
Asset Value. In the event a deviation between the market value and the amortized
cost value exceeds 0.10%, or if the Adviser believes the deviation may result in
dilution or other unfair results to shareholders or investors, the Board of
Trustees must be notified and daily mark-to-market appraisals will be conducted
until the deviation falls below 0.10%. If the deviation from $1.00 per share
exceeds 0.25% for the total market value of the fund, the Board of Trustees must
be notified immediately. If the deviation from the amortized cost value per
share exceeds 0.30%, the Board of Trustees must be notified and may consider
taking remedial action. If the deviation from the amortized cost value per share
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.
Working Assets Money Market Fund also limits its 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 9 - 11 above).
Tax Matters
Taxation of the Funds
Federal Taxes. Each of our funds is treated as a separate entity for
federal tax purposes under the Internal Revenue Code of 1986, as amended (the
"Code"). Further, each of the funds has elected to be treated and intends to
qualify as a "regulated investment company" under Subchapter M of the Code. We
plan to continue this election in the future for all of the funds. As a
regulated investment company, each fund will not be subject to any federal
income or excise taxes on its net investment income and net realized capital
gains that it distributes to shareholders in accordance with the timing
requirements imposed by the Code. If a fund should fail to qualify as a
regulated investment company in any year,
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the fund would incur federal income taxes upon its taxable income and
distributions from the fund would generally be taxable as ordinary dividend
income to shareholders.
Foreign Taxes. Although we do not expect the funds will pay any federal
income or excise taxes, investment income received by a fund from sources within
foreign countries may be subject to foreign income taxes withheld at the source.
The United States has entered into tax treaties with many foreign countries
which may entitle a fund to a reduced rate of tax or an exemption from tax on
foreign income; the funds intend to qualify for treaty reduced rates where
available. It is not possible, however, to determine any fund's effective rate
of foreign tax in advance, since the amount of a fund's assets to be invested
within various countries is not known.
Except in the case of the Global Equity Fund, we do not expect that any
fund which incurs foreign income taxes will 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.
Massachusetts Taxes. As long as a fund maintains its status as a regulated
investment company under the Code and distributes all of its income, the fund
will not be required to pay any Massachusetts income or excise tax.
Taxation of Shareholders
Taxation of Distributions. Shareholders of a fund will generally have to
pay federal income taxes on the dividends and capital gain distributions they
receive from the fund. Dividends from ordinary income and any distributions from
net short-term capital gains are taxable to shareholders as ordinary income for
federal income tax purposes, whether the distributions are made in cash or in
additional shares. Distributions of net capital gains (i.e., the excess of net
long-term capital gains over net short-term capital losses), whether made in
cash or in additional shares, are taxable to shareholders as long-term capital
gains without regard to the length of time the shareholders have held their
shares. Any fund 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 the
shareholders on December 31 of the year in which the dividend is declared.
Dividends-Received Deduction. For each of the funds other than Working
Assets Money Market Fund and the Citizens Income Fund, a portion of any 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.
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"Buying A Dividend." 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.
Special Considerations for Non-U.S. Persons. 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.
Backup Withholding. The funds are 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 the 30% withholding applicable to Non-U.S. Persons.
Disposition of Shares. 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.
Effects of Certain Investments and Transactions
Certain Debt Instruments. An investment by a fund in certain stripped
securities and certain securities purchased at a market discount will cause the
fund to recognize income prior to the receipt of cash payments with respect to
those securities. In order to distribute this income and avoid a tax on the
fund, the fund may be required to liquidate portfolio securities that it might
otherwise have continued to hold, potentially resulting in additional taxable
gain or loss to the fund.
Options, Etc. A fund's transactions in options, futures and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of fund income and distributions to shareholders. For
example, certain positions held by a fund on the last business day of each
taxable year will be marked to market (e.g., treated as if closed out) on that
day, and any gain or loss associated with the positions will be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held by a
fund that substantially diminish its risk of loss with respect to other
positions in its portfolio may constitute "straddles", and may be subject to
special tax rules that would cause deferral of fund losses, adjustments in the
holding periods of fund securities, and conversion of short-term into long-term
capital losses. Certain tax elections exist for straddles that may alter the
effects of these rules. Each fund intends to limit its activities in options,
futures and forward contracts to the extent necessary to meet the requirements
of the Code.
Foreign Investments. 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 loss. Use of non-U.S. currencies for non-hedging purposes
and investments by a fund in "passive foreign investment companies" may have to
be limited in order to avoid a tax on a fund. A fund may elect to mark to market
any investments in
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"passive foreign investment companies" on the last day of each taxable year.
This election may cause the fund to recognize ordinary income prior to the
receipt of cash payments with respect to those investments; in order to
distribute this income and avoid a tax on the fund, the fund may be required to
liquidate portfolio securities that it might otherwise have continued to hold
potentially resulting in additional gain or loss to the fund.
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.
How We Calculate Performance
All performance reported in advertisements is historical and not intended
to indicate future returns.
From time to time the "yield" and "compounded effective yield" of our funds
may be published in advertisements and sales material. For the Citizens Income
Fund the yield is usually reported over a 30 day period, whereas for the Working
Assets Money Market Fund the yield is quoted over a seven day period.
Citizens Income Fund's Yield
To calculate the Citizens Income Fund's 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.
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 (or one-month) 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. Expenses accrued for the period include any
fees charged to all shareholders during the base period.
The Citizens Income Fund's yield is calculated according to the following 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
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<PAGE>
Working Assets Money Market Fund's 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 the
fund's net investment income per share for the most recent 7 days, annualize it
and then divide by the fund's Net Asset Value per share (expected always to be
$1.00) to get a percentage. The "effective yield" assumes you have reinvested
your dividends.
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 a fund's 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.
Compounded effective yield, which may be quoted for the Working Assets
Money Market Fund, is determined by taking the base period return (computed as
described above) and calculating the effect of assumed compounding. This is
accomplished 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.
The formula for effective yield is:
[(base period return + 1)365/7 - 1]
Compounded effective yield information is useful to investors in reviewing
the performance of the Working Assets Money Market Fund since the yield is
calculated on the same basis as those of other money market funds. However,
shareholders should take a number of factors into account in using the fund's
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.
Current yield and effective yield, which are calculated according to a
formula prescribed by the SEC, may differ from 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 major change
in investment policies, it might be appropriate to annualize the dividends paid
over the period such policies were in effect, rather than using the dividends
during the past twelve months. The current distribution rate differs from the
current yield computation because it may include distributions to shareholders
from additional sources (i.e., sources other than dividends and interest, such
as short-term capital gains), and is calculated over a different period of time.
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The following table sets forth various measures of performance for certain
classes of the funds as of June 30, 1999:
Fund 7-Day Yield Effective Yield 30-Day Yield
Working Assets Money Market Fund
(Standard shares) 3.81% 3.89% N/A
Working Assets Money Market Fund
(Institutional Class shares) 4.76% 4.87% N/A
Citizens Income Fund (Standard shares) N/A N/A 5.60%
Total Return and Other Quotations
We can express investment results for our four equity funds and the
Citizens Income Fund in terms of "total return." Total return refers to the
total change in value of an investment in the fund over a specified period.
In calculating the total return of a class of shares of a fund, we start
with the total number of shares of the fund 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 the fund's
percentage gain or loss. For periods of more than one year, we adjust the
cumulative total return to get an average annual total return.
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 (or fractional portion).
For the period ended June 30, 1999 certain classes of the funds had the
following performance:
<TABLE>
<CAPTION>
Hypothetical
5 Year Average Annual Investment Return on
One Year Average Annual Total Return Since $1,000 for the
Fund Total Return Total Return Inception One Year Period
<S> <C> <C> <C> <C>
Citizens Income Fund
(Standard shares) 0.78% 7.28% 6.67% $1,007.77
(6/10/92)
Citizens Emerging
Growth Fund (Standard shares) 36.10% 27.01% 24.67% $1,360.99
(2/8/94)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Hypothetical
5 Year Average Annual Investment Return on
One Year Average Annual Total Return Since $1,000 for the
Fund Total Return Total Return Inception One Year Period
<S> <C> <C> <C> <C>
Citizens Global Equity
Fund (Standard shares) 22.34% 17.49% 15.69% $1,223.36
(2/8/94)
Citizens Index Fund
(Standard shares) 31.58% N/A 31.72% $1,315.78
(3/3/95)
Citizens Index Fund
(Institutional Class
shares) 32.62% N/A 34.22% $1,326.16
(1/25/96)
</TABLE>
When we quote a fund's yield or total return we are referring to its past
results and not predicting the fund's 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 a fund's 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 investment results, we sometimes will compare them to
unmanaged market indices such as the Dow Jones Industrial Average, Standard &
Poor's 500 ("S&P 500") Index, S&P MidCap 400 Index, S&P SmallCap 600 Index,
Financial Times World Index, Lehman U.S. Aggregate Index and the Russell 2000,
as well as other data and rankings from recognized independent publishers or
sources such as Morningstar, Inc., Lipper, Inc., IBC's Money Fund Report,
Bloomberg Magazine, Money Magazine, Mutual Funds Magazine, Kiplinger's Personal
Finance Magazine, Worth Magazine, Your Money Magazine, Smart Money Magazine,
Forbes Magazine, Fortune Magazine, Co-Op America Quarterly, The Green Money
Journal and others.
Financial Statements
The 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, 1999 are incorporated herein by reference and are provided
to each person to whom the Statement of Additional Information is sent or given.
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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 three services we use most frequently.
When considering any rating, it is important to remember that the ratings of
Moody's, Standard & Poor's and Fitch IBCA 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
edged." 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.
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<PAGE>
Rating Refinements: Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through Caa. 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.
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<PAGE>
Plus (+) or minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r: This symbol is attached to the ratings of instruments with significant
noncredit risks. It highlights risks to principal or volatility of expected
returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
Fitch IBCA International Long-Term Credit Ratings
AAA: Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. The capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good credit quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Plus (+) or minus (-): Plus and minus signs may be appended to a rating to
denote relative status within the major rating categories. Such suffixes are not
added to the "AAA" long-term rating 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
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
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<PAGE>
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.
36
