As filed with the Securities and Exchange Commission on June 30, 1999
Securities Act of 1933 File No. 2-80886
Investment Company Act of 1940 File No. 811-3626
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 45
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 40
CITIZENS FUNDS*+
(Exact name of Registrant as specified in charter)
230 Commerce Way, Suite 300, Portsmouth, NH 03801
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (603) 436-5152
Sophia Collier
230 Commerce Way, Suite 300
Portsmouth, NH 03801
(Name and Address of Agent for Service)
It is proposed that this filing become effective:
[ ] Immediately upon filing pursuant to paragraph (b)
[ ] On _____ pursuant to paragraph (b)
[ ] 75 days after filing pursuant to paragraph (a)
[X] On August 29, 1999 pursuant to paragraph (a) of Rule 485
____________________________________________________________________________
*Formerly known as Citizens Investment Trust.
+This filing relates to its series Citizens Index Fund, Citizens Emerging
Growth Fund, Citizens Global Equity Fund, Citizens Small Cap Index Fund
(Administrative class only), Citizens Income Fund and Working Assets Money
Market Fund.
<PAGE>
PROSPECTUS
CITIZENS FUNDSTM
Citizens Index Fund
Citizens Emerging Growth Fund
Citizens Small Cap Index Fund
Citizens Global Equity Fund
Citizens Income Fund
Working Assets Money Market Fund
__________ __, 1999
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.
<PAGE>
Contents
OVERVIEW............................................................ __
THE FUNDS
Investment Objectives of the Funds............................... __
Principal Investment Strategies.................................. __
Principal Risks.................................................. __
Performance...................................................... __
Fees and Expenses................................................ __
ADDITIONAL FUND DETAILS
Socially Responsible Investing................................... __
Defensive Positions.............................................. __
Citizens Index Fund.............................................. __
Citizens Emerging Growth Fund.................................... __
Citizens Small Cap Index Fund.................................... __
Citizens Global Equity Fund...................................... __
Citizens Income Fund............................................. __
Working Assets Money Market Fund................................. __
MANAGEMENT OF CITIZENS FUNDS
The Role of Investment Adviser................................... __
Our Sub-Advisers................................................. __
Citizens Funds' Management Fees.................................. __
12b-1 Fees and Classes........................................... __
SHAREHOLDER INFORMATION
Investment Minimums.............................................. __
How We Value Our Shares.......................................... __
How to Buy and Sell Shares....................................... __
Shareholder Services and Policies................................ __
Costs for Services............................................... __
Mailing Address and Wiring Instructions.......................... __
DIVIDENDS, DISTRIBUTIONS AND TAXES.................................. __
THE YEAR 2000....................................................... __
FINANCIAL HIGHLIGHTS................................................ __
<PAGE>
OVERVIEW
Citizens FundsTM
Our goal at Citizens Funds is to achieve strong financial
results while investing in companies that are managed in a
socially responsible manner.
Our Funds
CITIZENS INDEX FUND invests primarily in the companies that make
up the Citizens IndexTM 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 IndexTM and has the
objective of capital appreciation.
CITIZENS GLOBAL EQUITY FUND invests 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.
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. The
Citizens Emerging Growth Fund and Citizens Small Cap Index Fund
are also designed for investors who can accept the share price
fluctuations associated with investing in medium and small-sized
companies. The 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.
<PAGE>
Citizens Income Fund is designed for investors seeking high
current income and who can accept the greater share price
fluctuations associated with higher income.
Working Assets Money Market Fund is designed for investors who
require stability of principal and are seeking current income.
<PAGE>
THE FUNDS
INVESTMENT OBJECTIVES OF THE FUNDS
CITIZENS INDEX FUND - Long-term capital appreciation. To pursue this objective,
the fund tries to match the performance of the Citizens Index and primarily
invests in the companies that make up the Index.
CITIZENS EMERGING GROWTH FUND - Aggressive growth. To pursue this objective,
the fund invests primarily in medium-sized companies considered to be in the
developing stages of their life cycles.
CITIZENS SMALL CAP INDEX FUND - Capital appreciation. To pursue this objective,
the fund tries to match the performance of the Citizens Small Cap Index and
primarily invests in the companies that make up the Index.
CITIZENS GLOBAL EQUITY FUND - Capital appreciation. To pursue this objective,
the fund invests in both U.S. and foreign companies.
CITIZENS INCOME FUND - Generating current income and paying a dividend each
month.
WORKING ASSETS MONEY MARKET FUND - Current income consistent with safety and
liquidity.
The investment objective of a fund cannot be changed without the approval of a
majority of the outstanding shares of that fund.
PRINCIPAL INVESTMENT STRATEGIES
CITIZENS INDEX FUND
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 by purchasing and holding the stock
of approximately 300, mostly large-sized, companies that make up the Index. 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 Index changes.
During normal market conditions, at least 65% of the fund's assets will be
invested in companies whose market capitalizations, at the time the fund
invests in them, are in the capitalization range of the S&P 500.
<PAGE>
CITIZENS EMERGING GROWTH FUND
The Citizens Emerging Growth Fund looks for portfolio gains by investing in
companies considered to be in the developing stages of their life cycle and
that offer the potential for accelerated earnings, revenue growth and increased
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. The fund also may invest in
smaller or larger companies and may invest in U.S. and foreign companies.
CITIZENS SMALL CAP INDEX FUND
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 by purchasing and holding the stock
of approximately 300, mostly small-sized, companies that make up the Index. 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 Index changes.
During normal market conditions, at least 65% of the fund's assets will be
invested in companies whose market capitalizations, at the time the fund
invests in them, are in the capitalization range of the S&P SmallCap 600 Index.
CITIZENS GLOBAL EQUITY FUND
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 fund is guided by analyses of:
o the global economy and regional economies;
o countries and industries in which the fund may invest; and
o individual companies.
CITIZENS INCOME FUND
Citizens Income Fund invests primarily in bonds or mortgages that are due
within 2 to 30 years, although it will occasionally hold short-term securities
as well. The fund normally maintains an average maturity of between 5 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. The fund may purchase the securities of U.S. and
non-U.S. issuers.
<PAGE>
WORKING ASSETS MONEY MARKET FUND
Working Assets Money Market Fund invests in short-term money market instruments
(short-term debt issued by U.S. government agencies, corporations, or banks or
other financial institutions) that the fund's portfolio managers believe
present minimal risk. The fund maintains a weighted average maturity of 90 days
or less. 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.
PRINCIPAL RISKS
An investment in any of our funds is subject to Year 2000 Risk, or the risk
that Citizens Funds and its service providers could be harmed if their computer
systems do not properly process information on and after January 1, 2000 (known
as the Y2K problem). Failure to successfully address the Y2K problem could
result in interruptions to and other material adverse effects on Citizens
Funds' business and operations, including problems in calculating Net Asset
Value and in implementing the Funds' purchase and redemption procedures.
Failure to successfully address the Y2K problem also could adversely affect the
business and operations of the companies in which Citizens Funds invests.
Other principal risks involved in investing in each fund are described below.
As with all mutual funds, you could lose money by investing in any of the
Citizens Funds.
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:
o Market Risk. The stock market is sometimes volatile and may change
dramatically and unpredictably in response to political, regulatory,
market or economic developments. The securities of growth companies
tend to be extra sensitive to these market movements because their
share prices reflect expectations about the futures of these companies.
Equity securities have historically gone up and down more than fixed
income securities. The value of your investment in the equity funds
will go up and down based on market conditions.
o Industry Risk. Our equity funds are 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.
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.
<PAGE>
o Company Risk. The value of an individual stock varies with the
prospects of its issuer 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.
Other principal risks of investing in some, but not all, of our equity funds
include the following:
o 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. In addition,
tracking error, cash positions, fees and expenses will prevent these
funds from exactly duplicating or matching the performance of the
underlying Index.
o 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 managers or have a difficult time obtaining financing or
market share. Their shares are also more volatile and thinly traded
than the shares of larger companies. Medium-sized companies generally
involve less risk than smaller companies but are still more volatile
and more subject to market conditions than are larger companies.
o Foreign Investing. The CITIZENS GLOBAL EQUITY FUND invests in foreign
markets, which are generally less efficient and more volatile than
those in the U.S. 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 the 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.
FIXED INCOME FUNDS
Investments in our fixed income funds (CITIZENS INCOME FUND and WORKING ASSETS
MONEY MARKET FUND) are subject to movements in the markets for fixed income
securities (such as bonds and commercial paper). The principal risks of
investing in our fixed income funds also include:
o 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.
<PAGE>
o Interest Rate Risk. When interest rates rise, the prices of fixed
income securities generally fall and the value of the Citizens Income
Fund's shares generally declines. A rise in interest rates also may
cause the Working Assets Money Market Fund's yield to go down. This
interest rate risk will affect the price of a debt security more if the
security has a longer maturity.
o 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.
Other principal risks of investing in one or the other of our fixed income
funds include the following:
o 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, and the prices of these securities may go up and down more
than 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.
o 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 fall. 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.
o 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
maturity of such mortgages. 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.
<PAGE>
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 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.
o 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 below 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. 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-issued, average annual total returns for these classes are not
shown below. How a fund performed in the past is not necessarily an indication
of how the fund will perform in the future.
CITIZENS INDEX FUND
Year-by-Year Total Returns, Standard shares, as of December 31 each year
1996 23.07%
1997 34.96%
1998 42.75%
The Citizens Index Fund, Standard shares, year-to-date return as of June 30,
1999 was [___%]. The highest return for a quarter covered in the bar chart
above was 27.49% for the quarter ended 12/31/98. The fund's lowest return was
- -7.89% for the quarter ended 9/30/98.
<PAGE>
Average Annual Total Returns (through December 31, 1998)
1 Year Since
Return Inception
-------------------------------- -------------- ------------
(3/5/95)
-------------------------------- -------------- ------------
Citizens Index Fund -
Standard shares 42.75% 32.51%
-------------------------------- -------------- ------------
S&P 500* 28.75% 30.91%
-------------------------------- -------------- ------------
(1/25/96)
-------------------------------- -------------- ------------
Citizens Index Fund -
Institutional Class shares 43.79% 35.53%
-------------------------------- -------------- ------------
S&P 500* 28.75% 28.96%
-------------------------------- -------------- ------------
--------------------
* The S&P 500 is a widely recognized, unmanaged index of common stock
prices of 500 of the largest companies in the U.S. stock market.
CITIZENS EMERGING GROWTH FUND
Year-by-Year Total Returns (as of December 31 each year)
1995 40.73%
1996 13.91%
1997 17.69%
1998 42.71%
The Citizens Emerging Growth Fund's year-to-date return as of June 30, 1999 was
[____%]. The highest return for a quarter covered in the bar chart above was
35.96% for the quarter ended 12/31/98. The fund's lowest return was -12.08% for
the quarter ended 9/30/98.
Average Annual Total Returns (through December 31, 1998)
-------------------------------- -------------- ----------
Since
1 Year Inception
Return (2/8/94)
-------------------------------- -------------- ----------
Citizens Emerging Growth
Fund 42.71% 24.15%
-------------------------------- -------------- ----------
S&P MidCap 400* 18.83% **
-------------------------------- -------------- ----------
<PAGE>
--------------------
* The S&P MidCap 400 is an unmanaged index of common stocks of mid-size
companies in the U.S. market.
** Information regarding performance of the S&P MidCap 400 Index is not
available for this period.
CITIZENS SMALL CAP INDEX FUND
Citizens Small Cap Index Fund commenced operations after 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 is not provided in this prospectus.
CITIZENS GLOBAL EQUITY FUND
Year-by-Year Total Returns (as of December 31 each year)
1995 13.74%
1996 13.16%
1997 19.91%
1998 32.26%
The Citizens Global Equity Fund's year-to-date return as of June 30, 1999 was
[____%]. The highest return for a quarter covered in the bar chart above was
23.47% for the quarter ended 12/31/98. The fund's lowest return was -10.32% for
the quarter ended 9/30/98.
Average Annual Total Returns (through December 31, 1998)
Since
1 Year Inception
Return (2/8/94)
----------------------------------- ------------ ----------------
Citizens Global Equity Fund 32.26% 15.05%
----------------------------------- ------------ ----------------
FT World Index* 23.04% 14.55%
----------------------------------- ------------ ----------------
--------------------
* The FT World Index is an unmanaged index of __________.
<PAGE>
CITIZENS INCOME FUND
Year-by-Year Total Returns (as of December 31 each year)
1993 9.96%
1994 -3.08%
1995 17.38%
1996 4.85%
1997 10.48%
1998 5.81%
The Citizens Income Fund's year-to-date return as of June 30, 1999 was [____%].
The highest return for a quarter covered in the bar chart above was 5.08% for
the quarter ended 3/31/95. The fund's lowest return was -2.24% for the quarter
ended 3/31/94.
Average Annual Total Returns (through December 31, 1998)
------------------------------------- --------- ------------ -------------
Since
1 Year 5 Year Inception
Return Return (6/10/92)
------------------------------------- --------- ------------ -------------
Citizens Income Fund 5.81% 6.87% 7.40%
------------------------------------- --------- ------------ -------------
Lehman Intermediate
Government/Corporate Index* 8.44% 7.30% **
------------------------------------- --------- ------------ -------------
* The Lehman Intermediate Government/Corporate Index is an unmanaged
index of government and corporate bond issues with $1 million or more
outstanding and maturities from one to ten years..
** Information regarding performance of the Lehman Government/Corporate
Intermediate Index is not available for this period.
WORKING ASSETS MONEY MARKET FUND
Year-by-Year Total Returns (as of December 31 each year)
1989 _____%
1990 _____%
1991 _____%
1992 _____%
<PAGE>
1993 _____%
1994 _____%
1995 _____%
1996 _____%
1997 _____%
1998 _____%
The Working Assets Money Market Fund's year-to-date return as of June 30, 1999
was [____%]. The highest return for a quarter during the last ten calendar
years was [_____%] for the quarter ended [__________]. The fund's lowest return
was [____%] for the quarter ended [__________].
Average Annual Total Returns (through December 31, 1998)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
------------------------------------- --------- ------------ ------------ -----------
1 Year 5 Year 10 Year Since
Return Return Return Inception
------------------------------------- --------- ------------ ------------ -----------
Working Assets Money Market Fund -
Standard shares _____% _____% _____% _____%
------------------------------------- --------- ------------ ------------ -----------
[Name of Index]* _____% _____% _____% _____%
------------------------------------- --------- ------------ ------------ -----------
(__/__/__)
------------------------------------- --------- ------------ ------------ -----------
Working Assets Money Market Fund -
Institutional Class shares _____% _____% N/A _____%
------------------------------------- --------- ------------ ------------ -----------
[Name of Index]* _____% _____% N/A _____%
------------------------------------- --------- ------------ ------------ -----------
</TABLE>
---------------
* [Discussion of Index]
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.
<PAGE>
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).
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Citizens Working
Citizens Small Citizens Assets
Citizens Emerging Cap Global Citizens Money
Index Growth Index Equity Income Market
Fund Fund Fund Fund Fund Fund
ALL SHARES AND CLASSES
SHAREHOLDER FEES
(fees paid directly
from your investment)* None None None None None None
Maximum Sales Charge
(Load) Imposed on
Purchases None None None None None None
Maximum Deferred Sales
Charge (Load) None None None None None None
Maximum Sales Charge
(Load) Imposed on
Reinvested Dividends None None None None None None
Redemption Fee None None None None None None
Exchange Fee None None None None None None
Maximum Account Fee
(Charged only if account
falls below a minimum
balance)** $3.00/ $3.00/ $3.00/ $3.00/ $3.00/ $3.00/
month month month month month month
</TABLE>
- ---------------------------
* See "Costs for Services," on page __.
** 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).
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Working
Citizens Citizens Assets
Citizens Emerging Global Citizens Money
Index Growth Equity Income Market
Fund Fund Fund Fund Fund
STANDARD SHARES
Annual Fund
Operating Expenses
(expenses that are
deducted from fund assets)
Management Fees .50% 1.00% 1.00% .65% .35%
Distribution
(12b-1) Fees .25% .25% .25% .25% .20%
Other Expenses .84% .71% .95% .84% .68%
Total Annual Fund
Operating Expenses 1.59% 1.96% 2.20% 1.74% 1.23%
Fee Waiver and Expense
Reimbursement+ .10% N/A% .15% .29% .02%
Net Expenses 1.49% 1.96% 2.05% 1.45% 1.21%
</TABLE>
- --------------------
+ The investment adviser to the fund has contractually agreed to waive
certain fees and reimburse certain expenses for the fiscal year commencing
July 1, 1999 and ending June 30, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Citizens
Citizens Small Citizens
Citizens Emerging Cap Global Citizens
Index Growth Index Equity Income
Fund Fund Fund Fund Fund
ADMINISTRATIVE
CLASS SHARES
Annual Fund
Operating Expenses
(expenses that are
deducted from fund assets)
Management Fees .50% 1.00% .50% 1.00% .65%
Distribution
(12b-1) Fees .25% .25% .25% .25% .25%
Other Expenses .__% .__% .__% .__% .__%
Total Annual Fund
Operating Expenses .__% .__% .__% .__% .__%
Fee Waiver and Expense
<PAGE>
Reimbursement+ N/A .__% .__% .__% .__%
Net Expenses .__% .__% .__% .__% .__%
</TABLE>
- --------------------
+ The investment adviser to the fund has contractually agreed to waive
certain fees and reimburse certain expenses for the fiscal year commencing
July 1, 1999 and ending June 30, 2000.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Working
Citizens Citizens Assets
Citizens Emerging Global Citizens Money
Index Growth Equity Income Market
Fund Fund Fund Fund Fund
INSTITUTIONAL
CLASS SHARES
Annual Fund
Operating Expenses
(expenses that are
deducted from fund assets)
Management Fees .50% 1.00% 1.00% .65% .35%
Distribution
(12b-1) Fees None None None None None
Other Expenses .__% .__% .__% .__% .__%
Total Annual Fund
Operating Expenses .__% .__% .__% .__% .__%
Fee Waiver and Expense
Reimbursement+ .__% .__% .__% N/A .__%
Net Expenses .__% .__% .__% .__% .__%
</TABLE>
- --------------------
+ The investment adviser to the fund has contractually agreed to waive
certain fees and reimburse certain expenses for the fiscal year commencing
July 1, 1999 and ending June 30, 2000.
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:
1 Year 3 Years 5 Years 10 Years
Citizens Index Fund
Standard shares $__ $__ $__ $__
Administrative Class shares $__ $__ $__ $__
<PAGE>
Institutional Class shares $__ $__ $__ $__
Citizens Emerging Growth Fund
Standard shares $__ $__ $__ $__
Administrative Class shares $__ $__ $__ $__
Institutional Class shares $__ $__ $__ $__
Citizens Small Cap Index Fund
Administrative Class shares $__ $__ N/A N/A
Citizens Global Equity Fund
Standard shares $__ $__ $__ $__
Administrative Class shares $__ $__ $__ $__
Institutional Class shares $__ $__ $__ $__
Citizens Income Fund
Standard shares $__ $__ $__ $__
Administrative Class shares $__ $__ $__ $__
Institutional Class shares $__ $__ $__ $__
Working Assets Money Market Fund
Standard shares $__ $__ $__ $__
Institutional Class shares $__ $__ $__ $__
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 that Citizens Funds deems 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.
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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 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.
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 or other fixed income securities. These positions may
prevent a particular fund from achieving its investment objective or otherwise
adversely affect fund performance.
CITIZENS INDEX FUND
There will be at least an 80% match between the holdings of the fund and the
composition of the Citizens Index, and the fund seeks to achieve a 95%
correlation, before expenses, with the performance of the Index. A 100%
correlation would mean that the fund and the Index are perfectly correlated.
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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 Index.
The Citizens Index is a market-weighted index of approximately 300, mostly
large-sized, companies, roughly 200 of which 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.
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 social criteria, or to reflect changes in the
composition of the S&P 500. 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 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 portfolio gains by investing in
companies considered to be in the developing stages of their life cycle and
that offer the potential for accelerated earnings, revenue growth and share
price appreciation. 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.
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CITIZENS SMALL CAP INDEX FUND
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 seeks to achieve a
95% correlation, before expenses, with the performance of the Index. A 100%
correlation would mean that the fund and the Index are perfectly correlated.
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
Index. Since many of the companies the fund invests in are relatively new, we
do not expect much, if any, dividend income. The fund's turnover rate is not
expected to exceed 20% annually.
The Citizens Small Cap Index is a market-weighted index of approximately 300
companies, most of which are also included in the S&P SmallCap 600 Index. The
others are companies selected in order to provide appropriate industry and
sector diversity, which we believe is essential to a sound indexing strategy.
The range of market capitalizations in the S&P SmallCap 600 Index as of
__________ __, 1999 was $___ million to $___ billion, and as of that date at
least 65% of the total market capitalization of the companies that comprise the
Citizens Small Cap Index was within this range. All of these companies have
passed our rigorous social and environmental screens, and we believe these
companies best represent their industries.
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. In addition, to moderate the risk of currency
fluctuations, the fund will sometimes use currency "hedging." We do this by
entering into arrangements to buy or sell a particular currency, security or
securities index for a stated value against the U.S. dollar at a given time.
While there are costs and risks involved in hedging, we still think hedging can
be a valuable tool.
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
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associated with active management may 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 these debt securities these agencies and enterprises of the U.S.
government and these companies raise money in exchange for interest payments or
dividends. The fund also may invest in preferred stock. The Citizens Income
Fund invests primarily in bonds or mortgages that are due within 2 to 30 years,
although at times it will hold short-term securities as well. The fund's
average maturity usually is between 5 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.
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 usually available
from these securities can benefit the fund and more than 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.
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.
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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 U.S. dollar denominated,
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. The fund maintains a dollar-weighted average
maturity of 90 days or less for the fund as a whole. Checking services are
available.
U.S. Government Securities
When we invest in government securities, we buy only those that are issued by
agencies or other enterprises of the U.S. government. We do not invest in
general obligations of the U.S. government, such as Treasury bills, notes and
bonds.
Commercial Paper
We will also buy "First Tier," commercial paper, which is high quality,
short-term debt issued by well-established 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.
MANAGEMENT OF CITIZENS FUNDS
THE ROLE OF INVESTMENT ADVISER
In order to manage Citizens Funds on a day-to-day basis, we have 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' inception 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 each fund's social criteria and will be carried
<PAGE>
on Citizens Funds "Approved List" of investments. Citizens Advisers also
selects which securities will be bought and sold for 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 five 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).
CITIZENS INDEX FUND and CITIZENS SMALL CAP INDEX FUND. Sophia Collier is the
lead manager of the team that manages the Citizens Index Fund and the Citizens
Small Cap Index Fund. 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.
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 and the Citizens
Emerging Growth Fund, Seneca Capital Management LLC, is a registered investment
adviser. It is the 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 is the lead manager of the team that manages the Citizens Income
Fund. Ms. Seneca is the founder, Chief Investment Officer and Managing Partner
of Seneca Capital Management. Rick Little is the lead manager of the team that
<PAGE>
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.
Sevgi Ipek is the lead manager responsible for day-to-day management of the
Citizens Global Equity Fund. Ms. Ipek is also responsible for Continental and
Eastern European asset allocation, investment strategy and stock selection for
all portfolios under management at Clemente Capital. Prior to joining Clemente
Capital, Ms. Ipek worked as an analyst and international economist for The WEFA
Group, Inc.
CITIZENS FUNDS' MANAGEMENT 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):
Advisory Administrative
Fee Fee Aggregate 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% 0.20% 0.70%
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%
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Citizens Small Cap Index Fund
Administrative Class 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%
Administrative Class shares** 0.65% 0.10% 0.75%
Institutional Class 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% N/A 0.35%
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* For the year ended June 30, 1999, Citizens Index Fund, Standard shares,
paid a shareholder servicing fee of 0.31% of average daily net assets.
** Because the class of shares has not been in existence for a full fiscal
year, the fees reflected are the contractual fees provided for under the
Management Agreement and administrative and shareholder services contract
with the Adviser.
*** As of July 1, 1999 the administrative fee for the Standard shares and
Institutional Class shares of the Working Assets Money Market Fund is
0.10%.
The Adviser also is reimbursed for the cost of providing shareholder services
to each fund, and, in the case of the Citizens Index Fund, Standard shares, is
paid a fee of 0.40% of average annual net assets.
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.) The minimum initial investments and distribution
fees for these classes differ as discussed below. 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
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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 also will
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.
With respect to the Standard shares and Administrative Class shares of each
fund, 0.25% of the respective 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). 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, other than the Working Assets Money Market Fund, are subject to
12b-1 fees.
INVESTMENT MINIMUMS
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). The minimum
subsequent investment for all accounts, including Automatic Investment Plan
accounts, is $50. 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.
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). There is no minimum
subsequent investment. 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.
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.
<PAGE>
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.
Equity securities are valued at the closing sales 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. If no market quotation is available
for a given security (including restricted securities which are subject to
limitations on their sale), our Adviser will fairly value that security in good
faith pursuant to the policies established by Citizens Funds' board of
trustees.
Fixed income investments are generally valued at the bid price for securities.
Debt securities maturing within 60 days normally are 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 evaluation based on
analysis of market data or other factors if such valuations are believed to
reflect more accurately the fair value of such securities.
The value of our shares is determined at the close of business of the New York
Stock Exchange on each day on which it is open for trading.
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 process 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.
<PAGE>
Shares in Working Assets Money Market Fund cost $1.00 per share. For all other
funds, your cost will be the Net Asset Value next determined after your payment
is received 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 such 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 orders 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, 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 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
<PAGE>
telephone transactions, including balance verification. To keep these problems
to a minimum, we record all telephone calls. But please remember, none of
Citizens Funds, our Adviser or our Transfer Agent will be responsible if we
properly 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 on page___). 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. If portfolio securities are distributed
instead of cash, shareholders may incur brokerage commissions or other costs in
converting the securities to cash.
<PAGE>
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. 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.
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.
<PAGE>
MAKING A CHANGE IN YOUR ACCOUNT
After your account is set up, you may want to make a change in one of the
options or in the account title. We are pleased to assist, but to protect both
you and Citizens Funds from fraud, we may require an original Medallion
Signature Guarantee, which is a signature guarantee from an eligible guarantor
(see list below) 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. There will be a $20.00 charge for any checks
returned for any reason.
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," above.
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.
TRANSACTIONS THAT REQUIRE MEDALLION SIGNATURE GUARANTEES
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
<PAGE>
ELIGIBLE GUARANTORS
o Commercial Bank
o Trust Company
o Savings Associations
o Credit Unions
o Members of domestic stock exchange
Note: Notaries public are not eligible guarantors.
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 advance $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
ordered 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
<PAGE>
WIRING INSTRUCTIONS:
Citizens Funds
c/o PNC Bank, N.A.
Philadelphia, PA
ABA#: 031000053
For Further Credit
A/C# 86-1030-3646
Shareholder name/account number
OVERNIGHT DELIVERY PACKAGES (i.e., Federal Express, UPS, Airborne Express):
Send to:
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.
TRANSFER AGENT AND DIVIDEND PAYING AGENT:
PFPC Inc.
400 Bellevue Parkway
Suite 108
Wilmington, DE 19809
DIVIDENDS, DISTRIBUTIONS AND TAXES
Unless you give us other instructions when you fill out your account
application (or by telephone or in writing thereafter), we will automatically
reinvest your dividends and distributions at the Net Asset Value, calculated on
<PAGE>
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, are declared and paid on
the following schedule:
DIVIDEND CAPITAL GAINS 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
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 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.
<PAGE>
Please consult your own 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.
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. Included within this Y2K Plan is an assessment and monitoring
of the Y2K preparedness of all companies whose securities are recommended for
inclusion in our mutual fund portfolios. Vendor and third party assessment and
monitoring includes written requests for information and statements, periodic
reporting and regularly scheduled teleconferences.
As of this date, we believe all of Citizens Funds' business critical computer
hardware is fully Year 2000 compliant as certified by the National Software
Testing Laboratories (NSTL) YMARK2000 program (www.nstl.com). Moreover, we
designed our internal software with Year 2000 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 established: 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 is expected to be completed by September 30,
1999.
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
<PAGE>
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 for applicability 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.
[CITIZENS FUNDS LOGO]
Printed on recycled paper with soy-based ink.
(C)1999 Citizens Advisers
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.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each fund's
financial performance for the past 5 years or, if shorter, the period of the
fund's operations. Certain financial information reflects financial results for
a single fund share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in a fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP, whose reports, along with the funds'
financial statements, are included in the annual report, which is available
upon request.
[Financial highlights to be added by amendment.]
<PAGE>
Citizens 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
<PAGE>
CITIZENS FUNDS
STATEMENT OF ADDITIONAL INFORMATION
_________ __, 1999
This Statement is not a prospectus and should be read in conjunction with
the Citizens Funds' Prospectus dated _________ __, 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.......................................................
Investment Strategies, Risks and Fundamental Policies ...............
Trustees, Officers and Beneficial Owners.............................
Investment Advisory and Other Services...............................
Brokerage Allocation and Soft Dollars................................
Ownership of Shares and Shareholder Rights...........................
How We Value Fund Shares.............................................
Tax Matters..........................................................
How We Calculate Performance.........................................
Financial Statements.................................................
<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 7/1/99). 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 the U.S. Government or its agencies;
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
<PAGE>
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 Trust'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.
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
<PAGE>
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.
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
<PAGE>
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.
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 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, unless, in the case of restricted
securities, the Board of Trustees of the Trust determines, based on the trading
<PAGE>
markets for the specific restricted security, that it is liquid. 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.
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 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 our 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 our Board of Trustees finds that a liquid trading market exists
for these securities. Our Trustees will review on an ongoing basis
any determination by the Adviser to treat a restricted security as a
<PAGE>
liquid security, including the Adviser's assessment of current
trading activity and the availability of reliable price information.
In determining whether a privately placed security is properly
considered a liquid security, the Adviser and our Trustees will take
into account the following factors: (i) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the
mechanics of transfer); (ii) dealer undertakings to make a market in
the security; and (iii) the number of dealers willing to purchase or
sell the security and the number of other potential purchasers. To
the extent 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 our Trustees.
3. The funds may borrow only under special circumstances. We do not
normally borrow money, but for temporary purposes a fund may borrow
from banks up to 10% of the fund's total assets. If we borrow, we can
pledge our assets up to the amount borrowed. A fund cannot borrow to
purchase securities or to increase its income, but can borrow to pay
for shares being redeemed so that we do not have to sell securities
we do not want to sell. A fund will not purchase any securities while
the fund has borrowings above 5% of assets outstanding. The interest
paid on our borrowings would reduce our net income.
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 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 we buy money market instruments or loan
participation interests, we are 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 our 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.
<PAGE>
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.
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
<PAGE>
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 Income Fund -- 64.56%, 80.14% and ____%; Citizens
Emerging Growth Fund -- 228.66%, 245.30% and ____%; Citizens Global Equity Fund
- -- 69.34%, 72.33% and ____%; Citizens Index Fund -- 18.64%, 13.64% and ____%,
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,
subject to the 10% limitation referred to in paragraph 3 below. The
interest rates and amounts involved may change daily. We have the right
to increase the amount under the note at any time up to the full amount
provided by the note agreement, or to decrease the amount; and the
borrower may repay up to the full amount of the note without penalty.
Because these types of notes are direct arrangements between us and the
borrower, they generally will not be traded and there is no active
secondary market for these notes. However, they are redeemable on demand,
and thus immediately repayable by the borrower, at face value plus
accrued interest at any time. Our right to redeem is dependent on the
borrower's ability to pay principal and interest on demand. Accordingly,
our Adviser will consider and continuously monitor the earning power,
cash flow and other liquidity ratios of the borrower to assess its
ability to meet its obligations on demand. We will invest in these notes
only if the Board of Trustees or the Adviser determines that they present
minimal credit risks and are of comparable quality to commercial paper
having the highest rating of Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's 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."
<PAGE>
4. The fund will not invest more than 10% of its net assets in illiquid
securities. Generally an illiquid security is any security that cannot be
disposed of promptly and in the ordinary course of business at
approximately the amount at which the fund has valued the instrument.
Subject to this limitation, our Trustees have authorized the fund to
invest in restricted securities, specifically privately placed commercial
paper, where such investment is consistent with the fund's investment
objective, and has authorized such securities to be considered to be
liquid to the extent the Adviser determines that there is a liquid
institutional or other daily market for such securities. For example,
restricted securities which may be freely transferred among qualified
institutional buyers pursuant to Rule 144A under the Securities Act of
1933 and for which a liquid institutional market has developed may be
considered to be liquid securities. See the discussion relating to the
purchase of illiquid securities in the section regarding the fundamental
investment policies of the 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
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.
<PAGE>
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.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------ ----------------------- -------------------------------------------
NAME, ADDRESS POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST DURING PAST 5 YEARS
- ------------------------------------ ----------------------- -------------------------------------------
Azie Taylor Morton, Chair of the Board and Investment adviser
10910 Medfield Court, Austin, Trustee
TX 78739
63 years
- ------------------------------------ ----------------------- -------------------------------------------
William D. Glenn, II Trustee Psychotherapist and Executive Director of
915 Las Ovejas, San Rafael, CA Continuum HIV Day Services, a non-profit
94903 corporation promoting AIDS awareness,
51 years treatment and research
- ------------------------------------ ----------------------- -------------------------------------------
<PAGE>
- ------------------------------------ ----------------------- -------------------------------------------
NAME, ADDRESS POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST DURING PAST 5 YEARS
- ------------------------------------ ----------------------- -------------------------------------------
Sophia Collier* Trustee Portfolio Manager Citizens Funds (since
230 Commerce Way, Suite 300 1995);
Portsmouth, NH 03801 Chair of the Board of Directors, Citizens
43 years Advisers (since 1991);
President, Citizens Funds and Citizens
Advisers (1991 to September 1998)
- ------------------------------------ ----------------------- -------------------------------------------
John L. Shields* Trustee and President President and Chief Executive Officer of
230 Commerce Way, Suite 300 Citizens Advisers (since September 1998);
Portsmouth, NH 03801 Senior Management Consultant, Cerulli
46 years 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
7 Wall Street, Concord, NH Community Loan Fund (since 1984), a
03301 non-profit corporation promoting
46 years community investment and development
- ------------------------------------ ----------------------- -------------------------------------------
Lokelani Devone Trustee Assistant General Counsel, DFS Group
525 Market Street, 33rd floor, Limited (international retail business
San Francisco, CA 94105 group) (since 1989)
42 years
- ------------------------------------ ----------------------- -------------------------------------------
Ada Sanchez Trustee Student (since 1996);
111 90th Avenue, Treasure Director of Public Service and Social
Island, FL 33706 Change Program, Hampshire College (1987
47 years to 1996)
- ------------------------------------ ----------------------- -------------------------------------------
Robert B. Reich* Trustee University Professor and the Maurice B.
4 Mercer Circle, Cambridge, MA Hexter Professor of Social and Economic
02138 Policy, Brandeis University and its
53 years Heller Graduate School (since 1996);
U.S. Secretary of Labor (1993 to 1996)
- ------------------------------------ ----------------------- -------------------------------------------
Mitchell Johnson, Trustee President, M.A.J. Capital Management,
2753 Unicorn Lane NW, Inc.(money management firm) (since
Washington, DC 20015 August 1994);
57 years Senior Vice President of Corporate
Finance, Student Loan Marketing
Association (1987 to 1994)
- ------------------------------------ ----------------------- -------------------------------------------
<PAGE>
- ------------------------------------ ----------------------- -------------------------------------------
NAME, ADDRESS POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST DURING PAST 5 YEARS
- ------------------------------------ ----------------------- -------------------------------------------
Joseph F. Keefe Secretary Executive Vice President and General
230 Commerce Way, Suite 300 Counsel, Citizens Advisers (since May
Portsmouth, NH 03801 1997);
45 years Partner, Hall, Hess, Kenison, Stewart,
Murphy & Keefe (law firm) (1984 to 1997)
- ------------------------------------ ----------------------- -------------------------------------------
Sean Driscoll Treasurer Fund Accountant, Vice President, Director
230 Commerce Way, Suite 300 of Fund Administration and Director of
Portsmouth, NH 03801 Fund Accounting, Citizens Advisers (since
34 years October 1998);
Director of Fund Administration, State
Street Bank and Trust Company (March
1998 to November 1998);
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 President Executive Vice President, Operations,
230 Commerce Way, Suite 300 Citizens Advisers (since 1994)
Portsmouth, NH 03801
35 Years
- ------------------------------------ ----------------------- -------------------------------------------
Samuel Pierce Assistant Vice Senior Social Analyst, Citizens Advisers
230 Commerce Way, Suite 300 President (since July 1998); Assistant Vice President,
Portsmouth, NH 03801 Wellington Management Company, LLC
31 years (November 1992 to July 1998)
- ------------------------------------ ----------------------- -------------------------------------------
</TABLE>
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 FROM
POSITION CITIZENS FUNDS
Azie Taylor Morton $15,295
<PAGE>
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.
As of August __, 1999, there were ____ outstanding shares of beneficial
interest, representing all the shares of all the funds comprising Citizens
Funds. The following are the shareholders who, as of August __, 1999 owned
beneficially or of record 5% or more of the outstanding shares: _________.
Our Trustees and officers as a group owned less than 1% of the
outstanding shares of each fund and class as of August __, 1999, except for the
Citizens Index Fund, Institutional Class shares, where a single trustee owned
____% of the outstanding shares.
INVESTMENT ADVISORY AND OTHER SERVICES
ADVISER
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
<PAGE>
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.
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.
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.
<PAGE>
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:
<TABLE>
<CAPTION>
<S> <C>
- ------------------------------------------ ---------------------------------------------
Citizens Index Fund,
Standard shares 1.49%
- ------------------------------------------ ---------------------------------------------
Citizens Index Fund,
Institutional Class shares 0.74%
- ------------------------------------------ ---------------------------------------------
Citizens Index Fund,
Administrative Class shares 0.99%
- ------------------------------------------ ---------------------------------------------
Citizens Small Cap Index Fund,
Administrative Class shares 1.15%
- ------------------------------------------ ---------------------------------------------
Citizens Global Equity Fund,
Standard shares 2.05%
- ------------------------------------------ ---------------------------------------------
Citizens Income Fund,
Standard shares 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
- ------------------------------------------ ---------------------------------------------
</TABLE>
Not all our expenses are subject to the limits described above. Interest
expenses, taxes, brokerage commissions, and extraordinary expenses, such as
litigation, that do not usually occur in the operations of a mutual fund are
not included.
For the fiscal years ended June 30, 1997, 1998 and 1999, the Adviser
received the following fees: Working Assets Money Market Fund, 1997-$341,144,
1998-$392,811 and 1999-$____; Citizens Income Fund, 1997-$218,016,
1998-$290,174, and 1999-$____; Citizens Emerging Growth Fund, 1997-$503,188,
1998-$741,296, and 1999-$____; Citizens Global Equity Fund, 1997-$206,581,
1998-$372,017, and 1999-$____; Citizens Index Fund, 1997-$878,074,
1998-$1,439,749, and 1999-$____. The Citizens Small Cap Index Fund is
newly-organized and did not offer shares during these periods.
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.
<PAGE>
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 and expenses are payable monthly and are based on
average annual net assets in the following amounts:
<TABLE>
<CAPTION>
<S> <C>
- ---------------------------------------------------------------------------- --------------------
Fund Administrative Fee
- ---------------------------------------------------------------------------- --------------------
Working Assets Money Market Fund - Standard shares 0.10%
- ---------------------------------------------------------------------------- --------------------
Working Assets Money Market Fund - Institutional Class shares 0.10%
- ---------------------------------------------------------------------------- --------------------
Citizens Income Fund - Standard shares 0.10%
- ---------------------------------------------------------------------------- --------------------
Citizens Income Fund - Institutional Class and Administrative Class shares 0.10%
- ---------------------------------------------------------------------------- --------------------
Citizens Emerging Growth Fund - Standard shares 0.10%
- ---------------------------------------------------------------------------- --------------------
Citizens Emerging Growth Fund - Institutional Class and Administrative 0.10%
Class shares
- ---------------------------------------------------------------------------- --------------------
Citizens Global Equity Fund - Standard shares 0.10%
- ---------------------------------------------------------------------------- --------------------
Citizens Global Equity Fund - Institutional Class and Administrative Class 0.10%
shares
- ---------------------------------------------------------------------------- --------------------
Citizens Index Fund - Standard shares 0.20%
- ---------------------------------------------------------------------------- --------------------
Citizens Index Fund - Institutional Class and Administrative Class shares 0.20%
- ---------------------------------------------------------------------------- --------------------
Citizens Small Cap Index Fund - Administrative Class shares 0.10%
- ---------------------------------------------------------------------------- --------------------
</TABLE>
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 flat fee approximating the "market price"
of such services. These include but are not limited to answering calls from
existing shareholders in a timely manner; maintenance of a toll-free number;
<PAGE>
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 0.40% of average annual net assets.
The Citizens Small Cap Index Fund has not yet commenced operations and
therefore will not pay any administrative and shareholder service fees until
fiscal year 2000.
For the fiscal years ended June 30, 1997, 1998 and 1999, the Adviser
accrued the following administrative and shareholder service fees: Working
Assets Money Market Fund, 1997-$293,217, 1998-$278,850, and 1999-$____;
Citizens Income Fund, 1997-$78,340, 1998-$101,909, and 1999-$____; Citizens
Emerging Growth Fund, 1997-$172,422, 1998-$193,896, and 1999-$____; Citizens
Global Equity Fund, 1997-$71,181, 1998-$86,805, and 1999-$____; and Citizens
Index Fund, 1997-$1,104,684, 1998-$1,635,911, and 1999-$____. 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 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
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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 $_______ under its 12b-1 Plan,
broken down by category as follows:
Marketing, advertising and $____
Public relations
Printing and mailing of prospectuses $____
and sales literature to non-shareholders
Compensation to broker/dealers $____
and service organizations
Compensation to sales personnel $____
Interest, carrying or other finance charges $____
Other (______) $____
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
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attributable to that class of shares only. Class expenses include, but are not
limited to, transfer agent fees and administrative and shareholder fees and
expenses such as the cost of registering shares under state laws, the cost of
typesetting, printing and distributing shareholder reports and Prospectuses.
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), ____%; Citizens Index Fund
(Institutional Class shares), ____%; Citizens Emerging Growth Fund (Standard
shares), ____%; Citizens Global Equity Fund (Standard shares), ____%; Citizens
Income Fund (Standard shares), ____%; Working Assets Money Market Fund
(Standard shares), ____%; and Working Assets Money Market Fund (Institutional
Class shares), ____. 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 Trust has retained as its Independent Accountants the firm of
PricewaterhouseCoopers LLP, One Post Office Square, Boston, Massachusetts,
02109. PricewaterhouseCoopers LLP will conduct an annual audit of the financial
statements of the funds, will prepare the funds' federal and state income tax
returns and consult with management of the funds as to matters of accounting,
regulatory filings, and federal and state income taxation.
The audited financial statements of the funds are incorporated herein by
reference.
The statements of assets and liabilities, including the schedules of
investments, and the related statements of operations and of changes in net
assets and the financial highlights for the year ended June 30, 1999 have been
audited by PricewaterhouseCoopers LLP, as stated in their opinion which is
incorporated by reference and has been so incorporated in reliance of such
report given upon their authority as experts in accounting and auditing.
<PAGE>
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
In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, the 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 may 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
<PAGE>
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.
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
<PAGE>
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.
Accordingly, when shares are purchased dividends begin to accrue on the day the
Transfer Agent receives payment for the shares, provided that the payment is
received by 4:00 p.m. Eastern time. When shares are redeemed, the shares are
not entitled to a dividend declared on the day of the redemption if the
redemption request is received by the Transfer Agent prior to 4:00 p.m. Eastern
time. Dividends are automatically reinvested in shares, at Net Asset Value,
unless a shareholder otherwise instructs the Transfer Agent in writing.
Shareholders so requesting will be mailed checks in the amount of the
accumulated dividends. For the purpose of calculating dividends, 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
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,
<PAGE>
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 process 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 the close of the
New York Stock 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 such 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 orders 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 same.
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 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.
<PAGE>
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 Trust's 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.
<PAGE>
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.
If any of the shares being redeemed were recently purchased by check,
proceeds may not be made available for up to seven business days, and if
recently purchased by electronic funds transfer, for up to five business days,
while we determine whether the check or electronic funds transfer used to
purchase the shares has been honored by the bank on which is was drawn or made.
You can eliminate such delays by making your investments by wire.
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.
<PAGE>
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 Trust does not expect changes in interest rates
to significantly affect the value of shares of the Working Assets Money Market
Fund, since the fund uses the amortized cost method of valuation, which is
described in the section "How We Value Fund Shares." However, changes in
interest rates can have a significant effect on the value of non-money market
fixed income securities.
The value of equity securities held in the Citizens 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.
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 the time the New
York Stock Exchange closes 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 last sales 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 are normally valued at amortized cost, adjusted for
market fluctuation, if any. 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 evaluation based
upon analysis of market data or other factors if such valuations are believed
to reflect more accurately the fair value of such securities.
<PAGE>
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.
Working Assets Money Market Fund
The Trust's Trustees have determined that it is appropriate for us to
value shares of the Working Assets Money Market Fund using the amortized cost
method and that this method represents the fair value of the fund's shares.
This method values a security at the time of its purchase at cost and
thereafter assumes a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the security. This method does not take into account unrealized gains
and losses.
While the amortized cost method provides certainty in valuation, there
may be periods during which value, as determined by the amortized cost method,
is higher or lower than the price 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
<PAGE>
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 __-__ 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, 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 to be able to pass through to
shareholders foreign tax credits with respect to such foreign taxes. If the
Global Equity Fund holds more than 50% of its assets in foreign stock and
securities at the close of its taxable year, it may elect to "pass through" to
its shareholders foreign income taxes paid. If the Global Equity Fund so
elects, its shareholders will be required to treat their pro rata portions of
the foreign income taxes paid by the fund as part of the amounts distributed by
them from the fund and thus includable in their gross income for federal income
tax purposes. Shareholders who itemize deductions would then be allowed to
claim a deduction or credit (but not both) on their federal income tax returns
for such amounts, subject to certain limitations. Shareholders who do not
itemize deductions would (subject to such limitations) be able to claim a
credit but not a deduction. No deduction for such amounts will be permitted to
individuals in computing their alternative minimum tax liability. If the Global
Equity Fund does not qualify or elect to "pass through" to its shareholders
foreign income taxes that it pays, shareholders will not be able to claim any
deduction or credit for any part of such taxes.
<PAGE>
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.
"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
<PAGE>
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 "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.
<PAGE>
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
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
<PAGE>
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, are not indicative of the amounts that actually
may be paid to our shareholders. Amounts paid to shareholders are reflected in
the quoted current distribution rate. The current distribution rate is computed
by dividing the total amount of dividends per share we paid during the past
twelve months by a current maximum offering price. Under certain circumstances,
such as when there has been a change in the amount of dividend payout, or a
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
<PAGE>
the dividends during the past twelve months. The current distribution rate
differs from the current yield computation because it may include distributions
to shareholders from additional sources (i.e., sources other than dividends and
interest, such as short-term capital gains), and is calculated over a different
period of time.
The following table sets forth various measures of performance for
certain classes of the funds as of June 30, 1999:
<TABLE>
<CAPTION>
<S> <C> <C>
FUND 7-DAY YIELD EFFECTIVE YIELD 30-DAY YIELD
Working Assets Money Market Fund
(Standard shares) ____ ____ N/A
Working Assets Money Market Fund
(Institutional Class shares) ____ ____ N/A
Citizens Income Fund N/A N/A ____
</TABLE>
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).
<PAGE>
For the period ended June 30, 1999 certain classes of the funds had the
following performance:
<TABLE>
<CAPTION>
HYPOTHETICAL
INVESTMENT
5 YEAR AVERAGE ANNUAL RETURN ON $1,000
ONE YEAR AVERAGE ANNUAL TOTAL RETURN FOR THE
FUND TOTAL RETURN TOTAL RETURN SINCE INCEPTION ONE YEAR PERIOD
<S> <C> <C> <C> <C>
Citizens Income Fund ____
____ ____ (6/10/92) ____
Citizens Emerging ____
Growth Fund ____ ____ (2/8/94) ____
Citizens Global ____
Equity Fund ____ ____ (2/8/94) ____
Citizens Index Fund
(Standard shares) ____
____ N/A (3/3/95) ____
Citizens Index Fund
(Institutional Class ____
shares) ____ N/A (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 Government/Corporate Intermediate 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 following financial statements of Citizens Funds and the opinion of
its independent auditors, included in the Annual Report to the shareholders for
the year ended June 30, 1999 are incorporated herein by reference and are
provided to each person to whom the Statement of Additional Information is sent
or given:
<PAGE>
Statement of Investments - June 30, 1999 Statement of Assets and Liabilities -
June 30, 1999
Statement of Operations for the year ended - June 30, 1999
Statement of Changes in Net Assets for the years ended June 30, 1998 and 1999
Financial Highlights for the years ended June 30, 1995, 1996, 1997, 1998 and
1999
Notes to Financial Statements
Report of Independent Certified Public Accountants
<PAGE>
APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF BOND RATINGS
We use the ratings provided by national rating services as one of several
indicators of the investment quality of fixed income securities. The following
is a description of the ratings of the 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.
<PAGE>
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.
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.
<PAGE>
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The rating C may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this
obligation are being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
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.
<PAGE>
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
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:
<PAGE>
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period had not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
<PAGE>
PART C: OTHER INFORMATION
Item 23 Exhibits
(a) Declaration of Trust*****
(b) By-Laws*
(c) N/A
(d) Management Agreement:
(1) Management Agreement*****
(2) Renewal of Management Agreement
(3) Form of Sub-Investment Advisory Agreement**
(4) Amended Sub-Investment Advisory Agreement****
(e) Distribution Agreement
(f) N/A
(g) Custodian Contract:
(1) Custodian Contract***
(2) Form of Letter Agreement adding Citizens Small Cap Index
Fund to the Custodian Contract******
(h) Other Material Contracts:
(1) Administrative and Shareholder Services Agreement
(2) Expense Reimbursement Agreement
(i) Form of Opinion and Consent of Counsel as to the legality of the
securities being registered
(j) N/A
(k) N/A
(l) N/A
(m) Rule 12b-1 Distribution Plan
(n) N/A
(o) Rule 18f-3 Plan
(p) Powers of attorney **** and ******
* Incorporated by reference to Post-Effective Amendment No. 38 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on October 7, 1997.
** Incorporated by reference to Post-Effective Amendment No. 34 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on June 21, 1996.
*** Incorporated by reference to Post-Effective Amendment No. 35 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on September 27, 1996.
**** Incorporated by reference to Post-Effective Amendment No. 40 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on December 11, 1997.
<PAGE>
***** Incorporated by reference to Post-Effective Amendment No. 42 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on August 28, 1998.
****** Incorporated by reference to Post-Effective Amendment No. 44 to the
Registrant's Registration Statement (File No. 2-80886), as filed with
the Securities and Exchange Commission on April 15, 1999.
Item 24. Persons Controlled by or under Common Control with the Fund
o See the Prospectus and the Statement of Additional Information
regarding the Registrant's control relationships.
o Citizens Funds is a Massachusetts business trust.
o Citizens Advisers, Inc., the investment adviser to the Registrant,
is a California corporation, which also controls the distributor
of the Registrant, Citizens Securities, Inc., which is also a
California corporation.
Item 25. Indemnification
Article Seventh of the Declaration of Trust filed as Exhibit (a) to
the Registration Statement is incorporated by reference. Citizens
Funds participates in a group liability policy under which it and its
trustees, officers and affiliated persons, the adviser and the
distributor are insured against certain liabilities.
Item 26. Business and other Connections of Investment Adviser
Other businesses, professions, vocations, or employment of a
substantial nature in which each director or principal officer of
Citizens Advisers, Inc. is or has been, at any time during the last
two fiscal years, engaged for his or her own account or in the
capacity of director, officer, employee, partner or trustee are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Name and Position Connection with and
With Investment Adviser Name of Other Company
John L. Shields, Trustee, Citizens Funds
President, CEO President, Citizens Securities, Inc.
Senior Consultant, Cerulli Associates (1995 to 1998)
Sophia Collier, Trustee, Citizens Funds
Chair of Board President, Citizens Funds and
Citizens Advisers, Inc. (1991 to 1998)
<PAGE>
President, Northpoint Technology, LTD
President, NPT, Inc.
John P. Dunfey, Chairman and Director, Dunfey Brothers Capital Group
Partner President, Treasurer & Director, DA-TRIAD, Inc.
Trustee and Governor, Dana-Farber Cancer Inst., Boston
Chair, Human Rights Project, Inc.
Chair, New England Circle, Inc.
Director, International League for Human Rights, NY
Robert J. Dunfey, Sr. Treasurer & Founding Director, Dunfey Brothers Capital
Partner Group
Trustee, the Jackson Laboratory, Bar Harbor, Maine
Past Director, KeyBank of Maine
Trustee, University of Maine System
Treasurer and Director, New England Circle, Inc.
Director, American Ireland Fund, Boston
Founder & Honorary Director, Susan L. Curtis
Foundation, Portland, Maine
Gerald Dunfey, Vice President & Founding Director, Dunfey Brothers
Partner Capital Group
Director, DA-TRIAD, Inc.
President, New England Circle, Inc.
Director, Martin Luther King Center for Nonviolent Social
Change
Board of Advisors, Fund for a Free South Africa
Board of Incorporators, Joslin Diabetes Center
William Hart, Director, SIS Bank, Springfield, MA
Partner Director, Blue Cross/Blue Shield of NH
President, Dunfey Brothers Capital Group
Director, DA-TRIAD, Inc.
Director, National Trust for Historic Preservation
Director, American Academy in Rome
Director, Currier Gallery of Art
Director, Berwick Academy, Berwick, Maine
</TABLE>
Item 27. Principal Underwriters
a Not applicable.
b John L. Shields, 230 Commerce Way, Suite 300, Portsmouth, NH, is
the President of Citizens Funds' distributor, Citizens Securities,
Inc.
c Not applicable.
<PAGE>
Item 28. Location of Accounts and Records
The accounts, books and other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940, as amended, and
the rules under that act are kept at Citizens Funds' Transfer and
Dividend Distributing Agent, PFPC, Inc., 400 Bellevue Pkwy.,
Wilmington, DE 19808, and at Citizens Funds' Custodian and Fund
Accounting Agent, State Street Bank and Trust, One Heritage Drive,
North Quincy, MA 02171.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Portsmouth and State of New Hampshire on the 29th day of June, 1999.
CITIZENS FUNDS
By /s/ Joseph F. Keefe
---------------------------
Joseph F. Keefe, Secretary
/s/ John L. Shields
- ------------------------------ Trustee, President,
(John L. Shields) Principal Executive,
Financial and
Accounting Officer
Azie Taylor Morton*
- ------------------------------ Trustee
(Azie Taylor Morton)
William Glenn*
- ------------------------------ Trustee
(William Glenn)
Ada Sanchez*
- ------------------------------ Trustee
(Ada Sanchez)
Sophia Collier*
- ------------------------------ Trustee
(Sophia Collier)
Juliana Eades*
- ------------------------------ Trustee
(Juliana Eades)
Lokelani Devone*
- ------------------------------ Trustee
(Lokelani Devone )
Robert B. Reich*
- ------------------------------ Trustee
(Robert B. Reich)
<PAGE>
Mitchell Johnson*
- ------------------------------ Trustee
(Mitchell Johnson)
* By Joseph F. Keefe Attorney in Fact /s/ Joseph F. Keefe
---------------------------
See Powers of Attorney incorporated by reference as exhibits hereto.
<PAGE>
EXHIBIT INDEX
(d) Management Agreement:
(2) Renewal of Management Agreement
(e) Distribution Agreement
(h) Other Material Contracts:
(1) Administrative and Shareholder Services Agreement
(2) Expense Reimbursement Agreement
(i) Form of Opinion and Consent of Counsel as to the legality of the
securities being registered
(m) Rule 12b-1 Distribution Plan
(o) Rule 18f-3 Plan
Exhibit (d)(2)
RENEWAL OF MANAGEMENT AGREEMENT
-------------------------------
THIS AGREEMENT, made this 17th day of May, 1999, between Citizens Funds,
an open end investment company organized and existing under the laws of the
Commonwealth of Massachusetts, (the "Fund") and Citizens Advisers, Inc., a
California Corporation (the "Adviser").
WITNESSETH
WHEREAS, there is now in effect a Management Agreement dated June 1, 1992
and restated as of January 19, 1997, to be in effect through May 31, 1999,
between the Fund and the Adviser providing the research, portfolio management
services and certain administrative services to be furnished to the Fund by the
Adviser on certain terms and conditions and subject to certain provision set
forth therein; and
WHEREAS, said Agreement was reapproved by the vote of the holders of a
majority of the outstanding shares of the capital stock of the Fund at the
Special Meeting of Stockholders held May 18, 1992, and said Agreement provides
for year to year renewals by mutual consent, upon certain specified conditions,
and the renewal of such agreement has been approved by the Board of Trustees of
the Fund on May 17, 1999; and
NOW, THEREFORE, such parties agree as follows:
1. The Management Agreement dated June 1, 1992 and restated as of January 19,
1997, is hereby renewed for the additional 12 month period beginning June
1, 1999 and ending at the close of business on May 31, 2000.
2. In all other respects said Management Agreement, as now amended and in
effect, is reaffirmed and shall continue in effect for the period provided
by such Agreement as renewed by this Agreement.
3. This Agreement may be executed in several counterparts, each of which
shall be original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their corporate names by their duly authorized officers as of the
day and year first above written.
Citizens Funds Citizens Advisers, Inc.
By /s/ Azie Taylor Morton By /s/ John L. Shields
-------------------- --------------------
Azie Taylor Morton John L. Shields
Chair President
Exhibit (e)
DISTRIBUTION AGREEMENT
This Agreement, made as of the 17th day of May, 1999 between CITIZENS
FUNDS, a Massachusetts business trust (the "Fund"), and CITIZENS SECURITIES,
INC., a California Corporation (the "Distributor").
WHEREAS, the Fund proposes to engage in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "'40 Act"); and
WHEREAS, the Distributor is registered as a broker-dealer under the
Securities Exchange Act of 1934, as amended (the "'34 Act"), and is a member
in good standing of the National Association of Securities Dealers, Inc. (the
"NASD");
WHEREAS, the Fund's Shares of Beneficial Interest, no par value (the
"Shares"), are divided into separate series and separate classes representing
interests in separate funds of securities and other interests;
WHEREAS, the Fund desires the Distributor to act as distributor of its
shares in connection with the continuous offering of the Fund's shares, in the
manner and on the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties agree as follows:
1. Appointment of Distributor. The Fund hereby appoints the Distributor as
its exclusive agent to sell and to arrange for the sale of the Fund's Shares,
on the terms and for the period set forth in this Agreement, and the
Distributor hereby accepts such appointment and agrees to act hereunder. It is
understood and agreed that the services of the Distributor hereunder are not
exclusive, and the Distributor may act as principal underwriter for the shares
of any other registered investment company.
2. Offering and Sale of Shares.
(a) Solicitation of Orders. The Distributor shall use its best efforts
(but only in those states in which the Distributor may lawfully do so) to
obtain from investors unconditional orders for the sale of Shares authorized
for issuance by the Fund and which are registered under the Securities Act of
1933 (the " '33 Act"). The Distributor shall not be obligated, however, to
register or maintain its registration as a broker or dealer under the states
securities laws of any jurisdiction if, in the judgment of the Distributor,
such registration is not practicable or feasible. The Distributor may in its
discretion reject any order to purchase Shares.
(b) Sale of Shares. The Distributor agrees to sell the Fund's Shares,
as agent for the Fund, upon the terms described in the Fund's then current
prospectus. The Distributor shall not be obligated to sell any certain number
of Shares. Upon acceptance by the Distributor of an order for the purchase of
<PAGE>
Fund Shares, the Distributor shall promptly transmit such order to the Fund's
shareholder servicing agent. A purchase order shall be deemed effective at the
time and in the manner set forth in the Fund's then current prospectus. The
Distributor shall not make any short sales of Shares.
(c) Transmission of Purchase Price. The Distributor shall promptly
transmit any funds received by it from investors in payment of the purchase
price or Shares sold through it to the Fund's shareholder servicing agent.
3. Duties of the Fund.
(a) Maintenance of Federal Registration. The Fund shall take, from time
to time, all necessary action and such steps, including payment of the related
filing fee, as may be necessary to register and maintain registration of an
indefinite number of a Shares under the '33 Act. The Fund agrees to file from
time to time such amendments, reports and other documents as may be necessary
in order that there may be no untrue statement of a material fact in a
registration statement or prospectus, or necessary in order that there may be
no untrue statement of a material fact in a registration statement or
prospectus, or necessary in order that there may be no untrue statement of a
material fact in a registration statement or prospectus, or necessary in order
that there may be no omission to state a material fact in the registration
statement or prospectus which omission would make the statements therein
misleading.
(b) Maintenance of "Blue Sky" Qualifications. The Fund shall use its
best efforts to qualify and maintain the qualification of an appropriate number
of Shares for sale under the securities laws of such states as the Distributor
and the Fund may approve, and, if necessary or appropriate in connection
therewith, to qualify and maintain the qualification of the Fund as a broker or
dealer in such states; provided that the Fund shall not be required to amend
its Declaration of Trust or By-Laws to comply with the laws of any state, to
maintain an office in any state, to change the terms of the offering of the
Shares in any state, to change the terms of the offering of the Shares in any
state from the terms set forth in its then current prospectus, to qualify as a
foreign corporation in any state or to consent to service of process in any
state other than with respect to claims arising out of the offering and sale of
the Shares. The Distributor shall furnish such information and other material
relating to its affairs and activities as may be required by the Fund in
connection with such qualifications.
(c) Copies of Reports and Prospectus. The Fund shall keep the
Distributor fully informed with regard to its affairs and shall furnish to the
Distributor copies of all information, financial statements and other papers
which the Distributor may reasonably request for use in connection with the
distribution of Shares, including one certified copy, upon request by the
Distributor, of all financial statements prepared for the Fund by independent
public accountants and such reasonable number of copies of its most current
prospectus and annual and interim reports as the Distributor may request and
shall cooperate fully in the efforts of the Distributor to sell and arrange for
the sale of the Shares and in the performance of the Distributor under this
Agreement.
4. Expenses.
(a) Expenses Paid by the Fund. The Fund shall pay all expenses:
(i) in connection with the preparation, setting in type and filing
of any registration statement and prospectus under the '33 Act and/or the '40
Act, and any amendments or supplements that may be made from time to time;
<PAGE>
(ii) in connection with the registration and qualification of
Shares for sale in the various states in which the fund shall determine it
advisable to qualify such Shares for sale (including registering of the Fund as
broker or dealer or any officer or the Fund or other person as agent or
salesman of the Fund in any state.);
(iii) of preparing, setting in type, printing and mailing any
report or other communication to shareholders of the Fund in their capacity as
such;
(iv) of preparing, setting in type, printing and mailing
prospectuses annually to existing shareholders (if the Fund shall elect to do
so);
(v) in connection with the issuance and transfer of Shares
resulting from the acceptance by the Distributor of orders to purchase Shares
placed with the Distributor by investors, including the expenses of confirming
such purchase orders;
(vi) of any issue taxes or (in the case of Shares redeemed) any
initial transfer taxes; and
(vii) in connection with the Distribution Plan of the Fund adopted
pursuant to Rule 12b-1 of the 1940 Act, and the financing of Distribution
activities outlined in paragraph (b) below, the Fund shall also pay the
following distribution fees based upon the average annual net assets of the
series and classes of Citizens Funds to the extent permitted by such Plan:
<TABLE>
<CAPTION>
<S> <C>
Citizens Index Fund, Standard shares 0.25% of average net assets
Citizens Index Fund, Administrative Class shares 0.25% of average net assets
Citizens Index Fund, Institutional Class shares No distribution fee (not
subject to Distribution Plan)
Citizens Emerging Growth Fund, Standard shares 0.25% of average net assets
Citizens Emerging Growth Fund, Administrative Class shares 0.25% of average net assets
Citizens Emerging Growth Fund, Institutional Class shares No distribution fee (not
subject to Distribution Plan)
Citizens Global Equity Fund, Standard shares 0.25% of average net assets
Citizens Global Equity Fund, Administrative Class shares 0.25% of average net assets
Citizens Global Equity Fund, Institutional Class shares No distribution fee (not
subject to Distribution Plan)
Citizens Small Cap Index Fund, Standard shares 0.25% of average net assets
Citizens Small Cap Index Fund, Administrative Class shares 0.25% of average net assets
Citizens Small Cap Index Fund, Institutional Class shares No distribution fee (not
subject to Distribution Plan)
Citizens Income Fund, Standard shares 0.25% of average net assets
Citizens Income Fund, Administrative Class shares 0.25% of average net assets
Citizens Income Fund, Institutional Class shares No distribution fee (not
<PAGE>
subject to Distribution Plan)
Working Assets Money Market Fund, Standard shares 0.20% of average net assets
Working Assets Money Market Fund Institutional Class shares No distribution fee (not
subject to Distribution Plan)
</TABLE>
(b) Expenses Paid by the Distributor. The Distributor shall (unless
such expenses are to be paid by the Fund pursuant to subparagraph (a) above and
the Fund's Distribution Plan adopted pursuant to Rule 12b-1 under the `40 Act)
pay or cause to be paid all expenses:
(i) of printing and distributing any prospectus or reports
prepared for its use in connection with the distribution of Shares to the
public;
(ii) of preparing, setting in type, printing and mailing any other
literature used by the Distributor in connection with distribution of the
Shares to the public;
(iii) of advertising in connection with the distribution of such
Shares to the public;
(iv) incurred in connection with its registration as a broker or
dealer or the registration or qualification of its officers, partners,
directors or representatives under Federal and state laws; and
(v) incurred in connection with the sale and offering for sale of
Shares which have not been herein specifically allocated as between the Fund
and Distributor.
5. Conformity with Applicable Laws and Rules. The Distributor agrees that
in selling Shares hereunder it shall conform in all respects with the laws of
the United States and of any state in which Shares may be offered, and with
applicable rules and regulations of the NASD.
6. Independent Contractor. In performing its duties hereunder, the
Distributor shall be an independent contractor and neither the Distributor, nor
any of its officers, partners, directors, employees, or representatives is or
shall be an employee of the Fund in the performance of the Distributors duties
hereunder. The Distributor shall be responsible for its own conduct and the
employment, control, and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents or employees. The
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employee taxes thereunder.
7. Indemnification.
(a) Indemnification of Fund. The Distributor agrees to indemnify and
hold harmless the Fund and each of its trustees, officers, employees,
representatives and each person, if any, who controls the Fund within the
meaning of Section 15 of the '33 Act against any and all losses, liabilities,
damages, claims or expenses (including the reasonable costs or investigating or
defending any alleged loss, liability, damage, claims or expense and reasonable
legal counsel fees incurred in connection therewith) to which the Fund or such
<PAGE>
of its trustees, officers, employees, representatives or controlling person may
become subject under the '33 Act, under any other statute, at common law, or
otherwise, arising out of the acquisition of any Shares by any person which (i)
may be based upon any wrongful act by the Distributor or any of the
Distributors partners, directors, officers, employees or representatives, or
(ii) may be based upon any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, shareholder
report or other information covering Shares filed or made public by the Fund or
any amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such statement or
omission was made in reliance upon information furnished to the Fund by the
Distributor. In no case (i) is the Distributor's indemnity in favor of the
Fund, or any person indemnified to be deemed to protect the Fund or such
indemnified person against any liability to which the Fund or such person would
otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of duties or by reason of reckless disregard of
obligations and duties under this Agreement or (ii) is the Distributor to be
liable under its indemnity agreement contained in this Paragraph in respect to
any claim made against the Fund or such person, as the case may be, shall have
notified the Distributor in writing of the claim within a reasonable time after
the summons or other first written notification giving information of the
nature of the claim shall have been served upon the Fund or upon such person
(or after the Fund or such person shall have received notice to such service on
any designated agent). However, failure to notify the Distributor of any such
claim shall not relieve the Distributor from any liability which the
Distributor may have to the Fund or any person against whom such action is
brought otherwise than on account of the Distributor's indemnity agreement
contained in this Paragraph.
The Distributor shall be entitled to participate, at its own expense,
in the defense, or, if the Distributor so elects, to assume to defense of any
suit brought to enforce any such claim, but, if the Distributor elects to
assume the defense, such defense shall be conducted by legal counsel chosen by
the Distributor and satisfactory to the Fund, to its trustees, officers,
employees or representatives, or to any controlling person or persons,
defendant or defendants, in the suit. In the event that the Distributor elects
to assume the defense of any such suit and retain such legal counsel, the Fund,
its trustees, officers, employees, representatives or controlling person or
persons, defendant or defendants in the suit, shall bear the fees and expenses
of any additional legal counsel retained by them. If the Distributor does not
elect to assume the defense of any such suit, the Distributor will reimburse
the Fund, such trustees, officers, employees, representatives or controlling
person or persons, defendant or defendants in such suit for the reasonable fees
and expenses of any legal counsel retained by them. The Distributor agrees to
promptly notify the Fund of the commencement of any litigation of proceedings
against it or any of its partners, officers, employees or representatives in
connection with the issue or sale of any Shares.
(b) Indemnification of the Distributor. The Fund agrees to indemnify
and hold harmless the Distributor and each of its partners, officers,
employees, representatives and each person, if any, who controls the
Distributor within the meaning of Section 15 of the '33 Act against any and all
losses, liabilities, damages, claims or expenses (including the reasonable
costs of investigating or defending any alleged loss, liability, damage, claim
or expense and reasonable legal counsel fees incurred in connection therewith)
to which the Distributor or such of its partners, officers, employees,
representatives or controlling person may become subject under the '33 Act,
under any other statute, at common law, or otherwise, arising out of the
acquisition of any Shares by any person which (i) may be based upon any
<PAGE>
wrongful act by the Fund or any of the Fund's trustees, officers, employees or
representatives, or (ii) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement,
prospectus, shareholder report or other information covering Shares filed or
made public by the Fund or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
unless such statement or omission was made in reliance upon information
furnished to the Fund by the Distributor. In no case (i) is the Fund's
indemnity in favor of the Distributor, or any person indemnified to be deemed
to protect the Distributor or such indemnified person against any liability to
which the Distributor or such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties or by reason of his reckless disregard of his obligations and duties
under this Agreement, or (ii) is the Fund to be liable under its indemnity
agreement contained in this Paragraph with respect to any claim made against
Distributor, or person indemnified unless the Distributor, or such person, as
the case may be, shall have notified the Fund in writing of the claim within a
reasonable time after the summons or other first written notification giving
information of the nature of the claim shall have been served upon the
Distributor or upon such person (or after the Distributor or such person shall
have received notice of such service on any designated agent). However, failure
to notify the Fund of any such claim shall not relieve the Fund of any
liability which the Fund may have to the Distributor or any person against whom
such action is brought otherwise than on account of the Fund's indemnity
agreement contained in this Paragraph.
The Fund shall be entitled to participate, at its own expense, in the
defense, or, if the Fund so elects, to assume the defense of any suit brought
to enforce any such claim, but if the Fund elects to assume the defense, such
defense shall be conducted by legal counsel chosen by the Fund and satisfactory
to the Distributor, to its partners, officers, employees or representatives, or
to any controlling person or persons, defendant or defendants, in the suit. In
the event that the Fund elects to assume the defense of any such suit and
retain such legal counsel, the Distributor, its partners, officers, employees,
representatives or controlling person or persons, defendant or defendants in
the suit, shall bear the fees and expenses of any additional legal counsel
retained by them. If the Fund does not elect to assume the defense of any such
suit, the Fund will reimburse the Distributor, such partners, officers,
employees, representatives or controlling person or persons, defendant or
defendants in such suit for the reasonable fees and expenses of any legal
counsel retained by them. The Fund agrees to promptly notify the Distributor of
the commencement of any litigation or proceedings against it or any of its
trustees, officers, employees or representatives in connection with the issue
or sale or any Shares.
8. Authorized representations. The Distributor is not authorized by the
Fund to give on behalf of the Fund any information of to make any
representations in connection with the sale of Shares other than the
information and representations contained in a registration statement of
prospectus filed with the Securities and Exchange Commission ("SEC") under the
'33 Act and/or the '40 Act, covering Shares, as such registration statement and
prospectus may be amended or supplemented from time to time, or contained in
shareholder reports or other material that may be prepared by or on behalf of
the Fund for the Distributor's use. This shall not be construed to prevent the
Distributor from preparing and distributing tombstone ads and sales literature
or other material as it may deem appropriate. No person other than Distributor
is authorized to act as principal underwriter (as such term is defined in the
'40 Act) for the Fund.
9. Term of Agreement. The term of this Agreement shall begin on the date
first above written, and unless sooner terminated as hereinafter provided, this
Agreement shall remain in effect as to any class of shares of series of the
Trust until June 30, 2000. Thereafter, this Agreement shall continue in effect
<PAGE>
from year to year as to any class of shares of series of the Trust, subject to
the termination provisions and all other terms and conditions thereof, so long
as: (a) such continuation shall be specifically approved at least annually by
the Board of Trustees or by vote of a majority of the outstanding voting
securities of the applicable class of Shares and, concurrently with such
approval by the Board of Trustees or prior to such approval by the holders of
the outstanding voting securities of the applicable class of Shares, as the
case may be, by the vote, cast in person at a meeting called for the purpose of
voting on such approval, of a majority of the trustees of the Fund who are not
parties to this Agreement or interested persons of any such party; and (b) the
Distributor shall not have notified the Fund, in writing, at least 60 days
prior to June 30, 2000, or 60 days prior to June 30 of any year thereafter,
that it does not desire such continuation. The Distributor shall furnish to the
Fund, promptly upon its request, such information as may reasonably be
necessary to evaluate the terms of this Agreement or any extension, renewal or
amendment hereof.
10. Amendment and Assignment of Agreement. This Agreement may not be
amended without the affirmative vote of a majority of the Board of Trustees and
of the non-interested Trustees, and may not be assigned as to any class of
Shares of a series of the Fund without the affirmative vote of a majority of
the outstanding voting securities of the applicable class of Shares. This
Agreement shall automatically and immediately terminate in the event of its
assignment.
11. Termination of Agreement. This Agreement may be terminated as to any
class of Shares of a series of the Fund by either party hereto, without the
payment of any penalty, upon 60 days prior notice in writing to the other
party; provided, that in the case of termination by the Fund such action shall
have been authorized by resolution of a majority of the trustees of the Fund
who are not parties to this Agreement or interested persons of any such party,
or by vote of a majority of the outstanding voting securities of the applicable
class of Shares.
12. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
Nothing herein contained shall be deemed to require the Fund to take any
action contrary to its Declaration of Trust or By-Laws, or any applicable
statutory or regulatory requirement to which it is subject or by which it is
bound, or to relieve or deprive the Board of Trustees of the Fund of its
responsibility for and control of the conduct of the affairs of the Fund.
13. Definition of Terms. Any question of interpretation of any term or
provision of this Agreement having a counterpart in or otherwise derived from a
term or provision of the '40 Act shall be resolved by reference to such term or
provision of the `40 Act and to interpretation thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC validly issued pursuant to the '40
Act. Specifically, the terms "vote of a majority of the outstanding voting
securities", "interested persons", "assignment", and "affiliated person", as
used in Paragraphs 10, 11 and 12 hereof, shall have the meanings assigned to
<PAGE>
them by Section 2(a) of the `40 Act. In addition, where the effect of a
requirement of the `40 Act reflected in any provision of this Agreement is
relaxed by a rule, regulation or order of the SEC, whether of special or of
general application, such provision shall be deemed to incorporate the effect
of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized representatives and their respective corporate
seals to be hereunto affixed, as of the day and year first above written.
CITIZENS FUNDS
By: \s\ Azie Taylor Morton
---------------------------------
Azie Taylor Morton
Chair
CITIZENS ADVISERS, INC.
By: \s\ John L. Shields
---------------------------------
John L. Shields
President and CEO
Exhibit (h)(1)
ADMINISTRATIVE AND
SHAREHOLDER SERVICES AGREEMENT
Agreement made this Seventeenth day of May, 1999, by and between the
undersigned, CITIZENS FUNDS (the "Fund"), a Massachusetts business trust, and
CITIZENS ADVISERS, INC. (the "Adviser"), a California Corporation and
Investment Adviser to the Fund, wherein the Adviser agrees to provide certain
general administrative and shareholder services on behalf of the Fund and its
series (collectively, the "funds").
1. Description of Administrative Services. The Adviser agrees to provide the
Fund with the following facilities and services:
(a) Administration of certain daily fund expense accounting duties, including
but not limited to payment and budgeting of operating expenses of all
funds, and calculation of expense accruals.
(b) Administration of annual Fund audit with Fund auditors.
(c) Preparation and filing of registration statement, annual and semi-annual
reports and all other required regulatory filings.
(d) Administrative services in connection with Custody and Transfer Agents,
including daily monitoring of net asset value and dividend factors,
contract and fee negotiations, and quality control.
(e) Administration of funds' compliance systems with federal and state
regulatory requirements.
(f) Organizational services for any new series of the Fund, including but not
limited to drafting the prospectus and statement of additional
information, filing of all required documents, soliciting proxies, and
clerical duties associated with the filing of any such documents.
(g) Blue Sky reporting services as required for the issuer of securities in
the states and territories.
(h) Vendor relations.
(i) Facilities and equipment to perform all such duties.
(j) Other similar services.
Determinations as to who shall provide certain of these services may be
established from time to time by written agreement between the Fund and the
Adviser to be attached as an addendum to this Agreement. The Fund may at times
perform only a portion of these services and the Fund may choose to have these
services provided by others on the Fund's behalf.
<PAGE>
The foregoing list of services does not list all possible administrative
services which may be provided by the Adviser. The foregoing list may be
supplemented from time to time by written agreement between the Fund and the
Adviser to be attached as an addendum to this Agreement.
2. Description of Shareholder Services. The Adviser also agrees to provide the
Fund with the following facilities and services:
(a) Receipt of calls from existing shareholders in a timely manner.
(b) Maintenance of a toll-free number.
(c) Response to shareholder inquiries.
(d) Maintenance of a computer interface with the Fund's transfer agent.
(e) Execution of appropriate shareholder requests.
(f) Retention, maintenance and research of shareholder records.
(g) Printing and mailing of prospectuses and annual reports to shareholders,
as well as shareholder statement production, shareholder tax filings and
other shareholder communications.
(h) Facilities and equipment to perform all such duties.
(i) Other similar services.
3. Fees and Expenses. For performance of administrative and shareholder
services pursuant to this Agreement, the Fund agrees on behalf of each of the
individual funds to pay the Adviser and its affiliate, Citizens Securities,
Inc. (the "Distributor") on the basis of the Fee Schedule annexed as Addendum A
hereto.
In addition to any fees paid pursuant to the foregoing, the Fund agrees on
behalf of each of the individual funds to reimburse the Adviser for
out-of-pocket expenses, including but not limited to postage, forms and
materials, telephone charges and records storage. In addition, any other
expenses incurred by the Adviser at the request or with the consent of the Fund
shall be reimbursed by the Fund on behalf of the applicable fund(s).
The Fund agrees on behalf of each of the funds to pay all fees and
reimbursable expenses within five days following the mailing of the respective
billing notice.
4. Indemnification. The Adviser shall not be responsible for, and the Fund
shall on behalf of the applicable fund(s), indemnify and hold the Adviser
harmless from and against, any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable to:
<PAGE>
(a) All actions of the Adviser or its agents or subcontractors required to be
taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct.
(b) The Fund's lack of good faith, negligence or willful misconduct which may
arise out of the breach of this Agreement or any representation or
warranty of the Fund hereunder.
(c) The reliance on or use by the Adviser or its agents or subcontractors of
information, records, documents or services which (i) are received by the
Adviser or its agents or subcontractors, and (ii) have been prepared
maintained or performed by the Fund or any other person or firm on behalf
of the Fund including but not limited to any previous transfer agent or
registrar.
(d) The reliance on, or the carrying out by the Adviser or its agents or
subcontractors of, any instructions or requests of the Fund on behalf of
the applicable fund(s).
(e) The offer or sale of Shares in violation of any requirement under federal
securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state or in violation of
any stop order or other determination or ruling by any federal agency or
any state with respect to the offer or sale of any such shares in such
state.
At any time, the Adviser may consult with legal counsel with respect to
any matter arising in connection with the services to be performed by the
Adviser under this Agreement, and the Adviser and its agent or subcontractors
shall not be liable and shall be indemnified by the Fund on behalf of the
applicable fund(s) for any action taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel. The Adviser, its agents and
subcontractors shall be protected and indemnified in acting upon any paper or
document furnished by or on behalf of the Fund, reasonably believed to be
genuine and to have been signed by the proper person or persons, or upon any
instruction, information, data, records, or documents, provided the Adviser or
its agents or subcontractors by machine readable input, telex, CRT data entry
or other similar means authorized by the Fund, and shall not be held to have
notice of any change of authority of any person, until receipt of written
notice thereof from the Fund.
In order that the indemnification provisions contained in this Article
shall apply, upon the assertion of a claim for which the Fund may be required
to indemnify the Adviser, the Adviser shall promptly notify the Fund of such
assertion, and shall keep the Fund advised with respect to all developments
concerning such claim. The Fund shall have the option to participate with the
Adviser in the defense of such claim or to defend against such claim in its own
name or in the name of the Adviser. The Adviser shall in no case confess any
claim or make any compromise in any case in which the Fund may be required to
indemnify the Adviser except with the Fund's prior written consent.
This Agreement may be terminated by either party upon one hundred twenty
(120) days written notice to the other. Should the Fund exercise its right to
terminate, all out of pocket expenses associated with the movement or transfer
of records and material will be borne by the Fund on behalf of the applicable
<PAGE>
fund(s). Additionally, the Adviser reserves the right to charge for any other
reasonable expenses associated with such termination and/or a charge equivalent
to the average of three (3) months' fees.
5. Additional Funds. In the event that the Fund establishes one or more series
of Shares in addition to Working Assets Money Market Fund, Citizens Income
Fund, Citizens Emerging Growth Fund, Citizens Global Equity Fund, Citizens
Index Fund and Citizens Small Cap Index Fund, with respect to which it desires
to have the Adviser render services under the terms of this Agreement, it shall
so notify the Adviser in writing, and if the Adviser agrees in writing to
provide such services, such series of Shares shall be subject to this
Agreement.
6. Assignment of the Agreement. Unless this Agreement is amended as described
below, neither the Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written consent of the other party.
This Agreement shall inure to the benefit and bind the parties and their
respective heirs, successors and assigns.
7. Amendment. This Agreement may be amended or modified by a writing, executed
by both parties and authorized or approved by a resolution of the Trustees of
the Fund.
8. Applicable Law. This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the State of New
Hampshire.
9. Acts of God. In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, such party shall
not be liable for damages to the other for any damages resulting from such
failure to perform or otherwise from such causes.
10. Consequential Damages. Neither party to this Agreement shall be liable to
the other party for consequential damages under any provision of this Agreement
or for any consequential damages arising out of any act or failure to act
hereunder.
11. Termination or Registration. The Fund will assume all duties, expenditures
and arrangements of a continuing nature under this Agreement in the event of
its termination or the resignation of the Adviser.
<PAGE>
A copy of the Declaration of Trust of the Fund is on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this instrument is executed on behalf of the Trustees of the Fund as Trustees
and not individually and that the obligations of this instrument are not
binding upon any of the Trustees or Shareholders individually but are binding
only upon the assets and property of the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf by and through their duly
authorized officers, as of the day and year first above written.
CITIZENS FUNDS
By: Azie Taylor Morton
-------------------------
Azie Taylor Morton
Chair
CITIZENS ADVISERS, INC.
By: John L. Shields
-------------------------
John L. Shields
President and Chief Executive Officer
Attest:
Joseph F. Keefe
--------------------------
Secretary
Date: May 17, 1999
--------------------
<PAGE>
ADMINISTRATIVE AND SHAREHOLDER SERVICES AGREEMENT
FEE SCHEDULE
ADMINISTRATIVE SERVICES
- -----------------------
Citizens Advisers, Inc. ("the Administrator") assumes a number of general
administrative services for each individual series and class of Citizens Funds
("the Fund") for which services the Administrator is paid a monthly fee based
on an annual rate of each class's average net assets.
The administrative service fees are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Fund Fee Effective
Working Assets Money Market Fund - Standard shares 10/100 of 1% 7/1/99
Working Assets Money Market Fund - Institutional Class shares 10/100 of 1% 7/1/99
Citizens Income Fund - Standard shares 10/100 of 1% 7/1/95
Citizens Income Fund - Institutional Class
and Administrative Class shares 10/100 of 1% 7/1/95
Citizens Emerging Growth Fund - Standard shares 10/100 of 1% 7/1/95
Citizens Emerging Growth Fund- Institutional Class
and Administrative Class shares 10/100 of 1% 7/1/95
Citizens Global Equity Fund - Standard shares 10/100 of 1% 7/1/95
Citizens Global Equity Fund- Institutional Class
and Administrative Class shares 10/100 of 1% 7/1/95
Citizens Index Fund - Standard shares 20/100 of 1% 1/25/96
Citizens Index Fund - Institutional Class
and Administrative Class shares 20/100 of 1% 7/1/99
Citizens Small Cap Index Fund - Standard shares 10/100 of 1% 7/1/95
Citizens Small Cap Index Fund - Institutional Class
and Administrative Class shares 10/100 of 1% 7/1/95
</TABLE>
The Administrative services provided to the Fund include but are not
limited to the following:
1. Administration of certain daily fund expense accounting duties,
including but not limited to payment and budgeting of operating
expenses of all funds, and calculation of expense accruals.
2. Administration of annual Fund audit with Fund auditors.
3. Preparation and filing of registration statement, annual and
semi-annual reports and all other required regulatory filings.
4. Administrative services in connection with Custody and Transfer
Agents, including daily monitoring of net asset value and dividend
<PAGE>
factors, contract and fee negotiations, and quality control.
Administration of funds' compliance systems with federal and state
regulatory requirements.
5. Blue Sky reporting services as required for the issuer of securities
in the states and territories.
6. Vendor relations.
7. Facilities and equipment to perform all such services.
8. Other similar services.
In addition to fees for the above services, the Administrator may provide other
day to day services. Out of pocket expenses incurred by the Administrator in
relation to such services will be reimbursed to the Administrator by the Fund
at cost.
SHAREHOLDER SERVICES
- ---------------------
Citizens Securities, Inc. also provides a number of services to the Fund
relating primarily to shareholder services and communications, including but
not limited to the following services:
1 Receipt of calls from existing shareholders in a timely manner.
2 Maintenance of a toll-free number.
3 Response to shareholder inquiries.
4 Maintenance of a computer interface with the Fund's transfer agent.
5 Execution of appropriate shareholder requests.
6 Retention, maintenance, and research of shareholder records.
7 Printing and mailing of prospectuses and annual reports to shareholders,
shareholder statement production, shareholder tax filings and other
shareholder communications.
8 Facilities and equipment to perform all such duties.
9 Other similar services.
The Administrator is reimbursed the cost of providing the above shareholder
services and communications for each of the individual funds with the exception
of the Citizens Index Fund Standard shares. With respect to the Citizens Index
Fund, Standard shares, the Fund pays to the Administrator a monthly shareholder
service fee based on an annual rate of 40/100 of 1% of average net assets of
the fund's Standard shares.
Agreed and Accepted:
CITIZENS FUNDS CITIZENS ADVISERS, INC.
By: /s/ Azie Taylor Morton By: /s/ John L. Shields
------------------ ----------------------
Azie Taylor Morton John L. Shields
Chair President and Chief Executive Officer
Dated: May 17, 1999
Exhibit (h)(2)
Citizens Advisers, Inc.
July 1, 1999
Citizens Funds
230 Commerce Way, Suite 300
Portsmouth, NH 03801
Ladies and Gentlemen:
As you know, we and certain of our affiliates currently provide advisory,
administrative, distribution, and other services to the several series of
Citizens Funds (the "Trust"). We hereby agree with the Trust that for each
class of shares of each series of the Trust listed on Schedule 1 to this
letter, we will reimburse that series for all expenses (other than Excluded
Expenses, as defined below) payable by that series for each such class
described in the Trust's Registration Statement on Form N-1A as filed with the
Securities and Exchange Commission, as in effect from time to time, to the
extent necessary so that the series' aggregate expenses for each such class,
net of waivers, would not exceed on a per annum basis the percentage of average
daily net assets specified for that series on Schedule 1. Reimbursement of each
series' expenses will be made at least annually.
Excluded Expenses means (a) taxes, (b) interest, (c) brokerage
commissions, and (d) extraordinary expenses, such as litigation.
The agreements in this letter shall take effect on the date hereof, and
shall remain in effect as to each series on Schedule 1 until June 30, 2000.
Please sign below to confirm your agreement with the terms of this letter.
Sincerely,
Citizens Advisers, Inc.
By: \s\ John L. Shields
----------------------------------------
John L. Shields
President and Chief Executive Officer
Agreed:
Citizens Funds
By: \s\ Azie Taylor Morton
---------------------------
Azie Taylor Morton
Chair
<PAGE>
Schedule 1
1. Working Assets Money Market Fund, Standard shares: 1.50% of the first $40
million of assets and 1% thereafter.
2. Working Assets Money Market Fund, Institutional Class shares: No
contractual limit.
3. Citizens Income Fund, Standard shares: 1.45% of the first $100 million and
1.25% thereafter.
4. Citizens Income Fund, Institutional Class shares and Administrative Class
shares: No contractual limits.
5. Citizens Emerging Growth Fund: No contractual limits.
6. Citizens Global Equity Fund, Standard shares: 2.05% of assets.
7. Citizens Global Equity Fund, Institutional Class shares and Administrative
Class shares: No contractual limits.
8. Citizens Index Fund, Standard shares: 1.49% of assets.
9. Citizens Index Fund, Administrative Class shares: 0.99% of assets.
10. Citizens Index Fund, Institutional Class shares: 0.74% of assets.
11. Citizens Small Cap Index Fund, Standard shares: 1.55% of assets.
12. Citizens Small Cap Index Fund, Administrative Class shares: 1.15% of
assets.
13. Citizens Small Cap Index Fund, Institutional Class shares: 0.90% of
assets.
Exhibit (i)
DRAFT
__________ __, 1999
Citizens Funds
230 Commerce Way
Suite 300
Portsmouth, NH 03801
Ladies and Gentlemen:
We have acted as counsel to Citizens Funds, a Massachusetts business trust
(the "Trust"), in connection with Post-Effective Amendments Numbered 45 and
____ to the Trust's Registration Statement filed with the Securities and
Exchange Commission on June 30, 1999 and __________ __, 1999 (collectively, the
"Amendments"), with respect to the Trust's series Citizens Index Fund, Citizens
Emerging Growth Fund, Citizens Global Equity Fund, Citizens Small Cap Index
Fund, Citizens Income Fund and Working Assets Money Market Fund (collectively,
the "Funds").
In connection with this opinion, we have examined the following described
documents:
(a) the Amendments;
(b) a certificate of the Secretary of State of the Commonwealth of
Massachusetts as to the existence of the Trust;
(c) copies, certified by the Secretary of State of the Commonwealth of
Massachusetts, of the Trust's Declaration of Trust and of all amendments
thereto on file in the office of the Secretary of State; and
(d) a certificate executed by the President of the Trust, certifying as
to, and attaching copies of, the Trust's By-Laws and certain votes of the
Trustees of the Trust authorizing the issuance of shares of the Funds.
In such examination, we have assumed the genuineness of all signatures,
the conformity to the originals of all of the documents reviewed by us as
<PAGE>
copies, the authenticity and completeness of all documents reviewed by us in
original or copy form and the legal competence of each individual executing any
document.
This opinion is based entirely on our review of the documents listed
above. We have made no other review or investigation of any kind whatsoever,
and we have assumed, without independent inquiry, the accuracy of the
information set forth in such documents.
This opinion is limited solely to the laws of the Commonwealth of
Massachusetts (other than the Massachusetts Uniform Securities Act, as to which
we express no opinion) as applied by courts in such Commonwealth to the extent
such laws may apply to or govern the matters covered by this opinion.
We understand that all of the foregoing assumptions and limitations are
acceptable to you.
Based upon and subject to the foregoing, please be advised that it is our
opinion that the shares of the Funds, when issued and sold in accordance with
the Amendments and the Trust's Declaration of Trust and By-laws, will be
legally issued, fully paid and non-assessable, except that, as set forth in the
Amendments, shareholders of the Funds may under certain circumstances be held
personally liable for the Trust's obligations.
We hereby consent to the filing of this opinion as an exhibit to the
Amendments.
Very truly yours,
BINGHAM DANA LLP
Exhibit (m)
AMENDED AND RESTATED DISTRIBUTION PLAN
1 The Plan. This Plan (the "Plan") is the written plan contemplated by Rule
12b-1 (the "Rule") under the Investment Company Act of 1940 (the "Act") of
Citizens Funds (the "Fund").
2 Definitions. As used in this Plan, the following terms shall have the
following meanings:
a "Qualified Recipient" shall mean any broker-dealer or other "person"
(as that term is defined in the Act) which (i) has entered into a
written agreement (a "related agreement") that complies with the Rule
with the Fund's Distributor and (ii) has rendered distribution
assistance (whether direct, administrative or both) in the
distribution of the Fund's shares.
b "Qualified Holdings" shall mean all shares of the Fund beneficially
owned by (i) a Qualified Recipient, (ii) the customers (brokerage or
other) of a Qualified Recipient, (iii) the clients (investment
advisory or other) of a Qualified Recipient, (iv) the accounts as to
which a Qualified Recipient has a fiduciary or custodial
relationship, and (v) the members of a Qualified Recipient, if such
Qualified Recipient is an association or union; provided that the
Qualified Recipient shall have been instrumental in the purchase of
Fund shares by, or shall have provided administrative assistance to,
such customers, clients, accounts or members in relation thereto. The
Distributor may make final and binding decisions as to all matters
relating to Qualified Holdings and Qualified Recipients, including
but not limited to (i) the identity of Qualified Recipients; (ii)
whether or not any fund shares are to be considered as Qualified
Holdings of any particular Qualified Recipient; and (iii) what Fund
shares, if any, are to be attributed to a particular Qualified
Recipient, to a different Qualified Recipient or to no Qualified
Recipient.
c "Qualified Trustees" shall mean the Trustees of the Fund who are not
interested persons, as defined in the Act, of the Fund and who have
no direct or indirect financial interest in the operation of this
Plan or any agreement related to this Plan. While this Plan is in
effect, the selection and nomination of Qualified Trustees shall be
committed to the discretion of such Qualified Trustees. Nothing
herein shall prevent the involvement of others in such selection and
nomination if the final decision on any such selection and nomination
is approved by a majority of such Qualified Trustees.
d "Permitted Payments" shall mean payments by the Distributor to
Qualified Recipients as permitted by this Plan.
3 Payments Authorized. The Distributor is authorized, pursuant to this plan,
to make Permitted Payments to any Qualified Recipient under a related
agreement on either or both of the following bases:
a as reimbursement of direct expenses incurred in the course of
distributing Fund shares or providing administrative assistance to
the Fund or its shareholders, including, but not limited to,
advertising, printing and mailing promotional material, telephone
calls and lines, computer terminals, and personnel; and/or
<PAGE>
b at a rate specified in the related agreement with the Qualified
Recipient in question based on the average value of the Qualified
Holdings of such Qualified Recipient.
The Distributor may make Permitted Payments in any amount to any
Qualified Recipient, provided that (i) the aggregate of (A) the total
amount of all Permitted Payments to all Qualified Recipients (whether
made under (a) and/or (b) above) and (B) the total of Permitted
Expenses (as hereinafter defined) do not exceed, in any fiscal year
of the Fund, one-quarter of one percent of the average annual net
assets of the Fund in that fiscal year; and (ii) a majority of the
Fund's Qualified Trustees may at any time decrease or limit the
aggregate amount of all Permitted Payments or decrease or limit the
amount payable to any Qualified Recipient. The Fund will reimburse
the Distributor for such Permitted Payments within such limit, but
the Distributor shall bear any Permitted Payments beyond such limits.
4 Expenses Authorized. The Distributor is authorized, pursuant to this Plan,
to purchase advertising of shares of the Fund, to pay for sales literature
and other promotional material, including items, such as books, that may
be given to purchasers of Fund shares, and to make payments to the
salesmen of the Distributor. Any such advertising and sales material may
include references to other open-end investment companies or other
investments and any salesmen so paid are not required to devote their time
solely to the sale of Fund shares. Any such expenses ("Permitted
Expenses") shall be reimbursed or paid by the Fund, except that the amount
of reimbursement or payment of Permitted Expenses by the Fund plus the
amount of Permitted Payments to Qualified Recipients shall not in any
fiscal year of the Fund exceed one-quarter of one percent of the average
net assets of the Fund in such year and the Distributor shall bear any
such expenses beyond such limit.
5 Certain Other Payments Authorized. If and to the extent that any of the
payments by the Fund listed below are considered to be "primarily intended
to result in the sale of shares" issued by the Fund within the meaning of
the Rule, such payments by the Fund are authorized without limit under
this Plan and shall not be included in the limitations contained in this
Plan: (i) the costs of the preparation, printing and mailing of all
required reports and notices to shareholders, irrespective of whether such
reports or notices contain or are accompanied by material intended to
result in the sale of shares of the Fund or other funds or investments;
(ii) the costs of preparing, printing and mailing of all prospectuses;
(iii) the costs of preparing, printing and mailing of any proxy statements
and proxies, irrespective of whether any such proxy statement includes any
item relating to, or directed toward, the sale of the Fund's shares; (iv)
all legal and accounting fees relating to the preparation of any such
reports, prospectuses, proxies and proxy statements; (v) all fees and
expenses relating to the qualification of the Fund and/or its shares under
the securities or "Blue-Sky" law of any jurisdiction; (vi) all fees under
the Act and the Securities Act of 1933, including fees in connection with
any application for exemption relating to or directed toward the sale of
the Fund's shares; (vii) all fees and assessments of the Investment
Company Institute or any successor organization, irrespective of whether
some of its activities are designed to provide sales assistance; (viii)
all costs of preparing and mailing confirmations of shares sold or
redeemed or share certificates, and reports of share balances; and (ix)
all costs of responding to telephone or mail inquiries of investors or
prospective investors.
6 Investment Advisory Fees. It is recognized that the costs of distribution
of the Fund's shares in excess of Permitted Payments and Permitted
Expenses ("Excess Distribution Costs") are not offset by any sales charges
<PAGE>
on the Fund's shares and that the profits, if any, of the Fund's
Distributor are dependent primarily on the advisory fees paid by the Fund
to the Distributor in its capacity as the Fund's Advisor and such fees
paid by any other funds which may be advised by the Distributor. If and to
the extent that any investment advisory fees paid by the Fund might, in
view of any Excess Distribution Costs be considered as indirectly
financing any activity which is primarily intended to result in the sale
of shares issued by the Fund, the payment of such fees is authorized under
the Plan. In taking any action contemplated by Section 15 of the Act as to
any investment advisory contract to which the Fund is a part, the Fund's
Board of Trustees including its Trustees who are not "interested persons",
as defined by the Act, shall, in acting on the terms of any such contract,
apply the "fiduciary duty" standard contained in Section 36(b) of the Act.
7 No Admission of Authority. The adoption of this Plan does not constitute
any admission that the adoption of the Rule or any particular provisions
thereof represented an authorized exercise of authority by the Securities
and Exchange Commission.
8 Reports. While this Plan is in effect, the Distributor shall report at
least quarterly to the Fund's Board of Trustees in writing for its review
on the following matters: (i) the amounts of all payments made pursuant to
Section 3 of this Plan, the identity of the recipients of each such
payment; the basis of which each such recipient was chosen as a Qualified
Recipient and the basis on which the amount of the Permitted Payment to
such Qualified Recipient was made; and (ii) all costs of each item
specified in Sections 4 and 5 of this Plan (making estimates of such costs
where necessary or desirable) during the preceding calendar or fiscal
quarter.
9 Effectiveness, Continuation, Termination and Amendment. This Plan has been
approved (i) by a vote of the Board of Trustees of the Fund and of the
Qualified Trustees, cast in person at a meeting called for the purpose of
voting on this Plan; and (ii) by a vote of holders of at least a
"majority" (as defined in the Act) of the outstanding voting securities of
each class of shares of each series of the Fund to which this Plan
applies. The Plan, unless terminated as hereinafter provided, shall
continue in effect as to any class of shares of a series of the Fund for
one year from the date of such shareholder approval and from year to year
thereafter only so long as such continuance is specifically approved at
least annually by the Fund's Board of Trustees and its Qualified Trustees
cast in person at a meeting called for the purpose of voting on such
continuance. This Plan may be terminated at any time as any to any class
of shares of any series of the Fund by a vote of a majority of the
Qualified Trustees or by the vote of the holders of a "majority" (as
defined in the Act) of the outstanding voting securities of that class of
shares. This Plan may not be amended to increase materially the amount of
payments to be made without shareholder approval, as set forth in (ii)
above, and all amendments must be approved in the manner set forth under
(i) above.
Exhibit (o)
CITIZENS FUNDS
AMENDED AND RESTATED MULTIPLE CLASS PLAN
THIS MULTIPLE CLASS PLAN, dated as of May 18, 1998, and amended and
restated as of May 17, 1999, of Citizens Funds, a Massachusetts business trust
(the "Fund"), on behalf of its series, the Citizens Index Fund, Citizens
Emerging Growth Fund, Citizens Global Equity Fund, Citizens Small Cap Index
Fund, Citizens Income Fund and Working Assets Money Market Fund (collectively
the "Series");
W I T N E S S E T H:
WHEREAS, the Fund is engaged in business as an open-end investment company
and is registered under the Investment Company Act of 1940, as amended
(collectively with the rules and regulations promulgated thereunder, the "1940
Act"); and
WHEREAS, the shares of beneficial interest (without par value) of the Fund
(the "Shares") are divided into separate series and may be divided into one or
more separate classes;
WHEREAS, the Shares of each Series have been divided into multiple
classes, and the Fund desires to amend and restate the Fund's Multiple Class
Plan dated May 18, 1998 which is adopted on behalf of each of the Series as a
plan pursuant to Rule 18f-3 (as amended and restated, the "Plan");
WHEREAS, the Board of Trustees of the Fund, in considering whether the
Fund should adopt and implement this Plan, has evaluated such information and
considered such pertinent factors as it deemed necessary to an informed
evaluation of this Plan and determination as to whether this Plan should be
adopted and implemented, and has determined that the adoption and
implementation of this Plan, including the expense allocation contemplated
herein, are in the best interests of each class of Shares individually, as well
as the Fund and the Series;
NOW THEREFORE, pursuant to a vote of the Board of Trustees of the Fund and
a majority of the Trustees who are not "interested persons" of the Fund
("Qualified Trustees"), the Fund hereby adopts this Plan pursuant to Rule 18f-3
under the 1940 Act, on the following terms and conditions:
1. Each of the Series have heretofore issued, and may from time to time
hereafter issue, Shares in one or more classes (each, a "Class" and
collectively, the "Classes"). Shares so issued will have the rights
and preferences set forth in the Fund's then current registration
statement relating to the applicable Series and Class.
<PAGE>
2. Shares issued in Classes will be issued subject to and in accordance
with the terms of Rule 18f-3 under the 1940 Act, including, without
limitation:
(a) Each Class shall have a different arrangement for shareholder
services or the distribution of securities or both, and shall
pay all of the expenses of that arrangement;
(b) Each Class may pay a different share of other expenses, not
including advisory or custodial fees or other expenses related
to the management of the Fund's assets, if these expenses are
actually incurred in a different amount by that Class, or if
the Class receives services of a different kind or to a
different degree than other Classes;
(c) Each Class shall have exclusive voting rights on any matter
submitted to shareholders that relates solely to its
arrangement;
(d) Each Class shall have separate voting rights on any matter
submitted to shareholders in which the interests of one Class
differ from the interests of any other Class; and
(e) Except as otherwise permitted under Rule 18f-3 under the 1940
Act, each Class shall have the same rights and obligations of
any other Class.
3. Nothing herein contained shall be deemed to require the Fund to take
any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Board
of Trustees of the responsibility for and control of the conduct of
the affairs of the Fund.
4. This Plan shall become effective as to each Series upon approval by
a vote of the Board of Trustees and vote of a majority of the
Qualified Trustees.
5. This Plan shall continue in effect indefinitely unless terminated by
a vote of the Board of Trustees of the Fund. This Plan may be
terminated at any time with respect to any Series by a vote of the
Board of Trustees of the Fund.
6. This Plan may be amended at any time by the Board of Trustees of the
Fund, provided that any material amendment of this Plan shall be
effective only upon approval by a vote of the Board of Trustees of
the Fund and a majority of the Qualified Trustees.
<PAGE>
7. This Plan shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the
1940 Act.
8. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the
Plan shall not be affected thereby.
CITIZENS FUNDS
Date: May 17, 1999 By: \s\ Azie Taylor Morton
--------------------- ----------------------------
Azie Taylor Morton
Chair
Attest:
\s\ Joseph F. Keefe
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Secretary
