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As filed with the Securities and Exchange Commission on November 1, 2000
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. 49
And
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 44
CITIZENS FUNDS*
(Exact name of Registrant as specified in charter)
230 Commerce Way, Portsmouth, NH 03801
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code: (603) 436-5152
Sophia Collier, Trustee
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) of Rule 485
[X] On November 1, 2000 pursuant to paragraph (b) of Rule 485
[ ] 75 days after filing pursuant to paragraph (a) of Rule 485
[ ] On _____ pursuant to paragraph (a) of Rule 485
--------------------------------------------------------------------------------
*This filing relates to its series Citizens Core Growth Fund (formerly Citizens
Index Fund), Citizens Emerging Growth Fund, Citizens Global Equity Fund,
Citizens Small Cap Core Growth Fund (formerly Citizens Small Cap Index Fund),
Citizens Income Fund and Citizens Money Market Fund (formerly Working Assets
Money Market Fund).
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SUPPLEMENT TO NOVEMBER 1, 2000 CITIZENS FUNDS PROSPECTUS
On page 34, under "Management of Citizens Funds - The Role of the Investment
Adviser" Citizens Income Fund is deleted from the heading of the third paragraph
and the first sentence of the third paragraph is deleted in its entirety.
On page 35, under "Management of Citizens Funds - Our Sub-Advisers", Citizens
Income Fund is added to the title of the second paragraph. The first sentence of
the second paragraph is deleted in its entirety and the following is
substituted:
The sub-adviser for the Citizens Emerging Growth Fund since the Fund
commenced operations in 1994 and sub-adviser for the Citizens Income
Fund since 1993, Seneca Capital Management LLC is a registered
investment adviser.
On page 47, under "Mailing address and wiring instructions" the entire section
is deleted in its entirety and the following is substituted:
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
WIRING INSTRUCTIONS TRANSFER AGENT AND DIVIDEND PAYING AGENT:
Citizens Funds PFPC Inc
c/o PNC Bank, N.A. 400 Bellevue Parkway, Suite 108
Philadelphia, PA Wilmington, DE 19809
ABA# 031000053
For Further Credit
A/C # 86-1030-3646
Shareholder name/fund name/account number
OVERNIGHT DELIVERY PACKAGES (E.G., FEDERAL EXPRESS, UPS, AIRBORNE EXPRESS):
Citizens Funds
c/o PFPC Inc.
400 Bellevue Parkway, Suite 108
Wilmington, DE 19809
Please send only overnight delivery packages to the above address. Regular U.S.
Mail will not be accepted at this address and may be returned to you.
Please make all checks payable to "Citizens Funds." We are unable to accept
third-party checks.
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November 1, 2000
PROSPECTUS
CITIZENS CORE GROWTH FUND-SM- (FORMERLY CITIZENS INDEX FUND)
CITIZENS EMERGING GROWTH FUND-SM-
CITIZENS SMALL CAP CORE GROWTH FUND-SM-
(FORMERLY CITIZENS SMALL CAP INDEX FUND)
CITIZENS GLOBAL EQUITY FUND-SM-
CITIZENS INCOME FUND-SM-
CITIZENS MONEY MARKET FUND-SM- (FORMERLY WORKING ASSETS MONEY MARKET FUND)
Citizens Funds-Registered Trademark-
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
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Table of Contents
OVERVIEW......................................................................4
THE FUNDS
Investment Objectives and Principal Investment Strategies.....................5
Principal Risks..............................................................10
Performance..................................................................13
Fees and Expenses............................................................17
ADDITIONAL FUND DETAILS
Growth Plus Risk Management..................................................20
Citizens Core Growth Fund....................................................22
Citizens Emerging Growth Fund................................................23
Citizens Small Cap Core Growth Fund..........................................23
Citizens Global Equity Fund..................................................24
Citizens Income Fund.........................................................25
Citizens Money Market Fund...................................................26
MANAGEMENT OF CITIZENS FUNDS
The Role of the Investment Adviser...........................................28
Our Sub-Advisers.............................................................28
Citizens Funds' Fees.........................................................29
12b-1 Fees and Classes.......................................................30
SHAREHOLDER INFORMATION
Investment Minimums..........................................................31
How We Value Our Shares......................................................31
How to Buy and Sell Shares...................................................32
Shareholder Services and Policies............................................34
Costs for Services...........................................................36
Mailing Address and Wiring Instructions......................................36
DIVIDENDS, DISTRIBUTIONS AND TAXES...........................................37
FINANCIAL HIGHLIGHTS.........................................................39
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=========================================================================
OVERVIEW
=========================================================================
CITIZENS FUNDS-Registered Trademark-
Our goal at Citizens Funds is to achieve strong financial results by seeking out
securities which we believe have above-average prospects for long-term growth,
and by employing specific risk management methods in the management of our
actively managed portfolios, as well as in the management of our indexes
underlying our passively-managed portfolios. One such method is that all of our
Funds invest only in companies that we deem to have positive records of
corporate responsibility.
OUR FUNDS
The Citizens Core Growth Fund invests primarily in the companies that make up
the Citizens Index-SM- and has the objective of long-term capital appreciation.
The Citizens Emerging Growth Fund invests primarily in the common stock of
medium-sized companies with the objective of aggressive growth.
The Citizens Small Cap Core Growth Fund invests primarily in the companies that
make up the Citizens Small Cap Index-SM- and has the objective of capital
appreciation.
The Citizens Global Equity Fund invests primarily in foreign and U.S. stocks
with the objective of capital appreciation.
The Citizens Income Fund invests primarily in fixed income securities with the
objective of generating current income and paying a dividend each month.
The Citizens Money Market Fund's objective is current income consistent with
safety and liquidity. The Fund seeks to maintain a stable $1.00 Net Asset Value
per share at all times, although there is no assurance it will be able to do so.
RISKS
There are certain risks common to all of our Funds:
- The stock and bond markets are sometimes volatile and may change
significantly and unpredictably in response to political, regulatory,
market or economic developments.
- The stocks or bonds our Funds purchase may go up or down more or less than
the markets as a whole.
- As with all mutual funds, you could lose money by investing in any of the
Citizens Funds.
WHO MAY WANT TO INVEST
Our four equity funds (Citizens Core Growth Fund, Citizens Emerging Growth Fund,
Citizens Small Cap Core Growth Fund and Citizens Global Equity Fund) are
designed for investors seeking long-term growth who can accept the volatility
associated with common stock investments.
The Citizens Emerging Growth Fund is also designed for investors seeking
aggressive growth and who are willing to accept substantial share price
fluctuations in return for the price appreciation potential inherent in a
concentrated and high-turnover strategy.
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The Citizens Small Cap Core Growth Fund is also designed for investors seeking
long-term growth who can accept the volatility associated with investing in
smaller capitalization companies but who wish to moderate this risk through
diversification.
The Citizens Global Equity Fund is also designed for investors who want to
invest in the securities of non-U.S. companies as well as U.S. companies and who
are willing to accept the additional risks associated with non-U.S. investing.
The Citizens Income Fund is designed for investors who are seeking current
income and who can accept the share price fluctuations associated with
investments in bonds.
The Citizens Money Market Fund is designed for investors who require stability
of principal and who are seeking current income.
=========================================================================
THE FUNDS
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INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
Our actively managed funds employ a growth discipline, seeking companies with
above-average prospects for long-term growth in earnings and profitability. Such
companies typically are leaders in their markets, have proven business models,
innovative technologies, strong brand franchises, loyal customer relationships
and strong financial positions. Risk management strategies are an integral part
of our investment process. All of our funds invest only in companies that meet a
high standard for corporate and environmental responsibility meaning that they
have positive environmental, community, and workplace records. We believe that
our socially responsible investing mandate directly complements our efforts to
control risk by avoiding companies whose corporate behavior could become an
impediment to performance.
CHANGE IN INVESTMENT OBJECTIVE
The investment objective of a Fund cannot be changed without the approval of a
majority of the outstanding shares of that Fund.
CITIZENS CORE GROWTH FUND (FORMERLY CITIZENS INDEX FUND)
OBJECTIVE
The Citizens Core Growth Fund's investment objective is long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Citizens Core Growth Fund follows a strategy designed to harvest the total
return of the large-cap portion of the U.S. stock market. The Fund typically
buys and holds stocks, sometimes for a number of years, seeking to benefit from
the long-term growth of such securities. This strategy is followed by
replicating the composition and performance of the Citizens Index-SM- as
closely as possible. The Citizens Index was created and is maintained by the
Fund's investment adviser, Citizens Advisers, Inc., and consists of
approximately 300 large sized U.S. companies that have passed Citizens Funds'
financial, social and environmental screens. Approximately 200 of these are
included in the S&P 500 Index. The others are promising companies that provide
industry diversity, have passed our rigorous screens for corporate
responsibility and, in our view, have strong financial prospects. The Fund
invests in Citizens Index companies in proportion to their market
capitalization, which means that relatively larger companies have greater
representation in the Fund than smaller ones.
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During normal market conditions, there will be at least an 80% match between the
Fund's holdings and those of the Citizens Index, and the Fund tries to achieve
95% correlation before expenses with the performance of the Citizens Index. The
Fund will buy and sell securities as the composition of the Citizens Index
changes. During normal market conditions, at least 65% of the companies that
make up the Citizens Index will have market capitalizations in the
capitalization range of the S&P 500 Index (146.0 million to $571.4 billion as of
September 30, 2000). Under special circumstances, for defensive purposes or to
reduce concentration in a particular issuer or sector, the Adviser may undertake
an investment strategy that creates a temporary variance from the Index. The
fund may concentrate in certain sectors, including but not limited to
technology.
RISKS
The Fund is subject to the following principal risks (for more details see pages
10-11):
- Market Risk
- Sector Risk
- Company Risk
- Passive Investing Risk
CITIZENS EMERGING GROWTH FUND
OBJECTIVE
Citizens Emerging Growth Fund's investment objective is aggressive growth.
PRINCIPAL INVESTMENT STRATEGIES
The Citizens Emerging Growth Fund seeks capital appreciation by investing
primarily in young, growing companies that offer the potential for accelerated
earnings, revenue growth and increased share prices. The Fund follows an
earnings momentum strategy (a strategy by which the Fund invests in companies
with accelerating earnings growth) by seeking to invest in companies that have
displayed recent positive earnings surprises and/or are projected to attain
increased earnings in the near term. The Fund ordinarily sells companies when
they meet targeted share prices.
During normal market conditions, at least 65% of the Fund's total assets will be
invested in the common stock of medium-sized companies whose market
capitalizations are in the capitalization range of the S&P MidCap 400 Index
($120.0 million to $17.6 billion as of September 30, 2000). From time to time,
the Fund may invest a limited portion of its assets in the common stock of
smaller or larger companies, initial public offerings(IPOs), and foreign
companies as well as U.S., companies. The Fund may concentrate in certain
sectors, including but not limited to technology.
RISKS
The Fund is subject to the following principal risks (for more details see pages
10-13 below):
- Market Risk
- Sector Risk
- Company Risk
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- Small-and Medium-Sized Company Risk
- Liquidity Risk
- Foreign Investing Risk
- Portfolio Turnover Risk
- IPO Investing Risk
-
CITIZENS SMALL CAP CORE GROWTH FUND (FORMERLY CITIZENS SMALL CAP INDEX FUND)
OBJECTIVE Citizens Small Cap Core Growth Fund's investment objective is capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The Citizens Small Cap Core Growth Fund focuses on the small-cap sector of the
domestic stock market and offers investors the opportunity to participate in
both the high growth potential and significant value that may be found in
companies of this size. The Fund's strategy can be summarized as buying and
holding quality small-cap names across a broad range of industries. This
strategy is typically pursued by replicating the composition and performance of
the Citizens Small Cap Index-SM- as closely as possible. The Citizens Small Cap
Index was created and is maintained by the Fund's investment adviser, Citizens
Advisers, Inc., and consists of approximately 300 small-sized U.S. companies
that have passed Citizens' financial, social and environmental screens, forming
a well-diversified list representing over 20 industries. The Fund invests in
Citizens Small Cap Index companies in proportion to their market capitalization,
which means that relatively larger companies have greater representation in the
Fund than smaller ones. The companies are typically in the capitalization range
of the S&P SmallCap 600 Index ($34.0 million to $5.2 billion as of September 30,
2000) at the time of their selection and all of them must exhibit what Citizens
Advisers believes to be strong financial promise and a high level of corporate
responsibility. At least annually, Citizens Advisers reviews the composition of
the Citizens Small Cap Index and periodically removes companies that fall
outside the targeted market capitalization range. The Fund will buy and sell
securities as the composition of the Citizens Small Cap Index changes.
During normal market conditions, there will be at least an 80% match between the
Fund's holdings and those of the Citizens Small Cap Index, and the Fund tries to
achieve a 95% correlation, before expenses, with the performance of the Index.
During normal market conditions, at least 65% of the companies that make up the
Citizens Small Cap Index will have market capitalizations in the capitalization
range of the S&P SmallCap 600 Index. Under special circumstances, for defensive
purposes or to reduce concentration in a particular issuer or sector, the
Adviser may undertake an investment strategy that creates a temporary variance
from the Index. The Fund may concentrate in certain sectors, including but not
limited to technology.
RISKS
The Fund is subject to the following principal risks (for more details see pages
10-11):
- Market Risk
- Sector Risk
- Company Risk
- Passive Investing Risk
- Small- and Medium-Sized Company Risk
- Liquidity Risk
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CITIZENS GLOBAL EQUITY FUND
OBJECTIVE
Citizens Global Equity Fund's investment objective is capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
The 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 total assets will be invested in foreign markets, in a minimum of three
countries, one of which may be the U.S. The Fund may invest, to a limited
extent, in the securities of issuers located in emerging market countries.
In selecting investments, the investment manager considers overall and relative
economic conditions in the U.S. and foreign markets, and seeks broad portfolio
diversification in different countries to help moderate the special risks of
foreign investing. The investment manager looks for:
- Primarily stocks of large-cap growth-oriented companies worldwide; The Fund
may also invest to a limited degree in medium- and smaller-sized companies;
- Companies that stand to benefit from global growth trends (these trends may
include, among others: financial market liberalization, corporate
restructuring to meet global competition and developments in information
technology);
- Businesses with strong competitive positions and high demand for their
products or services; and
- Cyclical opportunities in the business cycle and sectors or industries
that may benefit from those opportunities.
The Fund may also invest in sponsored American Depository Receipts (ADRs), which
are shares of foreign companies deposited in U.S. banks or a local branch of a
foreign bank. An ADR is considered a security of the country in which the
foreign company depositing its securities is headquartered. The Fund may to a
limited extent, invest in stocks of small-cap growth oriented companies
worldwide. The Fund may concentrate in certain sectors, including but not
limited to technology.
RISKS
The Fund is subject to the following principal risks (for more details see pages
10-13):
- Market Risk
- Sector Risk
- Company Risk
- Small- and medium-sized company risk
- Liquidity Risk
- Foreign Investing Risk
- Portfolio Turnover Risk
CITIZENS INCOME FUND
OBJECTIVE
Citizens Income Fund's investment objective is generating current income and
paying a dividend each month.
PRINCIPAL INVESTMENT STRATEGIES
The Citizens Income Fund invests primarily in bonds or mortgage-backed
securities that have expected maturities of 2 to 30 years, although it will
occasionally hold short-term securities (such as discount notes and commercial
paper) as well. The Fund normally maintains an average maturity of between 5 and
15 years. The Fund normally invests in high quality, investment-grade
securities, but as much as 35% of the Fund's total assets may be invested in
high yield, or "junk bond," securities. The Fund may concentrate in certain
sectors, including but not limited to technology.
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RISKS
The Fund is subject to the following principal risks (for more details see
pages 13-14):
- Market Risk
- Interest Risk Rate
- Credit Risk
- High Yield/Junk Bond Risk
- Liquidity Risk
- Mortgage-Backed Securities Risk
- Sector Risk
-
CITIZENS MONEY MARKET FUND (FORMERLY WORKING ASSETS MONEY MARKET FUND)
OBJECTIVE
The Citizens Money Market Fund's investment objective is current income
consistent with safety and liquidity.
PRINCIPAL INVESTMENT STRATEGIES
The Citizens Money Market Fund invests in high quality, short-term money market
instruments (short-term debt issued by U.S. government agencies, corporations,
banks or other financial institutions) that the Fund's adviser, Citizens
Advisers, Inc., believes present minimal risk. The Fund operates pursuant to the
detailed requirements of Rule 2a-7 of the Investment Company Act of 1940.
Accordingly, the Fund invests in debt securities that call for payment in U.S.
dollars, maintains a dollar-weighted average maturity of 90 days or less and
will not purchase securities with maturities greater than 397 days. With respect
to government securities, the Fund only invests in those that are issued by
agencies or other enterprises of the U.S. government and does not invest in
general obligations of the U.S. government, such as Treasury bills, notes and
bonds. The Fund seeks to maintain a stable $1.00 Net Asset Value per share at
all times, although there is no assurance it will be able to do so.
RISKS
The Fund is subject to the following principal risks (for more details see
pages 13-15):
- Market Risk
- Interest Rate Risk
- Credit Risk
- Money Market Instrument Risk
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 or
cash equivalents, such as money market instruments or other high quality,
short-term fixed income securities. These positions may prevent a particular
Fund from achieving its investment objective or otherwise adversely affect Fund
performance.
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PRINCIPAL RISKS
The principal risks of investing in each of our Funds are described below.
EQUITY FUNDS
The principal risks of investing in our equity funds (Citizens Core Growth Fund,
Citizens Emerging Growth Fund, Citizens Small Cap Core Growth Fund and Citizens
Global Equity Fund) include:
MARKET RISK. The stock market is sometimes volatile and may change dramatically
and unpredictably in response to political, regulatory, market or economic
developments. The stock of growth companies - as compared to older, more
established companies - tends to be extra sensitive to these developments in the
market because their share prices are based more on expectations about the
futures of these companies. Stock prices have historically gone up and down more
than the value of fixed income securities. The value of your investment in any
of the equity Funds will go up and down based on market conditions.
SECTOR RISK. Although none of our Funds invests more than 25% of their total
assets in a particular industry, our equity Funds will at times be invested more
heavily in some industries or broader market sectors than in others, and may be
over-weighted in certain sectors in comparison to the market as a whole, or to
other market indices. Since the outlook for particular sectors will differ due
to unique market, economic, regulatory or competitive environments, there is
always the possibility that the value of a group of related stocks will go down
more than the total market because of developments in a specific sector. These
fluctuations may cause the value of your investment to go down.
Also, although the Funds limit investment in any one industry, industries may
be interrelated such that the Funds have a greater concentration in a broader
market sector, such as technology. In recent periods the technology sector
has enjoyed unusually favorable market conditions which may not be
sustainable and which have more recently been very volatile. Technology
companies may be subject to greater risks than other companies, including but
not limited to obsolescence, short product cycles and more rapidly changing
market conditions.
COMPANY RISK. The value of the stock of an individual company varies with the
prospects of that company and can be more or less volatile than the market as
a whole. The success or failure of each of the companies in which the equity
Funds invest will cause the value of your investment to go up or down.
PASSIVE INVESTING RISK. Because they are generally managed to approximate the
performance of their respective indices, the Citizens Core Growth Fund and
Citizens Small Cap Core Growth Fund usually will not sell stocks of companies
even though they may be experiencing financial trouble or their share prices are
declining. Also, these Funds may invest more heavily in some companies because
those companies make up a larger portion of the particular Index. Also, tracking
error (which occurs when a fund's holdings and the composition of the Index do
not completely match up), cash positions, fees and expenses will prevent these
Funds from exactly duplicating or matching the performance of their underlying
Indices.
SMALL- AND MEDIUM-SIZED COMPANY RISK. The small- and medium-sized companies that
the Citizens Emerging Growth Fund, Citizens Global Equity Fund and Citizens
Small Cap Core Growth Fund invest in may have speculative characteristics. Small
companies, in particular, have unique risks. Among others, they may be dependent
on an individual, may have inexperienced management, limited product lines or
have a difficult time obtaining financing or market share. Their shares are also
more volatile, and may not be traded as frequently or in as large a volume as
shares of larger companies. Medium-sized companies generally involve less risk
than smaller companies but their shares are still more volatile and more subject
to changes in the market than larger companies.
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LIQUIDITY RISK. The Citizens Emerging Growth Fund, Citizens Small Cap Core
Growth Fund and the Citizens Global Equity Fund may not be able to sell their
smaller capitalization securities as quickly as companies with larger
capitalizations, especially if investor perceptions about the issuer worsen.
During certain economic downturns it may be more difficult for the Funds to sell
their smaller capitalization, less liquid securities at their fair value to meet
requests for redemptions by shareholders or to respond to changes in the market.
FOREIGN INVESTING RISK. The Citizens Global Equity Fund will invest in foreign
markets. The Citizens Emerging Growth Fund may invest limited portion of its
assets in foreign markets. Foreign markets are generally less efficient and more
volatile than those in the United States. Foreign economies and governments may
be less mature and stable than those in the U.S. and foreign securities may be
more significantly impacted by political and economic events. Settlement and
trading costs are generally higher, and foreign companies may be adversely
affected by excessive (or inadequate) government regulation, excessive taxation,
nationalization, expropriation or political, economic or social instability.
There is also the risk of currency regulation and exchange controls or
fluctuations in exchange rates between foreign currencies and the U.S. dollar,
which could cause the value of a fund's investments in foreign markets to go
down. The risks of investing in emerging market economies are even greater and
can include high inflation, high sensitivity to commodity prices and economic
dependence on a few industries or government-owned industries. These
characteristics of foreign investing will cause the value of your investment to
go up or down.
Certain European countries have joined the European Economic and Monetary
Union (EMU). Each EMU participant's currency began a conversion into a single
European currency, called the euro, on January 1, 1999, to be completed by
July 1, 2002. European financial markets could be adversely affected if the
euro conversion does not continue as planned or if a participating country
chooses to withdraw from the EMU. The value of the euro has declined
significantly since its introduction. This decline may negatively affect
companies that are based in Europe or sell to European markets.
PORTFOLIO TURNOVER RISK. The Citizens Emerging Growth Fund and the Citizens
Global Equity Fund have relatively high portfolio turnover rates (in excess of
100%). Funds with high turnover may incur higher transaction costs, such as
brokerage fees, than funds that buy and sell securities less often. High
portfolio turnover may therefore negatively impact the Fund's performance.
Frequent sales of securities held by the Funds may also cause shareholders to
realize higher amounts of taxable ordinary income or capital gains (including
short-term capital gains, which are generally taxed to shareholders at ordinary
income tax rates).
IPO INVESTING RISK. A significant portion of the Citizens Emerging Growth Fund's
returns may have been and may, in the future, be affected by its investments in
initial public offerings (IPOs). The impact of investments in IPOs may be
greater when a fund has a smaller asset base. If the size of the Citizens
Emerging Growth Fund increases, there is no guarantee that the Fund's
performance will be impacted to the same extent by IPOs or that the Fund will
continue to be able to participate in IPOs. In addition, IPOs are subject to
many of the same risks of investing in companies with smaller market
capitalizations. Securities issued in IPOs have no trading history and
information about the companies may be available for very limited periods. In
addition, the prices of securities sold in IPOs may be highly volatile. A Fund
may not be able to invest in securities issued in IPOs to the extent desired
because, for example, only a small portion of the securities being offered in an
IPO may be made available to the Fund or because under certain market conditions
few companies may issue securities in IPOs.
FIXED INCOME FUNDS
The principal risks of investing in our fixed income funds (Citizens Income Fund
and Citizens Money Market Fund) include:
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MARKET RISK. The fixed income market, like the stock market, is sometimes
volatile and may change dramatically and unpredictably in response to political,
regulatory, market or economic developments. The value of your investment in the
Citizens Income Fund will go up and down based on market conditions.
INTEREST RATE RISK. When interest rates rise, the prices of fixed income
securities generally fall. This interest rate risk will generally affect the
price of a debt security more if the security has a longer maturity. A rise in
interest rates generally will cause the value of the Citizens Income Fund's
shares to decline. A significant rise in interest rates may even cause the value
of your investment in the Citizens Money Market Fund to go down.
CREDIT RISK. Prices of debt securities also go up and down based on how
creditworthy investors perceive issuers of these securities to be. The prices of
debt securities with lower ratings tend to go up and down more than those of
securities with higher ratings. It is possible that some issuers will not be
able to make payments to a fund on debt securities that the fund holds, and as a
result the fund may not receive the income it expected from these securities or
repayment of capital on the due date. If an issuer of a debt security is viewed
as unable to make timely payments on its securities, the value of these
securities may go down.
HIGH YIELD/JUNK BOND RISK. The Citizens Income Fund may invest as much as 35% of
its total assets in bonds or other debt instruments that are rated below
investment grade and are considered speculative. These investments are known as
high yield securities or "junk bonds." Junk bonds tend to have a greater risk of
default than securities with higher ratings. Also, the prices of junk bonds may
go up and down more than the prices of securities with higher ratings. Junk
bonds tend to react more to economic, industry, legislative and regulatory
changes 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 junk bonds to default at
higher than usual rates.
LIQUIDITY RISK. The Citizens Income Fund may not be able to sell its lower-rated
securities as quickly as those securities with higher ratings, especially if
investor perceptions about the issuer worsen. During certain economic downturns
it may be more difficult for the Fund to sell its lower-rated, less liquid
securities at their fair value to meet requests for redemptions by shareholders
or to respond to changes in the market.
MORTGAGE-BACKED SECURITIES RISK. The Citizens Income Fund may invest in
mortgage-backed securities. The value of these investments may be adversely
affected by prepayment of mortgages or extension of the expected maturity of the
securities. When interest rates go down, mortgage-backed securities experience
higher rates of prepayment and the Fund may experience an unpredicted loss of
interest income. The Fund will then have to reinvest the money at lower interest
rates. Therefore, mortgage-backed securities may not be an effective means of
locking in a particular interest rate. When interest rates go up,
mortgage-backed securities 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.
SECTOR RISK. Although the Citizens Income Fund will not invest more than 25% of
its total assets in a particular industry, it may at times be invested more
heavily in some industries or broader market sectors than in others, and may be
over-weighted in certain sectors in comparison to the market as a whole. Since
the outlook for particular sectors will differ due to unique market, economic,
regulatory or competitive environments, there is always the possibility that the
value of a group of related stocks will go down more than the total market
because of developments in a specific sector. These fluctuations may cause the
value of your investment to go down. The Fund may be concentrated in certain
sectors, including but not limited to
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telecommunications and financial services. Sector concentration may result in
increased risk due to such factors as extensive government regulation and
intensive competition, among others.
MONEY MARKET INSTRUMENT RISK. Money market securities generally involve less
risk - but a lower return - than lower quality or longer term fixed income
securities. An investment in the Citizens Money Market Fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Citizens Money Market Fund seeks to preserve the value of
your investment at $1.00 per share, there is no guarantee that it will be able
to do so.
PERFORMANCE
The bar charts and tables on the following pages provide some indication of the
risks of investing in a Fund by showing changes in a Fund's performance from
year to year and by showing how a Fund's average annual returns for certain
periods compare with those of a widely recognized index of market performance.
How a Fund performed in the past is not necessarily an indication of how the
Fund will perform in the future.
Performance information is not included for the Citizens Small Cap Core Growth
Fund because that Fund has not been in operation for a full calendar year.
CITIZENS CORE GROWTH FUND
CALENDAR YEAR RETURNS AS OF DECEMBER 31 (STANDARD CLASS SHARES)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1996 23.07%
1997 34.96%
1998 42.75%
1999 27.49%
The Citizens Core Growth Fund, Standard Class shares, year-to-date return as of
September 30, 2000 was -6.08%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 27.49% (4th quarter 1998)
Worst quarter return: -7.89% (3rd quarter 1998)
Average Annual Returns (through December 31, 1999)
=========================================================================
One Year Return Since Inception
=========================================================================
Citizens Core Growth Fund -
Standard Class shares 27.49% 31.45% (3/3/95)
-------------------------------------------------------------------------
Citizens Core Growth Fund -
Institutional Class shares 28.40% 33.68% (1/25/96)
-------------------------------------------------------------------------
S&P 500 Index* 21.04% 28.09% (3/3/95)
26.65% (1/25/96)
-------------------------------------------------------------------------
* The S&P 500 Index is a widely recognized, unmanaged index of the common stock
prices of 500 of the largest companies in the U.S. market.
13
<PAGE>
CITIZENS EMERGING GROWTH FUND
CALENDAR YEAR RETURNS AS OF DECEMBER 31 (STANDARD CLASS SHARES)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 40.73%
1996 13.91%
1997 17.69%
1998 42.71%
1999 68.09%
The Citizens Emerging Growth Fund, Standard Class shares, year-to-date return as
of September 30, 2000 was 23.66%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 42.46% (4th quarter 1999)
Worst quarter return: -12.08% (3rd quarter 1998)
Average Annual Returns (through December 31, 1999)
===============================================================================
One Year Return Five Year Return Since Inception
===============================================================================
Citizens Emerging Growth Fund - 68.09% 35.23% 30.70% (2/8/94)
Standard Class shares
-------------------------------------------------------------------------------
S&P MidCap 400 Index* 14.70% 23.05% 18.46% (2/8/94)
-------------------------------------------------------------------------------
* The S&P MidCap 400 Index is an unmanaged index of common stock prices of
mid-size companies in the U.S. market.
CITIZENS GLOBAL EQUITY FUND
CALENDAR YEAR RETURNS AS OF DECEMBER 31 (STANDARD CLASS SHARES)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1995 13.74%
1996 13.16%
1997 19.91%
1998 32.26%
1999 74.09%
The Citizens Global Equity Fund, Standard Class shares year-to-date return as of
September 30, 2000 was -6.16%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 46.07% (4th quarter 1999)
Worst quarter return: -10.32% (3rdquarter 1998)
14
<PAGE>
Average Annual Returns (through December 31, 1999)
===============================================================================
One Year Return Five Year Return Since Inception
===============================================================================
Citizens Global Equity Fund - 74.09% 28.84% 23.42% (2/8/94)
Standard Class shares
-------------------------------------------------------------------------------
Financial Times World Index* 26.00% 19.35% 16.41% (2/8/94)
-------------------------------------------------------------------------------
* The Financial Times World Index is an unmanaged index of common stocks of
domestic and foreign companies.
CITIZENS SMALL CAP CORE GROWTH FUND
Citizens Small Cap Core Growth Fund commenced operations December 28, 1999 and
does not have annual returns for a full calendar year. For this reason, a bar
chart and table showing performance information and information on best and
worst calendar quarter performance are not provided in this prospectus.
CITIZENS INCOME FUND
CALENDAR YEAR RETURNS AS OF DECEMBER 31 (STANDARD CLASS SHARE)
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1993 9.96%
1994 -3.08%
1995 17.38%
1996 4.85%
1997 10.48%
1998 5.81%
1999 -0.82%
15
<PAGE>
The Citizens Income Fund, standard class shares year-to-date return as of
September 30, 2000 was 5.22%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 5.08% (1st quarter 1995)
Worst quarter return: -2.24% (1st quarter 1994)
Average Annual Returns (through December 31, 1999)
===============================================================================
One Year Return Five Year Return Since Inception
===============================================================================
Citizens Income Fund - -0.82% 7.36% 6.28% (6/10/92)
Standard Class shares
-------------------------------------------------------------------------------
Lehman U.S. Aggregate Index* -0.82% 7.73% 6.72% (6/10/92)
-------------------------------------------------------------------------------
* The Lehman U.S. Aggregate Index is an unmanaged index of taxable, investment
grade fixed-income securities, including government, corporate, mortgage and
asset-backed securities. For up-to-date yield information please call (800)
223-7010.
CITIZENS MONEY MARKET FUND
CALENDAR YEAR RETURNS AS OF DECEMBER 31 (STANDARD CLASS SHARES)*
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
1991 5.57%
1992 3.09%
1993 2.22%
1994 3.24%
1995 5.01%
1996 4.29%
1997 4.44%
1998 4.43%
1999 4.05%
* The inception date for the Citizens Money Market Fund, Standard Class shares
is August 30, 1983. Complete data for periods prior to 1991 is not available.
The Citizens Money Market Fund, Standard Class shares year-to-date return as of
September 30, 2000 was 3.93%.
Best and Worst Quarterly Performance (during period shown above)
Best quarter return: 1.58% (1st quarter 1991)
Worst quarter return: 0.54% (2nd and 3rd quarters 1993)
16
<PAGE>
Average Annual Returns (through December 31, 1999)
===============================================================================
One Year Return Five Year Return Since Inception
===============================================================================
Citizens Money Market Fund - 4.05% 4.44% 4.03% (1/1/91)**
Standard Class shares
-------------------------------------------------------------------------------
Citizens Money Market Fund 4.53% N/A 4.93% (2/1/96)
Institutional Class shares
-------------------------------------------------------------------------------
** The inception date for the Citizens Money Market Fund, Standard Class shares
is August 30, 1983. Complete data for periods prior to 1991 is not available.
The 7-day yield for the Citizens Money Market Fund, Standard Class shares was
4.62% and for Institutional Class shares was 4.98% for the period ended December
31, 1999.
The current 7-day yield can be obtained by calling Citizens Funds at (800)
223-7010.
FEES AND EXPENSES
The following tables describe the fees and expenses that you may pay if you buy
and hold shares of Citizens' funds. Annual fund operating expenses are paid out
of the assets of the Funds. The Funds do not have a sales charge (load).
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENT)*
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Maximum Maximum Maximum Redemption Exchange Fee Maximum
Sales Deferred Sales Charge Fee Account Fee
Charge Sales Charge (Load Imposed (Charged only if
(Load) (Load) on Reinvested account falls
Imposed Dividends) below minimum
on balance)**
Purchases
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Citizens Core None None None None None $3.00/month
Growth Fund
--------------------------------------------------------------------------------------------------------------------
Citizens None None None None None $3.00/month
Emerging
Growth Fund
--------------------------------------------------------------------------------------------------------------------
Citizens Small None None None None None $3.00/month
Cap Core
Growth Fund
--------------------------------------------------------------------------------------------------------------------
Citizens Global None None None None None $3.00/month
Equity Fund
--------------------------------------------------------------------------------------------------------------------
Citizens None None None None None $3.00/month
Income Fund
--------------------------------------------------------------------------------------------------------------------
Citizens Money None None None None None $3.00/month
Market Fund
--------------------------------------------------------------------------------------------------------------------
</TABLE>
* See "Costs for Services," on page 46.
** A fee of $3.00/month currently is charged on accounts that fall below a
minimum balance of $2,500 ($1,000 minimum balance for Uniform Gifts/Transfers to
Minors Act (UGMA/UTMA) accounts and Automatic Investment Plan accounts.)
This fee does not apply to IRA or E fund accounts.
17
<PAGE>
Annual Fund Operating Expenses
(EXPENSES THAT ARE DEDUCTED FROM ASSETS)
<TABLE>
<CAPTION>
===============================================================================================================
Fund Class Shares Management Distribution Other Total Reimbursements/ Net
Fees Fees Expenses Annual Waivers Expenses
Operating
Expenses
===============================================================================================================
<S> <C> <C> <C> <C> <C> <C>
CITIZENS CORE GROWTH FUND
===============================================================================================================
Standard Class shares** 0.50% 0.25% 0.65% 1.40% 0.06% 1.344%
Administrative Class shares** 0.50% 0.25% 0.21% 0.96+% 0.02% 0.94%
Institutional Class shares** 0.50% N/A 0.24% 0.74% 0.06% 0.68%
===============================================================================================================
===============================================================================================================
CITIZENS EMERGING GROWTH FUND
===============================================================================================================
Standard Class shares 1.00% 0.25% 0.50% 1.75% N/A 1.75++%
Administrative Class shares 1.00% 0.25% 0.16% 1.41%+ 0.00% 1.41%
Institutional Class shares 1.00% N/A 0.31% 1.31% 0.01% 1.30++%
===============================================================================================================
CITIZENS SMALL CAP CORE GROWTH FUND
===============================================================================================================
Standard Class shares** 0.50% 0.25% 1.58% 2.33%+ 0.99% 1.34%
===============================================================================================================
CITIZENS GLOBAL EQUITY FUND
===============================================================================================================
Standard Class shares 1.00% 0.25% 0.58% 1.83% 0.00% 1.83%
Administrative Class shares 1.00% 0.25% 0.30% 1.55%+ 0.00% 1.55%
Institutional Class shares 1.00% N/A 0.43% 1.43% 0.04% 1.39%
===============================================================================================================
CITIZENS INCOME FUND
===============================================================================================================
Standard Class shares** 0.65% 0.25% 0.57% 1.47% 0.07% 1.40%
===============================================================================================================
===============================================================================================================
CITIZENS MONEY MARKET FUND
===============================================================================================================
Standard Class shares** 0.35% N/A 0.63% 0.98% 0.00% 0.98%
Institutional Class shares 0.35% N/A 0.47% 0.82% N/A 0.82%
===============================================================================================================
</TABLE>
* See next page.
** Expenses have been restated to reflect current fees.
+ The Total Annual Operating Expenses for this class/Fund are based on estimated
amounts for the current fiscal year.
++ For the fiscal year ended June 30, 2000, the Adviser voluntarily waived
0.10% of its fee when the Fund's monthly average net asets exceeded $100
million. With this waiver the net operating expenses for the Standard and
Institutional Class shares were 1.69% and 1.24% respectively.
FOR THE FISCAL YEAR COMMENCING JULY 1, 2000 AND ENDING JUNE 30, 2001, THE
INVESTMENT ADVISER TO THE FUNDS HAS CONTRACTUALLY AGREED TO WAIVE CERTAIN FEES
AND/OR REIMBURSE CERTAIN EXPENSES, SUCH AS DISTRIBUTION FEES AND OTHER EXPENSES
(OTHER THAN INTEREST EXPENSES, TAXES, BROKERAGE COMMISSIONS AND EXTRAORDINARY
EXPENSES, SUCH AS LITIGATION, THAT DO NOT USUALLY OCCUR IN THE OPERATIONS OF A
MUTUAL FUND). IF A FUND'S AGGREGATE EXPENSES FOR THE RELEVANT CLASS WOULD EXCEED
ON A PER ANNUM BASIS THE PERCENTAGE OF AVERAGE DAILY NET ASSETS SPECIFIED BELOW,
THE ADVISER WILL WAIVE CERTAIN FEES AND/OR REIMBURSE CERTAIN EXPENSES FOR THE
AMOUNT OF THE EXCESS.
18
<PAGE>
NET
FUND EXPENSES
============================================================================
CITIZENS CORE GROWTH FUND
============================================================================
Standard Class shares 1.34%
Administrative Class shares 0.94%
Institutional Class shares 0.68%
============================================================================
CITIZENS EMERGING GROWTH FUND
============================================================================
Administrative Class shares 1.55%
Institutional Class shares 1.30%
============================================================================
CITIZENS SMALL CAP CORE GROWTH FUND
============================================================================
Standard Class shares 1.34%
============================================================================
CITIZENS GLOBAL EQUITY FUND
============================================================================
Standard Class shares 2.05%
Administrative Class shares 1.68%
Institutional Class shares 1.39%
============================================================================
CITIZENS INCOME FUND
============================================================================
Standard Class shares 1.40% of the first $100 million
of assets and 1.25% thereafter
============================================================================
CITIZENS MONEY MARKET FUND
============================================================================
Standard Class shares 1.50% of the first $40 million
of assets and 1% thereafter
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. Contractual fee
waivers and reimbursements are reflected only in the one year amounts. Although
your actual costs may be higher or lower, based on these assumptions your costs
would be:
<TABLE>
<CAPTION>
One Year Three Years Five Years Ten Years
=================================================================================================
<S> <C> <C> <C> <C>
CITIZENS CORE GROWTH FUND
=================================================================================================
Standard Class shares $136 $443 $766 $1,680
Administrative Class shares* $ 96 $306 N/A N/A
Institutional Class shares $ 69 $237 $411 $ 918
=================================================================================================
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
CITIZENS EMERGING GROWTH FUND
=================================================================================================
Standard Class shares $178 $551 $949 $2,062
Administrative Class shares* $144 $446 N/A N/A
Institutional Class shares $132 $415 $718 $1,579
=================================================================================================
CITIZENS SMALL CAP CORE GROWTH FUND
=================================================================================================
Standard Class shares* $136 $727 N/A N/A
=================================================================================================
CITIZENS GLOBAL EQUITY FUND
=================================================================================================
Standard Class shares $186 $576 $990 $2,148
Administrative Class shares* $158 $490 N/A N/A
Institutional Class shares $142 $452 $782 $1,713
=================================================================================================
CITIZENS INCOME FUND
=================================================================================================
Standard Class shares $143 $465 $803 $1,757
=================================================================================================
CITIZENS MONEY MARKET FUND
=================================================================================================
Standard Class shares $100 $312 $542 $1,201
Institutional Class shares $ 84 $262 $455 $1,014
</TABLE>
*The costs for this class/Fund are based on the projections made in the Annual
Fund Operating Expense table on page 23.
===============================================================================
ADDITIONAL FUND DETAILS
===============================================================================
More information about the Citizens Funds' investment strategies and risks
appears below and in the Citizens Funds' Statement of Additional Information. Of
course, a Fund is not required to and may not invest in all of the investments
or engage in all of the investment techniques or strategies listed in this
prospectus or in the Statement of Additional Information.
GROWTH PLUS RISK MANAGEMENT
We strive to deliver strong investment performance and we are always cognizant
of risk. We endeavor to reduce risk through specific risk management strategies.
For instance, all of our Funds or the indexes that our Funds seek to replicate,
employ social and environmental screens to avoid companies whose corporate
behavior could negatively affect their performance. All of our Funds also avoid
excessive company and industry concentrations.
The Citizens Emerging Growth Fund employs proprietary, quantitative techniques
in order to minimize risk relative to value. The Citizens Global Equity Fund
seeks to reduce risk by limiting investments in emerging nations to no more than
25% of total assets. The Citizens Income Fund employs strategies to limit
duration risk and minimize default risk through careful security selection and
credit analysis, and by limiting high-yield securities to no more than 35% of
total assets.
20
<PAGE>
Of course, these strategies may not always be used or may not be successful in
minimizing risk when they are used. Investing in the stock and bond markets is
inherently risky, particularly if you do not plan to invest for the long term.
Our goal at Citizens Funds is to achieve strong financial results while
investing in companies that are managed in a socially responsible manner. The
Funds will invest only in companies we deem to be socially and environmentally
responsible.
To find these investments, we seek companies that have positive environmental,
community and workplace records. At the same time, we avoid companies whose
primary business is the manufacture or distribution of alcohol, tobacco, nuclear
power, oil or conventional or nuclear weaponry. We also avoid companies on the
AFL-CIO's national boycott list and companies that lack diversity (i.e.,
representation by women or people of color) on their corporate boards or in
upper management. Finally, we avoid companies that use animals to test
personal-care products or otherwise treat animals in an inhumane manner.
21
<PAGE>
CITIZENS CORE GROWTH FUND
The Citizens Core Growth Fund invests primarily in stocks included in the
Citizens Index, which was created and is maintained by the Fund's investment
adviser, Citizens Advisers, Inc. The Citizens Index is a market-weighted index
consisting of approximately 300, mostly large-sized, U.S. companies. Roughly 200
of the companies in the Citizens Index are included in the S&P 500 Index. During
normal market conditions, at least 65% of the companies that make up the
Citizens Index will have market capitalizations in the capitalization range of
the S&P 500 Index. 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.
Under normal market conditions, there will be at least an 80% match between the
holdings of the Fund and the composition of the Citizens Index, and the Fund
tries to achieve a 95% correlation, before expenses, with the performance of the
Index. A 100% correlation would mean that the Fund and the Citizens Index are
perfectly matched. Although the Fund seeks to duplicate the performance of the
Citizens Index by investing in the companies that make up the Index, fees and
expenses associated with operating the Fund will prevent exact correlation and
will generally result in the Fund slightly underperforming the Citizens Index.
Companies will be deleted from the Citizens Index and sold by the Fund if they
fail our annual corporate 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 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, in the judgment of the adviser, offer exceptional investment opportunity,
or to reflect changes in the composition of the S&P 500 Index. Citizens Advisers
decides on any changes in the Citizens Index. The "Financial Highlights" section
of this prospectus shows the Fund's portfolio turnover rate.
In addition, under normal circumstances, the Fund will usually hold a small
amount of cash or cash equivalents such as money market instruments (usually no
more than 5% of assets) to facilitate redemption activity and to be used for
operating expenses. Upon occasion, when the Adviser deems the markets to be
especially volatile or susceptible to a correction, the percentage of the Fund's
assets held in cash and cash equivalents could be much higher. Our allocation to
cash may improve returns when the market is moving down and may reduce them when
the market is moving up.
22
<PAGE>
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
CITIZENS CORE GROWTH FUND*
--------------------------------------------------------------------------------------------------------------
Objective Long-term Capital Appreciation
--------------------------------------------------------------------------------------------------------------
Morningstar Category Large Cap Growth
--------------------------------------------------------------------------------------------------------------
Inception Date 3/3/95
--------------------------------------------------------------------------------------------------------------
CUSIP 174688 40 8
--------------------------------------------------------------------------------------------------------------
Ticker Symbol WAIDX
--------------------------------------------------------------------------------------------------------------
Manager Team led by Sophia Collier
--------------------------------------------------------------------------------------------------------------
Assets (as of 9/30/00) $658,051,003
--------------------------------------------------------------------------------------------------------------
Sales charge No-load
--------------------------------------------------------------------------------------------------------------
</TABLE>
*Information provided for standard class shares only
CITIZENS EMERGING GROWTH FUND
The Citizens Emerging Growth Fund looks for capital appreciation by investing
mainly in young, growing companies that offer the potential for accelerated
earnings, revenue growth and share price appreciation. The Fund follows an
earnings momentum strategy by seeking to invest in companies that have displayed
recent earnings surprises and/or that the Fund's managers project to attain
increased earnings in the near term. In addition to earnings growth, the Fund
seeks companies with attractive share prices and ordinarily will sell companies
when they meet targeted share prices. Since many of the companies the Fund
invests in are relatively new, we don't expect much, if any, dividend income.
The Fund is very actively managed with a significant turnover rate. The Fund
usually sells its investments in companies if their valuations are higher than
the Fund's managers find attractive, if their earnings are disappointing or if
their growth slows. This active and frequent trading may create tax consequences
for shareholders in the form of capital gains and losses. Capital gains, when
distributed, are taxable to shareholders. The trading costs associated with
active management may also lower Fund performance. The "Financial Highlights"
section of this prospectus shows the Fund's portfolio turnover rate.
In addition, under normal circumstances, the Fund will usually hold a small
amount of cash or cash equivalents such as money market instruments (usually no
more than 5% of assets) to facilitate redemption activity and to be used for
operating expenses. Upon occasion, when the adviser deems the markets to be
especially volatile or susceptible to a correction, the percentage of the Fund's
assets held in cash and cash equivalents could be much higher. Our allocation to
cash may improve returns when the market is moving down and may reduce them when
the market is moving up.
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
CITIZENS EMERGING GROWTH FUND*
--------------------------------------------------------------------------------------------------------------
Objective Aggressive Growth
--------------------------------------------------------------------------------------------------------------
Morningstar Category Mid Cap Growth
--------------------------------------------------------------------------------------------------------------
Inception Date 2/8/94
--------------------------------------------------------------------------------------------------------------
CUSIP 174688 20 0
--------------------------------------------------------------------------------------------------------------
Ticker Symbol WAEGX
--------------------------------------------------------------------------------------------------------------
Manager Team led by Richard Little
--------------------------------------------------------------------------------------------------------------
Assets (as of 9/30/00) $444,339,787
--------------------------------------------------------------------------------------------------------------
Sales charge No-load
--------------------------------------------------------------------------------------------------------------
</TABLE>
*Information provided for standard class shares only
CITIZENS SMALL CAP CORE GROWTH FUND
The Citizens Small Cap Core Growth Fund invests primarily in stocks included in
the Citizens Small Cap Index, which was created and is maintained by the Fund's
investment adviser, Citizens Advisers, Inc. The Citizens Small Cap Index is a
market-weighted index consisting of approximately 300 small-sized companies.
During normal market conditions, at least 65% of the companies that make up the
Citizens Small Cap Index will have market capitalizations in the capitalization
range of the S&P SmallCap 600 Index. All of the companies in the Citizens Small
Cap Index have passed our rigorous social and environmental screens, and we
believe these are the smaller companies that best represent their industries.
23
<PAGE>
Under normal market conditions, there will be at least an 80% match between the
holdings of the Fund and the composition of the Citizens Small Cap Index. The
Fund tries to achieve a 95% correlation, before expenses, with the performance
of the Index. A 100% correlation would mean that the Fund and the Citizens Small
Cap Index are perfectly matched. Although the Fund seeks 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
under-performing the Citizens Small Cap Index. Since many of the companies the
Fund invests in are relatively new, we do not expect much, if any, dividend
income.
Companies will be deleted from the Citizens Small Cap Index and sold by the Fund
if they fail our annual social responsibility review. If a company is removed,
we will replace it with another company or companies, usually from the same
industry, that meet all our social criteria. In addition, from time to time we
may make other changes in the Index and in the Fund to include, for example,
companies that, in the judgment of the Adviser, offer exceptional investment
opportunity, or to reflect changes in the composition of the S&P SmallCap 600
Index. Citizens Advisers decides on any changes in the Citizens Small Cap Index.
The "Financial Highlights" section of this prospectus shows the Fund's portfolio
turnover rate.
In addition, under normal circumstances, the Fund will usually hold a small
amount of cash or cash equivalents such as money market instruments (usually no
more than 5% of assets) to facilitate shareholder redemption activity and to be
used for operating expenses. Our allocation to cash may improve returns when the
market is moving down and may reduce them when the market is moving up.
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
CITIZENS SMALLL CAP CORE GROWTH FUND
--------------------------------------------------------------------------------------------------------------
Objective Capital Appreciation
--------------------------------------------------------------------------------------------------------------
Morningstar Category New Fund
--------------------------------------------------------------------------------------------------------------
Inception Date 12/28/99
--------------------------------------------------------------------------------------------------------------
CUSIP 174688 10 1
--------------------------------------------------------------------------------------------------------------
Ticker Symbol CSCSX
--------------------------------------------------------------------------------------------------------------
Manager Team led by Sophia Collier
--------------------------------------------------------------------------------------------------------------
Assets (as of 9/30/00) $11,338,439
--------------------------------------------------------------------------------------------------------------
Sales charge No-load
--------------------------------------------------------------------------------------------------------------
</TABLE>
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 companies that are benefiting from political or economic
conditions. Under normal market conditions, the Fund will allocate more than
half of its total assets to foreign markets, in most circumstances in a minimum
of three countries, including the U.S. 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 total assets.
The Fund may invest in sponsored American Depository Receipts (ADRs), which are
receipts typically issued by a U.S. bank or trust company evidencing ownership
of the underlying securities of foreign companies that have agreed to have their
securities traded as depository receipts. The Fund may also invest in Yankee
bonds, which are dollar-denominated bonds issued in the U.S. by foreign banks
and governments.
24
<PAGE>
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.
In addition, under normal circumstances, the Fund will usually hold a small
amount of cash or cash equivalents such as money market instruments (usually no
more than 5% of assets) to facilitate shareholder redemption activity and to be
used for operating expenses. Our allocation to cash may improve returns when the
market is moving down and reduce them when the market is moving up.
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
CITIZENS GLOBAL EQUITY FUND*
--------------------------------------------------------------------------------------------------------------
Objective Capital Appreciation
--------------------------------------------------------------------------------------------------------------
Morningstar Category World Stock
--------------------------------------------------------------------------------------------------------------
Inception Date 2/8/94
--------------------------------------------------------------------------------------------------------------
CUSIP 174688 30 9
--------------------------------------------------------------------------------------------------------------
Ticker Symbol WAGEX
--------------------------------------------------------------------------------------------------------------
Manager Team led by Sevgi Ipek
--------------------------------------------------------------------------------------------------------------
Assets (as of 9/30/00) $361,046,648
--------------------------------------------------------------------------------------------------------------
Sales charge No-load
--------------------------------------------------------------------------------------------------------------
</TABLE>
*Information provided for standard class shares only
CITIZENS INCOME FUND
The Citizens Income Fund invests in fixed income or debt securities issued by
agencies and enterprises of the U.S. government or by private companies. By
issuing such debt securities, these agencies and enterprises of the U.S.
government and private companies raise money in exchange for agreeing to make
interest payments to the purchasers of these securities. The Citizens Income
Fund invests primarily in bonds or mortgage-backed securities that have expected
maturities of 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, the Fund generally can earn
higher interest than in a money market fund, but the Fund is taking more risk.
The Fund may occasionally purchase the securities of non-U.S. issuers.
When we invest in government securities, we buy only those that are issued by
agencies or other enterprises of the U.S. government. These securities may not
be backed by the full faith and credit of the U.S. government. We do not invest
in general obligations of the U.S. government, such as Treasury bills, notes and
bonds.
The Fund also may invest in convertible debt securities, convertible preferred
and preferred stock, and real estate investments trusts (REITs). REITs pool
investors' funds for investment primarily in income-producing real estate or
real estate-related loans or other interests.
As much as 35% of the Fund's total assets may be invested in high yield bonds or
other debt instruments rated below investment grade, known as "junk bonds."
Although such bonds are considered to be speculative and add risk to a
portfolio, we believe by limiting the overall Fund exposure to a maximum level
of 35% of the Fund's assets, the higher yield often available from these
securities has the potential to compensate for the greater risk.
Occasionally we buy securities that are not rated. In these cases, the security
must be of comparable quality, in the judgment of the Adviser to the rated,
investment grade securities we buy for the Fund. If they are not, they are
treated as below investment grade bonds and are subject to the 35% limitation on
investing in such bonds.
25
<PAGE>
The Fund may invest in mortgage-backed securities, or securities that represent
interests in a pool of mortgage loans. These investments entitle the Fund to a
share of the principal and interest payments made on the underlying mortgages.
When homeowners make interest and principal payments, these payments, net of any
fees paid to the issuer or guarantor of mortgage-backed securities, are passed
on to the investors in the pool. The Fund receives additional payments, net of
fees or any costs incurred, from prepayments of principal that result when
property is sold, refinanced or foreclosed upon. The market value and yield of
these instruments can vary due to changes in interest rates and early
prepayments of underlying mortgages, as described under "Mortgage-Backed
Securities Risk," on page 14 of this prospectus.
Citizens Income Fund may invest in warrants, which are instruments that entitle
the holder to buy the underlying equity securities at a specific price for a
specific period of time. The Fund may also agree to purchase debt securities at
a fixed price before they have been issued. The Fund takes a risk that the
market value of these "when-issued" securities will go down before they are
delivered to the Fund.
The Fund is actively managed. This active trading may create tax consequences
for shareholders in the form of increased capital gains and losses. Capital
gains, when distributed, are taxable to shareholders. The trading costs
associated with active management may also lower Fund performance. The
"Financial Highlights" section of this prospectus shows the Fund's portfolio
turnover rate.
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
CITIZENS INCOME FUND
--------------------------------------------------------------------------------------------------------------
Objective Current Income with a Monthly Dividend
--------------------------------------------------------------------------------------------------------------
Morningstar Category Intermediate-term Bond
--------------------------------------------------------------------------------------------------------------
Inception Date 6/10/92
--------------------------------------------------------------------------------------------------------------
CUSIP 174688 60 6
--------------------------------------------------------------------------------------------------------------
Ticker Symbol WAIMX
--------------------------------------------------------------------------------------------------------------
Manager Team led by Susan Kelly (as of 12/01/00)
--------------------------------------------------------------------------------------------------------------
Assets (as of 9/30/00) $62,351,816
--------------------------------------------------------------------------------------------------------------
Sales charge No-load
--------------------------------------------------------------------------------------------------------------
</TABLE>
CITIZENS MONEY MARKET FUND
The Citizens Money Market Fund, in accordance with the requirements of Rule 2a-7
of the Investment Company Act of 1940, invests only in short-term money market
instruments (short-term debt issued by agencies of the U.S. government,
corporations, or banks or other financial institutions) that we believe present
minimal risk and that call for payment in U.S. dollars. The Fund maintains a
dollar-weighted average maturity of 90 days or less and will not purchase
securities with maturities greater than 397 days.
When we invest in government securities, we buy only those that are issued by
agencies or other enterprises of the U.S. government. These securities may not
be backed by the full faith and credit of the U.S. government. We do not invest
in general obligations of the U.S. government, such as Treasury bills, notes or
bonds.
The Fund will only buy "First Tier" commercial paper, which is high quality,
short-term debt issued by corporations.
The Fund may also purchase asset-backed commercial paper and Extendible
Commercial Notes (ECNs).
26
<PAGE>
Banks sometimes issue other types of debt that the Fund may invest in and that
may offer the Fund a yield advantage. These investments include certificates of
deposit, time deposits and bankers' acceptances of U.S.
banks or thrift institutions.
Checking and debit card services are available for this Fund. See pages 45 and
46 for additional details on this service.
<TABLE>
<S> <C>
--------------------------------------------------------------------------------------------------------------
CITIZENS MONEY MARKET FUND*
--------------------------------------------------------------------------------------------------------------
Objective Current income consistent with safety and liquidity
--------------------------------------------------------------------------------------------------------------
Category Money Market
--------------------------------------------------------------------------------------------------------------
Inception Date 8/30/83
--------------------------------------------------------------------------------------------------------------
CUSIP 174688 70 5
--------------------------------------------------------------------------------------------------------------
Ticker Symbol WKAXX
--------------------------------------------------------------------------------------------------------------
Manager Team led by Susan Kelly
--------------------------------------------------------------------------------------------------------------
Assets (as of 9/30/00) $113,406,793
--------------------------------------------------------------------------------------------------------------
Sales charge No-load
--------------------------------------------------------------------------------------------------------------
</TABLE>
*Information provided for standard class shares only
27
<PAGE>
===============================================================================
MANAGEMENT OF CITIZENS FUNDS
===============================================================================
THE ROLE OF THE INVESTMENT ADVISER
In order to manage the Funds on a day-to-day basis, Citizens Funds has signed a
Management Agreement with Citizens Advisers, Inc., with offices at 230 Commerce
Way, Portsmouth, NH, 03801. Citizens Advisers has managed Citizens Funds' assets
since the Funds commenced operations in 1982. Citizens Securities, Inc., a
subsidiary of Citizens Advisers, serves as Citizens Funds' distributor. Citizens
Funds, Citizens Advisers and Citizens Securities are not affiliated with any
bank.
In its role as investment adviser to Citizens Funds, Citizens Advisers
determines which companies meet the Funds' social criteria and will be carried
on Citizens Funds "Approved List" of investments. Citizens Advisers also selects
which securities will be included in the Citizens Core Growth Fund, Citizens
Small Cap Core Growth Fund, Citizens Income Fund (as of December 1, 2000) and
Citizens Money Market 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.
CITIZENS INCOME FUND AND CITIZENS MONEY MARKET FUND. Susan Kelly will lead the
portfolio management team of the Citizens Income Fund as of December 1, 2000.
Ms. Kelly has been the lead manager of the team that manages the Citizens Money
Market Fund since March 2000. Before joining Citizens Funds, Ms. Kelly held
investment management positions at John Hancock Advisors. From 1990 to 1997, Ms.
Kelly worked in investment management at Smith Barney in New York, where she was
an assistant vice president and assistant portfolio manager. A graduate of
Purdue University, Ms. Kelly has a Masters in Business Administration from New
York University, Leonard N. Stern School of Business, with a double major in
finance and strategic management.
CITIZENS CORE GROWTH FUND AND CITIZENS SMALL CAP CORE GROWTH FUND. Sophia
Collier has been the lead manager of the team that manages the Citizens Core
Growth Fund and the Citizens Small Cap Core Growth Fund since each Fund
commenced operations. 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 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 EMERGING GROWTH FUND. Seneca Capital Management LLC. The sub-adviser
for the Citizens Emerging Growth Fund since the Fund commenced operations in
1994 and sub-adviser for the Citizens Income Fund from 1993 until December 1,
2000, Seneca Capital Management LLC is a registered investment adviser. It is
the business successor to our prior sub-adviser, GMG/Seneca Capital Management,
which was established in 1990. Phoenix, Duff and Phelps purchased a majority
interest in Seneca Capital Management LLC in 1997. Seneca Capital Management LLC
manages more than $13 billion from its offices at 909 Montgomery Street, San
Francisco, CA.
Gail Seneca is the founder and has been the Chief Investment Officer and
Managing Partner of Seneca Capital Management since its founding in 1990.
Richard Little is the lead manager of the
28
<PAGE>
team that manages the Citizens Emerging Growth Fund. Mr. Little has worked in
the investment field for over 30 years. He has been with Seneca Capital
Management or its predecessor since 1990 and was previously a senior vice
president at NatWest Securities. Mr. Little is a Chartered Financial Analyst.
CITIZENS GLOBAL EQUITY FUND. Clemente Capital, Inc. The sub-adviser for the
Citizens Global Equity Fund, Clemente Capital, Inc., is a registered investment
adviser organized in 1979. It is jointly owned by Lilia Clemente; Wilmington
Trust of Wilmington, DE; Diaz-Verson Capital Investments, Inc., of Columbus, GA;
and Richard W. McWalters. Clemente also manages the First Philippine and
Clemente Global Growth Funds, two closed-end funds traded on the New York Stock
Exchange. Its headquarters are at Carnegie Hall Tower, 152 West 57th Street, New
York, NY.
Ms. Clemente is the Chair and Global Strategist at Clemente Capital, which she
has led for over two decades.
Sevgi Ipek is the lead portfolio manager responsible for the day-to-day
management of the Citizens Global Equity Fund, a position she assumed in 1995.
Ms. Ipek is a global equity portfolio manager at Clemente Capital, her employer
since 1994. Prior to joining Clemente, Ms. Ipek worked as an analyst and
international economist for the WEFA Group, Inc. Ms. Ipek is a Chartered
Financial Analyst.
CITIZENS FUNDS' FEES
For the services the Adviser and sub-advisers provided to Citizens Funds during
the fiscal year ended June 30, 2000, the Adviser received the following fees
(based on the average annual net assets of the respective Funds):
<TABLE>
<CAPTION>
Management Fee Administrative Fee Aggregate Management
and Administrative
Fees*
============================================================================================================
<S> <C> <C> <C>
CITIZENS CORE GROWTH FUND
============================================================================================================
Standard Class shares 0.50% 0.13% 0.63%**
Administrative Class shares 0.50% 0.09% 0.59%**
Institutional Class shares 0.50% 0.09% 0.59%**
============================================================================================================
CITIZENS EMERGING GROWTH FUND
============================================================================================================
Standard Class shares 1.00%+ 0.10% 1.10%
Administrative Class shares 1.00%+ 0.10% 1.10%
Institutional Class shares 1.00%+ 0.10% 1.10%
============================================================================================================
CITIZENS SMALL CAP CORE GROWTH FUND
============================================================================================================
Standard Class shares 0.50% 0.10% 0.60%
============================================================================================================
CITIZENS GLOBAL EQUITY FUND
============================================================================================================
Standard Class 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%
============================================================================================================
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
============================================================================================================
CITIZENS INCOME FUND
============================================================================================================
Standard Class shares 0.65% 0.10% 0.75%
============================================================================================================
CITIZENS MONEY MARKET FUND
============================================================================================================
Standard Class shares 0.35% 0.10% 0.45%
Institutional Class shares 0.35% 0.10% 0.45%
============================================================================================================
</TABLE>
-------------------------
*For the fiscal year ending June 30, 2001, the Adviser also is paid a per
account fee for providing shareholder services to each fund, except in the case
of the Citizens Core Growth Fund, Standard Class shares, where Citizens Advisers
is paid a shareholder servicing fee of up to 0.35% of average annual net assets.
The current shareholder servicing fee is 0.28%. For the year ended June 30,
2000, the shareholder servicing fee for Citizens Core Growth Fund, Standard
Class shares, was 0.40% of average annual net assets.
**The current administrative fees (based on the average annual net assets) for
the Citizens Core Growth Fund Standard, Institutional and Administrative Class
shares is up to 0.20%.
+The Adviser voluntarily waived 0.10% of its fee for the Citizens Emerging
Growth Fund when the Fund's monthly average net assets exceeded $100 million.
12B-1 FEES AND CLASSES
Citizens Funds offers Standard Class shares, Administrative Class shares and
Institutional Class shares. (Citizens Money Market Fund does not offer
Administrative Class shares; Citizens Small Cap Core Growth Fund and Citizens
Income Fund offer only Standard Class shares.) The minimum initial investment
and distribution fees for these classes differ. Administrative Class shares and
Institutional Class shares require higher minimum investments and carry lower
expense ratios than Standard Class shares. Each of the classes is no-load.
Citizens Funds has a 12b-1 Plan which allows the Funds to pay Citizens
Securities and other distributors of the Funds' shares distribution fees for the
sale and distribution of its shares. These fees reimburse these parties for
sales-related expenses including the printing of prospectuses and reports sent
to non-shareholders, as well as other sales material, advertising,
communications and salaries for salespeople and other personnel. We will also
pay commissions to outside brokers or service organizations for similar
services. Because these costs are paid out of each Fund's net assets on an
on-going basis, over time these fees will increase the cost of your investment
and may cost you more than paying other types of sales charges. Institutional
Class shares are not subject to 12b-1 (distribution) fees.
With respect to the Standard Class shares and Administrative Class shares of
each Fund, 0.25% of the applicable Fund's net assets is payable under Citizens
Funds' 12b-1 Plan and the related Distribution Agreement with Citizens
Securities. No distribution fees are payable with respect to the Institutional
Class shares of the Funds.
30
<PAGE>
===============================================================================
SHAREHOLDER INFORMATION
===============================================================================
All Funds are no-load. The Standard Class shares and Administrative Class shares
of each Fund are subject to 12b-1 fees.
INVESTMENT MINIMUMS
STANDARD CLASS SHARES
- MINIMUM INITIAL INVESTMENT. The minimum initial investment in the Standard
Class shares of each Fund is $2,500 ($1,000 for IRA, UGMA/UTMA and
Automatic Investment Plan (AIP) accounts).
- MINIMUM SUBSEQUENT INVESTMENT. The minimum subsequent investment for
all accounts, including Automatic Investment Plan accounts, is $50.
- MINIMUM BALANCE. If your account falls below the minimum for the Fund, you
will be assessed a monthly fee of $3 until you bring your balance above the
$2,500 minimum ($1,000 for IRA, UGMA/UTMA and AIP accounts). This fee will
also be applied to inactive AIP 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, you will receive 30 days notice and
an opportunity to bring the account up to the applicable minimum.
INSTITUTIONAL AND ADMINISTRATIVE CLASS SHARES
- MINIMUM INITIAL INVESTMENT. The minimum initial investment in
Administrative Class and Institutional Class shares is $1 million (at the
discretion of Citizens Funds, less than $1 million for purchases made
through registered investment advisers and retirement plan sponsors, as
well as institutional clients).
- MINIMUM SUBSEQUENT INVESTMENT. There is no minimum subsequent investment.
- MINIMUM BALANCE. With respect to accounts that fall below $1 million (or
less at the discretion of Citizens Funds for certain accounts opened
through registered investment advisers and retirement plan sponsors, as
well as institutional clients), Citizens Funds reserves the right to
transfer these accounts from the Administrative Class or Institutional
Class and convert them to Standard Class shares. Before converting an
account to Standard Class shares, you will receive 30 days notice and an
opportunity to bring the account up to the required minimum balance.
IRAS
There is an annual fee of $10 for each Individual Retirement Account (IRA), with
a maximum IRA account fee of $20 per shareholder. This fee is waived for total
IRA balances of $25,000 and higher and total account balances of $50,000 and
higher. There is also an IRA closure fee of $15.
In addition to different minimum investments, Standard Class 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 and Administrative Class shares vary and are
computed separately.
Equity securities are valued at the last sale price on the primary exchange on
which those securities are traded or on the principal over-the-counter market on
which such securities are traded, or, lacking any sales, at the last available
bid price for domestic securities and halfway between the bid and the asked
price for international securities.
31
<PAGE>
Fixed income investments are generally valued at the closing bid price for
securities. Debt securities maturing within 60 days (and all securities held by
the Citizens Money Market Fund) are normally valued at amortized cost. Amortized
cost is approximately equal to market value, and is described in the Statement
of Additional Information.
Securities may also be valued on the basis of valuations furnished by a pricing
service that uses both dealer-supplied evaluations and evaluations based on
analysis of market data or other factors, if these valuations are believed to
more accurately reflect the fair value of the securities.
If no market quotation is available for a given security (including restricted
securities that are subject to limitations on their sale), the Funds' Adviser
will fairly value that security in good faith pursuant to the policies
established by Citizens Funds' Board of Trustees.
The values of foreign securities are converted from the local currency into U.S.
dollars using current exchange rates. If trading in the currency is restricted,
a Fund will use a rate believed to reflect the currency's fair value in U.S.
dollars. Trading may take place in foreign securities held by a Fund on days
when the Fund is not open for business. As a result, the Fund's Net Asset Value
may change on days on which shareholders are not able to purchase or sell Fund
shares. If events materially affecting the value of foreign securities occur
between the time when the exchange on which they are traded closes and the time
when the Fund's Net Asset Value is calculated, the securities may be valued at
fair value.
The value of our shares is determined on each day the New York Stock Exchange is
open for trading, at 4 p.m., Eastern Time, or, if the New York Stock Exchange
closes earlier, at the close of business of the Exchange.
HOW TO BUY AND SELL SHARES
HOW TO BUY SHARES
It's easy to buy shares in any of our Funds. Just fill out an application and
send in your payment by check, wire transfer, exchange from another Citizens
mutual fund or through arrangements with your investment adviser or
broker-dealer. All checks must be made payable to "Citizens Funds." Citizens
Funds is unable to accept third-party checks. Foreign checks drawn on U.S.
dollars are accepted, but shares purchased with foreign checks may be held in
escrow for at least 20 days.
Shares in Citizens 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 these brokers have also been
authorized to designate intermediaries, to accept on their behalf purchase and
redemption orders. A Fund will be deemed to have received such an order when the
broker or broker designee accepts the order, which shall be priced at the Net
Asset Value next computed after the broker or designee accepts the order.
Purchases and sales of Fund shares through broker dealers may involve higher
fees.
Citizens Funds are available through many popular fund "supermarkets,"
including Charles Schwab's Mutual Fund OneSource-Registered Trademark- and
Fidelity Investments FundsNetwork-Registered Trademark-.
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.
32
<PAGE>
BENEFITS OF AUTOMATIC INVESTING
Automatic investing, or saving a predetermined amount of money each month or
quarter, offers many advantages:
- It encourages the discipline of saving on a regular basis.
- You can avoid the temptation to time the market.
- Your employer may allow you to deduct directly from your paycheck. You
won't miss what you don't see.
- It's easy and convenient. Fill out the form and the rest automatically
happens each month.
To get started, visit www.citizensfunds.com or call us at (800) 223-7010.
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 (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 and including
$25,000) you want to sell (redeem). Certain redemptions under $25,000 also may
require a Medallion Signature Guarantee (see information below), at the
discretion of Citizens Funds. Depending upon your instructions, we will deposit
the amount of your redemption into another Citizens Funds account, mail you a
check or electronically transfer your redemption to your pre-designated account.
Normally, we will send you your redemption on the next business day after we
receive your request. One-day wired funds cost $10, or we offer free three-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. Citizens Funds will not be
responsible, nor will our Adviser or Transfer Agent, if we follow the above
precautions and act on telephone instructions we reasonably believe to be
genuine.
During periods of unusual market activity, severe weather or other abnormal
circumstances, it may be difficult for you to reach a representative of Citizens
Funds by telephone. Under such circumstances, please consider sending written
instructions.
REQUESTS FOR REDEMPTION
If you do not use the Telephone Exchange and Redemption option, you can redeem
your shares by sending us a written request at any time, although the process
will take longer. Requests for redemption of shares worth more than $25,000 must
be accompanied by an original Medallion Signature Guarantee, which is a
signature guarantee provided by an eligible guarantor (see list below). We may
require further documentation from corporations, fiduciaries, retirement plans
and/or institutional investors.
33
<PAGE>
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 are redeeming shares that were
recently purchased by check, the proceeds may be delayed until the check for
purchase clears; this may take up to 15 days from the date of purchase.
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 or in whole with portfolio securities where the redemption is for more
than $250,000. If portfolio securities are distributed instead of cash,
shareholders may incur brokerage commissions or other costs in converting the
securities to cash.
TRANSACTIONS REQUIRING MEDALLION SIGNATURE GUARANTEE
- All requests for redemption over $25,000 (and certain requests under and
including $25,000);
- Changing your account title in any way;
- Authorizing a telephone transaction for the first time;
- Changing your pre-designated wire or ACH instructions;
- Establishing or modifying a systematic withdrawal plan;
- Exchanges between accounts which do not have identical titles.
ELIGIBLE GUARANTORS
- Commercial Banks
- Trust Companies
- Savings Associations
- Credit Unions
- Broker-Dealers
- Members of domestic stock exchanges
Note: Notaries Public are not eligible guarantors.
You may sell (redeem) your shares on any business day on which the New York
Stock Exchange is open. The redemption price for your shares will be the Net
Asset Value the next time it is calculated after your redemption request, in
proper form, has been received.
SHAREHOLDER SERVICES AND POLICIES
We try to demonstrate our commitment to your investment success by offering a
family of mutual funds to meet diverse objectives, and assisting you with a
complete range of convenient services including the following retirement
services:
- Traditional and Roth IRAs
- SEP and SIMPLE IRAs
- 401(k), 403(b) and 457 plans
- Rollover and transfer services
34
<PAGE>
Please call our Shareholder Service Center for more information at (800)
223-7010.
EXCHANGE PRIVILEGE
Since peoples' investment needs change over time, we provide for easy exchanges
among our Funds at no charge. You may make an exchange at any time and to any
Fund. (An exchange is considered a purchase and sale of shares for tax
purposes.) Just call us or write us with your request. The investment minimums
and monthly below minimum balance fee remain applicable to exchange purchases
into other Citizens 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.
MAKING A CHANGE IN YOUR ACCOUNT
After your account is set up, you may want to make a change in one of the
options or in the account title. We are pleased to assist you, but to protect
both you and Citizens Funds from fraud, we may require an original Medallion
Signature Guarantee, which is a signature guarantee from an eligible guarantor
(see page 43) 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, SEPs IRAs, SIMPLE IRAs and 403(b) plans
(for employees of non-profit organizations). Our Funds are suitable for 401(k)
and 457 plans, variable annuities, 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 Citizens Money Market Fund, we will send you a
book of 20 checks. Although these checks are payable through a banking agent of
Citizens Funds, your account is not FDIC insured, and your shares are subject to
fluctuations in value. You may write a check for any amount. There is a $0.50
fee per check written (waived with E fund Account see next page). 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," on
page 42.
THE E FUND-Registered Trademark- ACCOUNT
Citizens Money Market Fund offers an optional transaction account, the E fund
Account, which is available through Citizens Funds' distributor, Citizens
Securities. The E fund Account offers enhanced transactional features,
including free check writing and a MasterCard-Registered Trademark- debit
card. It is available for an annual fee of $35.00 and is not subject to the
minimum balance fee. The
35
<PAGE>
MasterCard-Registered Trademark- debit card may be used to redeem shares for
cash at automated teller machines (ATMs), or to make purchases at any retail
location which accepts the debit card.
COSTS FOR SERVICES
<TABLE>
<S> <C>
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 E FUND Account) $ 0.50
Stop payments $ 10.00
Box of 200 checks for the E FUND Account $ 15.95 (first 20 free)
ATM withdrawal/cash withdrawal at bank $ 0.65 each/$2.50
Annual fee for the E FUND Account $ 35.00
Debit Card replacement for the E FUND Account $ 10.00
Copies of statements, checks and tax forms $ 2.00/each (free if obtained
through our audio response system)
</TABLE>
*This fee is waived for total IRA balances of $25,000 and higher, and total
account balances of $50,000 and higher.
MAILING ADDRESS AND WIRING INSTRUCTIONS
REGULAR U.S. MAIL:
Citizens Funds
P.O. Box 182456
Columbus, OH 43218-2456
PLEASE MAKE ALL CHECKS PAYABLE TO "CITIZENS FUNDS." WE ARE UNABLE TO ACCEPT
THIRD-PARTY CHECKS.
WIRING INSTRUCTIONS: TRANSFER AGENT AND DIVIDEND PAYING AGENT:
Citizens Funds BISYS
c/o Fifth Third Bank 3435 Stelzer Road
38 Fountain Sq. Plaza Columbus, OH 43219
Cincinnati, OH 45263
Routing#: 042000314
For Further Credit
A/C# 999-44-975
Shareholder name/fund name/account number
36
<PAGE>
OVERNIGHT DELIVERY PACKAGES (e.g., Federal Express, UPS, Airborne Express):
Citizens Funds
3435 Stelzer Road
Columbus, OH 43219-3035
Please make all checks payable to "Citizens Funds." We are unable to accept
third-party checks.
=========================================================================
DIVIDENDS, DISTRIBUTIONS AND TAXES
=========================================================================
Unless you give us other instructions when you fill out your account application
- or by telephone at (800) 223-7010 or in writing thereafter - we will
automatically reinvest your dividends and distributions from a Fund into
additional shares of that Fund, at the Net Asset Value calculated on the date
the dividends or distributions are payable.
We also can pay your dividends and distributions to you by check or electronic
transfer through the Automated Clearing House to your bank account. Information
regarding dividends and other distributions will be included on your statement.
Dividends and distributions of capital gains, if any, normally are declared and
paid on the following schedule:
37
<PAGE>
<TABLE>
<CAPTION>
Dividend Capital Gains Distributions
Declared Paid Long-term Short-term
=========================================================================================
<S> <C> <C> <C> <C>
CITIZENS CORE GROWTH FUND Annually Annually Annually Annually
=========================================================================================
CITIZENS EMERGING GROWTH FUND Annually Annually Annually Annually
=========================================================================================
CITIZENS SMALL CAP CORE GROWTH FUND Annually Annually Annually Annually
=========================================================================================
CITIZENS GLOBAL EQUITY FUND Annually Annually Annually Annually
=========================================================================================
CITIZENS INCOME FUND Monthly Monthly Annually Annually
=========================================================================================
CITIZENS MONEY MARKET FUND Daily Monthly None None
=========================================================================================
</TABLE>
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. Dividends
designated as capital gains dividends are taxable as long-term capital gains.
All other dividends are generally taxable as ordinary income. Some dividends
paid by Citizens Core Growth Fund, Citizens Emerging Growth Fund, Citizens Small
Cap Core Growth Fund and Citizens Global Equity Fund will ordinarily qualify for
the dividends received deduction for corporate shareholders. Dividends from
Citizens Income Fund and Citizens Money Market Fund are not expected to be
eligible for the dividends received deduction. 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 from a fund other than the Citizens Money Market Fund will reduce
a Fund's Net Asset Value per share. As a result, if you purchase shares just
before a fund makes a distribution, you will pay the full purchase price for the
shares and then effectively receive a portion of the purchase price back as a
taxable distribution.
Citizens Global Equity Fund may be eligible to "pass through" to you foreign
income taxes that it pays. If the Fund makes this election, you will be required
to include your share of those taxes in gross income as a distribution from the
Fund. You will then be allowed to claim a credit (or a deduction, if you itemize
deductions) for such amounts on your federal income tax return, subject to
certain limitations.
When you redeem, sell or exchange shares of a fund, it is generally considered a
taxable event. Depending on the purchase price and the sale price for the shares
redeemed, sold or exchanged, you may have a gain or loss on the transaction. You
are responsible for any tax liabilities generated by your transactions.
The account application asks each new investor to certify that the investor's
Social Security or taxpayer identification number is correct and that the
shareholder is not subject to 31% backup withholding for failing to report
income to the IRS. A Fund may be required to withhold (and pay over to the IRS
for your credit) 31% of taxable distributions and redemption proceeds it pays
you if you fail to provide this information or otherwise violate IRS
regulations. The Funds will generally withhold U.S. federal income tax at the
rate of 30% if you are neither a citizen nor a resident of the U.S. You may be
able to arrange for a lower withholding rate under an applicable tax treaty if
you supply the appropriate documentation required by the Funds.
38
<PAGE>
Please consult your tax adviser for further information regarding the federal,
state and local tax consequences of an investment in Citizens Funds.
===============================================================================
FINANCIAL HIGHLIGHTS
===============================================================================
The financial highlights table starting on the next page is intended to help you
understand each Fund's financial performance for the past five years or, if
shorter, the period of the Fund's operations. Certain financial information
reflects financial results for a single Fund share of the applicable class. The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in a Fund class (assuming reinvestment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP for the fiscal years ending June 30, 1998, June 30,
1999 and June 30, 2000, whose reports, along with the Funds' financial
statements, are included in the annual report, which is available upon request.
Financial highlights information for periods prior to June 30, 1998 was audited
by other auditors.
FINANCIAL HIGHLIGHTS
Per Share Data
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Year Ended June 30
Net Asset Value, Beginning of Period
Net Income (Loss)
Net Gain (Loss) on Securities (both Realized & Unrealized)
Total From Investment Operations
LESS DISTRIBUTIONS
Dividends from Net Income
Distributions (from Net Realized Gains)
Total Distributions
Net Asset Value, End of Period
<TABLE>
<S> <C> <C> <C> <C> <C>n <C> <C> <C>
==============================================================================================
CITIZENS CORE GROWTH (FORMERLY CITIZENS INDEX FUND) FUND-STANDARD CLASS SHARES
==============================================================================================
1996 $10.94 $ 0.08 $ 2.47 $2.55 $(0.03) $(0.05) $(0.08) $13.41
1997 13.41 0.00 4.78 4.78 (0.06) (0.09) (0.15) 18.04
1998 18.04 (0.07) 6.44 6.37 0.00 (0.95) (0.95) 23.46
1999 23.46 (0.15) 7.52 7.37 0.00 (0.31) (0.31) 30.52
2000 30.52 (0.22) 4.08 3.86 0.00 (1.79) (1.79) 32.59
==============================================================================================
CITIZENS CORE GROWTH FUND (FORMERLY CITIZENS INDEX FUND) - INSTITUTIONAL CLASS SHARES
==============================================================================================
1996(1) $10.00 $ 0.08 $ 0.92 $ 1.00 $ 0.00 $ 0.00 $ 0.00 $11.00
1997 11.00 0.08 3.94 4.02 (0.09) (0.09) (0.18) 14.84
1998 14.84 0.11 5.21 5.32 (0.08) (0.95) (1.03) 19.13
1999 19.13 0.01 6.19 6.20 0.00 (0.31) (0.31) 25.02
2000 25.02 0.00 3.36 3.36 0.00 (1.79) (1.79) 26.59
==============================================================================================
CITIZENS CORE GROWTH FUND (FORMERLY CITIZENS INDEX FUND) - ADMINISTRATIVE CLASS SHARES
==============================================================================================
2000(4) $32.09 $(0.01) $ 0.58 $ 0.57 $ 0.00 $ 0.00 $32.66
==============================================================================================
</TABLE>
39
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>n <C> <C> <C>
==============================================================================================
CITIZENS EMERGING GROWTH FUND-STANDARD CLASS SHARES
==============================================================================================
1996 $11.87 $(0.13) $ 4.72 $ 4.59 $ 0.00 $(1.59) $(1.59) $14.87
1997 14.87 (0.16) 0.68 0.52 0.00 (1.25) (1.25) 14.14
1998 14.14 (0.20) 4.61 4.41 0.00 (1.00) (1.00) 17.55
1999 17.55 (0.19) 6.19 6.00 0.00 (1.79) (1.79) 21.76
2000 21.76 (0.30)(5) 16.58 16.28 0.00 (4.56) (4.56) 33.48
==============================================================================================
CITIZENS EMERGING GROWTH FUND - INSTITUTIONAL CLASS SHARES
==============================================================================================
2000(6) $25.67 $(0.11) $12.61 $12.50 $ 0.00 $ (4.56) $(4.56) $33.61
=================================================================================
CITIZENS EMERGING GROWTH FUND - ADMINISTRATIVE CLASS SHARES
==============================================================================================
2000(4) $28.70 $(0.10)(5) $ 4.97 $ 4.87 $ 0.00 $ 0.00 $33.57
==============================================================================================
CITIZENS SMALL CAP CORE GROWTH (FORMERLY CITIZENS SMALL CAP INDEX FUND) -STANDARD CLASS SHARES
==============================================================================================
2000(7) $10.00 $ 0.00 $ 1.23 $ 1.23 $ 0.00 $ 0.00 $ 0.00 $11.23
==============================================================================================
</TABLE>
(1) Period from January 25, 1996 (commencement of operations)
(2) Annualized
(3) Not annualized
(4) Period from February 4, 2000 (commencement of operations)
(5) Based onaverage shares outstanding
(6) Period from November 1, 1999 (commencement of operations)
(7) Period from December 28, 1999 (commencement of operations)
RATIOS AND SUPPLEMENTAL DATA
Portfolio Turnover Rate
Net Assets End of Period (in 000s)
Ratio of Expenses to Average Net Assets Net of Reimbursement or Fee Waiver
Ratio of Expenses to Average Net Assets Prior to Reimbursement or Fee Waiver
Ratio of Net Income (Loss) to Average Net Assets
Total Return
<TABLE>
<S> <C> <C> <C> <C> <C>
==============================================================================================
CITIZENS CORE GROWTH FUND (FORMERLY CITIZENS INDEX FUND)- STANDARD CLASS SHARES
==============================================================================================
6.44% $136,980 1.79% 1.82% 0.68% 23.41%
18.64 211,116 1.59 1.59 0.02 35.88
13.64 341,395 1.59 1.59 (0.39) 36.50
18.04 578,286 1.58 1.58 (0.68) 31.58
20.04 699,399 1.49 1.52 (0.75) 12.82
==============================================================================================
</TABLE>
40
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
==============================================================================================
CITIZENS CORE GROWTH FUND (FORMERLY CITIZENS INDEX FUND) - INSTITUTIONAL CLASS SHARES
==============================================================================================
6.44% $ 7,524 0.98%(2) 1.01%(2) 2.37%(2) 10.00%(3)
18.64 13,001 0.88 0.88 0.76 36.93
13.64 31,673 0.88 0.88 0.28 37.38
18.04 98,705 0.83 0.83 0.05 32.62
20.04 180,779 0.74 0.74 0.00 13.67
==============================================================================================
CITIZENS CORE GROWTH FUND (FORMERLY CITIZENS INDEX FUND) - ADMINISTRATIVE CLASS SHARES
==============================================================================================
20.04% $ 21 0.99%(2) 101.59%(2) (0.27)%(2) 1.78%(3)
==============================================================================================
CITIZENS EMERGING GROWTH FUND - STANDARD CLASS SHARES
==============================================================================================
337.41% $ 36,409 2.02% 2.34% (1.64)% 42.43%
228.66 60,341 1.99 2.01 (1.32) 4.03
245.30 87,892 1.96 1.96 (1.37) 33.05
208.49 136,137 1.82 1.83 (1.20) 36.04
159.95 386,670 1.69 1.75 (1.09) 82.19
==============================================================================================
CITIZENS EMERGING GROWTH FUND - INSTITUTIONAL CLASS SHARES
==============================================================================================
159.95% $ 16,284 1.24%(2) 1.31%(2) (0.61)%(2) 55.02%(3)
==============================================================================================
CITIZENS EMERGING GROWTH FUND - ADINISTRATIVE CLASS SHARES
==============================================================================================
195.95% $ 8 1.55%(2) 158.14%(2) (0.90)%(2) 16.97%(3)
==============================================================================================
CITIZENS SMALL CAP CORE GROWTH (FORMERLY CITIZENS SMALL CAP INDEX FUND) -STANDARD CLASS SHARES
==============================================================================================
20.16% $ 8,397 1.49%(2) 5.98%(2) 0.00%(2) 12.30%(3)
==============================================================================================
</TABLE>
41
<PAGE>
FINANCIAL HIGHLIGHTS
PER SHARE DATA
INCOME (LOSS) FROM INVESTMENT OPERATIONS
Year Ended June 30
Net Asset Value, Beginning of Period
Net Gain (Loss) on Securities (both Realized & Unrealized)
Total From Investment Operations
LESS DISTRIBUTIONS
Dividends (from Net Income)
Distributions (from Net Realized Gains)
Total Distributions
Net Asset Value, End of Period
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
=======================================================================================================
CITIZENS GLOBAL EQUITY FUND- STANDARD CLASS SHARES
=======================================================================================================
1996 10.69 (0.10) 1.43 1.33 0.00 (0.13) (0.13) 11.89
1997 11.89 (0.07) 2.65 2.58 0.00 0.00 0.00 14.47
1998 14.47 (0.20) 3.24 3.04 0.00 (0.56) (0.56) 16.95
1999 16.95 (0.12) 3.86 3.74 0.00 (0.47) (0.47) 20.22
2000 20.22 (0.22)(1) 10.94 10.72 0.00 (0.95) (0.95) 29.99
=======================================================================================================
CITIZENS GLOBAL EQUITY FUND- INSTITUTIONAL CLASS SHARES
=======================================================================================================
2000(2) $23.45 $(0.05)(1) $ 7.63 $ 7.58 $0.00 $(0.95) $(0.95) $30.08
=======================================================================================================
CITIZENS GLOBAL EQUITY FUND- ADMINISTRATIVE CLASS SHARES
=======================================================================================================
2000(5) $33.45 $(0.06) $(3.37) $(3.43) $0.00 $ 0.00 $ 0.00 $30.02
=======================================================================================================
CITIZENS INCOME FUND - STANDARD CLASS SHARES
=======================================================================================================
1996 10.38 0.66 (0.10) 0.56 (0.66) 0.00 (0.66) 10.28
1997 10.28 0.67 0.28 0.95 (0.67) 0.00 (0.67) 10.56
1998 10.56 0.60 0.49 1.09 (0.60) (0.02) (0.62) 11.03
1999 11.03 0.59 (0.50) 0.09 (0.59) (0.02) (0.61) 10.51
2000 10.51 0.65 (0.32) 0.33 (0.63) (0.01) (0.64) 10.20
=======================================================================================================
CITIZENS MONEY MARKET FUND (FORMERLY WORKING ASSETS MONEY MARKET FUND)- STANDARD CLASS SHARES
=======================================================================================================
1996 1.00 0.045 0.000 0.045 (0.045) 0.000 (0.045) 1.00
1997 1.00 0.042 0.000 0.042 (0.042) 0.000 (0.042) 1.00
1998 1.00 0.045 0.000 0.045 (0.045) 0.000 (0.045) 1.00
1999 1.00 0.040 0.000 0.040 (0.040) 0.000 (0.040) 1.00
2000 1.00 0.046 0.000 0.046 (0.046) 0.000 (0.046) 1.00
=======================================================================================================
CITIZENS MONEY MARKET FUND (FORMERLY WORKING ASSETS MONEY MARKET FUND)- INSTITUTIONAL CLASS SHARES
=======================================================================================================
1996(6) $ 1.00 $ 0.021 $ 0.000 $ 0.021 $(0.021) $ 0.000 $(0.021) $ 1.00
1997 1.00 0.049 0.000 0.049 (0.049) 0.000 (0.049) 1.00
1998 1.00 0.051 0.000 0.051 (0.051) 0.000 (0.051) 1.00
1999 1.00 0.045 0.000 0.045 (0.045) 0.000 (0.045) 1.00
2000 1.00 0.049 0.000 0.049 (0.049) 0.000 (0.049) 1.00
=======================================================================================================
</TABLE>
(1) Based on average shares outstanding
(2) Period from November 1, 1999 (commencement of operations)
(3) Annualized
(4) Not annualized
(5) Period from February 4, 2000 (commencement of operations)
(6) Period from February 1, 1996 (commencement of operations)
42
<PAGE>
RATIOS AND SUPPLEMENTAL DATA
Portfolio Turnover Rate
Net Assets End of Period in (000s)
Ratio of Expenses to Average Net Assets Net of Reimbursement or Fee Waiver
Ratio of Expenses to Average Net Assets Prior to Reimbursement or Fee Waiver
Ratio of Net Income (Loss) to Average Net Assets
Total Return
<TABLE>
<S> <C> <C> <C> <C> <C>
==================================================================================================
CITIZENS GLOBAL EQUITY FUND - STANDARD CLASS SHARES
==================================================================================================
85.92% $ 15,595 2.55% 2.72% (1.01)% 12.52%
69.34 29,573 2.10 2.33 (0.70) 21.70
72.33 49,045 2.20 2.20 (0.76) 21.75
64.07 90,549 1.96 1.96 (0.88) 22.34
120.69 354,818 1.82 1.83 (0.79) 53.27
==================================================================================================
CITIZENS GLOBAL EQUITY FUND - INSTITUTIONAL CLASS SHARES
==================================================================================================
120.69% $ 12,544 1.39%(3) 1.43%(3) (0.25%)(3) 32.55%(4)
==================================================================================================
CITIZENS GLOBAL EQUITY FUND - ADMINISTRATIVE CLASS SHARES
==================================================================================================
120.69% $ 1 1.68%(3) 296.20%(3) (0.48)%(3) (10.25)%(4)
==================================================================================================
CITIZENS INCOME FUND - STANDARD CLASS SHARES
==================================================================================================
41.36% $ 32,276 1.38% 1.48% 6.26% 5.48%
64.56 33,230 1.41 1.47 6.44 9.57
80.14 51,366 1.74 1.86 5.55 10.49
44.07 62,837 1.45 1.49 5.50 0.78
52.96 61,836 1.45 1.47 6.34 3.35
==================================================================================================
CITIZENS MONEY MARKET FUND (FORMERLY WORKING ASSETS MONEY MARKET FUND) - STANDARD CLASS SHARES
==================================================================================================
N/A $ 78,326 1.18% 1.21% 4.56% 4.60%
N/A 85,179 1.25 1.39 4.23 4.30
N/A 103,597 1.21 1.23 4.46 4.54
N/A 105,740 1.19 1.24 4.00 4.07
N/A 112,700 1.17 1.18 4.59 4.67
==================================================================================================
CITIZENS MONEY MARKET FUND(FORMERLY WORKING ASSETS MONEY MARKET FUND) - INSTITUTIONAL CLASS SHARES
==================================================================================================
85.92% $ 15,595 2.55% 2.72% (1.01)% 12.52%
N/A $ 14,539 0.47%(3) 0.47%(3) 5.16%(3) 2.09%(4)
N/A 17,504 0.60 0.60 4.92 5.01
N/A 18,178 0.56 0.56 5.11 5.23
N/A 22,464 0.70 0.70 4.47 4.58
N/A 23,370 0.81 0.82 4.93 5.04
==================================================================================================
</TABLE>
43
<PAGE>
CITIZENS FUND PROSPECTUS NOTE:
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 Annual or Semi-Annual Reports, call (800) 223-7010 or visit Citizens
Funds' web site at http://www.citizensfunds.com.
The Information about Citizens Funds (including 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 of 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. 811-03626.
CITIZENS FUNDS -Registered Trademark-
(800) 223-7010
www.citizensfunds.com
Citizens Funds are available through such mutual fund supermarkets as Charles
Schwab's Mutual Fund OneSource-Registered Trademark- and Fidelity Investments
FundsNetwork-Registered Trademark-.
Citizens Index-SM- and Citizens Small Cap Index-SM- are servicemarks of
Citizens Advisers. Citizens Funds-Registered Trademark- and E FUND-Registered
Trademark- are registered trademarks of Citizens Advisers.
(C) 2000 Citizens Advisers
Printed on recycled paper with soy-based inks.
44
<PAGE>
CITIZENS FUNDS-Registered Trademark-
STATEMENT OF ADDITIONAL INFORMATION
NOVEMBER 1, 2000
This Statement of Additional Information (SAI) is not a prospectus and
should be read in conjunction with the Citizens Funds' Prospectus dated November
1, 2000. A copy of the current Prospectus can be obtained by calling (800)
223-7010, by writing Citizens Funds, 230 Commerce Way, , Portsmouth, New
Hampshire 03801 or by visiting the Citizens Funds Internet site at
www.citizensfunds.com. This SAI and the Prospectus may be amended or
supplemented from time to time.
Certain disclosure has been incorporated by reference into this SAI from
the Citizens Funds' annual report. For a free copy of the annual report, please
call (800) 223-7010.
CITIZENS FUNDS-Registered Trademark-
Citizens Core Growth Fund-SM- (FORMERLY KNOWN AS CITIZENS INDEX FUND)
Citizens Emerging Growth Fund-SM-
Citizens Small Cap Core Growth Fund-SM- (FORMERLY KNOWN AS CITIZENS SMALL CAP
INDEX FUND)
Citizens Global Equity Fund-SM-
Citizens Income Fund-SM-
Citizens Money Market Fund-SM-
(FORMERLY KNOWN AS 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.........................................................
Appendix A: Description of Ratings..........................................
-1-
<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: Citizens 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 Core Growth Fund (inception date 3/3/95), and Citizens Small
Cap Core Growth Fund (inception date 12/28/99). On May 28, 1992 the Trust, which
had operated as a money market fund since 1983, changed its name from Working
Assets Money Fund to Working Assets Common Holdings. On October 5, 1995 the
Trust changed its name from Working Assets Common Holdings to Citizens
Investment Trust, and on July 14, 1998 it changed its name to Citizens Funds.
Each of the series of Citizens Funds is referred to herein as a "Fund," or,
collectively, the "Funds."
This Statement of Additional Information relates to all six Funds and to
Standard, Administrative and Institutional Class shares.
INVESTMENT STRATEGIES, RISKS AND FUNDAMENTAL POLICIES
INVESTMENT STRATEGIES AND RISKS
In addition to the principal investment strategies and risks described in
the Prospectus, Citizens Funds will from time to time employ other investment
strategies that 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:
- Obligations of agencies and enterprises of the U.S. Government;
- Certificates of Deposit of banks;
- Commercial paper or other corporate notes of investment grade quality; and
- Yankee bonds.
REPURCHASE AGREEMENTS
The 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 102% of the
value of the repurchase price agreed to be paid by the seller. The repurchase
price may be higher than the purchase price, the difference being income to the
particular Fund, or the purchase and repurchase prices may be the same, with
interest at a standard rate due to the Fund, together with the repurchase price
on repurchase. In either case, the income to a Fund is unrelated to the interest
rate on securities collateralizing the repurchase.
-2-
<PAGE>
The Trust requires all vendors of repurchase agreements to deliver
collateral in the applicable Fund's name in the form of government securities
equal to 102% of the value of any repurchase agreement. However, it is important
to note that while repurchase agreements may be a useful tool in managing a
Fund, they do have greater risk than directly investing in securities. If a bank
or stockbroker becomes bankrupt, or otherwise defaults after selling a Fund a
repurchase agreement, the Fund may suffer some delay and expense in liquidating
the securities, decline in the value of the securities and loss of principal or
interest.
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. The Funds may use derivative securities to hedge against
changes in interest rates, foreign currency exchange rates, changes in
securities prices or other factors affecting the value of their investments.
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). Derivatives involve
special risks and may result in losses.
OPTIONS. Each Fund, other than Citizens 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.
FUTURES CONTRACTS. Each Fund, other than Citizens Money Market Fund, may
purchase or sell futures contracts and options on futures contracts. These
contracts provide for the future sale by one party and purchase by another party
of a specified amount of a specific security at a specified future time and at a
specified price. An option on a futures contract gives the purchaser the right,
in exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. Index futures are
futures contracts for various indices that are traded on registered securities
exchanges.
WARRANTS. Each Fund, other than Citizens 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. Each Fund, other than Citizens Money Market Fund,
may purchase structured securities, such as interest-only strips or similar
vehicles where one or more of the rights within the underlying securities has
been traded through the financial markets for a different right or series of
rights. In the most extreme cases, some classes of stripped mortgage-backed
securities may receive only interest payments (called IOs because they receive
interest only) and other classes of stripped mortgage-backed securities may
receive only principal payments (called POs because they receive principal
only).
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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:
- 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;
- an imperfect correlation between the price of derivatives and the movements
of the securities prices, interest rates or currency exchange rates being
hedged;
- the possible absence of a liquid secondary market for any particular
derivative at any time;
- the potential loss if the counter party to the transaction does not perform
as promised; and
- 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, other than Citizens Money Market Fund, and especially the
Citizens Global Equity Fund and the Citizens Emerging Growth Fund, may invest in
foreign securities that 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. The
Citizens Global Equity Fund's share price will tend to reflect the movements of
the different securities markets in which they are invested and, to the degree
not hedged, the foreign currencies in which investments are denominated. As a
result of its investments in foreign securities, a Fund may receive interest or
dividend payments, or the proceeds of the sale or redemption of such securities,
in the foreign currencies in which such securities are denominated. Under
certain circumstances - such as where a Fund believes that the applicable
exchange rate is unfavorable at the time the currencies are received or
anticipates, for any other reason, that the exchange rate will improve - the
Fund may hold such currencies for an indefinite period of time. A Fund may also
hold foreign currency in anticipation of purchasing foreign securities. While
the holding of currencies would permit the Fund to take advantage of favorable
movements in the applicable exchange rate, such strategy also would expose the
Fund to risk of loss if exchange rates move in a direction adverse to the Fund's
position. Such losses could reduce any profits or increase any losses sustained
by the Fund from the sale or redemption of securities and could reduce the
dollar value of interest or dividend payments received.
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The Citizens Global Equity Fund and the Citizens Emerging Growth Fund may
invest in foreign companies through investments in American Depositary Receipts
(ADRs). These securities are not usually denominated in the same currency as the
securities into which they may be converted. ADRs are receipts typically issued
by a U.S. bank or trust company evidencing ownership of the underlying
securities. ADRs are subject to many of the same risks that apply to other
investments in non-U.S. securities.
WHEN-ISSUED SECURITIES
Each Fund, other than Citizens 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 follow procedures consistent with current
policies of the Securities and Exchange Commission (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 a basis may involve more risk
than other types of purchases. For example, a Fund may have to sell assets that
have been set aside to cover its commitments in order to meet redemptions. Also,
if the Funds' adviser, Citizens Advisers, Inc. (referred to as "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, such as securities subject to contractual
restrictions on resale. 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, as amended (the "Securities Act"),
but can be offered and sold to "qualified institutional buyers" under Rule 144A
under the Securities Act. Restricted securities, which may be traded pursuant to
Rule 144A, will not be considered illiquid if the Funds' Board of Trustees finds
that a liquid trading market exists for these securities. The Trustees have
adopted guidelines and, subject to oversight by the Trustees, have delegated to
the Adviser and to any applicable sub-adviser the daily function of determining
and monitoring liquidity of restricted securities. See "Fundamental Policies"
below.
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REAL ESTATE SECURITIES
The Citizens Income Fund may invest in equity securities of companies in
the real estate industry, including real estate investment trusts (REITs). These
securities are sensitive to changes in real estate values, property taxes,
interest rates, real estate asset cash flows, occupancy rates, governmental
regulations and the management skill and creditworthiness of the issuer. REITs
also may be subject to liability under environmental and hazardous waste laws.
HEDGING RISK
The Citizens Global Equity Fund may (but is not required to) enter into
hedging transactions, or arrangements to buy or sell a particular currency,
security or securities index for a stated value against the U.S. dollar at a
given time. Hedging may not achieve its objective of reducing the effects of
currency fluctuations on the Fund, and may create losses or reduce the Fund's
potential gains.
EURO CONVERSION RISK
The Citizens Global Equity Fund may invest in securities of European
issuers. Certain European countries that are a part of the European Economic
Union have agreed to participate in the conversion to a single European
currency, the euro. This conversion is to be completed by July 1, 2002 and its
effects on investments in the securities of European issuers and foreign
currencies are 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.
GROWTH PLUS RISK MANAGEMENT
The mission of Citizens Funds is to achieve superior investment returns for
our shareholders. Towards this end, our active Funds and the indexes underlying
our passively managed funds employ a growth discipline, seeking companies with
above-average prospects for long-term growth in earnings and profitability.
While we strive to deliver strong investment performance, we are attentive to
risk in the process. Risk management strategies are integral to how we manage
each Fund. However, these strategies may not be successful in reducing risk.
Some of the risk management strategies that we may employ are as follows:
CITIZENS CORE GROWTH FUND
- Limits investment exposure in any one company to no more than 5% of total
assets, with respect to 75% of the Fund's total assets.
- Limits investment exposure in any one industry to no more than 25% of total
assets.
- Holds large basket of attractive companies without over-concentration in
any one sector.
- Employs social and environmental screens to avoid companies whose corporate
behavior could become an impediment to performance.
CITIZENS EMERGING GROWTH FUND
- Limits investment exposure in any one company to no more than 5% of total
assets, with respect to 75% of the Fund's total assets.
- Limits investment exposure in any one industry to no more than 25% of total
assets.
- Analyzes portfolio for its overall level of diversification. If the
portfolio is not reasonably diversified relative to the market as defined
by R-squared, growth stocks from diversifying industry groups are
integrated. R-squared is a statistical measure that indicates the extent to
which the variability of a security or portfolio's returns is explained by
the variability of the market. The value will be between 0 and 1. The
higher the number, the greater the extent to which portfolio returns are
related to the market return. An R-Squared value of .75 indicates that 75%
of the fluctuation in a portfolio's return is explained by market action.
An R-Squared of 1.0 indicates that portfolio returns are
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entirely related to the market and are not influenced by other factors. An
R-Squared of 0 indicates that no relationship exists between the
portfolio's returns and the market return. Note: That R-Squared measures
the strength and not the positive or negative direction of the relationship
between assets and the market.
- Uses relative valuation techniques favoring companies that are rapidly
growing their earnings potential but are currently trading at prices that
accurately reflect their earnings growth potential. Companies that are
overpriced are ranked lower than their more attractively priced
counterparts, and generally do not reach the purchasing stage of the
process.
- Employs social and environmental screens to avoid companies whose corporate
behavior could become an impediment to performance.
CITIZENS SMALL CAP CORE GROWTH FUND
- Limits investment exposure in any one company to no more than 5% of total
assets, with respect to 75% of the Fund's total assets.
- Limits investment exposure in any one industry to no more than 25% of total
assets.
- Holds large basket of attractive companies without over-concentration in
any one sector.
- Employs social and environmental screens to avoid companies whose corporate
behavior could become an impediment to performance.
CITIZENS GLOBAL EQUITY FUND
- Limits investment exposure in any one company to no more than 5% of total
assets, with respect to 75% of the Fund's total assets.
- Limits investment exposure in any one industry to no more than 25% of total
assets.
- Limits investments in emerging nations to no more than 25% of total assets.
- Employs social and environmental screens to avoid companies whose corporate
behavior could become an impediment to performance.
CITIZENS INCOME FUND
- Limits investment exposure in any one company to no more than 5% of total
assets, with respect to 75% of the Fund's total assets.
- Limits duration risk to small deviations around a pre-selected target.
- Controls default risk with proprietary credit analysis process.
- Limits high-yield securities to no more than 35% of total assets.
- Employs social and environmental screens to avoid companies whose corporate
behavior could become an impediment to performance.
Citizens Funds are not intended to be the lowest risk choices available to
investors. Rather, the goal of our risk management strategies is to attain a
reasonable, targeted level of risk commensurate with our Funds' growth mandates.
The above-stated risk management strategies may not always be employed, or if
employed, may not be effective at all times.
Our goal at Citizens Funds is to achieve strong financial results while
investing in companies that are managed in a socially responsible manner. The
Funds will invest only in companies we deem to be socially and environmentally
responsible.
To find these investments, we seek companies that have positive
environmental, community and workplace records. At the same time, we avoid
companies whose primary business is the manufacture or distribution of alcohol,
tobacco, nuclear power, oil or conventional or nuclear weaponry. We also avoid
companies on the AFL-CIO's national boycott list and companies that lack
diversity (i.e., representation by women or people of color) on their corporate
boards or in upper management. Finally, we avoid companies that use animals to
test personal-care products or otherwise treat animals in an inhumane manner.
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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.
CALCULATED RISK
Most investors focus on performance but it is as important to understand
how much risk your Fund is taking on in the process. Here are some popular
metrics to help evaluate risk.
BETA: A measure of the magnitude of a Fund's share price ups and downs relative
to swings in the market. The market is assigned a beta of 1.00. If a portfolio
has a beta of 1.20%, its share price has increased (or decreased) 12% if the
market has increased (or decreased) 10%.
STANDARD DEVIATION: A measure of the dispersion of a Fund's return, i.e., the
degree to which a Fund's return varies from its historical average. A higher
standard deviation indicates a wider dispersion of past returns and thus greater
historical volatility.
ALPHA: A risk-adjusted performance measure representing the difference between a
Fund's actual performance and the performance anticipated in light of a Fund's
risk posture (beta). A positive alpha indicates that the Fund has produced a
rate of return that is more than commensurate with its risk profile.
SHARPE RATIO: A measure of reward per unit of risk. The higher the Sharpe ratio,
the greater the return per unit of risk. The Sharpe ratio is often used to
compare fund returns on a "level playing field."
FUNDAMENTAL POLICIES
The following are fundamental investment policies followed by each of the
Funds (unless otherwise noted below) that 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
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approval of the holders of a majority of the outstanding shares of that Fund
(a Majority Shareholder Vote), which as used herein means the vote of the
lesser of (a) 67% or more of the outstanding voting securities of the Fund
present at a meeting at which the holders of more than 50% of the outstanding
voting securities of the Fund are present or represented by proxy, or (b)
more than 50% of the outstanding voting securities of the Fund. The term
"voting securities" has the same meaning as in the Investment Company Act of
1940, as amended (the "1940 Act").
1. Subject to the provisions of the Funds' Declaration of Trust, which
provides that we may issue several classes of shares in any one Fund,
the Funds may not issue senior securities. They may not issue
securities that have priority over others in dividends, redemption
rights, or have other privileges.
2. The Funds must limit their involvement in illiquid instruments, that
is, repurchase agreements that have a term of more than seven days,
and securities that have restrictions on resale or lack readily
available market quotations, to 10% of the total value of a Fund's net
assets and we will buy no such securities for a Fund unless the assets
in that Fund exceed $10 million at the time of purchase. Private
Placements which may be traded pursuant to Rule 144A under the
Securities Act of 1933 will not be subject to these limitations, if
the Funds' Board of Trustees finds that a liquid trading market exists
for these securities. The Funds' Trustees will review on an ongoing
basis any determination by the Adviser to treat a restricted security
as a liquid security, including the Adviser's assessment of current
trading activity and the availability of reliable price information.
In determining whether a privately placed security is properly
considered a liquid security, the Adviser and the Funds' Trustees will
take into account the following factors: (i) the nature of the
security and the nature of the marketplace trades (E.G., the time
needed to dispose of the security, the method of soliciting offers,
and the mechanics of transfer); (ii) dealer undertakings to make a
market in the security; and (iii) the number of dealers willing to
purchase or sell the security and the number of other potential
purchasers. To the extent a Fund invests in restricted securities that
are deemed liquid, the general level of illiquidity in the Fund may be
increased if qualified institutional buyers become uninterested in
purchasing these securities or the market for these securities
contracts. Acquisitions of such liquid restricted securities will be
made from a list approved by the Funds' Trustees.
3. The Funds may borrow only under special circumstances. The Funds do
not normally borrow money, but for temporary purposes a Fund may
borrow from banks up to 10% of the Fund's total assets. If a Fund does
borrow, it can pledge its assets up to the amount borrowed. A Fund
cannot borrow to purchase securities or to increase its income, but
can borrow to pay for shares being redeemed so that we do not have to
sell securities we do not want to sell. A Fund will not purchase any
securities while the Fund has borrowings above 5% of assets
outstanding. The interest paid on a Fund's borrowings would reduce
that Fund's net income.
4. The Funds may not underwrite securities, which means they may not sell
securities for others.
5. The Funds may not buy the securities of any company if the particular
Fund would then own more than 10% of the total value of all of the
company's outstanding voting securities, or if the Trust as a whole
would then own more than 10% of the total value of all of the
company's outstanding voting securities. A Fund may not concentrate
its investments by buying the securities of companies in any one
industry if more than 25% of the value of its 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.
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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 that
own commodities, oil, gas and mineral leases or real estate. This
restriction is not interpreted to prevent a Fund from investing in
fixed income securities or other debt instruments issued by limited
partnerships provided that it does not become a general or limited
partner.
8. The Funds may not make loans other than pursuant to repurchase
agreements. When a Fund buys money market instruments or loan
participation interests, it is investing, not making a loan.
9. The Funds may not invest for the purpose of exercising control or
management of other companies.
10. The Funds may not buy or continue to hold securities if the Funds'
Trustees or officers or the Directors or officers of the Adviser own
more than certain limits of these securities. If all of these people
who own more than 1/2 of 1% of the shares of a company together own
more than 5% of the company's shares, we cannot buy, or continue to
own, that company's shares.
11. The Funds may not participate with others on a joint, or a joint and
several, basis in any trading account in any securities.
12. The Funds may not, in managing 75% of its assets, invest more than 5%
in any one company; however, obligations issued or guaranteed by the
U.S. Government, its agencies and instrumentalities are not included
in this limit.
13. There is a limit on a Fund's ability to loan Fund securities. If a
Fund loans securities, then it must maintain collateral at 100% of the
value of the securities and any collateral must be marketable on an
exchange.
14. The following is a fundamental policy for the Citizens Core Growth
Fund, Citizens Global Equity Fund, Citizens Income Fund and the
Citizens Money Market Fund but does not apply to the Citizens Emerging
Growth Fund or the Citizens Small Cap Core Growth Fund: a Fund may
place only 5% of its total assets in companies which have been in
operation, including operations of predecessors, for less than three
years.
15. The Citizens 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
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unusual market, economic, political or economic conditions. Such temporary
defensive positions would be inconsistent with a Fund's principal investment
strategies (other than the Citizens Money Market Fund) and may adversely
impact Fund performance.
PORTFOLIO TURNOVER
With regard to the Citizens 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 Core Growth Fund, Citizens Emerging Growth Fund, Citizens Global
Equity Fund and the Citizens Small Cap Core Growth Fund, we may purchase both
equity and fixed income securities and hold them until such time as we believe
it is advisable to sell them in order to realize a gain or loss whereupon we
reinvest these assets in other securities.
Portfolio turnover rates will vary, depending on the type of Fund and its
particular investment objective. For example, the Citizens Core Growth Fund
seeks to have a turnover rate of less than 25% 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, 1998, 1999 and 2000, the Funds had the following
portfolio turnover rates: Citizens Core Growth Fund -- 13.64%, 18.04% and
20.04%; Citizens Emerging Growth Fund -- 245.30%, 208.49% and 159.95%; Citizens
Global Equity Fund -- 72.33%, 64.07% and 120.69%; Citizens Income Fund --
80.14%, 44.07%, 52.96% and Citizens Small Cap Core Growth Fund - 20.16% (from
December 28, 1999, commencement of operations, to June 30, 2000).
MORE DETAILS ON THE CITIZENS MONEY MARKET FUND
The following are present policies of the Citizens 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 the Fund to invest fluctuating amounts at varying
rates of interest pursuant to direct arrangements between the Fund and
the borrower. If the principal of a variable amount master demand note
cannot be demanded within seven days, the note is treated as illiquid and
subject to the 10% limitation referred to in paragraph four (4) below.
The interest rates and amounts involved may change daily. The Fund has
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 the
Fund and the borrower, they generally will not be traded and there is no
active secondary market for these notes. However, they are redeemable on
demand, and thus immediately repayable by the borrower, at face value
plus accrued interest at any time. The Fund's right to redeem is
dependent on the borrower's ability to pay principal and interest on
demand. Accordingly, the Fund's Adviser will consider and continuously
monitor the earning power, cash flow and other liquidity ratios of the
borrower to assess its ability to meet its obligations on demand. The
Fund will invest in these notes only if the Board of Trustees or the
Adviser determines that they present minimal credit risks and are of
comparable quality to commercial paper having the highest rating of
Moody's Investors Service, Inc. ("Moody's"), Standard & Poor's Ratings
Group ("Standard & Poor's") or any other Nationally Recognized
Statistical Rating Organization.
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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 - Repurchase Agreements."
4. The Fund will not invest more than 10% of its net assets in illiquid
securities. Generally an illiquid security is any security that cannot be
disposed of promptly and in the ordinary course of business at
approximately the amount at which the Fund has valued the instrument.
Subject to this limitation, the Fund's Trustees have authorized the Fund
to invest in restricted securities, specifically privately placed
commercial paper, where such investment is consistent with the Fund's
investment objective, and has authorized such securities to be considered
to be liquid to the extent the Adviser determines that there is a liquid
institutional or other daily market for such securities. For example,
restricted securities which may be freely transferred among qualified
institutional buyers pursuant to Rule 144A under the Securities Act of
1933 and for which a liquid institutional market has developed may be
considered to be liquid securities. See the discussion relating to the
purchase of illiquid securities in the section regarding the fundamental
investment policies of the Funds under "Investment Strategies, Risks and
Fundamental Policies" 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 Citizens 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,
-12-
<PAGE>
the notice period applicable to a demand for repurchase of the securities. A
portfolio lending agreement is deemed to have a maturity equal to the period
remaining until the date on which the loaned securities are scheduled to be
returned or, where the agreement is subject to a demand, the notice period
applicable to the demand.
The Citizens 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 Citizens 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>
---------------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST DURING PAST 5 YEARS
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Sophia Collier* Trustee Portfolio Manager, Citizens Funds (since 1995);
230 Commerce Way, Suite 300 Chair of the Board of Directors, Citizens Advisers
Portsmouth, NH 03801 (since 1991);
44 years President, Citizens Funds and Citizens Advisers
(1991 to September 1998)
---------------------------------------------------------------------------------------------------------------------------------
Sean P. Driscoll Treasurer Director of Fund Accounting and Compliance,
230 Commerce Way, Suite 300 Citizens Advisers (since November 1998);
Portsmouth, NH 03801 Director of Fund Administration, State Street
35 years 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)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-13-
<PAGE>
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
NAME, ADDRESS POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S)
AND AGE TRUST DURING PAST 5 YEARS
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Pablo S. Eisenberg Retired (since 1998);
3729 Massachusetts Avenue NW Trustee Executive Director for Community Change (since
Washington, DC 20016 1975)
68 years
---------------------------------------------------------------------------------------------------------------------------------
Mitchell A. Johnson* Trustee Retired (since 1995);
2753 Unicorn Lane NW Director, Eldorado Bancshares, Inc. (since 1997);
Washington, DC 20015 President, M.A.J. Capital Management, Inc.
58 years (money management firm) (1994 to 1995);
Senior Vice President of Corporate Finance,
Student Loan Marketing Association (1987 to
1994)
---------------------------------------------------------------------------------------------------------------------------------
Azie Taylor Morton* Chair of the Board and Investment adviser;
10910 Medfield Court Trustee Consultant/Director of Marketing, GRW Capital
Austin, TX 78739 Corporation (since 1992)
64 years
---------------------------------------------------------------------------------------------------------------------------------
John M. O'Brien Assistant Treasurer Vice President of Corporate Finance, Citizens
230 Commerce Way, Suite 300 Advisers (since October 1998); Services Manager,
Portsmouth, NH 03801 Bank Boston (January 1998 to October 1998);
35 Years Business Manager, Fidelity Investments (October
1989 to January 1998)
---------------------------------------------------------------------------------------------------------------------------------
Martha S. Pope Trustee Retired (since 1998);
701 A Street, NE Senior Advisor for the Northern Ireland Peace
Washington, DC 20002 Negotiations (January 1995 to July 1998);
55 years Secretary of the United States Senate (April 1994
to January 1995); Sergeant at Arms of the United
States Senate (January 1991 to March 1994)
---------------------------------------------------------------------------------------------------------------------------------
Ada Sanchez Trustee Program Officer, The Proteus Fund (since 1999)
11 Stagecoach Road Student (1996 - 1999);
Amherst, MA 01002 Director of Public Service and Social Change
48 years Program, Hampshire College (1987 to 1996)
---------------------------------------------------------------------------------------------------------------------------------
Stephen C. Schuyler Secretary Vice President and Senior Counsel, Citizens
230 Commerce Way, Suite 300 Advisers (since January 2000); Vice President
Portsmouth, NH 03801 and Assistant Counsel State Street Bank and
Trust Company (April 1998 to January 2000);
Scudder Kemper, Inc. (April 1996 to April 1998);
Attorney Adviser Securities and Exchange
Commission (September 1995 to April 1996);
Member SEC Registration
---------------------------------------------------------------------------------------------------------------------------------
John L. Shields* Trustee and President President and Chief Executive Officer of Citizens
230 Commerce Way, Suite 300 Advisers (since September 1998);
Portsmouth, NH 03801 Senior Consultant, Cerulli Associates, a mutual
47 years 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)
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-14-
<PAGE>
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 during the fiscal year ended June 30, 2000. 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.
<TABLE>
<CAPTION>
CITIZENS FUNDS - COMPENSATION TABLE
-------------------------------------------------------------------------------------------------------------------
<S> <C>
NAME OF PERSON AND POSITION AGGREGATE COMPENSATION FROM
FROM CITIZENS FUNDS
Sophia Collier* - Trustee 0
Robert B. Reich* 0
John L. Shields* - Trustee and President 0
Lokelani Devone - Trustee $5,000
Juliana Eades - Trustee $3,000
Pablo S. Eisenberg - Trustee $7,000
William D. Glenn Jr. - Trustee $5,000
Mitchell A. Johnson - Trustee $7,500
Azie Taylor Morton - Trustee $10,250
Martha S. Pope - Trustee $7,625
Ada Sanchez - Trustee $12,000
</TABLE>
* Sophia Collier, Robert B. Reich and John L. Shields are Interested Trustees
and received no compensation from Citizens Funds.
As of October 1, 2000, there were 170,883,129 outstanding shares of
beneficial interest, representing all the shares of all the Funds comprising
Citizens Funds. As of October 1, 2000 the following shareholders owned
beneficially or of record 5% or more of the outstanding shares of a Fund:
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Percentage
Fund: Shareholder: Address: Ownership:
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Citizens Core Growth Fund, Charles Schwab & Co., Inc. Special Custody Account FBO 14.32%
Standard Class shares Customers
101 Montgomery St.
San Francisco, CA 94104-4122
---------------------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, National Financial Services One World Financial Ctr 5.10%
Standard Class Corp. 200 Liberty St. 5th Floor
Shares New York, NY 10281-1003
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Guy Bell Plan 8515E Orchard Rd. 29.78%
Institutional Class shares Administrator Englewood, CO 80111
---------------------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Northern Trust Company P.O. Box 92956 16.14%
Institutional Class shares 801 S. Canal St.
Chicago, IL 60675
---------------------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Wendel & Co. Mutual Fund/Reorganization Dept. 11.80%
Institutional Class shares P.O. Box 1066
New York, NY 10268
---------------------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Charles Schwab & Co., Inc. 101 Montgomery St. 6.08%
Institutional Class shares San Francisco, CA 94104-4122
---------------------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Chase Manhattan Bank One Chase Square 99.54%
Administrative Class shares Rochester, NY 14643
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Charles Schwab & Co., Inc. Special Custody Account FBO 21.43%
Fund, Standard Class Customers
shares 101 Montgomery St.
San Francisco, CA 94104-4122
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth National Financial Services One World Financial Ctr 8.98%
Fund, Standard Class Corp. 200 Liberty St. 5th Floor
shares New York, NY 10281-1003
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Northern Trust P.O. Box 92956 51.62%
Fund, Institutional Class Chicago, IL 60675
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth DBTCO 1398 Central Ave. 18.87%
Fund, Institutional Class Dubuque, IA 52004-0747
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Laird Norton Trust Co. 801 2nd Ave. 16th Floor 15.65%
Fund, Institutional Class Seattle, WA 98104
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Charles Schwab & Co, Inc. 101 Montgomery St. 5.47%
Fund, Institutional Class San Francisco, CA 94104-4122
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Chase Manhattan Bank One Chase Square 99.89%
Fund, Administrative Class Rochester, NY 14643
shares
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-16-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Citizens Small Cap Core National Financial Service One World Financial Ctr 25.13%
Growth Fund, Standard Corp. 200 Liberty St. 5th Floor
Class shares New York, NY 10281-1003
---------------------------------------------------------------------------------------------------------------------------------
Citizens Small Cap Core Charles Schwab & Co., Inc. 101 Montgomery St. 9.49%
Growth Fund, Standard san Francisco, CA 94104-4122
Class shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Small Cap Core Sophia Collier One Harbor Place Ste 475 6.71%
Growth Fund, Standard Portsmouth, NH 03801
Class shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Charles Schwab & Co., Inc. Special Custody Account FBO 50.53%
Fund, Standard Class Customers
shares 101 Montgomery St.
San Francisco, CA 94104-4122
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity National Financial Service One World Financial Ctr 11.66%
Fund, Standard Class Corp. 200 Liberty St. 5th Floor
shares New York, NY 10281-1003
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Caroline & Sigmund Schott 678 Massachusetts Ave. Ste 301 28.84%
Fund, Institutional Class Foundation Cambridge, MA 02139
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Northern Trust P.O. Box 92956 23.23%
Fund, Institutional Class Chicago, IL 60675
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Dr. Phillips Inc. P.O. Box l3753 15.93%
Fund, Institutional Class 60 West ST.
shares Orlando, FL 32801
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Charles Schwab & Co. 101 Montgomery St. 13.40%
Fund, Institutional Class San Francisco, CA 94104-4122
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Laird Norton Trust Co. 801 2nd Ave. 16th Floor 10.54%
Fund, Institutional Class Seattle, WA 98104
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Wachovia Securities Inc. P.O. Box 1220 7.31%
Fund, Institutional Class Charlotte, NC 28201-1220
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Fleet National Bank as 200 Liberty St., 5th Floor 53.82%
Fund, Administrative Class Trustee of AETNA One World Financial Center
shares New York, NY 10281-1003
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-17-
<PAGE>
<TABLE>
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Chase Manhattan Bank One Chase Square 46.12%
Fund, Administrative Class Rochester, NY 14643
shares
---------------------------------------------------------------------------------------------------------------------------------
Citizens Income Fund Charles Schwab & Co., Inc. Special Custody Account FBO 13.91%
Customers
101 Montgomery St.
San Francisco, CA 94104-4122
---------------------------------------------------------------------------------------------------------------------------------
Citizens Money Market Bankers Trust Co. of Cattee 34 Exchange Place, 6th Floor 27.79%
Fund, Institutional Class Jersey City, NJ 07302
shares
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Our Trustees and officers as a group owned less than 1% of the outstanding
shares of each Fund and class as of October 1, 2000, except for the Citizens
Small Cap Core Growth Fund, Institutional Class shares, where a single trustee
owned 6.71% 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,
Portsmouth, New Hampshire 03801. The Adviser is a New Hampshire corporation. The
Management Agreement provides that the Adviser, subject to the control of the
Trust's Board of Trustees, will decide which securities will be bought and sold,
and when, and requires the Adviser to place purchase and sale orders. The
Adviser also manages the day-to-day operations of the Trust.
Sophia Collier individually owns 60% of the outstanding stock and is Chair
of the Board of Directors of Citizens Advisers, Inc. She is the former President
of Citizens Funds and remains on the Board of Trustees, serving as an Interested
Trustee. Ms. Collier is the founder of American Natural Beverage Corp., the
maker of Soho Natural Soda, a company which Ms. Collier co-founded in her
Brooklyn kitchen when she was 21 years old and built up over the next 12 years
to an enterprise with 52 employees and retail sales of $25 million. Soho Soda
was the first natural soda in America and was created as an alternative to
unhealthful mass market sodas. Ms. Collier and her partners sold American
Natural Beverage Corp. in 1989.
Four other individuals own the remaining 40% of the outstanding stock of
Citizens Advisers, Inc., as follows: John F. Dunfey (12%); Robert J. Dunfey, Sr.
(12%); Gerald F. Dunfey (12%); and William B. Hart, Jr. (4%). John, Robert and
Gerald Dunfey, brothers, now serve as directors of the Dunfey Group, a venture
capital and investment firm. John P. Dunfey is also a member of the Board of
Directors of Citizens Advisers. The Dunfey family has been associated, over a
number of years, with progressive social and political causes and has actively
participated in organizations dedicated to world peace, human and civil rights,
and economic justice. The family founded and continues to sponsor New England
Circle, a forum for the "discussion of social, political, literary and
educational topics that can lead to constructive change in our lives, our nation
and our world."
John L. Shields is 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,
-18-
<PAGE>
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
Seneca Capital Management is structured as a California Limited Liability
Corporation. The firm is owned by its investment professionals; and, as of July
15, 1997, Phoenix Investment Partners acquired a majority interest in the firm,
with existing Seneca senior management retaining a significant equity interest,
an enhanced compensation package, and most important, day-to-day control of the
organization. Gail Seneca serves as President, Chief Executive Officer and Chief
Investment Officer. Sandy Monticelli is the firm's Chief Operating Officer who
has the responsibility for the firm's Operations, Administration, Compliance and
Information Systems groups and has been with the firm since 1994. Seneca
continues to operate as an independent entity, headquartered in San Francisco.
As of June 30, 2000 Seneca Capital Management had over $13 billion of assets
under management.
Under a Sub-Advisory Agreement between the Adviser and Seneca Capital
Management, LLC, the Adviser pays Seneca the following sub-advisory fees based
on an annual rate of the applicable Fund's average net assets:
Citizens Income Fund (until December 1, 2000)
.175% of average net assets
Citizens Emerging Growth Fund
0.35% on the first $100 million
0.25% on remaining assets
CLEMENTE CAPITAL, INC.
Our sub-adviser for the Citizens Global Equity Fund, Clemente Capital,
Inc., is a registered investment adviser organized in 1979. It is majority owned
by Lilia Clemente; Wilmington Trust of Wilmington, Delaware; Diaz-Verson Capital
Investments, Inc. of Columbus, Georgia; and Richard W. McWalters, CEO. Clemente
also manages the First Philippine Fund, Clemente Strategic Value Fund and
Cornerstone Strategic Return Fund, three closed-end Funds traded on the New York
Stock Exchange. Its headquarters are at Carnegie Hall Tower, 152 West 57th
Street, New York, New York.
Under a Sub-Advisory Agreement between the Adviser and Clemente Capital,
Inc., the Adviser pays Clemente a sub-advisory fee based on an annual rate of
0.35% of the Citizens Global Equity Fund's average net assets on assets up to
and including $500 million and 0.25% on assets over $500 million.
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.
-19-
<PAGE>
Each Fund pays the Adviser a fee for its services as a percentage of each
Fund's average annual net assets as follows:
Citizens Core Growth Fund --0.50%; Citizens Emerging Growth Fund--1.00%;
Citizens Small Cap Core Growth Fund--0.50%; Citizens Global Equity Fund--1.00%;
Citizens Income Fund--0.65%; and Citizens 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, 2001. 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>
<S> <C>
----------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Standard Class shares 1.34%
----------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Administrative Class shares 0.94%
----------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund, Institutional Class shares 0.68%
----------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Fund, Administrative Class shares 1.55%
----------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Fund, Institutional Class shares 1.30%
----------------------------------------------------------------------------------------------------------
Citizens Small Cap Core Growth Fund, Standard Class shares 1.34%
----------------------------------------------------------------------------------------------------------
Citizens Global Equity Fund, Standard Class shares 2.05%
----------------------------------------------------------------------------------------------------------
Citizens Global Equity Fund, Administrative Class shares 1.68%
----------------------------------------------------------------------------------------------------------
Citizens Global Equity Fund, Institutional Class shares 1.39%
----------------------------------------------------------------------------------------------------------
Citizens Income Fund, Standard Class shares 1.40% of the first $100 million of
of assets and 1.25% thereafter
----------------------------------------------------------------------------------------------------------
Citizens Money Market Fund, Standard Class shares 1.50% of the first $40 million of
assets and 1% thereafter
----------------------------------------------------------------------------------------------------------
</TABLE>
Not all Fund expenses are subject to the limits described above. Interest
expenses, taxes, brokerage commissions, and extraordinary expenses, such as
litigation, that do not usually occur in the operations of a mutual fund are not
included.
For the fiscal years ended June 30, 1998, 1999 and 2000, the Adviser
incurred the following advisory fees: Citizens Core Growth Fund,
1998-$1,439,749, 1999-$2,442,486 and 2000-$3,815,543; Citizens Emerging Growth
Fund*, 1998-$741,296, 1999-$989,594 and 2000-$2,415,821; Citizens Global Equity
Fund, 1998-$372,017, 1999-$606,181 and 2000-$2,225,034; Citizens Income Fund,
1998-$290,174, 1999-$384,180 and 2000-$405,808; and Citizens Money Market Fund,
1998-$392,811, 1999-$440,357 and 2000-$456,568. For the period from December 28,
1999 (commencement of operations of Citizens Small Cap Core Growth Fund) to June
30, 2000, the Adviser received the following fee: Citizens Small Cap Core Growth
Fund, $10,082.
* For the fiscal years ending June 30, 1999 and June 30, 2000 the Adviser
voluntarily waived 0.10% of its fee when the Fund's monthly average net
assets exceeded $100 million.
CITIZENS SECURITIES, INC.
Citizens Securities, Inc., a wholly-owned subsidiary of the Adviser and a
New Hampshire 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 L. Shields, President and CEO of Citizens Advisers, is
also President and CEO of Citizens Securities.
-20-
<PAGE>
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. 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 advisors for pension funds or
other institutions which maintain omnibus accounts with Citizens Funds. These
fees (based on average annual net assets) and expenses are payable monthly up to
the following amounts:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Fund Administrative Fee
----------------------------------------------------------------------------------------------------------------------
<S> <C>
Citizens Core Growth Fund - Standard Class shares 0.20%
----------------------------------------------------------------------------------------------------------------------
Citizens Core Growth Fund - Institutional Class and Administrative Class shares 0.20%
----------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Fund - Standard Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Emerging Growth Fund - Institutional Class and Administrative Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Small Cap Core Growth Fund - Standard Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Fund - Standard Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Global Equity Fund - Institutional Class and Administrative Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Income Fund - Standard Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Money Market Fund - Standard Class shares 0.10%
----------------------------------------------------------------------------------------------------------------------
Citizens Money Market Fund - Institutional 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 paid a per account fee except the Citizens Core Growth
Fund which pays a percentage on average annual net assets. These include but are
not limited to answering calls from existing shareholders in a timely manner;
maintenance of a toll-free number; responding to shareholder inquiries and
requests; maintenance of computer interface with the Transfer Agent; retention,
maintenance and research of shareholder records; maintenance of facilities and
equipment to perform all such duties; and similar services.
The Citizens Core Growth Fund, Standard Class shares are charged a
shareholder service fee of up to 0.35% of average annual net assets.
For the fiscal years ended June 30, 1998, 1999 and 2000, the Adviser
incurred the following administrative and shareholder service fees: Citizens
Core Growth Fund, 1998-$1,635,911, 1999-$2,556,669 and 2000-$3,521,523; Citizens
Emerging Growth Fund, 1998-$193,896, 1999-$227,489 and 2000-$354,588; Citizens
Global Equity Fund, 1998-$86,805, 1999-$120,167 and 2000-$286,182; Citizens
Income Fund, 1998-$101,909, 1999-$113,106 and 2000-$94,546; Citizens Money
Market Fund, 1998-$278,850, 1999-$308,642 and 2000-$214,476. For the period from
December 28, 1999 (commencement of operations of the Citizens Small Cap Core
Growth Fund) to June 30, 2000, the Adviser accrued the following administrative
and shareholder service fees: Citizens Small Cap Core Growth Fund, $3,936.
-21-
<PAGE>
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 there under. 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 Class shares and
Administrative Class shares of each series of the Trust offering the same. As of
July 1, 2000, the distributor is not reimbursed for expenses under the
Distribution Agreement for the Citizens Money Market Fund, although the 12b-1
Plan continues to permit fees for this Fund if authorized by the Board. There is
no provision under the Distribution Plan for reimbursing Citizens Securities for
expenditures on behalf of the Trust's Institutional Class shares. In addition,
if and to the extent that the fee the Fund pays the Distributor as well as other
payments the Fund makes are considered as indirectly financing any activity
which is primarily intended to result in the sale of Fund shares, such payments
are authorized under the Plan.
The 12b-1 Plan provides that the Distributor shall provide and the Trustees
shall review quarterly reports setting forth the amounts, payments and the
purpose for which the amounts were expended. The Plan only permits reimbursement
of actual expenses and does not permit expenses to be carried forward from one
fiscal period to another. For the year ended June 30, 2000 the Trust approved
and paid to Citizens Securities $3,097,441 under its 12b-1 Plan, broken down by
category as follows:
Marketing, advertising and public relations $1,528,451
Printing and mailing of Prospectuses $170,797
and sales literature to non-shareholders
Compensation to broker/dealers $371,137
and service organizations
Compensation to sales personnel $904,494
Other $122,562
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
-22-
<PAGE>
Trustees or a vote of the majority of outstanding securities of that Fund, on
not more than 60 days notice. The Plan further provides that, while it is in
effect, the selection and nomination of the Trustees who are not interested
persons shall be committed to the discretion of the Qualified Trustees. The
Plan may not be amended to increase materially the amounts to be spent
without shareholder approval, and all amendments must be approved by the
Trustees.
EXPENSES
Other expenses paid by the Funds include all expenses not expressly assumed
by Citizens Advisers. These include interest, taxes, audit and legal fees,
custodian and transfer agent charges, insurance premiums, cost of registering
shares under federal and state laws, dues and any litigation costs, as well as
the cost of typesetting, printing and distributing shareholder reports and
Prospectuses sent to shareholders.
Administrative and Institutional Class shareholders in the Funds pay their
pro rata portion of Fund expenses, as well as any class expenses attributable to
that class of shares only. Class expenses include, but are not limited to,
transfer agent fees, distribution fees and administrative and shareholder fees
and expenses.
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, 2000, the following
annualized expense ratios were paid by the Funds after waivers and
reimbursements (based on average annual net assets of the respective Funds):
Citizens Core Growth Fund (Standard Class shares), 1.49%; Citizens Core Growth
Fund (Institutional Class shares), 0.74%; Citizens Core Growth Fund
(Administrative Class shares), 0.99%; Citizens Emerging Growth Fund (Standard
Class shares), 1.69%; Citizens Emerging Growth Fund (Institutional Class
shares), 1.24%; Citizens Emerging Growth Fund (Administrative Class shares),
1.55%; Citizens Global Equity Fund (Standard Class shares), 1.82%; Citizens
Global Equity Fund (Institutional Class shares), 1.39%, Citizens Global Equity
Fund (Administrative Class shares), 1.68%; Citizens Income Fund (Standard Class
shares), 1.45%; Citizens Money Market Fund (Standard Class shares), 1.17%;
Citizens Money Market Fund (Institutional Class shares), 0.81%; and Citizens
Small Cap Core Growth Fund (Standard Class shares) from December 28, 1999
(commencement of operations) to June 30, 2000, 1.49%.
CODES OF ETHICS
The Funds, the Adviser, the sub-advisers and the distributor have each
adopted a Code of Ethics (collectively, the Codes of Ethics) under Rule 17j-1 of
the 1940 Act. The Codes of Ethics permit personnel subject to the Codes to
invest in securities, including securities that may be purchased or held by the
Funds. The Codes of Ethics can be reviewed and copied at the SEC's Public
Reference Room in Washington, D.C. Information on the operation of the Public
Reference Room may be obtained by calling the SEC at (202) 942-8090. The Codes
of Ethics are available on the EDGAR Database on the SEC's Internet site at
http://www.sec.gov, and copies of the Codes of Ethics may be obtained, after
paying a duplication fee, by electronic request at the following e-mail address:
[email protected], or by writing the SEC's Public Reference Section,
Washington, D.C. 20549-0102.
OTHER SERVICE PROVIDERS
CUSTODIAN
Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati, Ohio 45263, 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
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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
Until December 9, 2000 the transfer agent and dividend-paying agent for the
Trust is PFPC Inc., 400 Bellevue Parkway, Suite 108, Wilmington, DE 9809. As of
December 9, 2000 the transfer agent and dividend-paying agent for the Trust is
BISYS, 3435 Stelzer Road, Columbus, Ohio 43219-8012. In its capacity as transfer
agent and dividend-paying agent, BISYS is responsible for processing daily
purchases, redemptions and transfers of Trust shares, preparing and mailing
shareholder confirmations and account statements, paying dividends and other
distributions, and other shareholder and account activities.
AUDITORS
The financial highlights of each Fund included in the Funds' Prospectus and
the financial statements incorporated by reference in this Statement of
Additional Information have been so included or incorporated by reference in
reliance on the report of PricewaterhouseCoopers LLP, 160 Federal Street,
Boston, Massachusetts 02110, independent accountants for the periods after June
30, 1997, given on the authority of said firm as experts in auditing and
accounting. PricewaterhouseCoopers LLP audits the financial statements of each
Fund and provides other audit, tax and related services.
LEGAL COUNSEL
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110-1726.
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 or a sub-adviser may select
brokers or dealers who also provide brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934, as
amended) to a Fund and/or the other accounts over which the Adviser or a
sub-adviser exercises investment discretion. The Adviser or a sub-adviser may
cause a Fund to pay a broker or dealer who provides such brokerage and research
services a commission for executing a portfolio transaction for a Fund that is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Adviser determines in good faith
that such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which the Adviser or a sub-adviser has with respect
to accounts over which they exercise investment discretion.
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The Adviser will maintain an account with one or more broker-dealers who
agree to provide or pay for brokerage and research services that benefit the
Funds. Sub-advisers will be informed in writing of the names of the
broker-dealers and provided with account information to allow the execution of
trades through those broker-dealers. In the event that best execution of an
equity transaction is available through a broker-dealer that has been so
identified, the Adviser or a sub-adviser, as the case may be, may place the
transaction with that broker-dealer after determining in good faith that the
amount of the commission is reasonable in relation to the value of the brokerage
and research services provided. These research services are sometimes referred
to as "soft dollars."
Any soft dollars generated by transactions on behalf of a Fund in this
fashion shall be used solely to purchase brokerage and research services within
the meaning of Section 28(e), and must be of benefit to that Fund. These
brokerage and research services, however, need not exclusively benefit that
Fund, and may also benefit other series of the Trust or other clients of the
Adviser or its sub-adviser. For these purposes, brokerage and research services
mean those that 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. The Adviser would, through the use of such
services, avoid the additional expenses that 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.
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 a Fund's shares. 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.
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DIVIDENDS AND DISTRIBUTIONS
CITIZENS CORE GROWTH FUND, CITIZENS EMERGING GROWTH FUND, CITIZENS SMALL CAP
CORE GROWTH FUND AND CITIZENS GLOBAL EQUITY FUND
The Citizens Core Growth Fund, Citizens Emerging Growth Fund, Citizens
Small Cap Core Growth Fund and Citizens Global Equity Fund normally declare and
pay dividends substantially equal to all net investment income annually. Net
investment income consists of non-capital gain income less expenses. Net
realized short-term capital gains, if any, and net realized long-term capital
gains, if any, will be distributed by the Funds at least annually. Dividends and
capital gains distributions are automatically reinvested at Net Asset Value in
additional shares, unless a shareholder elects cash distributions. Cash
distributions will be paid annually.
CITIZENS INCOME FUND
The Citizens Income Fund distributes to its shareholders monthly dividends
substantially equal to all of its net investment income. The Fund's net
investment income consists of non-capital gain income less expenses. Net
realized short-term capital gains, if any, and net realized long-term capital
gains, if any, will be distributed by the Fund at least annually. Dividends and
capital gains distributions are automatically reinvested at Net Asset Value in
additional shares, unless a shareholder elects cash distributions. Cash
distributions will be paid at the close of the appropriate monthly or annual
period.
CITIZENS MONEY MARKET FUND
Net income for the Citizens Money Market Fund is determined and accrued
daily and paid monthly. This dividend is payable to everyone who was a
shareholder at 4:00 p.m. Eastern time on the day the dividend is declared.
Dividends begin to accrue on the first day following the date of purchase,
provided that the payment is received by 4:00 p.m. Eastern time. When shares are
redeemed, the shares are entitled to a dividend declared on the day of the
redemption. Dividends are automatically reinvested in shares, at Net Asset
Value, unless a shareholder otherwise instructs the Transfer Agent in writing.
Shareholders so requesting will be mailed checks in the amount of the
accumulated dividends. For the purpose of calculating dividends, the Funds'
daily net investment income consists of: (a) all interest income accrued on
investments (including any discount or premium ratably amortized to the date of
maturity or determined in such other manner as the Trustees may determine); and
(b) minus all expenses accrued, including interest, taxes and other expense
items, amounts determined and declared as dividends and reserves for contingent
or undetermined liabilities, all determined in accordance with generally
accepted accounting principles; and (c) plus or minus all realized and
unrealized gains or losses on investments.
SHAREHOLDER AND TRUSTEE LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a trust may,
under certain circumstances, be held personally liable as partners for the
obligations of the Trust. The Trust's Declaration of Trust contains an express
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.
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The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law, but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
HOW TO PURCHASE AND REDEEM SHARES
HOW TO BUY SHARES
It's easy to buy shares of the Funds. Just fill out an application and send
in your payment by check, wire transfer, exchange from another Citizens mutual
fund or through arrangements with your investment adviser or broker-dealer. All
checks must be made payable to "Citizens Funds." Citizens Funds is unable to
accept third-party checks. Foreign checks drawn in U.S. dollars are accepted but
shares purchased with foreign checks may be held in escrow for at least 20 days.
For an initial wire to open an account, please call our Shareholder Service
Center at (800) 223-7010 prior to initiating the wire transfer.
Shares in the Citizens Money Market Fund cost $1.00 per share. For all
other Funds, your cost will be the Net Asset Value next determined after your
payment is received. (Net Asset Value is determined at 4 p.m. Eastern time, or,
if the New York Stock Exchange closes earlier, at the close of business of the
Exchange.) You can purchase both full and fractional shares, which will be
rounded to the nearest 1/1000th of a share. If your check is returned for any
reason, you will be assessed a fee of $20.00.
The Trust has authorized certain brokers, and these brokers have also been
authorized to designate intermediaries, to accept on its behalf purchase and
redemption orders and such brokers are also authorized to designate
intermediaries to accept orders on the Trust's behalf. The Trust will be deemed
to have received such an order when the broker or broker designee accepts the
order, which shall be priced at the Net Asset Value next computed after the
broker or designee accepts the order.
Investors may be charged a fee if they buy, sell or exchange Fund shares
through a broker or agent.
INVESTMENT MINIMUMS
The minimum initial investment for Standard Class 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 $2,500 minimum balance for the Fund ($1,000 for UGMA/UTMA and
AIP), you will be assessed a monthly fee of $3.00 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, you will receive 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 $1,000,000 (less than $1,000,000 for registered investment
advisers and retirement plan sponsors, as well as certain other third-party
solicitors, at the discretion of the Trust). There is no minimum subsequent
investment. With respect to accounts that fall below $1,000,000 (or less than
$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 Class shares. We will give adequate notice to the shareholder, allowing
the opportunity to bring the account up to the required minimum balance.
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There is an annual fee of $10 for each Individual Retirement Account (IRA),
with a maximum IRA account fee of $20 per shareholder. This fee is waived for
total IRA balances of $25,000 and higher and total account balances of $50,000
and higher. There is also an IRA closure fee of $15.
AUTOMATIC INVESTMENT PLAN
To enroll in the Trust's Automatic Investment Plan, simply check off that
box on the account application and provide us with your bank information, as
well as the amount and frequency of your investment into your chosen Fund. We
will do the rest.
PAYROLL DEDUCTION
Setting up direct payroll deposit is very easy. Call us for the necessary
information and steps to follow. If you or your payroll administrators have any
questions, please call the Citizens' Shareholder Service Department.
Funds will be deposited into your account using the Electronic Funds
Transfer System. We will provide the account number. Your payroll department
will let you know the date of the pay period when your investment begins.
HOW TO SELL SHARES
TELEPHONE EXCHANGE AND REDEMPTION. We have a Telephone Exchange and
Redemption option on your account application. Under this option, you can call
and tell us how much (up to $25,000) you want to redeem. Depending upon your
instructions, we will deposit the amount of your redemption into another
Citizens Funds account, mail you a check or electronically transfer your
redemption to your pre-designated account. Normally, we will send you your
redemption on the next business day after we receive your request. One-day wired
funds cost $10, or we offer free two-day service via the Automated Clearing
House (ACH). You will earn dividends up to and including the date when we
receive your redemption request.
If you do select the Telephone Exchange and Redemption option, you should
be aware it may increase the risk of error or of an unauthorized party gaining
access to your account. For added security you may provide us with a Personal
Identification Number (PIN) which must be verified before processing all
telephone transactions, including balance verification. To keep these problems
to a minimum, we record all telephone calls. Neither the Trust, the Adviser or
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.
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.
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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 Adviser has the
power to decide that conditions exist which would make cash payments
undesirable. In that case, a Fund could send redemption payments in securities
from that Fund, valued in the same way the Fund's Net Asset Value is determined.
There might then be brokerage or other costs to the shareholder in selling these
securities. The Funds have elected to be governed by Rule 18f-1 under the 1940
Act, which requires the Funds to redeem shares solely in cash up to the lesser
of $250,000 or 1% of a Fund's total net assets during any 90 day period for any
one shareholder. A shareholder's redemption proceeds may be more or less than
his or her original cost, depending on the value of the Fund's shares.
The Trust or its Adviser has the right to compel the redemption of shares
of each Fund if the aggregate Net Asset Value of the shares in the account is
less than $2,500 for Standard Class 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 Class shares if the aggregate Net Asset Value of
the shares in the account is less than $1,000,000 ( or less for registered
investment advisers and retirement plan sponsors, as well as certain other
third-party solicitorsat the discretion of the Trust).
HOW WE VALUE FUND SHARES
The value of the fixed income securities in which the Funds may invest will
fluctuate depending in large part on changes in prevailing interest rates. Fixed
income securities comprise a significant portion of assets in the Citizens Money
Market Fund and Citizens Income Fund and may comprise a portion of assets in the
Citizens Core Growth Fund, Citizens Emerging Growth Fund, Citizens Small Cap
Core Growth Fund and Citizens Global Equity Fund under normal conditions. If
interest rates go up, the value of fixed income securities generally goes down.
Conversely, if interest rates go down, the value of fixed income securities
generally goes up. Long-term obligations, which often have higher yields, may
fluctuate in value more than short-term ones.
The value of equity securities held in the Citizens Core Growth, Citizens
Emerging Growth, Citizens Small Cap Core Growth and Citizens 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 that
affect individual securities and the equity market as a whole.
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The Net Asset Value per share of a Fund is determined for each class by
adding the market value of all securities and other assets attributable to the
class, then subtracting the liabilities attributable to that class, and then
dividing the result by the number of outstanding shares of the class. All
expenses are accrued daily and taken into account in determining Net Asset
Value. Since these expenses differ by Class , the Net Asset Value of Standard,
Administrative and Institutional Class shares will vary and are computed
separately.
We attempt to keep the Net Asset Value of the Citizens Money Market Fund
fixed at $1.00 per share, while we expect the Net Asset Value per share in the
other Funds to fluctuate.
The value of the shares for each Fund is determined at 4 p.m. Eastern Time,
or, if the New York Stock Exchange closes earlier, at the close of business of
the Exchange on each day on which the New York Stock Exchange is open for
regular trading.
CITIZENS CORE GROWTH FUND, CITIZENS EMERGING GROWTH FUND, CITIZENS SMALL CAP
CORE GROWTH FUND, CITIZENS GLOBAL EQUITY FUND AND CITIZENS INCOME FUND
As described in the Prospectus, shares of the Citizens Core Growth Fund,
Citizens Emerging Growth Fund, Citizens Small Cap Core Growth 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 sale price on the
primary exchange on which such securities are traded or on the principal
over-the-counter market on which such securities are traded, or, lacking any
sales, at the last available bid price for domestic securities and halfway
between the bid and asked price for international securities. Fixed income
investments are generally valued at the closing bid price for securities.
Securities maturing within 60 days (and all securities held by the Citizens
Money Market Fund) are normally valued at amortized cost. Securities and other
assets for which market quotations are not readily available (including
restricted securities, if any) are appraised at their fair value as determined
in good faith under consistently applied procedures under the general
supervision of the Trust's Board of Trustees.
Securities may also be valued on the basis of valuations furnished by a
pricing service that uses both dealer-supplied valuations and valuations based
upon analysis of market data or other factors if these valuations are believed
to more accurately reflect the fair value of such securities.
Use of a pricing service has been approved by the Trust's Board of
Trustees. There are a number of pricing services available, and the Trustees and
officers of the Trust acting on behalf of the Trustees, may use or discontinue
the use of any pricing service now, or in the future, employed.
The values of foreign securities are converted from the local currency into
U.S. dollars using current exchange rates. If trading in the currency is
restricted, a Fund will use a rate believed to reflect the currency's fair value
in U.S. dollars. Trading may take place in foreign securities held by a Fund on
days when the Fund is not open for business. As a result, the Fund's Net Asset
Value may change on days on which shareholders are not able to purchase or sell
Fund shares. If events materially affecting the value of foreign securities
occur between the time when the exchange on which they are traded closes and the
time when the Fund's Net Asset Value is calculated, the securities may be valued
at fair value.
CITIZENS MONEY MARKET FUND
The Trust's Trustees have determined that it is appropriate for the
Citizens Money Market Fund to value its shares using the amortized cost method
and that this method approximates the fair value of the Fund's shares. This
method values a security at the time of its purchase at cost and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. This method does not take into account unrealized gains and
losses.
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While the amortized cost method generally approximates the market value of
short-term securities, there may be periods during which value, as determined by
the amortized cost method, is 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 Citizens 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 that the Trustees have adopted in connection with the
valuation of the Fund's securities using the amortized cost method, the Fund,
through its Custodian and Accounting Agent, conducts weekly mark-to-market
appraisals to compare its determination of Net Asset Value per share with the
amortized cost-based Net Asset Value. In the event a deviation between the
market value and the amortized cost value exceeds 0.10%, or if the Adviser
believes the deviation may result in dilution or other unfair results to
shareholders or investors, the Board of Trustees must be notified and daily
mark-to-market appraisals will be conducted until the deviation falls below
0.10%. If the deviation from $1.00 per share exceeds 0.25% for the total market
value of the Fund, the Board of Trustees must be notified immediately. If the
deviation from the amortized cost value per share exceeds 0.30%, the Board of
Trustees must be notified and may consider taking remedial action. If the
deviation from the amortized cost value per share exceeds 0.50%, the Board of
Trustees will take such action as it deems appropriate to eliminate or reduce
any material dilution of shares or other unfair results to shareholders or
investors, including without limitation: redeeming shares in kind; selling
securities prior to maturity to realize capital gains or losses or to shorten
the average maturity of the Fund; withholding dividends or payment of
distributions; determining Net Asset Value per share utilizing market quotations
or equivalents; reducing or increasing the number of shares outstanding on a pro
rata basis; offsetting each shareholder's pro rata portion of the deviation from
their accrued dividend account or from future dividends; or some combination of
the foregoing.
The Citizens 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 11-13).
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TAX MATTERS
The following discussion is a brief summary of the federal and, where noted,
state income tax considerations relevant to a shareholder investing in a Fund.
The discussion is very general, and prospective investors are urged to consult
their tax advisers about the tax consequences that an investment in a Fund may
have in their particular situations.
TAXATION OF THE FUNDS
FEDERAL TAXES. Each Fund is treated as a separate entity for federal income
tax purposes under the Internal Revenue Code of 1986, as amended (the Code).
Each Fund has elected to be treated and intends to qualify to be treated each
year as a "regulated investment company" under Subchapter M of the Code. In
order to so qualify, each Fund must meet various requirements of Subchapter M
relating to the nature of the Fund's gross income, the amount of its
distributions, and the composition of its portfolio assets.
If a Fund qualifies to be treated as a regulated investment company for a
given year, it 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.
MASSACHUSETTS TAXES. As long as a Fund maintains its status as a regulated
investment company under the Code, the Fund will not be required to pay any
Massachusetts income or excise tax.
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 that
may entitle a Fund to a reduced rate of tax or an exemption from tax on foreign
income; the Funds intend to qualify for such 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 Citizens Global Equity Fund, we do not expect
that any Fund that incurs foreign income taxes will be able to pass those taxes
through to shareholders for foreign tax credit purposes. If the Citizens Global
Equity Fund holds more than 50% of its assets in foreign stock and securities at
the close of a taxable year, it may elect to pass through to its shareholders
the foreign income taxes paid. If the Citizens 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 Citizens 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.
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TAXATION OF SHAREHOLDERS
TAXATION OF DISTRIBUTIONS. Shareholders of a Fund will generally have to
pay federal income taxes, and any state or local 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 for federal
income tax purposes without regard to the length of time the shareholders have
held their shares. Any dividend that is declared in October, November, or
December of any calendar year, that is payable to shareholders of record in such
a month, and that is paid the following January, will be treated as if received
by the shareholders on December 31 of the year in which the dividend is
declared.
DIVIDENDS-RECEIVED DEDUCTION. For each of the Funds other than Citizens
Money Market Fund and 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 each of Citizens Money Market
Fund and 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 Citizens 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 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% on taxable dividends and other payments to Non-U.S. Persons that are
subject to such withholding. The Funds will withhold at a lower tax treaty rate
if a shareholder provides documentation acceptable to the Fund demonstrating the
applicability of such a rate to a particular distribution. Any amounts over
withheld may be recovered by the shareholder 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 Citizens Money Market Fund) redemption proceeds paid to any
shareholder (including a Non-U.S. Person) who does not furnish to the Fund
certain information and certifications or who is otherwise subject to backup
withholding. Backup withholding will not, however, be applied to payments that
have been subject to the 30% withholding applicable to Non-U.S. Persons.
DISPOSITION OF SHARES. In general, any gain or loss realized upon a taxable
disposition of shares of a Fund by a shareholder that holds such shares as a
capital asset will be treated as a long-term capital gain or loss if the shares
have been held for more than twelve months and otherwise as a short-term capital
gain or loss. However, any loss realized upon a disposition of the shares in a
Fund held for six months or less will be treated as a long-term capital loss to
the
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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 are permitted to make such investments.
For example, foreign exchange gains and losses 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 A LIMITED SUMMARY OF FEDERAL (AND, WHERE INDICATED, STATE)
INCOME TAX CONSIDERATIONS. IT SHOULD NOT BE VIEWED AS A COMPREHENSIVE DISCUSSION
OF THE ITEMS REFERRED TO, NOR AS COVERING, ALL PROVISIONS RELEVANT TO INVESTORS.
SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISERS FOR ADDITIONAL DETAILS ON
THEIR PARTICULAR TAX STATUS.
HOW WE CALCULATE PERFORMANCE
All performance reported in advertisements is historical and not intended
to indicate future returns.
From time to time the yield and compounded effective yield of our Funds may
be published in advertisements and sales material. For the Citizens Income Fund
the yield is usually reported over a 30 day period, whereas for the Citizens
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.
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<PAGE>
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 purpose 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 includes any
fees charged to all shareholders during the base period.
The Citizens Income Fund's yield is calculated according to the following SEC
formula:
6
Yield = 2[a-b +1) -1] cd
where:
a = dividends and 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
CITIZENS MONEY MARKET FUND'S YIELD
Every business day, the Citizens Money Market Fund quotes a "7-day yield"
and a "7-day effective yield." To calculate the 7-day yield, we take the Fund's
net investment income per share for the most recent 7 days, annualize it and
then divide by the Fund's Net Asset Value per share (expected always to be
$1.00) to get a percentage. The effective yield assumes you have reinvested your
dividends.
The current yield of the Citizens 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 Citizens 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.
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The formula for effective yield is:
365/7
[(base period return + 1) ] - 1
Compounded effective yield information is useful to investors in reviewing
the performance of the Citizens 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 Citizens Money Market Fund is invested in short-term money market
instruments, our yield will fluctuate with money market rates. Therefore, the
compounded effective yield is not an indication of future yields. Other
investment alternatives such as savings certificates provide a fixed yield if
held full term, but there may be penalties if redeemed before maturity, whereas
there is no penalty for withdrawal at any time in the case of our Funds.
Current yield and effective yield, which are calculated according to a
formula prescribed by the SEC, may differ from the amounts that actually may be
paid to our shareholders. Amounts paid to shareholders are reflected in the
quoted current distribution rate. The current distribution rate is computed by
dividing the total amount of dividends per share we paid during the past twelve
months by a current maximum offering price. Under certain circumstances, such as
when there has been a change in the amount of dividend payout, or a major change
in investment policies, it might be appropriate to annualize the dividends paid
over the period such policies were in effect, rather than using the dividends
during the past twelve months. The current distribution rate differs from the
current yield computation because it may include distributions to shareholders
from additional sources (I.E., sources other than dividends and interest, such
as short-term capital gains), and is calculated over a different period of time.
The following table sets forth various measures of performance for certain
classes of the Funds as of June 30, 2000:
<TABLE>
<CAPTION>
FUND 7-DAY YIELD EFFECTIVE YIELD 30-DAY YIELD
---- ----------- --------------- ------------
<S> <C> <C> <C>
Citizens Money Market Fund
(Standard Class shares) 5.58% 5.73% N/A
Citizens Money Market Fund
(Institutional Class shares) 5.56% 5.72% N/A
Citizens Income Fund (Standard
Class shares) N/A N/A 6.83%
</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 a 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.
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These figures will be calculated according to the SEC formula:
P(1 + T)n = ERV
where:
P = A hypothetical initial payment of $1,000.
T = Average annual total return.
n = Number of years.
ERV = Ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1, 5 or 10 year periods at the end of the 1, 5 or 10 year
periods (or fractional portion).
For the period ended June 30, 2000 certain classes of the Funds had the
following performance:
<TABLE>
<CAPTION>
5 YEAR AVERAGE ANNUAL
ONE YEAR AVERAGE ANNUAL TOTAL RETURN SINCE
FUND TOTAL RETURN TOTAL RETURN INCEPTION
<S> <C> <C> <C>
Citizens Core Growth
Fund (Standard Class
shares) 12.82% 27.68% 27.93%
(3/3/95)
Citizens Core Growth
Fund (Institutional
Class shares) 13.67% N/A 29.26%
(1/25/96)
Citizens Emerging
Growth Fund
(Standard Class 82.19% 37.29% 32.27%
shares) (2/8/94)
Citizens Global
Equity Fund
(Standard Class 53.27% 25.58% 20.89%
shares) (2/8/94)
Citizens Income Fund
(Standard Class
shares) 3.35% 5.86% 6.25%
(6/10/92)
</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 (S&P) 500 Index, S&P MidCap 400 Index, S&P SmallCap 600 Index, Financial
Times World Index, Lehman U.S. Aggregate Index and the Russell 2000, as well as
other data and rankings from recognized independent publishers or sources such
as MORNINGSTAR, INC., LIPPER, INC., IBC'S MONEY FUND
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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, and others.
FINANCIAL STATEMENTS
The financial statements of Citizens Funds and the opinion of its
independent auditors, included in the Annual Report to the shareholders for the
year ended June 30, 2000, are incorporated herein by reference and are provided
to each person to whom the Statement of Additional Information is sent or given.
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APPENDIX A: DESCRIPTION OF RATINGS
DESCRIPTION OF BOND RATINGS
We use the ratings provided by national rating services as one of several
indicators of the investment quality of fixed income securities. The following
is a description of the ratings of the three services we use most frequently.
When considering any rating, it is important to remember that the ratings of
Moody's, Standard & Poor's and Fitch IBCA represent their opinions as to the
quality of various debt instruments. It should be emphasized, however, that
ratings are not absolute standards of quality. Consequently, debt instruments
with the same maturity, coupon and rating may have different yields while debt
instruments with the same maturity and coupon with different ratings may have
the same yield.
MOODY'S
Aaa: Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
Fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk appear somewhat larger than in Aaa securities.
A: Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa: Bonds which are rated Baa are considered as medium-grade obligations (I.E.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C: Bonds which are rated C are the lowest rated class of bonds, and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
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RATING REFINEMENTS: Moody's applies numerical modifiers, 1, 2 and 3 in each
generic rating classification from Aa through Caa. The modifier 1 indicates that
the obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and modifier 3 indicates a ranking in
the lower end of that generic rating category.
STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS
Aaa: An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
Aa: An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A: An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.
BBB: An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
BB, B, CCC, CC AND C: Obligations rated BB, B, CCC, CC and C are regarded as
having significant speculative characteristics. BB indicates the least degree of
speculation and C the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.
B: An obligation rated B is more vulnerable to nonpayment than obligations rated
BB, but the obligor currently has the capacity to meet its financial commitment
on the obligation. Adverse business, financial or economic conditions will
likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC: An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is currently highly vulnerable to nonpayment.
C: The rating C may be used to cover a situation where a bankruptcy petition has
been filed or similar action has been taken, but payments on this obligation are
being continued.
D: An obligation rated D is in payment default. The D rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
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.
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r: The r is attached to highlight derivatives, hybrids and certain other
obligations that Standard & Poor's believes may experience high volatility or
high variability in expected returns as a result of noncredit risks. Examples of
such obligations are securities whose principal or interest return is indexed to
equities, commodities or other instruments. The absence of an "r" symbol should
not be taken as an indication that an obligation will exhibit no volatility or
variability in total return.
FITCH IBCA INTERNATIONAL LONG-TERM CREDIT RATINGS
AAA: Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA: Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. The capacity is not significantly vulnerable to foreseeable events.
A: High credit quality. "A" ratings denote a low expectation of credit risk. The
capacity for timely payment of financial commitments is considered strong. This
capacity may, nevertheless, be more vulnerable to changes in circumstances or in
economic conditions than is the case for higher ratings.
BBB: Good credit quality. "BBB" ratings indicate that there is currently a low
expectation of credit risk. The capacity for timely payment of financial
commitments is considered adequate, but adverse changes in circumstances and in
economic conditions are more likely to impair this capacity. This is the lowest
investment-grade category.
Plus (+) or minus (-): Plus and minus signs may be appended to a rating to
denote relative status within the major rating categories. Such suffixes are not
added to the "AAA" long-term rating category.
MOODY'S SHORT-TERM PRIME RATING SYSTEM--TAXABLE DEBT & DEPOSITS GLOBALLY
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. The obligations have an original maturity
not exceeding one year, unless explicitly noted.
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
- Leading market positions in well-established industries.
- High rates of return on Funds employed.
- Conservative capitalization structure with moderate reliance on debt and ample
asset protection.
- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
- 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
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cited above but to a lesser degree. Earnings trends and coverage ratios,
while sound, may be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.
PRIME-3: Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt
protections measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime rating
categories.
NOTE: Moody's ratings are opinions, not recommendations to buy or sell, and
their accuracy is not guaranteed. A rating should be weighed solely as one
factor in an investment decision and you should make your own study and
evaluation of any issuers whose securities or debt obligations you consider
buying or selling.
STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS
Standard & Poor's short-term issue credit ratings are a current assessment of
the likelihood of timely payment of debt having an original maturity of no more
than 365 days. Ratings are graded as follows:
A-1: A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2: A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
A-3: A short-term obligation rated A-3 exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.
B: A short-term obligation rated B is regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
C: A short-term obligation rated C is currently vulnerable to nonpayment and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation.
D: A short-term obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period had not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.
-42-
<PAGE>
PART C: OTHER INFORMATION
Item 23. Exhibits
(a) Declaration of Trust
(1) Declaration of Trust
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.
(2) Designation of Series as filed herewith
(b) By-Laws
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.
(c) N/A
(d) Management Agreement:
(1) Management Agreement
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.
(2) Renewal of Management Agreement filed herewith
(3) Sub-Investment Advisory Agreements
Incorporated by reference to Post-Effective Amendment No. 46 to the Registrant's
Registration Statement (File No. 2-80886), as filed with the Securities and
Exchange Commission on August 27, 1999.
(4) Renewal of Sub-Investment Advisory Agreements filed herewith
(e) Distribution Agreement
Incorporated by reference to Post-Effective Amendment No. 45 to the Registrant's
Registration Statement (File No. 2-80886), as filed with the Securities and
Exchange Commission on June 30, 1999.
(f) N/A
(g) Custodian Contract:
(1) Custodian Contract
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.
(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
Incorporated by reference to Post-Effective Amendment No. 45 to the Registrant's
Registration Statement (File No. 2-80886), as filed with the Securities and
Exchange Commission on June 30, 1999.
(2) Renewal of Administrative to Shareholder Services Agreement filed
herewith
(3) Transfer Agency Agreement filed herewith
(4) Expense Reimbursement Agreements filed herewith
(i) Form of Opinion and Consent of Counsel as to the legality of the securities
being registered
(j) Opinion and Consent of Independent Accountants as filed herewith
(k) N/A
(l) N/A
(m) Rule 12b-1 Distribution Plan
Incorporated by reference to Post-Effective Amendment No. 45 to the Registrant's
Registration Statement (File No. 2-80886), as filed with the Securities and
Exchange Commission on June 30, 1999.
(n) Rule 18f-3 Plan
Incorporated by reference to Post-Effective Amendment No. 45 to the Registrant's
Registration Statement (File No. 2-80886), as filed with the Securities and
Exchange Commission on June 30, 1999.
(p) Code of Ethics for series of Citizens Funds, Citizens Advisers, Inc.,
Citizens Securities, Inc., Seneca Capital Management, LLC and Clemente Capital,
Inc. filed herewith
(q) Power of attorney filed herewith
1
<PAGE>
Item 24. Persons Controlled by or under Common Control with the Fund
- See the Prospectus and the Statement of Additional Information regarding the
Registrant's control relationships.
- Citizens Funds is a Massachusetts business trust.
- Citizens Advisers, Inc., the investment adviser to the Registrant, is a New
Hampshire corporation, which also controls the distributor of the Registrant,
Citizens Securities, Inc., which is also a New Hampshire 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 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:
Name and Position Connection with and
With Investment Adviser Name of Other
---------------- --------------
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)
President, Northpoint Technology, LTD
President, NPT, Inc.
Candace R. Corvey, Vice President, University of New Hampshire
Associate Vice President, Harvard University 1994-1996,
Associate Dean, Harvard University 1985 - 1994
John P. Dunfey, Chairman and Founder, The Dunfey Group
Director 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
Jane E. Newman, Executive Dean, John F. Kennedy School of Government, August,
2000,
Managing Director, The Commerce Group, (January 1999 to August 2000)
Interim Dean, University of New Hampshire (December
1997 to January 1999)
Executive Vice President, Exeter Trust Co. (September
1995 to December 1997)
Sean P. Driscoll, Treasurer, Citizens Funds, Vice President
Fund Accounting and Operations, Citizens Funds,
Director of Fund Accounting and Director of Fund Administration, State Street
Bank and
Compliance Trust Company (March 1998 to November 1998)
Vice President of Compliance, Putnam Investments
(January 1997 to March 1998)
Stephen C. Schuyler, Secretary, Citizens Funds
Vice President and Senior Counsel, Citizens Funds
John M. O'Brien, Assistant Treasurer, Citizens Funds
Vice President of Corporate Finance,
Services Manager, Bank Boston (January 1998 to October
1998) Business Manager, Fidelity Investments (October 1989 to
January 1998)
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.
2
<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.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act and the Investment Company
Act, the Registrant certifies that this Post-Effective Amendment to its
Registration Statement on Form N-1A meets all of the requirements for
effectiveness pursuant to Rule 485(b) under the Securities Act and that 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 1st day of November, 2000.
CITIZENS FUNDS
By /s/ Stephen C. Schuyler
----------------------------
Stephen C. Schuyler, Secretary
/s/ John L. Shields Trustee, President, Principal Executive, Financial and
Accounting Officer
---------------------------
(John L. Shields)
Azie Taylor Morton* Trustee
---------------------------
(Azie Taylor Morton)
Pablo Eisenberg* Trustee
---------------------------
(Pablo Eisenberg)
Ada Sanchez* Trustee
---------------------------
(Ada Sanchez)
Sophia Collier* Trustee
---------------------------
(Sophia Collier)
Martha Pope* Trustee
---------------------------
(Martha Pope)
Mitchell A. Johnson* Trustee
---------------------------
(Mitchell A. Johnson)
*By Stephen C. Schuyler Attorney in Fact /s/ Stephen C. Schuyler
-------------------
See Powers of Attorney: filed herewith
4
<PAGE>
Exhibit Index
(a) Declaration of Trust
(2) Designation of Series
(d) Management Agreement
(2) Renewal of Management Agreement
(4) Renewal of Sub-Investment Advisory Agreement
(h) Other Material Contracts
(2) Renewal of Administrative and Shareholder Services Agreement
(3) Transfer Agency Agreement
(4) Expense Reimbursement Agreement
(j) Opinion and Consent of Independent Accounts
(p) Code of Ethics
(q) Power of Attorney(s)
