SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Definitive Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
Citizens Funds - with respect to its series Citizens Income Fund
(Name of Registrant as Specified In Its Charter)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of the filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
CITIZENS INCOME FUND
One Harbour Place
Portsmouth, NH 03801
October __, 2005
Dear Shareholder:
This is not a proxy statement and you are not being asked to vote. As I
wrote you at the end of August, Dwight Asset Management Company. ("Dwight") has
been selected as the new subadviser for Citizens Income Fund. This is an
exciting new relationship and part of our ongoing effort to improve the fund's
performance. Enclosed is an information statement that relates to the approval
of the new subadvisory agreement with Dwight and explains why the Board of
Trustees approved the agreement.
As you may be aware, Citizens Funds has obtained exemptive relief from the
Securities and Exchange Commission which authorizes our Trustees to approve new
subadvisers without a shareholder vote under certain circumstances. The
information statement describes Dwight and the terms of the subadvisory
agreement. It's important to me that you fully understand our decision, so I
encourage you to read the information statement carefully.
Please remember this is not a proxy statement and, therefore, you are not
being asked to vote.
If you have any questions, please feel free to call a shareholder services
representative at 800.223.7010. They are available 9 am - 6 pm Eastern Time,
Monday through Friday.
Sincerely,
Sophia Collier
President
CITIZENS INCOME FUND
One Harbour Place
Portsmouth, NH 03801
Telephone: (800) 223-7010
INFORMATION STATEMENT
This Information Statement is being provided to shareholders of Citizens Income
Fund (the "Fund"), a series of Citizens Funds (the "Trust"), in lieu of a proxy
statement pursuant to the terms of an exemptive order that the Trust has
received from the Securities and Exchange Commission. The exemptive order
permits the Fund's investment manager, under certain circumstances, to hire new
subadvisers with the approval of the Trust's Board of Trustees, but without
obtaining shareholder approval. Pursuant to the exemptive order, the Trust has
agreed to provide certain information about any new subadvisers to the Fund's
shareholders. Accordingly, shareholders are not being asked to vote on the
hiring of the new subadviser, but are encouraged to review this Information
Statement.
WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
The Trust, a Massachusetts business trust organized on November 19, 1982, is
registered as an open-end diversified management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act "). The Fund was
designated as a separate series of the Trust on March 12, 1992 and commenced
operations on June 10, 1992. The mailing address of the Funds and the Trust is
One Harbour Place, Portsmouth, New Hampshire 03801.
THE ANNUAL REPORT FOR THE FUND FOR THE PERIOD ENDED JUNE 30, 2005, INCLUDING
AUDITED FINANCIAL STATEMENTS, AND THE SEMI-ANNUAL REPORT FOR THE PERIOD ENDED
DECEMBER 31, 2004, PREVIOUSLY HAVE BEEN SENT TO SHAREHOLDERS AND ARE AVAILABLE
UPON REQUEST WITHOUT CHARGE BY CONTACTING CITIZENS FUNDS, ONE HARBOUR PLACE,
PORTSMOUTH, NEW HAMPSHIRE 03801, BY CALLING TOLL-FREE, (800) 223-7010 OR BY
VISITING WWW.CITIZENSFUNDS.COM.
This Information Statement is being mailed on or about October __, 2005.
BACKGROUND
Citizens Advisers, Inc., a New Hampshire corporation (the "Manager"), One
Harbour Place, Portsmouth, New Hampshire 03801, manages the assets of the Fund
pursuant to a Management Agreement, dated June 1, 1992, and amended and
restated as of May 16, 2005 (the "Management Agreement"). The Management
Agreement was most recently approved by the Board of Trustees of the Trust,
including a majority of the Trustees who are not "interested persons," as
defined in the 1940 Act, of any party to such Agreement (the "Independent
Trustees"), on May 16, 2005. The Management Agreement was most recently
approved by shareholders of the Citizens Income Fund on July 3, 2001. See the
"Management Agreement" section of this Information Statement for additional
information.
Subject to the terms of the Management Agreement, the Manager provides the Fund
with overall investment management services and, subject to such policies as
the Board of Trustees may determine, makes investment decisions for the Fund.
The Manager may select and employ one or more subadvisers to make the
day-to-day investment decisions for the Fund consistent with the guidelines and
directions set by the Manager and the Board of Trustees and in accordance with
the provisions of the 1940 Act, and the Trust's Declaration of Trust and
By-Laws. The Manager may terminate the services of any subadviser at any time.
Dwight Asset Management Company. ("Dwight") became the subadviser to the Fund
on August 29, 2005. This Information Statement describes Dwight and its
subadvisory agreement relating to the Fund (the "New Subadvisory Agreement").
MANAGEMENT AGREEMENT
As noted above, the Manager manages the assets of the Fund pursuant to the
terms of the Management Agreement. The Management Agreement continues in effect
from year to year, subject to approval annually by the Board of Trustees in
accordance with the 1940 Act. The Management Agreement may be terminated with
respect to the Fund at any time without the payment of any penalty upon not
less than 60 days' written notice by the Manager or by the Board of Trustees of
the Trust or upon the vote of the holders of a majority (as defined in the 1940
Act) of the then issued and outstanding shares of the Fund. The Management
Agreement will automatically terminate in the event of its "assignment" (as
defined in the 1940 Act).
Under the terms of the Management Agreement, the Manager is responsible for
determining which securities are to be bought and sold for the Fund, the timing
of such purchases and sales, and the placement of orders to effect purchases
and sales, subject to the provisions of the 1940 Act, the Trust's Declaration
of Trust and the investment objectives, policies, procedures and restrictions
in the Fund's current registration statement under the 1940 Act. The Manager is
required to use its best efforts in rendering these services.
The Management Agreement also provides that neither the Manager nor any
subadvisers will be liable for any loss to the Fund sustained by reason of the
purchase, sale or retention of any security so long as the purchase, sale or
retention was made in good faith. However, the Manager and any subadvisers will
not be protected against liability to the Fund or its shareholders by reason of
willful misfeasance, bad faith or gross negligence in the performance of their
duties or by reason of their reckless disregard of their obligations and duties
under the Management Agreement or the applicable subadvisory agreement.
The Management Agreement states that the Manager or any affiliate of the
Manager may act as investment adviser or principal underwriter for any other
entity, and that the Manager or any affiliate shall not be restricted from
buying, selling or trading securities for its or their own accounts or for the
accounts of others for whom it or they may be acting, provided the Manager
represents that it will not undertake any activities which, in its sole
judgment, will adversely affect the performance of its obligations to the Trust
under the Management Agreement.
The Management Agreement also provides that the Manager and any subadviser will
have no responsibility or liability for the accuracy or completeness of the
Fund's current registration statement under the 1940 Act, except for
information supplied by the Manager. Under the terms of the Management
Agreement, the Trust agrees to indemnify the Manager and any subadviser to the
full extent permitted by the Trust's Declaration of Trust.
The Manager also performs a wide variety of administrative duties for the Trust
under a separate administrative and shareholder services contract. The Manager
sometimes will perform services under this administrative contract directly, or
may contract to have specialized services provided by third parties. Fees for
administrative services under this contract (based on average annual net
assets) and expenses are payable twice monthly, but in no event less frequently
than semi-annually, and include a fee up to 0.15% for the Fund. The Manager
also receives a per account fee under this contract for shareholder services.
Investors should refer to Appendix A attached hereto for the complete terms of
the Management Agreement for the Fund. The description of the Management
Agreement set forth herein is qualified in its entirety by the provisions of
the Management Agreement as set forth in Appendix A.
MANAGEMENT FEES
Under the Management Agreement, the Fund pays the Manager a management fee at
the annual rate of 0.65%.
The management fees are payable twice monthly, but in no event less frequently
than semi-annually, and are computed as of the close of business on each
business day at the annual rates indicated above.
The management fees paid to the Manager for services provided to the Fund, net
of expense waivers and reimbursements, for the period from July 1, 2004 through
June 30, 2005, were $375,312. In addition, the Fund paid the Manager
administrative and shareholder service fees for services provided to the Fund
in the amount of $116,749 and paid Citizens Securities, Inc., a wholly owned
subsidiary of the Manager and the principal underwriter and distributor of the
Fund, distribution fees in the amount of $144,351 for the same period.
As of June 30, 2005, the Fund had net assets of $56,596,788.
NEW SUBADVISER
Since August 29, 2005 Dwight has managed the assets of the Fund that were
previously managed by the Manager. On August 22, 2005, the Board of Trustees
approved the New Subadvisory Agreement. The New Subadvisory Agreement will
continue in effect for successive annual periods after the Agreement's
effectiveness so long as such continuance is approved at least annually by a
vote of a majority of the Trustees of the Fund who are not "interested persons"
(as defined in the 1940 Act) of the Fund, or of the Manager or of Dwight, at a
meeting specifically called for the purpose of voting on such approval, and by
the Trustees of the Fund or by a vote of a majority of the outstanding voting
securities (as defined in the 1940 Act) of the Fund.
The New Subadvisory Agreement may be terminated at any time without the payment
of any penalty by the Trustees of the Fund, by vote of a majority of the
outstanding voting securities of the Fund, or by the Manager, on not more than
60 days' nor less than 30 days' written notice to Dwight. The New Subadvisory
Agreement may be terminated by Dwight on not less than 90 days' notice to the
Trustees of the Fund and the Manager. The New Subadvisory Agreement will
automatically terminate in the event of its "assignment" (as defined in the
1940 Act).
Under the New Subadvisory Agreement, Dwight will manage the investment
operations and the composition of such portion of the Fund's assets as the
Manager may designate from time to time, including the purchase, retention and
disposition thereof, in accordance with the Fund's investment objective and
policies as stated in the Fund's current registration statement, subject to the
provisions of the 1940 Act. In addition, Dwight will furnish a continuous
investment program for the Fund, and determine from time to time what
investments or securities will be purchased, retained or sold by the Fund, and
what portion of the assets will be invested or held uninvested as cash.
The New Subadvisory Agreement provides that the Manager will furnish Dwight
with an approved list of securities that meet the Manager's social criteria
(such social criteria may include corporate, social or environmental factors)
from which Dwight will select and that Dwight may recommend to the Manager that
securities be added to the approved list. Dwight may also purchase securities
which it has prescreened based upon social criteria provided by the Manager.
The New Subadvisory Agreement also provides that Dwight will maintain the books
and records with respect to the Fund's securities transactions, will render
periodic and special reports to the Board of Trustees and the Manager as each
may reasonably request, and will provide the Fund and the Manager with a list
of all securities transactions as reasonably requested by the Fund or the
Manager.
The New Subadvisory Agreement provides that the investment advisory services of
Dwight provided to the Fund and Manager are not to be deemed exclusive, and
Dwight is free to render similar services to others.
In the absence of willful misfeasance, bad faith or gross negligence on the
part of Dwight in the performance of its duties under the New Subadvisory
Agreement, reckless disregard of its duties under the New Subadvisory Agreement
or loss resulting from breach of Dwight's fiduciary duty, Dwight will not be
subject to any liability to the Manager, the Fund, or any of the Fund's
shareholders for any error of judgment, mistake of law or any other act or
omission in the course of, or connected with, rendering services under the New
Subadvisory Agreement for any losses that may be sustained in connection with
the purchase, holding, redemption or sale of any security on behalf of the
Fund.
Shareholders should refer to Appendix B attached hereto for the complete terms
of the New Subadvisory Agreement with Dwight. The description of the New
Subadvisory Agreement set forth herein is qualified in its entirety by the
provisions in the New Subadvisory Agreement as set forth in Appendix B.
SUBADVISORY FEES
The Manager, not the Fund, pays all subadvisory fees. Under the New Subadvisory
Agreement, the Manager pays Dwight monthly compensation calculated daily by
applying the annual rate of 0.25% to the net assets of the Fund determined as
of the close of each business day.
As stated earlier, as of June 30, 2005, the Fund had net assets of $56,596,788.
Neither Dwight nor any affiliated person of Dwight, nor any affiliated person
of any such affiliated person, received any fees from the Manager or from the
Fund for services provided to the Fund during the fiscal year ended June 30,
2005. There were no material payments by the Manager or the Fund to Dwight, any
affiliated person of Dwight, or any affiliated person of any such affiliated
person, during the fiscal year ended June 30, 2005. In addition, for the fiscal
year ended June 30, 2005, no commissions were paid to any broker (i) that is an
affiliated person of the Fund, (ii) that is an affiliated person of any
affiliated person of the Fund, or (iii) an affiliated person of which is an
affiliated person of the Fund, the Manager, Dwight, or the distributor of the
Funds.
INFORMATION REGARDING DWIGHT
Dwight is a Delaware corporation and has been a U.S. registered investment
adviser since 1985. Dwight is a wholly owned subsidiary of Old Mutual, plc
("Old Mutual"). The principal offices of Old Mutual are located at 2 Lambeth
Hill, London, United Kingdom, and the principal offices of Dwight are located
at 100 Bank Street, Burlington, Vermont.
MANAGEMENT AND GOVERNANCE
Listed below are the names, positions and principal occupations of the
principal executive officers and directors of Dwight as of June 30, 2005. The
principal business address of each individual, as it relates to his or her
duties at Dwight, is the same as that of Dwight.
NAME PRINCIPAL OCCUPATION
John K. Dwight Chairman of the Board
Laura P. Dagan, CFA President and Chief Executive Officer
David W. Richardson, CFA Managing Director, Business Development
David W. Starr Managing Director, Client Portfolio Management
David J. Thompson, CFA Managing Director, Chief Investment Officer
Jeffrey B. Norris, CLU Managing Director, Chief Operating Officer
James J. Burns Managing Director, General Counsel
William T. Braunegg Managing Director, Chief Financial Officer
No officer or Trustee of the Fund currently is an officer or employee of
Dwight. No officer or Trustee of the Fund owns the securities of or has any
other material direct or indirect interest in Dwight or any other person
controlling, controlled by or under common control with Dwight. Since January
1, 2004, none of the Trustees of the Fund has had any material interest, direct
or indirect, in any material transactions, or in any material proposed
transactions, to which Dwight, Old Mutual, or any subsidiary of Dwight or any
subsidiary of Old Mutual was or is to be a party.
MANAGEMENT ACTIVITIES
As of June 30, 2005, Dwight had approximately $52 billion in assets under
management. Dwight does not act as investment adviser or subadviser for any
registered investment companies with investment objectives similar to those of
the Fund.
EVALUATION BY THE BOARD OF TRUSTEES
At a telephonic meeting held on August 11, 2005 and an in-person meeting held
on August 22, 2005, the Trustees of the Fund, including the Independent
Trustees, considered information with respect to whether the proposed New
Subadvisory Agreement was in the best interests of the Fund and its respective
shareholders. Discussed below are some of the material factors considered by
the Board of Trustees.
The Trustees first considered the potential benefits to the Fund of retaining a
subadviser, and concluded that the Fund could benefit from the retention of a
subadviser with extensive fixed income capabilities. The Trustees noted that
the Manager had recommended Dwight after it had identified and interviewed
several candidates.
The Board of Trustees considered, among other factors, representations by
Dwight and the Manager regarding the nature and quality of services to be
provided by Dwight and information regarding fees and performance. In
evaluating Dwight's ability to provide services to the Fund, the Trustees also
considered information as to Dwight's business organization, personnel,
financial resources and other matters.
The Trustees reviewed Dwight's investment philosophy and process. The Trustees
noted that Dwight had a well-defined investment process, and an investment
style compatible with the Fund's investment objectives. The Trustees reviewed
Dwight's performance for comparable mandates, and compared such performance
against the performance of the Fund and various benchmarks. In evaluating
Dwight's ability to provide services to the Fund, the Trustees considered
information as to its security selection process, measured approach to
portfolio risk and other matters. Based upon their review, the Trustees
concluded that (a) Dwight's investment process and management style would serve
to benefit the Fund and its shareholders, (b) the investment performance of
comparable accounts managed by Dwight performed favorably versus the Fund for
the three, five and ten year periods, (c) the terms of the New Subadvisory
Agreement were reasonable, fair and in the best interests of the Fund and its
shareholders, and (d) the fees provided in the New Subadvisory Agreement were
fair and reasonable in light of the usual and customary charges made for
services of the same nature and quality. Accordingly, after consideration of
the above factors, and such other factors and information as it deemed
relevant, the Board of Trustees, including all of the Independent Trustees,
unanimously approved the New Subadvisory Agreement.
ADDITIONAL INFORMATION
The Trust's distributor is Citizens Securities, Inc., One Harbour Place,
Portsmouth, New Hampshire 03801. The Trust's transfer agent and dividend-paying
agent and accounting agent is BISYS Fund Services, 3435 Stelzer Road, Columbus,
Ohio 43219.
As of August 31, 2005, the Fund had 5,743,569.483 shares outstanding.
As of December 31, 2004, the Trustees and officers of the Trust, individually
and as a group, owned beneficially or had the right to vote less than 1% of the
outstanding shares of the Fund.
As of August 31, 2005 the following persons owned of record or had the right to
vote 5% or more of the outstanding shares of the Fund
- -------------------------------- ---------------------------------------------- --------------------- -------------------
AMOUNT OF PERCENT OF
FUND - CLASS NAME AND ADDRESS OF BENEFICIAL BENEFICIAL
SHAREHOLDER OWNERSHIP INTEREST
- -------------------------------- ---------------------------------------------- --------------------- -------------------
Income Fund - Charles Schwab & Co., Inc. $2,983,719.40 5.21%
Standard Class Shares
- -------------------------------- ---------------------------------------------- --------------------- -------------------
The Trust is a Massachusetts business trust and as such is not required to hold
annual meetings of shareholders, although special meetings may be called for a
Fund for purposes such as electing Trustees or removing Trustees, changing
fundamental policies, or approving an advisory contract. Shareholder proposals
to be presented at any subsequent meeting of shareholders must be received by
the Trust at the Trust's office within a reasonable time before the proxy
solicitation is made.
By Order of the Board of Trustees,
/s/ Sophia Collier
Sophia Collier
President
October __, 2005
APPENDIX A
MANAGEMENT AGREEMENT
Agreement made as of the first day of June, 1992, and amended and restated
as of May 16, 2005 between Citizens Funds (formerly, Citizens Investment Trust)
(the "Trust"), a Massachusetts business trust, and Citizens Advisers, Inc., a
New Hampshire corporation (the "Manager").
WHEREAS, the Trust's shares of beneficial interest ("Shares") are divided
into separate series;
WHEREAS, the Trust wishes to retain the services of a manager with respect
to the Shares of each of its series listed on Exhibit A hereto (each, a "Fund,"
and collectively, the "Funds");
WHEREAS, Manager has agreed to act as manager with respect to each Fund;
NOW, THEREFORE, it is hereby agreed between the parties hereto as follows:
WITNESSETH:
In consideration of the mutual promises and agreements herein contained and
other good and valuable consideration, the receipt of which is hereby
acknowledged, it is hereby agreed by and between the parties hereto as follows:
I. In General
The Manager agrees, all as more fully set forth herein, to act as
managerial investment adviser to the Trust with respect to the
investment of the assets of each Fund, and to supervise and arrange
for the purchase and sale of securities held in each Fund.
II. Duties and Obligations of the Manager with Respect to Investment of
Assets in the Trust
A. Subject to the succeeding provision of this section and subject to
the direction and control of the Board of Trustees of the Trust, the
Manager is responsible for:
1. determining which securities are to be bought and sold for
each Fund; and
2. the timing of such purchases and sales as well as the
placement of orders to effect these purchases and sales.
The Manager, at its sole option and expense, may, subject to the provisions of
the Investment Company Act of 1940, as amended (the "Act"), delegate some or
all of these duties to one or more sub-managers.
B. Any investment purchases or sales made by the Manager shall at
all times conform to and be in accordance with any requirements
imposed by:
1. the provisions of the Act, and of any rules and
regulations in force thereunder;
2. any other applicable provisions of law;
3. the provisions of the Declaration of Trust and By-Laws of
the Trust, each as amended from time to time;
4. any policies and determinations of the Board of Trustees of
the Trust; and
5. the fundamental policies of the Trust, as reflected in the
applicable then-current registration statement of the Trust
under the Act, or as amended by the Shareholders of the
Trust.
C. The Manager shall use its best efforts in rendering services
hereunder, but neither the Manager nor any sub-manager shall be liable
for any loss sustained by reason of the purchase, sale or retention of
any security, whether or not such purchase, sale or retention shall
have been based upon its own investigation and research or upon the
investigation or research of another entity including, but not limited
to, in the case of the Manager or a sub-manager, the employees or
agents of the Manager or any sub-manager, provided that such purchase,
sale or retention was made in good faith. Nothing herein contained
shall, however, be construed to protect the Manager or any sub-manager
against any liability to the Trust or its Shareholders by reason of
willful misfeasance, bad faith or gross negligence in the performance
of its duties or by reason of its reckless disregard of its
obligations and duties under this Agreement.
D. Nothing in this Agreement shall prevent the Manager or any
affiliated person (as defined in the Act) of the Manager from acting
as investment adviser or manager and/or principal underwriter for any
other entity and shall not in any way restrict the Manager, any
sub-manager, or any such affiliated person from buying, selling or
trading securities for its or their own accounts or for the accounts
of others for whom they may be acting, provided that the Manager
represents that it will not undertake any activities which, in its
sole judgment, will adversely affect the performance of its
obligations to the Trust under this Agreement. The Trust expressly
acknowledges that the trade name "Citizens", and each Fund's name
(collectively, the "Trade Names") are not the property of the Trust
for any purpose. The Trust may use the Trade Names only in the manner
allowed by the Manager. The Trust further agrees that in the event
that the Manager ceases to be the Trust's investment manager for any
reason, the Trust will promptly take all necessary steps to stop using
the Trade Names.
E. It is agreed that the Manager and any sub-manager, will have no
responsibility or liability for the accuracy or completeness of the
Trust's registration statement under the Act or the Securities Act of
1933, as amended, except for information supplied by the Manager for
inclusion therein. The Trust agrees to indemnify the Manager and any
sub-manager to the full extent permitted by the Trust's Declaration of
Trust.
III. Allocation of Expenses
The Manager agrees that it (or a sub-manager) will provide the Trust, at the
Manager's expense, with all office space, facilities, equipment and clerical
personnel necessary for carrying out its duties under this Agreement. The
Manager will also pay all compensation of all Trustees, officers and employees
of the Trust who are affiliated persons (as defined in the Act) of the Manager.
All costs and expenses not expressly agreed to be paid by the Manager or a
sub-manager as described above, shall be paid by the Trust, including but not
limited to:
1. interest and taxes;
2. brokerage commissions;
3. insurance premiums;
4. compensation and expenses of the Trust's Trustees who are
not affiliated persons of the Manager;
5. legal and audit expenses;
6. fees and expenses of the Trust's custodian, shareholder
servicing agent, transfer agent, fund accountant and record
keeping agent;
7. expenses incident to the issuance of the Trust's shares of
beneficial interest, including those shares issued as
reinvested dividends;
8. fees and expenses incident to the registration of the Fund
or its shares of beneficial interest under Federal or State
securities laws;
9. expenses of preparing, printing or mailing reports and
notices and proxy material sent to the Shareholders of the
Trust;
10. all other expenses incidental to holding meetings of the
Shareholders of the Trust;
11. dues, assessments and/or contributions to the Investment
Company Institute or any successor thereto;
12. such non-recurring expenses as may arise, including those
relating to litigation affecting the Trust and the legal
obligation of the Trust to indemnify its officers and Trustees
with respect thereto; and
13. all expenses which the Trust agrees to bear in any
distribution agreement with the Manager or any other entity or
in any plan adopted by the Trust pursuant to rule 12b-1 under
the Act.
IV. Compensation of the Manager
The Trust agrees to pay the Manager and the Manager agrees to accept as full
compensation for all of the services rendered by the Manager hereunder, an
annual management fee payable twice monthly but in no event less frequently
than semi-annually and computed as of the close of each business day at the
annual rates with respect to each Fund as detailed in Exhibit A.
V. Duration, Revisions and Term
A. This Agreement is effective as to all Funds listed on Exhibit A on
the date of the amendment and restatement of this Agreement, and, as
to any series added to Exhibit A after the date hereof, this Agreement
shall become effective with respect to that series on the date
indicated on Exhibit A attached hereto. Exhibit A may be amended from
time to time to add additional series of the Trust as agreed by the
Trust and Manager. This Agreement shall, unless terminated as herein
provided, continue in effect with respect to a Fund for successive
annual periods after its effectiveness so long as such continuance is
specifically approved, with respect to such Fund, at least annually by
the Trust's Board of Trustees, including a majority of Trustees who
are not parties to this Agreement, or "interested persons" (as defined
in the Act) of any such party. Such vote must be cast in person at a
meeting of the Board of Trustees called for the purpose of voting on
such approval.
B. Revisions to this Agreement with respect to any Fund may be made
only if such amendment is approved by the "vote of a majority of the
outstanding voting securities" (as defined in the Act) of the Fund
(except for any such amendment as may be effected in the absence of
such approval without violating the Act).
C. This Agreement may be terminated with respect to any Fund without
penalty by either party upon not less than 60 days written notice,
provided that such termination by the Trust shall be directed and
approved by a majority of all its Trustees in office at that time or
upon the vote of the holders of a majority (as defined in the Act) of
the then issued and outstanding shares of beneficial interest of the
Fund. This Agreement shall automatically terminate in the event of its
assignment.
VI. Binding Only on Trust Property and Applicable Fund
The Manager acknowledges that the obligations of the Trust under this Agreement
are binding only on Trust property and not upon any Shareholder personally. The
Manager is aware that the Trust's Declaration of Trust disclaims individual
Shareholder liability for acts and obligations of the Trust.
Each party acknowledges and agrees that all obligations of each Fund are
binding only with respect to that Fund; that any liability of a Fund under this
Agreement, or in connection with the transactions contemplated herein, shall be
discharged only out of the assets of that Fund; and that no other series of the
Trust shall be liable with respect to this Agreement or in connection with the
transactions contemplated herein.
In witness whereof, the parties have caused the foregoing instrument to be
executed by duly authorized persons, all as of the day and year first above
written.
CITIZENS FUNDS
on behalf of each of its series
listed on Exhibit A hereto CITIZENS ADVISERS, INC.
By: /s/ Sophia Collier By: /s/ Sean Driscoll
EXHIBIT A
- ---------------------------------------------- --------------------------------
FUND COMPENSATION
- ---------------------------------------------- --------------------------------
Citizens Core Growth Fund 0.50%
- ---------------------------------------------- --------------------------------
Citizens Emerging Growth Fund 1.00%
- ---------------------------------------------- --------------------------------
Citizens Small Cap Core Growth Fund 0.50%
- ---------------------------------------------- --------------------------------
Citizens Value Fund 0.70%
(added September 20, 2001)
- ---------------------------------------------- --------------------------------
Citizens Global Equity Fund 1.00%
- ---------------------------------------------- --------------------------------
Citizens Income Fund 0.65%
- ---------------------------------------------- --------------------------------
Citizens Money Market Fund 0.35%
- ---------------------------------------------- --------------------------------
Citizens Balanced Fund 0.65%
(added August 19, 2002)
- ---------------------------------------------- --------------------------------
Citizens Ultra Short Bond Fund 0.35%
(added August 19, 2002)
- ---------------------------------------------- --------------------------------
Citizens 300 Fund 0.20%
(added February 17, 2003)
- ---------------------------------------------- --------------------------------
Citizens Small Cap Value Fund 0.75%
(added November 17, 2003)
- ---------------------------------------------- --------------------------------
APPENDIX B
INVESTMENT SUB-ADVISORY AGREEMENT
BETWEEN
CITIZENS ADVISERS, INC.
AND
DWIGHT ASSET MANAGEMENT COMPANY
This Agreement is made as of this 29th day of August, 2005, between Citizens
Advisers, Inc., a New Hampshire corporation (the "Adviser"), and Dwight Asset
Management Company, a Delaware corporation (the "Sub-Adviser").
WHEREAS, the Adviser is in the business of providing investment advisory
services; and
WHEREAS, the Sub-Adviser is in the business of providing investment advisory
services; and
WHEREAS, Citizens Funds (the "Investment Company") is a Massachusetts business
trust that is an open-end, diversified management investment company registered
under the Investment Company Act of 1940, as amended (the "1940 Act"),
currently consisting of multiple series, each having its own investment policy;
and
WHEREAS, the Citizens Income Fund (the "Fund") is a series of the Investment
Company; and
WHEREAS, pursuant to the Management Agreement between the Investment Company
and the Adviser, dated June 1, 1992, amended and restated as of May 16, 2005,
and as may be further amended from time to time (the "Management Agreement"),
the Adviser is required to perform investment advisory services to the series
of the Investment Company including the Fund; and
WHEREAS, the Adviser desires to retain the Sub-Adviser to render investment
advisory services to the Investment Company with respect to the Fund, and the
Sub-Adviser is willing to render such services;
NOW, THEREFORE, in consideration of the mutual agreements contained herein, the
parties hereto agree as follows:
1. APPOINTMENT OF SUB-ADVISER. In accordance with and subject to the Management
Agreement, the Adviser hereby appoints the Sub-Adviser to act as investment
sub-adviser to the Fund for the period and on the terms set forth in this
Agreement. The Sub-Adviser accepts such appointment and agrees to render the
services herein set forth, for the compensation herein provided.
Notwithstanding any provision of this Agreement to the contrary, the Adviser
shall retain all rights and ultimate responsibilities to supervise and, in its
discretion, conduct investment activities relating to the Fund.
2. ADVISORY DUTIES. The Sub-Adviser shall manage the investment operations and
the composition of such portion of the Fund's assets as the Adviser may
designate from time to time, including the purchase, retention and disposition
thereof, in accordance with the Fund's investment objective and policies as
stated in the Investment Company's then-current Registration Statement relating
to the Fund. The Sub-Adviser's duties hereunder are subject to the following
understandings:
(a) The Sub-Adviser shall provide supervision of investments, furnish a
continuous investment program for the Fund, determine from time to time what
investments or securities will be purchased, retained or sold by the Fund, and
what portion of the assets will be invested or held uninvested as cash;
(b) The Sub-Adviser, in the performance of its duties and obligations
under this Agreement, shall act in conformity with the Declaration of Trust and
By-Laws of the Investment Company, as each may be amended from time to time,
and the then-current Registration Statement of the Investment Company and with
the instructions and directions of the Board of Trustees of the Investment
Company or the Adviser, provided, however, the Sub-Adviser shall not be
responsible for acting contrary to any of the foregoing that are changed
without notice of such change to the Sub-Adviser; and the Sub-Adviser shall
conform to and comply with the applicable requirements of the 1940 Act and all
other applicable federal or state laws and regulations;
(c) The Sub-Adviser shall promptly communicate to the officers and
Trustees of the Investment Company and the Adviser such information relating to
Fund transactions as they may reasonably request. On occasions when the
Sub-Adviser deems the purchase or sale of a security to be in the best interest
of the Fund as well as other clients, the Sub-Adviser, to the extent permitted
by applicable laws and regulations, may aggregate the securities to be sold or
purchased, provided that in the reasonable opinion of the Sub-Adviser, all
accounts are treated equitably and fairly. In such event, allocation of the
securities so purchased or sold, as well as the expenses incurred in the
transactions, shall be made by the Sub-Adviser in the manner it considers to be
the most equitable and consistent with its fiduciary obligations to the
Investment Company and to such other clients;
(d) For the purposes of compliance with the Fund's prospectus language on
"social criteria" the Adviser will furnish the Sub-Adviser with an approved
list of securities from which the Sub-Adviser will select. The Sub-Adviser may
purchase securities which it has suggested for addition to the approved list
and for which the Sub-Adviser has prescreened based upon the criteria provided
by the Adviser. The Sub-Adviser shall not purchase securities which have been
rejected by the Adviser for inclusion on the approved list;
(e) The Sub-Adviser shall maintain books and records with respect to the
Investment Company's securities transactions and shall render to the Investment
Company's Board of Trustees and the Adviser such periodic and special reports
as the Board or the Adviser may reasonably request;
(f) The Sub-Adviser shall provide the Investment Company and the Adviser
with a list of all securities transactions as reasonably requested by the
Investment Company or the Adviser;
(g) The investment advisory services of the Sub-Adviser to the Investment
Company and the Adviser under this Agreement are not to be deemed exclusive,
and the Sub-Adviser shall be free to render similar services to others; and
(h) Should the Trustees of the Investment Company or the Adviser at any
time make a definite determination as to investment policy and notify the
Sub-Adviser thereof, the Sub-Adviser shall be bound by such determination for
the period, if any, specified in such notice or until notified that such
determination has been revoked. Further, the Adviser or the Trustees of the
Investment Company may at any time, upon notice to the Sub-Adviser, suspend or
restrict the right of the Sub-Adviser to determine what assets shall be
purchased, sold or exchanged and what portion, if any, of the assets shall be
held uninvested.
3. EXECUTION AND ALLOCATION OF PORTFOLIO BROKERAGE TRANSACTION. The
Sub-Adviser, subject to and in accordance with any directions which the
Investment Company's Board of Trustees may issue from time to time, shall
place, in the name of the Investment Company, on behalf of the Fund, orders for
the execution of the securities transactions in which the Fund is authorized to
invest. When placing such orders, the primary objective of the Sub-Adviser
shall be to obtain the best net price and execution for the Fund but this
requirement shall not be deemed to obligate the Sub-Adviser to place any order
solely on the basis of obtaining the lowest commission rate if the other
standards set forth in this section have been satisfied. The Investment Company
recognizes that there are likely to be many cases in which different brokers
are equally able to provide such best price and execution and that, in
selection among such brokers with respect to particular trades, it may be
desirable to choose those brokers who furnish "brokerage and research services"
(as defined in Section 28(e)(3) of the Securities Exchange Act of 1934) or
statistical quotations and other information to the Investment Company, the
Adviser and/or the Sub-Adviser in accordance with the standards set forth
below. Moreover, to the extent that it continues to be lawful to do so, the
Sub-Adviser may place orders with a broker who charges a commission higher than
another broker would have charged for effecting that transaction, provided that
the excess commission is reasonable in relation to the value of brokerage and
research services provided by that broker. Accordingly, the Investment Company
and the Sub-Adviser agree that:
(a) If the Fund adopts procedures pursuant to Rule 17e-1 of the 1940 Act,
affiliated brokers of Adviser or Sub-Adviser may be used by the Sub-Adviser to
execute securities transactions, when the Sub-Adviser has determined that the
Fund will receive competitive execution, price and commissions and in
accordance with such 17e-1 procedures. The Sub-Adviser shall render regular
reports to the Investment Company, not more frequently than quarterly, of how
much total brokerage business has been placed with affiliated brokers of
Adviser and the Sub-Adviser, and the manner in which the allocation has been
accomplished.
(b) Subject to the foregoing, the Sub-Adviser shall possess sole
discretion regarding the selection of broker/dealers through which its
securities transactions are executed.
4. BOOKS AND RECORDS. The Sub-Adviser shall keep the Fund's books and records
required to be maintained by it pursuant to paragraph 2(e) hereof. The
Sub-Adviser agrees that all records which it maintains for the Fund are the
property of the Investment Company and it shall surrender promptly to the
Investment Company any of such records upon the Investment Company's request.
The Sub-Adviser further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act any such records as are required to be maintained by
Rule 31a-1(f) under the 1940 Act. Nothing herein shall prevent the Sub-Adviser
from maintaining its own records as required by law, which may be a duplication
of the Investment Company's records.
5. REPORTS TO SUB-ADVISER. The Investment Company agrees to furnish the
Sub-Adviser at its principal office all prospectuses, proxy statements, reports
to shareholders, sales literature or other material prepared for distribution
to shareholders of the Fund or the public, which refer in any way to the
Sub-Adviser. The Investment Company shall furnish or otherwise make available
to the Sub-Adviser such other information relating to the business affairs of
the Investment Company as the Sub-Adviser at any time, or from time to time,
reasonably requests in order to discharge its obligations hereunder.
6. PROXIES. Unless otherwise directed by the Board of Trustees of the
Investment Company or the Adviser, the Sub-Adviser shall not exercise any right
to vote, appurtenant to any securities or other property held in the Fund's
investment portfolio, but shall have the authority to oppose or to consent to
the reorganization, consolidation, merger, or readjustment of the finances of
any corporation, company or association, or to the sale, mortgage, pledge or
lease of the property of any corporation, company or association any of the
securities of which are held in the Fund's investment portfolio and to do any
act which may be necessary or advisable in connection therewith provided that
the Sub-Adviser is advised of the corporate action by the Custodian.
7. EXPENSES. During the term of this Agreement, the Sub-Adviser shall pay all
of its own expenses incurred by it in connection with its activities under this
Agreement and the Adviser and/or Fund, as they may agree from time to time,
shall bear all expenses that are incurred in their operations not specifically
assumed by the Sub-Adviser.
Expenses borne by the Fund will include but not be limited to the following (or
the Fund's proportionate share of the following): (a) brokerage commissions
relating to securities purchased or sold by the Fund or any losses incurred in
connection therewith; (b) fees payable to and expenses incurred on behalf of
the Fund by the Investment Company's administrator; (c) expenses of organizing
the Investment Company and the Fund; (d) filing fees and expenses relating to
the registration and qualification of the Fund's shares and the Investment
Company under federal or state securities laws and maintaining such
registrations and qualifications; (e) fees and salaries payable to the
Investment Company's Trustees and officers who are not officers or employees of
the Investment Company's administrator, any investment adviser or underwriter
of the Investment Company; (f) taxes (including any income or franchise taxes)
and governmental fees; (g) costs of any liability, uncollectible items of
deposit and other insurance or fidelity bonds; (h) any costs, expenses or
losses arising out of any liability of or claim for damage or other relief
asserted against the Investment Company or the Fund for violation of any law;
(i) legal, accounting and auditing expenses, including legal fees of any
special counsel for the independent Trustees; (j) charges of custodians,
transfer agents and other agents; (k) costs of preparing share certificates (if
any); (l) expenses of setting in type and printing Prospectuses and Statements
of Additional Information and supplements thereto for existing shareholders,
reports and statements to shareholders and proxy material; (m) any
extraordinary expenses (including fees and disbursements of counsel) incurred
by the Investment Company or the Fund; and (n) fees and other expenses incurred
in connection with membership in investment company organizations.
8. COMPENSATION OF THE SUB-ADVISER. For the services to be rendered by the
Sub-Adviser as provided in this Agreement the Adviser shall pay to the
Sub-Adviser such compensation as designated in Exhibit A to this Agreement. The
Investment Company and the Fund shall not be liable to the Sub-Adviser for the
compensation of the Sub-Adviser, should the Adviser fail to meet its financial
obligations owed to the Sub-Adviser. If the Sub-Adviser serves for less than
the whole period of this Agreement, the Sub-Adviser's compensation shall be pro
rated in accordance with the time served under the Agreement.
9. LIMITATION OF SUB-ADVISER'S LIABILITY. In the absence of (a) willful
misfeasance, bad faith or gross negligence on the part of the Sub-Adviser in
performance of its obligations and duties hereunder, (b) reckless disregard by
the Sub-Adviser of its obligations and duties hereunder, or (c) a loss
resulting from a beach of fiduciary duty with respect to the receipt of
compensation for services (in which case, any award of damages shall be limited
to the period and the amount set forth in Section 36(b)(3) of the 1940 Act),
the Sub-Adviser shall not be subject to any liability whatsoever to the Adviser
or the Investment Company, or to any shareholder of the Investment Company, for
any error of judgment, mistake of law or any other act or omission in the
course of, or connected with, rendering services hereunder including, without
limitation, for any losses that may be sustained in connection with the
purchase, holding, redemption or sale of any security on behalf of the
Investment Company. The parties agree that any stated limitations on liability
shall not relieve the Sub-Adviser from any responsibility or liability under
state or federal statutes. The Fund may enforce any obligations of the
Sub-Adviser under this Agreement, and may recover directly from the Sub-Adviser
for any liability it may have to the Fund.
10. DURATION AND TERMINATION.
(a) This Agreement shall become effective on the date of its execution and
shall govern the relations between the parties hereto thereafter, and shall
remain in force until one year after initial approval by the Board of Trustees
of the Fund. This Agreement shall continue in effect with respect to the Fund
for successive annual periods after its effectiveness so long as such
continuance is specifically approved at least annually (i) by the vote of a
majority of the Board of Trustees of the Fund who are not interested persons of
the Fund, or of the Adviser, or of the Sub-Adviser at a meeting specifically
called for the purpose of voting on such approval, and (ii) by the Board of
Trustees of the Fund or by vote of a majority of the outstanding voting
securities of the Fund. The aforesaid requirement that continuance of this
Agreement be "specifically approved at least annually" shall be construed in a
manner consistent with the 1940 Act and all rules, regulations and orders
thereunder. Should the Agreement not be approved for continuance, the Adviser
shall provide the Sub-Adviser with prompt notice.
(b) This Agreement may be terminated at any time without the payment of
any penalty by the Trustees of the Investment Company, by vote of a majority of
the outstanding voting securities of the Fund, or by the Adviser, on not more
than sixty (60) days nor less than thirty (30) days written notice to the
Sub-Adviser. This Agreement may be terminated by the Sub-Adviser on not less
than ninety (90) days notice to the Trustees of the Investment Company and the
Adviser. This Agreement shall automatically terminate in the event of its
assignment.
(c) This Agreement may be amended by the Adviser and the Sub-Adviser only
if such amendment is approved by the vote of a majority of the outstanding
voting securities of the Fund (except for any such amendment as may be effected
in the absence of such approval without violating the 1940 Act).
(d) The terms "specifically approved at least annually," "vote of a
majority of the outstanding voting securities," "assignment," "affiliated
persons" and "interested persons," when used in this Agreement, shall have the
respective meanings specified in, and shall be construed in a manner consistent
with, the 1940 Act, subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under the 1940 Act.
11. CHOICE OF LAW. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts and any applicable federal law.
12. REPRESENTATIONS OF THE ADVISER. The Adviser represents and warrants that:
(a) it has received a copy of Part II of the Sub-Adviser's Form ADV;
(b) it has full corporate power and authority to enter into this
Agreement and to carry out its terms; and
(c) in the event that the Adviser, Sub-Adviser and Trustees of the
Investment Company agree to the use of futures in the Fund, the
Adviser agrees that at that time the Fund will be either (i) excluded
from the definition of the term "pool" under Section 4.5 of the
General Regulations under the Commodity Exchange Act ("Rule 4.5"), or
(ii) a qualifying entity under Rule 4.5(b) for which a notice of
eligibility has been filed.
13. COVENANTS OF THE SUB-ADVISER. The Sub-Adviser agrees that it (i) will not
deal with itself or any of its affiliates, or with the Trustees of the
Investment Company or the Investment Company's principal underwriter, if any,
as principal, broker or dealer in making purchases or sales of securities or
other property for the account of the Investment Company except as permitted by
the 1940 Act and all rules, regulations and orders thereunder, (ii) will comply
with all other provisions of the Investment Company's Declaration of Trust and
By-Laws then in effect and the Fund's current prospectus relative to the
Sub-Adviser, its directors, officers, employees and affiliates, and (iii) will
comply with all other laws, rules, regulations and orders applicable to the
activities contemplated herein.
14. LIMITATION OF LIABILITY. It is expressly acknowledged and agreed that the
obligations of the Investment Company hereunder shall not be binding upon any
of the Shareholders, Trustees, officers, employees or agents of the Investment
Company, personally, but shall bind only the trust property of the Investment
Company allocated to the Fund, as provided in its Declaration of Trust dated as
of July 3, 2001, as amended from time to time (the "Declaration"). The
execution and delivery of this Agreement have been authorized by the Trustees
of the Investment Company and signed by an officer of the Investment Company,
acting as such, and neither such authorization by such Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Investment Company allocated to the
Fund as provided in its Declaration.
IN WITNESS WHEREOF, the due execution hereof as of the date first above
written.
Attest: CITIZENS ADVISERS, INC.
By: /s/ Marcia S. Kovalik By: /s/ Sean P. Driscoll
Name: Sean P. Driscoll
Title: Executive Vice President
Attest: DWIGHT ASSET MANAGEMENT COMPANY
By: /s/ Natasha Kassian By: /s/ David J. Thompson
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Name: David J. Thompson
---------------------------------
Title: Managing Director
---------------------------------
Acknowledged as of the date first set forth above.
CITIZENS FUNDS
On behalf of the Citizens Income Fund
By: /s/ Sophia Collier
Name: Sophia Collier
Title: President
EXHIBIT A
As consideration for the Sub-Adviser's services to the Fund, the Sub-Adviser
shall receive from the Adviser an annual advisory fee, accrued daily and
payable monthly within 10 days of each month, of the following annual
percentages of the Fund's average daily net assets during the month:
Citizens Income Fund 0.25%
We mutually agree that this schedule be appended to, and form part of the
Investment Sub-Advisory Agreement and that this Exhibit A supersedes any
previous Exhibit A or agreement between us.