UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company File Number: 811-03626
CITIZENS FUNDS
(Exact Name of Registrant as Specified in Charter)
One Harbour Place, Suite 400, Portsmouth, New Hampshire 03801
(Address of Principal Executive Offices)
Sophia Collier
Citizens Advisers, Inc.
One Harbour Place
Portsmouth, NH 03801
(Name and Address of Agent for Service)
Registrant's Telephone Number, including Area Code: (603) 436-5152
Date of fiscal year end: June 30
Date of reporting period: December 31, 2006
ITEM 1. REPORT TO SHAREHOLDERS.
(CITIZENS FUNDS LOGO)
SEMI-ANNUAL REPORT
AND SUPPLEMENTAL COMMENTARY
DECEMBER 31, 2006
SHARE THE SEEDS OF RESPONSIBLE INVESTING
NOT A PART OF THE SEMI-ANNUAL REPORT
TABLE OF CONTENTS
SUPPLEMENTAL COMMENTARY
Letter from the president ................................................ 1
Citizens focus ........................................................... 3
SEMI-ANNUAL REPORT
Risks of mutual fund investing ........................................... 7
Benchmarks ............................................................... 8
Portfolio review disclosure .............................................. 9
Portfolio review ......................................................... 10
Portfolio composition .................................................... 34
Holdings ................................................................. 36
Statements of assets and liabilities ..................................... 54
Statements of operations ................................................. 56
Statements of changes in net assets ...................................... 58
Financial highlights ..................................................... 62
Financial notes .......................................................... 68
Supplemental information ................................................. 77
Shareholder services ..................................................... 80
PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF
CITIZENS FUNDS CAREFULLY BEFORE INVESTING. FOR THIS AND OTHER INFORMATION,
PLEASE VISIT WWW.CITIZENSFUNDS.COM OR CALL 800.223.7010 FOR A FREE PROSPECTUS
AND READ IT CAREFULLY BEFORE INVESTING.
NOT A PART OF THE SEMI-ANNUAL REPORT
LETTER FROM THE PRESIDENT
Dear Shareholder,
The financial markets finished 2006 on a strong note with an upswing and an
improved landscape for public policy issues such as the environment and
corporate governance. Also, Citizens Value Fund has developed into the flagship
of our fund family with strong financial returns and increasing recognition by
investors and the financial press. Morningstar wrote that Citizens Value Fund
was a "worthy core holding for socially conscious investors" and Citizens'
investors seem to agree with strong purchase activity in 2006. We instituted a
contractual expense limit of 1.29% through June 30, 2007 for Citizens Value Fund
standard shares, and we also established an institutional share class for
foundations, endowments and larger investors.
The success of Citizens Value Fund exemplifies what we are seeking to do with
our investment group: build strong performing products that invest in companies
with high standards for social and environmental responsibility. I hope you will
take time to read the individual managers' commentaries inside this report and
note the effort and insight that goes into structuring the portfolios to seek
return for shareholders.
We were active in 2006 on a number of social and environmental initiatives. In
March, we were the first mutual fund company to call on corporations to divest
of their operation in Sudan. We believe too little attention has been paid to
the humanitarian crisis in Sudan and that corporations need to do more. To date,
20 of the 23 corporations we targeted have responded, affirming they have ended
or will not establish ties to Sudan. We think this is significant as these
companies were reported to be involved with Sudan prior to our letter.
(PHOTO OF SOPHIA COLLIER)
"IT IS ENCOURAGING TO SEE NEW NATIONAL LEADERSHIP EMERGE, AND I FEEL THE
FINANCIAL MARKETS ARE ATTRACTIVELY VALUED. IN MY OPINION, IT IS A GOOD TIME TO
BE A SOCIALLY RESPONSIBLE INVESTOR!"
- -- SOPHIA COLLIER, PRESIDENT
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Our other initiatives focused on discrimination, climate change and toxics in
consumer products. We filed shareholder resolutions at Whole Foods Market, Inc.
on a toxics issue and YUM! Brands, Inc. on disability access. Our four year
campaign with Cisco Systems, Inc. saw success with the release of their first
corporate social responsibility report. We view this as an important victory
because we believe that only by reporting on their social and environmental
impact will companies have meaningful benchmarks for progress. In this regard,
we also had productive conversations with Intel Corp., Hewlett-Packard Co. and
Pfizer, Inc. regarding disclosure of social and environmental impacts. With a
changed political climate, we expect more company interest in this initiative in
2007.
I look to the New Year with optimism. It is encouraging to see new national
leadership emerge, and I feel the financial markets are attractively valued with
under appreciated growth prospects. In my opinion, it is a good time to be a
socially responsible investor!
I wish you a happy and healthy New Year.
Sincerely yours,
/s/ Sophia Collier
- -------------------------------------
Sophia Collier
President
Stock values fluctuate in response to individual company actions, as well as
general economic, political and market conditions. Value stocks may fall or
remain flat if certain conditions or investor perceptions do not change as
expected, or if the companies prove not to be underpriced.
See pages 7-9 for important fund risks and benchmark and other disclosures. In
considering performance of the funds for the six and twelve month periods, you
should also consider the funds' longer term track records described elsewhere in
this report. Of course, data presented reflects past performance which does not
guarantee future results.
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CITIZENS FOCUS
(PHOTO OF JOANNE DOWDELL)
"WHETHER FACE-TO-FACE OR BY TELEPHONE, COMPANIES TODAY ARE MORE WILLING TO MEET
WITH SOCIALLY RESPONSIBLE SHAREHOLDERS AND STAKEHOLDERS."
- -- JOANNE DOWDELL
VP OF CORPORATE RESPONSIBILITY
CORPORATE ENGAGEMENT - A STEP IN THE RIGHT DIRECTION
Speaking directly with corporate executives is an important and often effective
part of our activism and advocacy work. Productive dialog can lead to positive
change at the companies we engage, thus helping prevent the need to file a
shareholder proposal. Dialog also can be the by-product after a shareholder
proposal has been filed. The desired outcomes can sometimes take months and even
years to come to fruition, and may take several parties working together to
achieve. Whether face-to-face or by telephone, companies today are more willing
to meet with socially responsible shareholders and stakeholders than they were
just two or three years ago. As a result, we had a robust corporate dialog
schedule during the six month period ended December 31, 2006.
In July, we participated in a meeting with Johnson & Johnson, to get an update
on the company's work to improve product safety and provide greater transparency
of its non-proprietary activities. We plan to meet with Johnson & Johnson again
in 2007 to follow up. Citizens filed a resolution on the topic of toxic
ingredient usage with Johnson & Johnson in 2005. We withdrew the proposal once
the company agreed to on-going and constructive dialog with the shareholder
group.
During the period, Citizens joined an investor group to engage Cisco Systems
("Cisco") company representatives on right-to-privacy issues. Cisco, along with
Google, Microsoft and Yahoo!, have been targeted by Human Rights Watch for
aiding Chinese censorship policies. Companies argue they are following the law
and have little recourse. John Chambers, CEO of Cisco, has stated that the
company has no plans to stop doing business in
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China, where research firm IDC projects the e-commerce market will reach $390
billion by 2009(1). We would like to see Internet companies like Cisco take a
stronger stand against censorship and will continue to follow the issue.
In July, Citizens' social research analysts met with the representatives from
Pfizer responsible for reporting to stakeholders on the company's sustainability
initiatives. We provided feedback on the company's 2005 Corporate Citizenship
Report, including the issues of access to affordable medicines and transparency
of political contributions. Pfizer is one of a growing number of companies
issuing sustainability reports using the Global Reporting Initiative (GRI) as a
guide. A company that uses the GRI as a guide to structure the contents of a
sustainability report gives analysts the ability to compare "apples to apples"
and evaluate the risks of the company compared to its peers. Pfizer is a company
that continues to face public criticism, most recently on the issue of executive
compensation, yet understands the importance of working with socially
responsible investors like Citizens. Pfizer's willingness to increase disclosure
and have open discussions on these issues with shareholders and stakeholders is
an example of the changing attitudes towards dialog.
In August, Citizens and other socially responsible investors met with
representatives of Intel to discuss the company's social and environmental
initiatives. Intel is an example of a company that takes the initiative to meet
with socially responsible investors on an annual basis. This year's meeting
focused on the increased quantity of chemicals used to clean smaller chips, and
efforts to attract and retain a diverse workforce. Intel also is working to
update its contract manufacturer guidelines to the emerging industry standard,
the Electronics Industry Code of Conduct (EICC).
Citizens' work continued with the Investor Environmental Health Network (IEHN)
on the issue of toxic chemicals in consumer products. In September, we
participated in a meeting with representatives of Whole Foods Market as part of
our ongoing shareholder dialog with the company regarding potentially harmful
chemicals in their products.
In addition to direct dialog, we also use the "power of the pen" to help get our
views and concerns across to corporate executives. Letters provide a
- ----------
(1) Carrie Kirby, "Chinese Internet vs. free speech. Hard choices for U.S. tech
giants," San Francisco Chronicle, September 18, 2005
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permanent record and can be an appropriate starting point for on-going
communication.
In September, Citizens joined a group of investors and co-signed a letter to
Target calling on the company to support cleaner gold mining and production. The
coalition of investors, which at the time held more than 1.5 million shares of
Target, felt it was time for management to address the issue, and minimize the
potential risk to shareholder value. We believe bad publicity related to gold
poses a threat to the reputations of companies that sell products containing
gold.
Industrial gold mining involves serious risks to worker health and safety, the
environment and surrounding communities. It uses and produces large volumes of
toxic chemicals, including cyanide and mercury, and creates massive amounts of
waste material. The pollution and destruction of local community lands and
livelihoods caused by this industry recently have begun to attract the attention
of human rights and environmental organizations. An effort involving jewelry
retailer is currently under way to establish a mechanism for certifying more
responsible mining operations. Retailers such as Tiffany's, Zales and Kay
Jewelers are leading the way and we would like to see others follow suit.
Citizens Funds was a signatory to the Carbon Disclosure Project's annual survey
of global companies for the third year in a row. The survey, which will help
assess the risks posed by climate change on certain companies, will be sent in
early 2007. It asks companies to detail their methods for tracking carbon
emissions and outline the risks posed to their business by climate change.
Additionally, the survey asks companies for information about the opportunities
they might pursue in a carbon-constrained economy -- one in which carbon
emissions are taxed or capped at an absolute amount. The survey will also look
at whether companies are developing new technologies to reduce emissions, or to
generate renewable energy. Companies that are proactive in this area may be able
to benefit shareholders in the longer term.
Last year's survey, released in February 2006, was signed by 211 institutional
investors with over $31 trillion in assets. In 2007, we believe a greater number
of investors will pay attention to the environmental, social and financial
consequences of climate change, and we are proud to be part of this ongoing
effort.
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In November, Citizens co-signed a letter to ConocoPhillips regarding the
company's efforts to secure permits to drill for oil near Teshekpuk Lake in the
National Petroleum Reserve-Alaska (NPR-A). We want to see the company take a
leadership position on the issue by dropping its plans to drill in this
environmentally sensitive area. The Teshekpuk Lake area is vital to caribou
herds, migratory birds and Alaska Natives who rely on the area for subsistence
hunting and fishing. At ConocoPhillip's 2006 annual shareholder meeting, over
25% of shareholders voted in favor of a resolution asking the company to pursue
oil drilling rights in other, less controversial areas.
LOOKING AHEAD
We are very optimistic that 2007 will bring further progress in how corporations
respond to address the environmental and social risks they face around the
globe. You only need to look at Exxon Mobil's participation in discussions
regarding potential carbon regulations to recognize progress has been made. It
was not too long ago that some company executives rejected the science on
climate change. A January 11, 2007 Wall Street Journal article stated that the
company has stopped funding research to refute studies showing a correlation
between fossil-fuel and global warming. We would like to see this shift in
Exxon's long-standing view serve as a catalyst for change in other companies
approaches to climate change and other environmental issues.
We believe opportunities for socially responsible investors will expand and
expect there will be growth in the industry. Decades of planting the seeds of
change are bearing fruit. An increased number of institutional shareholders are
including SRI mandates, and "Generation Next," many believe, is poised to carry
on the work of so many before them. Their progressive, global perspectives will
be a force to be reckoned with, and we believe, will serve to further advance
the use of technology to help bring positive change in corporate, social and
environmental performance.
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RISKS OF MUTUAL FUND INVESTING
As with any fund that invests in stocks or fixed-income securities, the value of
your investment will fluctuate in response to individual company actions, as
well as general economic, political and market conditions. Reactions to these
factors may differ among various stock types, and investments in specific funds
may present unique risks--and benefits given the nature of their focus. Many of
these risks are discussed below, and additional information on risks may also be
found in the Citizens Funds prospectus.
GROWTH INVESTING RISKS
Growth stocks may be especially volatile, because their prices are largely based
on estimates of future earnings.
VALUE INVESTING RISKS
Value stocks may fall or remain flat if certain conditions or investor
perceptions do not change as expected, or if the companies prove not to be
underpriced.
SMALL- AND MEDIUM-SIZED COMPANY RISKS
Small- and medium-sized companies pose unique investment risks as they may have
less seasoned management, limited product lines, financing and market share
challenges, and shares that trade with more volatility, less frequently or in
smaller volumes.
FOREIGN INVESTING RISKS
Foreign markets pose unique investment risks, including political instability
and currency risks, excessive taxation, different financial and auditing
standards, increased market volatility and other factors.
FIXED-INCOME INVESTING RISKS
Interest rate increases can cause the value of bonds to decrease, meaning that a
bond fund investment may lose value in a rising interest rate environment. There
is also the chance that some of the fund's holdings will have their credit
ratings downgraded or may default, potentially reducing the fund's income level
and share price.
HIGH-YIELD SECURITY RISKS
High-yield securities (so-called "junk bonds") offer the potential for higher
returns but present significant volatility and risk of loss of principal and
interest.
7
MONEY MARKET RISKS
Investments in the Citizens Money Market Fund are not insured or guaranteed by
the FDIC or any other government agency. Although the fund seeks to preserve the
value of your investment at $1.00 per share, it is possible to lose money by
investing in the fund.
BENCHMARKS
When evaluating performance of any investment, it is useful to look at both
absolute and relative return. In other words, how much did the fund generate or
lose for shareholders in the reporting period, and how did that performance
compare to the fund's benchmark? Below is a brief description of the benchmarks
we use. Please keep in mind that these benchmark indices are unmanaged, meaning
you cannot invest directly in them, and their performance does not reflect the
impact of fees and expenses that apply to our funds.
The S&P 500 INDEX includes a representative sample of 500 leading companies in
the U.S. economy, focused on the large-cap segment of the U.S. equity universe.
The RUSSELL 1000 GROWTH INDEX measures the performance of those Russell 1000
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Growth Index covers the large-cap segment of the U.S. equity
universe.
The RUSSELL MIDCAP GROWTH INDEX measures the performance of those Russell Midcap
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell Midcap Growth Index covers the mid cap segment of the U.S. equity
universe; it includes the smallest 800 securities in the Russell 1000 Index.
The RUSSELL 2000 GROWTH INDEX measures the performance of those Russell 2000
companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 2000 Growth Index covers the small-cap segment of the U.S. equity
universe.
The MORGAN STANLEY CAPITAL INTERNATIONAL (MSCI) WORLD INDEX is a market
capitalization-weighted equity index of more than 1,500 stocks traded in 23
world markets.
8
The LEHMAN BROTHERS U.S. AGGREGATE INDEX is comprised of taxable, investment
grade fixed-income securities, including government, corporate, mortgage and
asset-backed securities.
The BLENDED INDEX is comprised of 60% S&P 500 Index and 40% Lehman Brothers U.S.
Aggregate Index.
PORTFOLIO REVIEW DISCLOSURE
The information in each portfolio review was obtained from the portfolio
manager(s) for each fund. Any views and opinions expressed are those of the
portfolio manager(s). Portfolio managers with different funds and strategies may
have opinions that vary from their colleagues'. Citizens Advisers considers
diversity of investment opinion to be a strength that contributes to healthy
debate and is part of a strong overall investment process. The portfolio reviews
are provided for informational purposes only and should not be used or construed
as a recommendation for any security.
9
CITIZENS CORE GROWTH FUND
(PHOTO OF ROBERT MAGAN, JONATHAN WHITE)
"WE HAVE INCREASED OUR EXPOSURE TO FOREIGN-BASED STOCKS TO BENEFIT FROM WHAT WE
BELIEVE IS MORE ROBUST GROWTH AVAILABLE IN INTERNATIONAL MARKETS."
CO-PORTFOLIO MANAGERS
Robert Magan, CFA
Jonathan White, CFA
INVESTMENT GOAL
Long-term capital appreciation
INVESTMENT STRATEGY
Invests mainly in stocks of U.S. large-capitalization companies
INCEPTION DATES
Standard shares 3.03.95
Institutional shares 1.25.96
Administrative shares 2.04.00
RISKS
Growth investing (See pages 7-9 for important fund risk and benchmark
disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
For the second half of 2006 the Core Growth Fund standard shares returned 2.20%,
lagging far behind the benchmark indexes of the S&P 500 Index, which returned
12.74%, and the Russell 1000 Growth Index, which returned 10.10% during the same
period.
In hindsight, we were too focused on the uncertain economic outlook during the
period. Worries over the health of the housing market and its potential effect
on consumer spending dominated the debate over "hard" or "soft economic landing"
scenarios. Economic concerns were complicated further by the anticipation and
results of the November elections, as expectations of a split in control of
Congress became a Democratic majority in both houses. This affected the outlook
for legislative activity on taxes, healthcare, the minimum
CITIZENS CORE GROWTH FUND
10
CITIZENS CORE GROWTH FUND PERFORMANCE (as of 12.31.06)
CORE GROWTH
TOTAL RETURN AVERAGE ANNUAL RETURN
-------------- -------------------------
Ticker 6 1 5 10 Since
Share class symbol months year years years inception
- ----------- ------ ------ ----- ----- ----- ---------
STANDARD SHARES WAIDX 2.20% -2.02% 0.65% 5.10% 8.09%
INSTITUTIONAL SHARES WINIX 2.59% -1.26% 1.37% 5.85% 7.49%
ADMINISTRATIVE SHARES CGADX 2.45% -1.59% 1.05% NA -4.92%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers have been instituted in the past to
maintain expense limits, without which returns would have been lower. Investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance figures assume reinvestment of dividends and
distributions but do not reflect the deduction of taxes you would pay on fund
distributions or redemptions of fund shares.
wage, energy, Iraq, and many other issues impacting both the overall economy and
specific companies.
The stock markets chose to ignore the uncertainty and advanced steadily from
July through the end of 2006. This advance was driven by reasonable valuation
levels, given the continuing strength in earnings growth in both second and
third quarter reports, and the pause in raising interest rates by the Federal
Reserve Board (Fed). These events attracted the ample amount of cash available
for investment from hedge funds, private equity groups, foreign sources and high
corporate cash balances, into both U.S. and foreign markets pushing stock prices
higher.
This upward momentum countered our changes to the portfolio to reflect our
specific economic expectations. While we moved the portfolio from a late
economic cycle orientation, emphasizing capital spending related stocks such as
industrials, to a defensive posture, with staples and healthcare stocks, to
finally a more neutral position, the market continued to advance almost
independent of economic developments. One sector specific strategy that
significantly hurt performance was our emphasis on energy early in the summer.
The price of oil in early July was $78 per barrel and there was a significant
chance of a disruption in oil production due to the potential for an above
average hurricane season, events in the Middle East and problems with Alaskan
pipelines. No hurricanes entered the Gulf
CITIZENS CORE GROWTH FUND
11
of Mexico, the Middle East problems were settled without escalation and the
pipeline problems were fixed more quickly than anticipated. By late September,
oil was at $55 per barrel and our energy stocks suffered. Our holdings in the
energy sector reduced the fund's return by 1.90% for the six month period ended
December 31, 2006.
Four of the ten stocks that under performed the most in the fund during the
period were industrial stocks. Rockwell Automation, Norfolk Southern, Fluor and
Fastenal were all significantly impacted during the summer by the deteriorating
economic picture. We sold all of these stocks during the third quarter, but in
aggregate they hurt the fund's returns by over 1.5% for the period. Performance
also suffered from staying too long in our position of Chicos FAS, the retailer
of women's clothing. It detracted 0.42% from the fund's return during the
period. This company had problems in the spring, which we thought were short
term in nature, however, they turned out to be more extensive. We sold the stock
in late summer.
Some of our strategies did work for us during the period. Toward the end of the
year we positioned the portfolio to take advantage of the "soft economic
landing" scenario, by cutting back on healthcare and consumer staples stocks and
increasing our exposure to the consumer discretionary sector and other sectors
that we believed would benefit from an improved economic outlook. Two stocks
that contributed most to performance were from the industrial sector, Precision
Cast Parts, which manufactures complex metal components, and Paccar, a producer
of large trucks. Also our holdings in the consumer discretionary sector,
particularly J.C. Penney, McDonald's and Walt Disney Co., worked well and helped
performance during the period.
WHAT IS THE OUTLOOK?
As we enter 2007 it appears that the economy has had a "soft landing" and may be
poised to reaccelerate. One critical factor will be continued stabilization in
the housing market. This is necessary to support both employment levels and
consumer spending. History suggests that the current strength of the stock
market indicates the start of a strengthening economy sometime around mid-year,
but false signals have been known to occur in the past. We have positioned the
portfolio in companies that show the greatest growth prospects with an eye to
valuation so we are not paying too much for growth. Also, we have increased our
exposure to foreign-based stocks such as Roche Holdings and Canon to benefit
from what we believe is more robust growth available in international markets.
CITIZENS CORE GROWTH FUND
12
CITIZENS EMERGING GROWTH FUND
EMERGING GROWTH
(PHOTO OF J. MICHAEL GALLIPO, JONATHAN WHITE)
"EARNINGS GROWTH AMONG COMPANIES REMAINS ROBUST, AND WE EXPECT GROWTH TO REMAIN
STRONG ENOUGH TO SUPPORT EQUITY PRICES."
CO-PORTFOLIO MANAGERS
J. Michael Gallipo, CFA
Jonathan White, CFA
INVESTMENT GOAL
Aggressive growth
INVESTMENT STRATEGY
Invests mainly in stocks of young, growing, medium capitalization companies
INCEPTION DATES
Standard shares 2.08.94
Institutional shares 11.01.99
Administrative shares 2.04.00
RISKS
Growth investing; small- and medium-sized company risks (See pages 7-9 for
important fund risk and benchmark disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
Citizens Emerging Growth Fund standard shares returned 1.89% during the six
month period ended December 31, 2006, lagging its benchmark the Russell Midcap
Growth Index, which returned 7.90% during the same period. The period saw
persistent rallies in all of the major equity indices as investors remained
optimistic that the economy would make a successful "soft landing". Earnings
growth for the third quarter came in much stronger than expected, which helped
extend the rally. Liquidity remained abundant during the period, whether
measured through traditional money supply growth, continued stock buybacks by
companies or a steady flow of deals from private equity investors.
Financials was the best performing sector for the fund compared to the fund's
benchmark during the
CITIZENS EMERGING GROWTH FUND
13
CITIZENS EMERGING GROWTH FUND PERFORMANCE (as of 12.31.06)
TOTAL RETURN AVERAGE ANNUAL RETURN
------------- -------------------------
Ticker 6 1 5 10 Since
Share class symbol months year years years inception
- ------------ ------ ------ ---- ----- ----- ---------
STANDARD SHARES WAEGX 1.89% 7.46% 4.13% 8.69% 11.25%
INSTITUTIONAL SHARES CEGIX 2.16% 7.97% 4.78% NA 0.89%
ADMINISTRATIVE SHARES CGRDX 2.03% 7.68% 4.47% NA -3.38%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers have been instituted in the past to
maintain expense limits, without which returns would have been lower. Investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance figures assume reinvestment of dividends and
distributions but do not reflect the deduction of taxes you would pay on fund
distributions or redemptions of fund shares.
period. The fund benefited from an overweight position versus the benchmark
(10.5% vs. 9.0%), although performance was hurt slightly by stock selection
within the sector. Consumer discretionary was the largest contributor to the
fund's absolute performance. This sector returned 11.30% and contributed 2.30%
to the fund's total return. Fears about the health and strength of the consumer,
which arose in the spring and early summer of 2006, abated during the period
resulting in a significant rally in retail-related stocks.
Industrial stocks were the greatest detractors from the fund's relative
performance during the period with the sector falling 8.01%, versus the
benchmark's 1.66% increase and subtracting 1.11% from fund performance. Weak
performance from a couple of the fund's larger holdings in this sector drove the
underperformance. Energy stocks were the largest detractor from the fund's
absolute performance. Our holdings in this sector fell 9.21% during the
six-month period, subtracting 1.15% from the fund's total return. Concerns over
the decline in natural gas and oil prices, and the possibility of a subsequent
decline in activity and earnings for the group, contributed to the sell-off.
CB Richard Ellis, the country's largest commercial real estate services firm,
was the fund's biggest contributor to performance. The stock rose 33.33% and
added 0.66% to the fund's total return. The performance validated our
CITIZENS EMERGING GROWTH FUND
14
decision to focus on the commercial real estate market rather than the
residential market. The next three largest contributors to the fund's relative
performance were all retail stocks that cater to either upper-income or teen
consumers - Nordstrom, Polo Ralph Lauren and American Eagle Outfitters. All
three companies posted very strong comparable sales data during the period and
look to be well-poised to maintain growth into 2007. Akamai Technologies had the
largest absolute gain during the period, with its stock price rising 47.53% as
the company benefited from the growth in high bandwidth content on the Internet.
The worst performing stock on an absolute basis, and second largest detractor
from fund performance, was Choice Hotels, which fell 30.53% and subtracted 0.58%
from the fund's total return. The stock, a strong performer for the fund over
the past several years, was hurt after the company's second quarter earnings
came in below investor forecasts and the company lowered guidance for the rest
of the year. Expeditors International, another long-time fund holding, was the
largest detractor from fund performance, falling 27.72% and subtracting 0.82%
from the fund's return. The company, which had a track record of beating analyst
forecasts, came in slightly below forecasts at the end of July, and was also
hurt by general weakness within the transportation and logistics industry. We
reduced the size of our position in Expeditors during the fourth quarter, but we
still believe the company has more growth ahead.
WHAT IS THE OUTLOOK?
Our outlook for 2007 is reasonably optimistic. The series of interest rate hikes
by the Fed seem to be having the desired effect of slowing, but not hurting, the
economy. We expect the Fed to remain on the sidelines for most, if not all, of
2007. Earnings growth among companies remains robust, and while we expect the
rate of growth to slow, we expect it to remain strong enough to support equity
prices. Also, the third year of a Presidential term has historically been a
strong year for the markets. As always, however, there are risks that we will
continue to watch closely. Foremost is the risk that the current weakness in the
housing market (while currently showing signs of bottoming out) may become more
pronounced and have a wider impact on the economy resulting in a harder landing.
In addition, political developments in Washington have the potential to
negatively impact certain segments of the market such as healthcare.
CITIZENS EMERGING GROWTH FUND
15
CITIZENS SMALL CAP CORE GROWTH FUND
(PHOTO OF J. MICHAEL GALLIPO, NATHAN MOSER, JONATHAN WHITE)
"WE BELIEVE 2007 SHOULD BE A GOOD YEAR FOR EQUITIES, AND SMALL CAP STOCKS IN
PARTICULAR."
CO-PORTFOLIO MANAGERS
J. Michael Gallipo, CFA
Nathan Moser, CFA
Jonathan White, CFA
INVESTMENT GOAL
Capital appreciation
INVESTMENT STRATEGY
Invests mainly in stocks of small-capitalization U.S. companies
INCEPTION DATE
Standard shares 12.28.99
RISKS
Growth risks; small- and medium-sized company risks
(See pages 7-9 for important fund risk and benchmark disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
Citizens Small Cap Core Growth Fund returned 1.68% for the six months ended
December 31, 2006, lagging its benchmark the Russell 2000 Growth Index, which
returned 6.86% for the same period. Small cap stocks underperformed their larger
counterparts for the period, despite outperforming during the fourth quarter.
The markets rallied as inflation expectations decreased, confidence in an
economic "soft landing" for 2007 increased and merger and acquisition activity
surged.
The fund's best performing sector during the six month period was financials,
contributing 1.64% to the fund's total return. Strong stock selection and a
significant overweight position relative to the benchmark contributed to the
strong performance. Consumer discretionary was the fund's next
CITIZENS SMALL CAP CORE GROWTH FUND
16
CITIZENS SMALL CAP CORE GROWTH FUND PERFORMANCE (as of 12.31.06)
SMALL CAP CORE GROWTH
TOTAL RETURN AVERAGE ANNUAL RETURN
------------- -------------------------
Ticker 6 1 3 5 Since
Share class symbol months year years years inception
- ----------- ------ ------ ---- ----- ----- ---------
STANDARD SHARES CSCSX 1.68% 8.74% 7.87% 5.44% 4.16%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers have been instituted in the past to
maintain expense limits, without which returns would have been lower. Investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance figures assume reinvestment of dividends and
distributions but do not reflect the deduction of taxes you would pay on fund
distributions or redemptions of fund shares.
best performing sector, with a total return of 4.36%. However, due to poor stock
selection, this sector underperformed the benchmark by 0.89%. Information
technology and industrials were the fund's worst performing sectors, detracting
0.23% and 1.74% from the fund's total return, respectively. The fund maintained
overweight positions in both the financials and consumer staples sectors, while
continuing to underweight healthcare and industrials relative to the benchmark.
We added to our biotechnology exposure during the period, and anticipate
increasing our exposure to the healthcare sector further in 2007.
The largest contributor to fund performance for the period was Decker's Outdoor
Corp., a footwear retailer best known for their UGG and Teva brands. The stock
gained 55.59% and added 0.98% to the fund's total return. Decker's strong stock
performance was driven by better than expected second and third quarter results
as well as increased optimism for a strong holiday season. Philadelphia
Consolidated Holding Corp., a property and casualty insurance company, was
another strong performer and gained 46.70% and added 0.53% to total return on
very strong third quarter results.
Choice Hotels International Inc., which operates mid-priced hotel chains such as
Clarion, Comfort Inn and Econo Lodge, declined 30.53% during the period. This
detracted 0.89% from the fund's total return. Choice Hotels' financial results
for the second quarter were below expectations and they reduced full year
guidance. The combination of high expectations and a
CITIZENS SMALL CAP CORE GROWTH FUND
17
lofty valuation magnified the decline. Dress Barn Inc., a retailer targeting
value-conscious women, declined 31.43% during the period in which the fund held
it. This decline was based in part on weaker than expected same store sales. We
sold our position due to our belief that the company's fundamentals had
deteriorated.
WHAT IS THE OUTLOOK?
Despite nearly two years of Federal Funds interest rate increases, liquidity
remains abundant. Corporations, private equity investors and foreign countries
are all looking to invest their cash, and we believe this trend should continue
in 2007. In our opinion, the current environment is positive for equities as
excess cash keeps interest rates low and leads to increased dividends, share
repurchases and mergers and acquisitions. We expect that economic growth will
slow - which should help ease the Federal Reserve's inflation concerns. We
believe 2007 should be a good year for equities, and small cap stocks in
particular, along with an expectation for periods with heightened volatility.
CITIZENS SMALL CAP CORE GROWTH FUND
18
CITIZENS VALUE FUND
VALUE
(PHOTO OF SOPHIA COLLIER)
"THIS MARKS THE FOURTH CONSECUTIVE YEAR IN WHICH THE FUND HAS OUTPERFORMED THE
S&P 500 INDEX."
PORTFOLIO MANGER
Sophia Collier
INVESTMENT GOAL
Long-term capital appreciation
INVESTMENT STRATEGY
Invests mainly in stocks and other equities of U.S. large-capitalization
companies
INCEPTION DATE
Standard shares 6.13.96
Institutional shares 3.31.06
RISKS
Value risks (See pages 7-9 for important fund risk and benchmark disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
Citizens Value Fund standard shares returned 10.30% for the six months ended
December 31, 2006 and 15.95% for the year. During the six months we
underperformed the benchmark S&P 500 Index's return of 12.74%, but we
outperformed its 15.80% result for the year. This marks the fourth consecutive
year in which the fund has outperformed the S&P 500 Index.
Within the six month period, the fund's underperformance was almost completely
the result of the underperformance of ConocoPhillips, the environmentally
approved energy company compared to ExxonMobil, a rejected company that is among
the largest names in the S&P 500 Index. Exxon's stock price rose almost 25%
during the second half of the year, while ConocoPhillips' stock was up only
CITIZENS VALUE FUND
19
CITIZENS VALUE FUND PERFORMANCE (as of 12.31.06)
TOTAL RETURN AVERAGE ANNUAL RETURN
-------------- -------------------------
Ticker 6 1 5 10 Since
Share class symbol months year years years inception
- ----------- ------ ------ ----- ----- ----- ---------
STANDARD SHARES MYPVX 10.30% 15.95% 2.06% 8.33% 8.68%
INSTITUTIONAL SHARES CVALX 10.58% NA NA NA 9.80%*
* Aggregate return
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers are currently in effect and have
been instituted in the past to maintain expense limits, without which returns
would have been lower. Investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Performance figures assume
reinvestment of dividends and distributions but do not reflect the deduction of
taxes you would pay on fund distributions or redemptions of fund shares.
9.80% in the period. ConocoPhillips' smaller return was the result of a sell-off
in the stock in the third quarter, following their announcement to acquire
Burlington Resources. ConocoPhillips rallied in the fourth quarter, but not
enough to overtake Exxon. Interestingly, we now believe that Exxon may be
overvalued, trading at a price/earnings multiple of almost 12, versus
ConocoPhillips which is valued at a much more reasonable price/earnings ratio of
7.3. This suggests to us that ConocoPhillips has the potential to exceed the
performance of its pricier counterpart in the year ahead, so we continue to hold
the stock.
Citizens Value Fund's top performing sector in the second half of the year was
consumer discretionary, where our holdings such as luxury retailer Nordstrom,
Inc. and Toyota Motor Corp. showed strong appreciation. Both companies seem to
be well in tune with consumer tastes. Toyota's ability to succeed with a hybrid
car is particularly encouraging. Automobiles are among the largest contributors
to global warming, and it is essential that new strategies for lower emission
vehicles be developed and commercialized.
The fund's second best performing sector in the period was information
technology led by the fund's holding of Freescale, a semiconductor company that
spun off from Motorola and then was acquired in the period
CITIZENS VALUE FUND
20
at a nice price premium by private equity investors. We liked Freescale because
it had what we believed was a depressed valuation with motivated management and
a specific and focused action plan to increase profit margins. This is the type
of company favored by our quality relative value strategy. While we do not buy
companies just because we believe they are acquisition candidates, it is nice
when they are acquired.
WHAT IS THE OUTLOOK?
Looking ahead, I believe the United States economy is fairly strong, and that
the global economy is even stronger. I do not believe that inflation is a
significant risk. I also believe that low unemployment will continue in the U.S.
and that interest rates, while higher than in recent years, are still at
historically low levels. Thus, I believe that the slowing housing market will
temper, but not destroy, consumer spending, the largest source of economic
growth. With this view, we will continue to position the portfolio in what we
consider undervalued companies with growing profitability. We will also keep an
eye out for special situations where we can seek to add value to the portfolio.
CITIZENS VALUE FUND
21
CITIZENS GLOBAL EQUITY FUND
(PHOTO OF JONATHAN WHITE)
"WE BELIEVE STOCKS IN EMERGING MARKETS HAVE THE POTENTIAL TO PROVIDE ATTRACTIVE
RETURNS."
PORTFOLIO MANAGER
Jonathan White, CFA
INVESTMENT GOAL
Capital appreciation
INVESTMENT STRATEGY
Invests in promising companies throughout the world
INCEPTION DATES
Standard shares 2.08.94
Institutional shares 11.01.99
Administrative shares 2.04.00
RISKS
Growth and foreign investing
(See pages 7-9 for important fund risk and benchmark disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
World equity markets were strong during the second half of 2006. The MSCI World
Index returned 13.21% during the period. This was slightly above the 12.74%
return of the U.S. market, as measured by the S&P 500 Index. The fund's standard
share class returned 7.86% during the six month period.
During the period, emerging markets and many European markets were very strong.
This overall strength in world markets was in the face of evidence of generally
slowing world economic growth and central banks more inclined to raise interest
rates rather than lower them. This reflects the substantial amounts of cash
available for investment from hedge funds, private equity investors, central
banks and corporations.
CITIZENS GLOBAL EQUITY FUND
22
CITIZENS GLOBAL EQUITY FUND PERFORMANCE (as of 12.31.06)
GLOBAL EQUITY
TOTAL RETURN AVERAGE ANNUAL RETURN
-------------- -------------------------
Ticker 6 1 5 10 Since
Share class symbol months year years years inception
- ----------- ------ ------ ----- ----- ----- ---------
STANDARD SHARES WAGEX 7.86% 14.41% 4.01% 6.76% 7.06%
INSTITUTIONAL SHARES CGEIX 8.19% 15.01% 4.66% NA -0.19%
ADMINISTRATIVE SHARES CEADX 8.04% 14.74% 4.30% NA -5.95%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers have been instituted in the past to
maintain expense limits, without which returns would have been lower. Investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance figures assume reinvestment of dividends and
distributions but do not reflect the deduction of taxes you would pay on fund
distributions or redemptions of fund shares.
Our stock selections in the consumer discretionary and telecommunications
services sectors worked well. Performance suffered from our energy holdings, an
underweight relative to the index in the financial sector and somewhat mediocre
returns in other sectors. In retrospect, we were a bit too cautious with our
assessment of the ability of global markets to perform as economies slowed and
we positioned the portfolio a bit too defensively both geographically and by
maintaining an above average cash position.
Our biggest contributor to performance was Volvo AB, the Swedish manufacturer of
trucks and engines. It has long been and continues to be one of our larger
positions. The stock was up over 40% during the period and contributed 0.93% to
overall fund performance. Another strong performer was Deutsche Boerse, the
German stock exchange. Deutsche Boerse has benefited from takeover speculation
that affected many international financial marketplaces in 2006. The stock was
up over 30% during the six month period, and contributed 0.86% to the fund's
return.
Another notable winner in the portfolio was Nintendo, which was purchased in
early November, shortly before the company introduced its innovative Wii video
gaming console that was such a success during the Christmas season. Although we
had a relatively small position in the
CITIZENS GLOBAL EQUITY FUND
23
portfolio (1.30%), Nintendo contributed 0.25% to the fund's return in less than
two months.
Two energy companies were the largest detractors from fund performance during
the second half of 2006. Valero Energy, a U.S. based petroleum refining and
marketing company, was down over 23% during the period hurting fund performance
by 0.46%. Consol Energy, which produces coal and natural gas, was down 29%, and
detracted 0.39% from the fund performance. The energy sector was weak overall as
multiple potential threats to supply from weather and geopolitical events passed
without causing disruption and the price of oil declined from $78 per barrel in
July to approximately $60 per barrel on December 31, 2006.
WHAT IS THE OUTLOOK?
As we enter 2007, the portfolio remains somewhat cautious given our outlook for
slowing economic growth, but we have reduced the defensive posture of the
portfolio that we had in the last quarter of 2006. The fund's primary divergence
from the MSCI World Index is an overweight in European stocks that is offset by
an underweight in U.S. stocks. We have increased the fund's direct participation
in emerging markets to approximately 5% of the portfolio with investments in
typically larger, infrastructure related stocks. These include ICICI Bank, a
major Indian bank, and two telecommunications companies, Telekomunikasi
Indonesia and America Movil S. A., a major provider of cellular service in
Mexico. We believe stocks in emerging markets have the potential to provide
attractive returns but they also can be quite volatile so we will carefully
monitor our position size and geographic exposures. On a sector basis, we are
overweight in the healthcare sector, primarily in non-U.S. companies which are
less vulnerable to U.S. legislative activities.
CITIZENS GLOBAL EQUITY FUND
24
CITIZENS BALANCED FUND
BALANCED
(PHOTO OF ROBERT MAGAN)
"WE BELIEVE THE OUTLOOK FOR EQUITIES IS POSITIVE IN 2007 AS THE ECONOMY
CONTINUES TO GROW AND COMPANIES CONTINUE TO REPORT GOOD EARNINGS."
PORTFOLIO MANAGER
Robert Magan, CFA
INVESTMENT GOAL
Current income and capital appreciation
INVESTMENT STRATEGY
Invests in a blend of stocks, bonds and money market securities
INCEPTION DATE
Standard shares 12.20.02
RISKS
Growth and fixed income investing (See pages 7-9 for important fund risk and
benchmark disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
For the six-month period ended December 31, 2006, the Citizens Balanced Fund
returned 5.14%. This trailed the fund's benchmark, the Blended Index, which
returned 9.64%. The Blended Index is a combination of 60% of the S&P 500 Index
and 40% of the Lehman Brothers U.S. Aggregate Index. The S&P 500 and the Lehman
Brothers U.S. Aggregate indices both increased in value during the period,
12.74% and 5.09% respectively.
The stock market provided strong performance during the six month period to the
surprise of some Wall Street analysts. Reduced concerns about inflation and
rising interest rates and reports of slower but continued economic growth fueled
this rally. The Federal Open Market Committee (FOMC) held its target for the
federal funds rate steady at 5.25% during the entire six month period.
CITIZENS BALANCED FUND
25
CITIZENS BALANCED FUND PERFORMANCE (as of 12.31.06)
AVERAGE
TOTAL RETURN ANNUAL RETURN
-------------- ----------------
Ticker 6 1 3 Since
Share class symbol months year years inception
- ----------- ------ ------ ----- ----- ---------
STANDARD SHARES CFBLX 5.14% 2.99% 5.92% 8.27%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers are currently in effect and have
been instituted in the past to maintain expense limits, without which returns
would have been lower. Investment return and principal value of an investment in
the fund will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Performance figures assume
reinvestment of dividends and distributions but do not reflect the deduction of
taxes you would pay on fund distributions or redemptions of fund shares.
At the end of the period the fund had a slight overweight in stocks, 61.9%,
relative to the Blended Index's weighting of 60%. The remainder of the portfolio
was allocated to bonds (34.1%) and short-term cash investments (4.0%). During
the period, the fund increased its exposure to stocks and reduced its exposure
to fixed income securities and cash investments. This reflected our positive
outlook for stocks in the longer term. We reduced the fund's allocation to fixed
income securities by reinvesting cash received from called bonds in stocks. The
fixed income portion of the portfolio slightly outperformed the Lehman Brothers
U.S. Aggregate Index during the period as the average maturity and average
duration of the fixed income portion of the portfolio was short of the
benchmark.
The fund's holdings in telecommunications stocks returned 27.08% during the
period, as investors began to take advantage of this undervalued sector versus
the rest of the market. This sector accounted for 0.90% of the fund's return.
Financial stocks in the fund returned 11.31%, accounting for 2.10% of the fund's
return. This sector responded nicely to the news that the FOMC was expected to
continue to hold short term rates steady and the potential that the next move
would be to lower rates.
Industrial stocks were volatile during the period due to the change in economic
outlook from recession to continued growth. The fund's industrial stocks
returned 3.08% accounting for only 0.01% of total return. The energy sector
contributed negatively to the return of the fund. Our holdings in this
CITIZENS BALANCED FUND
26
sector returned -4.19%, accounting for -0.68% of the fund's return for the
period.
Precision Castparts, a metal processing and manufacturing company, was the
largest contributor to positive performance for the period. The stock returned
30.96% during the period, which accounted for 0.64% of the fund's return. The
company benefited from strong third quarter earnings and an outlook for
increased earnings and revenue in the future. In addition, analysts increased
their estimates for 2007 and 2008. Their growth is likely to come from their
strong original equipment manufacturing business with the airline industry as
both Boeing and Airbus continue to take orders for new airplanes.
America Movil S.A. de C.V. (AMX), a wireless communications provider in Mexico
and South America, gained 35.88%, accounting for 0.60% of the fund's return. The
stock price moved higher as the company reported very solid earnings as
subscriber and market share growth drove improvement in bottom line earnings. We
believe future growth looks strong as AMX continues to grow organically and
through acquisition.
Shares of both Valero Energy Corp and Rockwell Automation Inc. fell during the
quarter 23.13% and 21.85% respectively, detracting 0.56% and 0.66% from the
fund's return. Valero's decline was caused by the drop in oil prices and a
recovery of gasoline inventories in the U.S. Rockwell declined due to slower
profit margin growth attributed to a decline in automotive orders. We sold
Rockwell and trimmed our position in Valero during the period.
WHAT IS THE OUTLOOK?
In our opinion the stock market will likely continue its year end rally into
January and then retreat as fourth quarter earnings reports are released and
economic strategists suggest that the years of double digit earnings growth have
ended. We believe that once the equity market comes to terms with slower
earnings, it should return to higher levels by year end.
We continue to believe that the greater long-term risk to economic growth is
inflation, not higher interest rates. Therefore, we expect the Fed to hold the
target for the federal funds rate at 5.25% through most of 2007. This gives them
the flexibility to battle inflation while trying to construct a "soft landing"
scenario for the economy. We believe that opportunities for capital appreciation
in the bond market are currently limited. We also believe that
CITIZENS BALANCED FUND
27
yields should move higher in the earlier part of the year as the economy shows
signs that it is not going into recession. Therefore, we continue to keep the
duration of the bond portfolio short of its benchmark in anticipation of higher
long term rates by the end of the first quarter.
We believe the outlook for equities is positive in 2007 as the economy continues
to grow and companies continue to report good earnings. It is our belief that
annualized GDP growth will likely slow in 2007 to a more sustainable rate of 2%
to 3%, with growth somewhat below the Fed's target of 3% to 3.5% during the
first two quarters. The third and fourth quarters will in our opinion, likely
see a return to sustainable levels of growth as the housing market bottoms and
the consumer continues to be active. We believe the consumer should continue to
be a driver through the housing downturn as long as unemployment remains low and
job growth continues at sustainable levels.
CITIZENS BALANCED FUND
28
CITIZENS INCOME FUND
INCOME
(GRAPHIC)
PORTFOLIO MANAGER
The fund is managed by a team of portfolio managers at Dwight Asset Management
Company
INVESTMENT GOAL
Current income and monthly dividend payment
INVESTMENT STRATEGY
Invests in bonds that are diversified across sectors, including U.S. treasury,
mortgages, corporate, and asset-backed securities
INCEPTION DATE
Standard shares 6.10.92
RISKS
Fixed-income investing; high-yield security risks (See pages 7-9 for important
fund risk and benchmark disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
During the six month period ended December 31, 2006, the fund returned 4.30% or
0.79% less than the 5.09% return of the Lehman Brothers U.S. Aggregate Index.
The fund's interest rate exposure, or duration, remained neutral during the
third quarter yet was moved to a defensive stance (less than that of the index)
during the fourth quarter, which had a small but positive effect on return. The
effect of sector decisions on return was positive for most broad market sectors
with the exception of corporate bonds; we maintained an underweight to
corporates, due to concern of potential events detrimental to bondholder value,
yet the sector proved to be one of the best performing pockets of the fixed
income market. The fund maintained an overweight, relative to the index, to both
commercial mortgage-backed debt and asset-backed securities, each of which added
to return during the period. The fund maintained an approximate 2.5% average
allocation to high yield over the period that assisted in offsetting the return
drag associated with our underweight to the corporate investment grade sector.
The second half of 2006 was, from an interest rate perspective, the
CITIZENS INCOME FUND
29
CITIZENS INCOME FUND PERFORMANCE (as of 12.31.06)
TOTAL RETURN AVERAGE ANNUAL RETURN
------------- -------------------------
Ticker 6 1 5 10 Since
Share class symbol months year years years inception
- ----------- ------ ------ ---- ----- ----- ---------
STANDARD SHARES WAIMX 4.30% 2.91% 3.27% 4.30% 5.17%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers have been instituted in the past to
maintain expense limits, without which returns would have been lower. Investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance figures assume reinvestment of dividends and
distributions but do not reflect the deduction of taxes you would pay on fund
distributions or redemptions of fund shares.
mirror image of the first 6 months of the year. The Treasury yield curve, which
saw yields rise across the entire curve but most prominently at the short end
during the first half of the year, reversed course as prices rose and yields
fell 34, 40 and 43 basis points during the latter half of the year for the
2-year, 5-year, and 10-year Treasury notes, respectively. The curve remained
flat despite the Fed's decision to leave the target Fed Funds rate unchanged at
each of the four Federal Open Market Committee (FOMC) meetings during the
period.
The fixed income market, benefited from the Treasury market rally during the
second half of the year. In addition to Treasury securities performing well, all
broad spread sectors (mortgages, corporates, and asset-backed) also performed
admirably as spreads tightened amid consistent demand.
Economic growth began to wane in the second half of the year partially due to a
severe downturn in housing. World events during the period, such as the
continued war in Iraq, conflict between Lebanon and Israel and unrest in Darfur,
when coupled with investor expectations that the Fed was done raising rates,
caused rates to drop across the yield curve.
WHAT IS THE OUTLOOK?
We anticipate that the Fed will continue to hold interest rates at the current
level at least until the second quarter of 2007, based on moderating
CITIZENS INCOME FUND
30
inflation concerns and lower growth expectations. The Fed expects that GDP
growth is likely to trend "close to or below the economy's long-run sustainable
pace." We may consider moving to a neutral duration posture in the near term and
have removed the fund's corporate bond underweight. We added slightly to our
mortgage position during the fourth quarter but will re-evaluate our position
based on demand for debt and the interest rate environment. We will likely
continue to overweight the commercial mortgage-backed and asset-backed
securities sectors and maintain an up-in-quality bias.
CITIZENS INCOME FUND
31
CITIZENS MONEY MARKET FUND
(PHOTO OF ROBERT MAGAN)
"WE BELIEVE THE FEDERAL RESERVE BOARD IS LIKELY DONE INCREASING SHORT TERM RATES
AND THAT THEIR NEXT MOVE MAY BE TO LOWER THE TARGET RATE."
PORTFOLIO MANAGER
Robert Magan, CFA
INVESTMENT GOAL
Current income consistent with safety and liquidity
INVESTMENT STRATEGY
Invests exclusively in money market instruments
INCEPTION DATES
Standard shares 8.30.83
Institutional shares 2.01.96
RISKS
Money market investing (See pages 7-9 for important fund risk and benchmark
disclosure)
PORTFOLIO REVIEW (UNAUDITED)
HOW DID THE FUND PERFORM?
The seven-day simple yield on standard shares of the Citizens Money Market Fund
was 4.39% as of December 31, 2006, up slightly from the yield of 4.35% on June
30, 2006. During the six month period ended December 31, 2006 the fund's
standard share class returned 2.21%.
During the six-month period, the average weighted maturity of the fund's
portfolio was lengthened from 35 days to a range of 40 to 45 days. This reflects
our belief that the Federal Reserve Board (Fed) is likely done increasing short
term rates and that their next move may be to lower the target rate.
The Federal Open Market Committee (FOMC) held steady its target for the federal
funds rate (a key rate that influences mortgage rates and credit card rates) at
5.25%
CITIZENS MONEY MARKET FUND
32
CITIZENS MONEY MARKET FUND PERFORMANCE (as of 12.31.06)
MONEY MARKET
TOTAL RETURN AVERAGE ANNUAL RETURN
-------------- -------------------------
Ticker 6 1 5 10 Since
Share class symbol months year years years inception
- ------------ ------ ------ ----- ----- ----- ---------
STANDARD SHARES WKAXX 2.21% 4.13% 1.59% 2.97% NA
INSTITUTIONAL SHARES WAIXX 2.35% 4.40% 1.89% 3.34% 3.49%
Data presented reflects past performance, which is no guarantee of future
results. Current performance may be lower or higher than the performance data
quoted. Performance data current to the most recent month end may be obtained
online at www.citizensfunds.com. Fee waivers have been instituted in the past to
maintain expense limits, without which returns would have been lower. Investment
return and principal value of an investment in the fund will fluctuate so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Performance figures assume reinvestment of dividends and
distributions but do not reflect the deduction of taxes you would pay on fund
distributions or redemptions of fund shares.
throughout the six month period. Fed Chairman, Ben Bernanke, and other FOMC
members, continue to indicate that their focus is on inflation and they have
expressed a willingness to raise interest rates as much as necessary to ward off
any return of higher inflation. We believe the Fed will hold interest rates at
their current levels for most of 2007. Our belief is based upon the most recent
economic data which showed a modest slowing in the pace of inflation and
economic growth at or just above the Fed's sustainable growth rate of 3%. A
reduced expectation level of inflation continues although it could very easily
change course with the return of higher oil prices and the resulting effect of
prices at the gasoline pump. How long the pause in changing the interest rate
lasts, and whether the next move is lower or higher rates, is still open to
debate
WHAT IS THE OUTLOOK?
While the FOMC currently is in a data dependent decision mode and will watch
economic releases closely, it is clear that the Fed's current campaign to
increase the federal funds target rate at a measured pace has ended. We will
continue to hold the average weighted maturity of the fund's portfolio closer to
the 40 - 45 day range as we believe that the FOMC will continue to hold the fed
funds rate steady well into 2007 and possibly longer. Keeping the portfolio's
average weighted maturity in this range locks in higher rates now and positions
the portfolio well if or when rates move lower in the future. We will be
watching the economic data points closely in the coming months.
CITIZENS MONEY MARKET FUND
33
PORTFOLIO COMPOSITION (UNAUDITED)
PORTFOLIO COMPOSITION
<Table>
<Caption>
PERCENTAGE OF
CORE GROWTH FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Financials 21.6%
Information Technology 13.8%
Healthcare 12.7%
Consumer Discretionary 11.9%
Industrials 9.9%
Consumer Staples 8.5%
Energy 8.3%
Materials 4.8%
Cash Equivalents 3.9%
Utilities 2.7%
Telecommunication Services 1.9%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
PERCENTAGE OF
EMERGING GROWTH FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Consumer Discretionary 20.5%
Information Technology 18.0%
Healthcare 15.9%
Financials 11.6%
Industrials 11.4%
Energy 8.9%
Cash Equivalents 4.5%
Materials 3.4%
Consumer Staples 2.3%
Utilities 1.9%
Telecommunication Services 1.6%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
SMALL CAP PERCENTAGE OF
CORE GROWTH FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Information Technology 22.6%
Consumer Discretionary 16.3%
Healthcare 15.3%
Industrials 14.4%
Financials 13.8%
Energy 6.0%
Consumer Staples 4.4%
Materials 4.3%
Cash Equivalents 2.9%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
PERCENTAGE OF
VALUE FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Financials 21.7%
Information Technology 15.0%
Healthcare 11.5%
Consumer Discretionary 10.6%
Industrials 9.9%
Energy 9.3%
Consumer Staples 8.9%
Cash Equivalents 4.6%
Telecommunication Services 3.4%
Utilities 2.6%
Materials 2.5%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
PERCENTAGE OF
GLOBAL EQUITY FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Financials 25.4%
Consumer Discretionary 13.0%
Healthcare 12.7%
Information Technology 11.8%
Consumer Staples 8.3%
Industrials 7.2%
Energy 7.0%
Materials 5.4%
Telecommunication Services 4.7%
Utilities 2.4%
Cash Equivalents 2.1%
- ------------------------------------------------------------
</Table>
SEE FINANCIAL NOTES
34
DECEMBER 31, 2006
<Table>
<Caption>
PERCENTAGE OF
BALANCED FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Equity
Financials 13.7%
Information Technology 10.2%
Healthcare 8.2%
Consumer Discretionary 7.8%
Industrials 6.4%
Consumer Staples 5.4%
Energy 5.4%
Telecommunication Services 2.3%
Utilities 2.1%
Materials 1.8%
Preferred Stock 0.4%
- ------------------------------------------------------------
Fixed Income
U.S. Government Agency Obligations 18.1%
Corporate Bonds 8.0%
U.S. Government Obligations 5.4%
Collateralized Mortgage Obligations 0.2%
Foreign Government Bonds 0.1%
- ------------------------------------------------------------
Cash Equivalents 4.5%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
PERCENTAGE OF
INCOME FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
U.S. Government Agency Obligations 38.2%
Collateralized Mortgage Obligations 22.7%
U.S. Government Obligations 17.4%
Corporate Bonds 16.7%
Cash Equivalents 5.0%
- ------------------------------------------------------------
</Table>
<Table>
<Caption>
PERCENTAGE OF
MONEY MARKET FUND INVESTMENTS
SECURITY ALLOCATION AT VALUE
- ------------------------------------------------------------
Commercial Paper 65.6%
U.S. Government Agency Obligations 10.7%
Corporate Bonds 10.0%
Municipal Notes 7.6%
Certificates of Deposit 6.1%
- ------------------------------------------------------------
</Table>
All portfolio compositions subject to change.
SEE FINANCIAL NOTES
35
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
CORE GROWTH FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
COMMON STOCKS - 94.0%
Air Freight - 1.5%
FedEx Corp. 40,000 4,345
Apparel Manufacturers - 1.7%
VF Corp. 60,000 4,925
Auto Manufacturing - 1.3%
Volvo AB ADR 55,000 3,785
Banks - 4.4%
Banco Santander Central Hispano SA ADR 150,000 2,799
Bank of America Corp. 55,000 2,936
UBS AG ADR 75,000 4,525
Wells Fargo & Co. 80,000 2,845
-------
13,105
Biotechnology - 2.3%
Gilead Sciences, Inc. (a) 60,000 3,896
Roche Holding AG ADR 32,000 2,864
-------
6,760
Chemicals - 2.9%
Praxair, Inc. 90,000 5,340
Sigma-Aldrich Corp. 40,000 3,109
-------
8,449
Computers - 7.1%
Autodesk, Inc. (a) 70,000 2,832
Hewlett-Packard Co. 70,000 2,883
Intuit, Inc. (a) 90,000 2,746
Network Appliance, Inc. (a) 115,000 4,517
Oracle Corp. (a) 300,000 5,143
VeriFone Holdings, Inc. (a) 80,000 2,832
-------
20,953
Electrical Equipment - 1.3%
Emerson Electric Co. 90,000 3,966
Electronics - 2.9%
Agilent Technologies, Inc. (a) 85,000 2,962
Cisco Systems, Inc. (a) 210,000 5,740
-------
8,702
Energy & Utilities - 10.7%
The AES Corp. (a) 210,000 4,627
Baker Hughes, Inc. 60,000 4,480
ConocoPhillips 50,000 3,598
CONSOL Energy, Inc. 80,000 2,570
EnCana Corp. 70,000 3,217
Questar Corp. 40,000 3,322
Silvan Power Co. (a) (b) 24,000 --
The Williams Cos., Inc. 120,000 3,134
Valero Energy Corp. 80,000 4,093
Vulcan Power Co., Class A (a) (b) 40,000 --
XTO Energy, Inc. 65,000 3,058
-------
32,099
Entertainment - 1.6%
The Walt Disney Co. 140,000 4,798
Financial - Diversified - 6.2%
American Express Co. 55,000 3,337
JPMorgan Chase & Co. 90,000 4,347
Merrill Lynch & Co., Inc. 40,000 3,724
Moodys, Inc. 50,000 3,453
State Street Corp. 50,000 3,372
-------
18,233
Financial Services - 1.2%
T. Rowe Price Group, Inc. 80,000 3,502
Foods - 6.5%
Campbell Soup Co. 75,000 2,917
Dean Foods Co. (a) 65,000 2,748
Groupe Danone ADR 110,000 3,586
McCormick & Co., Inc. 110,000 4,241
PepsiCo, Inc. 45,000 2,815
Sysco Corp. 80,000 2,941
-------
19,248
Healthcare - 10.1%
Allergan, Inc. 26,000 3,113
Baxter International, Inc. 100,000 4,639
Becton, Dickinson & Co. 75,000 5,261
C.R. Bard, Inc. 65,000 5,393
Johnson & Johnson, Inc. 100,000 6,602
Laboratory Corp. of America Holdings (a) 70,000 5,143
-------
30,151
</Table>
SEE FINANCIAL NOTES
36
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
CORE GROWTH FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
Insurance - 7.5%
Allianz SE ADR 150,000 3,063
American International Group, Inc. 50,000 3,583
Lincoln National Corp. 100,000 6,640
The Chubb Corp. 100,000 5,291
The St. Paul Travelers Cos., Inc. 65,000 3,490
-------
22,067
Manufacturing - 5.6%
Cummins, Inc. 25,000 2,955
Deere & Co. 35,000 3,327
PACCAR, Inc. 70,000 4,543
Precision Castparts Corp. 75,000 5,871
-------
16,696
Multimedia - 1.4%
News Corp., Class B 190,000 4,229
Office Equipment & Supplies - 1.1%
CANON, Inc. ADR 55,000 3,112
Personal Care - 1.8%
Colgate-Palmolive Co. 80,000 5,219
Publishing - 0.9%
The McGraw-Hill Cos., Inc. 40,000 2,721
Real Estate - 1.9%
Simon Property Group, Inc. 55,000 5,571
Restaurants - 1.5%
McDonald's Corp. 100,000 4,433
Retail - 3.2%
J.C. Penney Co., Inc. 70,000 5,415
Kohl's Corp. (a) 60,000 4,106
-------
9,521
Services - 4.3%
Accenture Ltd., Class A 80,000 2,954
CA, Inc. 467 11
Cognizant Technology Solutions Corp. (a) 55,000 4,244
Ecolab, Inc. 120,000 5,424
-------
12,633
Telecommunications - 3.1%
AT&T, Inc. 150,000 5,362
Comcast Corp., Class A (a) 90,000 3,810
-------
9,172
-------
TOTAL COMMON STOCKS 278,395
Cost: $254,075
REPURCHASE AGREEMENTS - 3.8%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $11,309,
collateralized by Federal Home Loan Bank security, 5.30%,
06/20/08, market value $11,643)
Cost: $11,303 11,303 11,303
-------
TOTAL INVESTMENTS - 97.8% 289,698
Cost: $265,378
</Table>
Percentages indicated are based on net assets of $296,170.
(a) Non-income producing security.
(b) On December 31, 2006, the fund owned the following restricted securities
constituting 0.00% of net assets which may not be publicly sold without
registration under the Securities Act of 1933. These securities are valued at
their fair value as determined in good faith under consistently applied
procedures under the general supervision of the Trust's Board of Trustees.
Additional information on the securities is as follows:
Vulcan Power Co., Class A
Acquisition Date: March 3, 1995
Cost: $300
Unit Cost: $7.50
Value: $0
Silvan Power Co.
Acquisition Date: July 27, 2004
Cost: $0
Unit Cost: $0
Value: $0
ADR - American Depositary Receipt
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
37
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
EMERGING GROWTH FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
COMMON STOCKS - 95.8%
Apparel Manufacturers - 1.2%
Gildan Activewear, Inc. (a) 45,000 2,098
Biotechnology - 1.5%
Gilead Sciences, Inc. (a) 40,200 2,610
Computers - 5.9%
Akamai Technologies, Inc. (a) 45,000 2,390
Corning, Inc. (a) 75,360 1,410
Komag, Inc. (a) 40,000 1,515
Lexmark International, Inc. (a) 30,000 2,196
Webex Communications, Inc. (a) 75,000 2,617
-------
10,128
Consumer Products - 1.5%
Newell Rubbermaid, Inc. 90,000 2,606
Electrical Equipment - 1.7%
WESCO International, Inc. (a) 50,000 2,941
Electronics - 4.9%
Broadcom Corp., Class A (a) 60,000 1,939
Lam Research Corp. (a) 59,000 2,987
MEMC Electronic Materials, Inc. (a) 90,000 3,522
-------
8,448
Energy & Utilities - 10.7%
AES Corp. (a) 45,000 992
Airgas, Inc. 35,000 1,418
Allegheny Energy, Inc. (a) 50,000 2,296
Arch Coal, Inc. 35,000 1,051
Baker Hughes, Inc. 38,840 2,900
EOG Resources, Inc. 46,400 2,898
Hydril (a) 25,000 1,880
Patterson-UTI Energy, Inc. 85,200 1,979
Transocean, Inc. (a) 37,700 3,049
-------
18,463
Financial - Diversified - 1.2%
Moodys, Inc. 30,988 2,140
Financial Services - 3.9%
Chicago Mercantile Exchange Holdings, Inc. 7,606 3,877
T. Rowe Price Group, Inc. 66,110 2,894
-------
6,771
Foods - 2.2%
Campbell Soup Co. 60,000 2,333
The Pepsi Bottling Group, Inc. 45,000 1,391
-------
3,724
Healthcare - 11.5%
Allergan, Inc. 17,000 2,036
C.R. Bard, Inc. 44,975 3,731
Express Scripts, Inc. (a) 30,000 2,148
Intuitive Surgical, Inc. (a) 17,650 1,693
Laboratory Corp. of America Holdings (a) 40,000 2,939
Psychiatric Solutions, Inc. (a) 70,000 2,626
Sierra Health Services, Inc. (a) 81,776 2,947
St. Jude Medical, Inc. (a) 45,000 1,645
-------
19,765
Hotels & Motels - 1.1%
Choice Hotels International, Inc. 46,060 1,939
Insurance - 1.6%
W. R. Berkley Corp. 82,287 2,840
Investment Banking & Brokerage - 2.3%
A.G. Edwards, Inc. 30,000 1,899
Investment Technology Group, Inc. (a) 47,000 2,015
-------
3,914
Manufacturing - 8.7%
Commercial Metals Co. 40,000 1,032
Cummins, Inc. 20,000 2,364
Eagle Materials, Inc. 51,500 2,226
Lennox International, Inc. 70,000 2,143
National-Oilwell Varco, Inc. (a) 27,000 1,652
Oshkosh Truck Corp. 58,568 2,835
Roper Industries, Inc. 32,000 1,608
Sonoco Products Co. 30,000 1,142
-------
15,002
Pharmaceuticals - 3.0%
Barr Pharmaceuticals, Inc. (a) 32,000 1,604
McKesson Corp. 31,000 1,572
Pharmaceutical Product Development, Inc. 60,000 1,933
-------
5,109
</Table>
SEE FINANCIAL NOTES
38
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
EMERGING GROWTH FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
Real Estate - 2.6%
CB Richard Ellis Group, Inc., Class A (a) 135,000 4,482
Restaurants - 2.4%
Darden Restaurants, Inc. 55,000 2,209
Domino's Pizza, Inc. 70,000 1,960
-------
4,169
Retail - 13.2%
American Eagle Outfitters, Inc. 99,000 3,090
Coach, Inc. (a) 58,000 2,492
J.C. Penney Co., Inc. 34,000 2,630
Limited Brands, Inc. 75,000 2,171
Nordstrom, Inc. 68,012 3,355
Polo Ralph Lauren 40,000 3,106
The Men's Wearhouse, Inc. 44,000 1,683
The TJX Cos., Inc. 70,000 1,994
Urban Outfitters, Inc. (a) 90,000 2,073
Whole Foods Market, Inc. 5,900 277
-------
22,871
Services - 10.8%
CheckFree Corp. (a) 60,000 2,410
Cognizant Technology Solutions Corp. (a) 58,400 4,505
Corporate Executive Board Co. 36,549 3,205
Expeditors International of Washington, Inc. 63,200 2,560
Macrovision Corp. (a) 60,000 1,696
Monster Worldwide, Inc. (a) 45,000 2,099
Pool Corp. 55,000 2,154
-------
18,629
Telecommunications - 3.9%
CommScope, Inc. (a) 56,000 1,707
NII Holdings, Inc. (a) 20,000 1,289
Polycom, Inc. (a) 75,000 2,318
Time Warner Telecom, Inc., Class A (a) 70,000 1,395
-------
6,709
-------
TOTAL COMMON STOCKS 165,358
Cost: $124,230
<Caption>
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 4.5%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $7,833,
collateralized by Federal Home Loan Bank security,
5.30%, 06/20/08, market value $8,064)
Cost: $7,829 7,829 7,829
-------
TOTAL INVESTMENTS - 100.3% 173,187
Cost: $132,059
</Table>
Percentages indicated are based on net assets of $172,615.
(a) Non-income producing security.
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
39
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
SMALL CAP CORE GROWTH FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
COMMON STOCKS - 97.2%
Apparel Manufacturers - 2.3%
Deckers Outdoor Corp. (a) 15,000 899
Banks - 2.9%
Capitol Bancorp Ltd. 12,000 555
Pinnacle Financial Partners, Inc. (a) 7,000 232
PrivateBancorp, Inc. 8,000 333
------
1,120
Biotechnology - 1.4%
American Oriental Bioengineering, Inc. (a) 20,000 233
Myriad Genetics, Inc. (a) 10,000 313
------
546
Computers - 12.8%
American Reprographics Co. (a) 18,000 600
ANSYS, Inc. (a) 8,500 370
Blackbaud, Inc. 30,000 779
Concur Technologies, Inc. (a) 27,000 433
Komag, Inc. (a) 12,000 455
Mentor Graphics Corp. (a) 25,000 451
NIC, Inc. (a) 70,000 348
Sykes Enterprises, Inc. (a) 26,500 467
VeriFone Holdings, Inc. (a) 15,000 531
Webex Communications, Inc. (a) 14,000 488
------
4,922
Electrical Equipment - 2.0%
Genlyte Group (a) 10,000 781
Electronics - 2.9%
Diodes, Inc. (a) 20,000 710
SiRF Technology Holdings, Inc. (a) 16,000 408
------
1,118
Energy & Utilities - 7.9%
Airgas, Inc. 18,000 729
Core Laboratories N.V. (a) 11,000 891
Holly Corp. 16,000 822
Hydril (a) 8,000 602
------
3,044
Financial - Diversified - 1.7%
Advanta Corp., Class B 15,000 654
Foods - 2.3%
Jones Soda Co. (a) 35,000 431
Spartan Stores, Inc. 21,000 439
------
870
Healthcare - 12.9%
Allscripts Healthcare Solutions, Inc. (a) 19,000 513
Arena Pharmaceuticals, Inc. (a) 20,000 258
Bio-Reference Laboratories, Inc. (a) 16,000 360
DJO, Inc. (a) 12,000 514
Healthways, Inc. (a) 7,000 334
Integra LifeSciences Holdings Corp. (a) 9,500 405
Natus Medical, Inc. (a) 20,000 332
Omnicell, Inc. (a) 15,000 279
Psychiatric Solutions, Inc. (a) 14,000 525
Quality Systems, Inc. 13,000 485
Sierra Health Services, Inc. (a) 14,000 505
Sirona Dental Systems, Inc. 12,000 462
------
4,972
Hotels & Motels - 1.6%
Choice Hotels International, Inc. 15,000 632
Insurance - 1.5%
Philadelphia Consolidated Holding Corp. (a) 13,000 579
Investment Banking & Brokerage - 4.5%
Affiliated Managers Group, Inc. (a) 8,000 841
Investment Technology Group, Inc. (a) 10,000 429
Knight Capital Group, Inc., Class A (a) 25,000 479
------
1,749
Manufacturing - 9.9%
Baldor Electric Co. 13,000 434
BE Aerospace, Inc. (a) 17,000 437
Eagle Materials, Inc. 11,500 497
Gardner Denver, Inc. (a) 15,000 559
Itron, Inc. (a) 7,000 363
Oshkosh Truck Corp. 11,000 533
Roper Industries, Inc. 10,500 528
Silgan Holdings, Inc. 10,000 439
------
3,790
</Table>
SEE FINANCIAL NOTES
40
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
SMALL CAP CORE GROWTH FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
Pharmaceuticals - 2.9%
Pharmaceutical Product Development, Inc. 19,500 628
Progenics Pharmaceuticals, Inc. (a) 7,000 180
ViroPharma, Inc. (a) 20,000 293
------
1,101
Restaurants - 1.1%
Jack in the Box, Inc. (a) 7,000 427
Retail - 6.9%
Casual Male Retail Group, Inc. (a) 45,000 587
Coldwater Creek, Inc. (a) 23,000 564
Monro Muffler Brake, Inc. 15,000 527
The Children's Place Retail Stores, Inc. (a) 5,500 349
The Pantry, Inc. (a) 13,000 609
------
2,636
Services - 16.7%
Bankrate, Inc. (a) 13,000 493
Corporate Executive Board Co. 7,000 614
First Cash Financial Services, Inc. (a) 30,000 777
Forrester Research, Inc. (a) 14,000 380
LIFE TIME FITNESS, Inc. (a) 12,000 582
LKQ Corp. (a) 30,500 702
Mobile Mini, Inc. (a) 20,000 539
Pool Corp. 12,000 470
Portfolio Recovery Associates, Inc. (a) 9,000 420
Priceline.com, Inc. (a) 12,000 523
Ritchie Bros. Auctioneers, Inc. 10,000 535
The Knot, Inc. (a) 15,000 394
------
6,429
Telecommunications - 3.0%
CommScope, Inc. (a) 12,000 366
NICE Systems Ltd. ADR (a) 25,000 769
------
1,135
------
TOTAL COMMON STOCKS 37,404
Cost: $30,790
<Caption>
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 2.9%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $1,109,
collateralized by Federal Home Loan Bank security, 5.30%,
06/20/08, market value $1,143)
Cost: $1,109 1,109 1,109
------
TOTAL INVESTMENTS - 100.1% 38,513
Cost: $31,899
</Table>
Percentages indicated are based on net assets of $38,464.
(a) Non-income producing security.
ADR - American Depositary Receipt
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
41
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
VALUE FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
COMMON STOCKS - 99.4%
Air Freight - 1.8%
FedEx Corp. 8,116 882
Apparel Manufacturers - 2.4%
NIKE, Inc., Class B 7,014 695
VF Corp. 6,047 496
------
1,191
Auto Manufacturing - 1.6%
Toyota Motor Corp. ADR 5,970 802
Banks - 3.2%
Bank of America Corp. 18,511 989
KeyCorp 15,600 593
------
1,582
Broadcasting - 1.0%
Grupo Televisa SA ADR 17,724 479
Chemicals - 1.3%
Praxair, Inc. 10,921 648
Computers - 8.8%
Corning, Inc. (a) 28,004 524
Hewlett-Packard Co. 14,617 602
Intel Corp. 25,713 521
International Business Machines Corp. 8,850 859
Microsoft Corp. 22,024 658
Oracle Corp. (a) 46,303 793
SanDisk Corp. (a) 9,869 425
------
4,382
Consumer Products - 2.0%
Kimberly-Clark Corp. 14,353 975
Electrical Equipment - 1.2%
Emerson Electric Co. 13,306 586
Electronics - 4.3%
Cisco Systems, Inc. (a) 21,951 600
MEMC Electronic Materials, Inc. (a) 13,207 517
Rockwell Automation, Inc. 7,611 465
Texas Instruments, Inc. 20,118 579
------
2,161
Energy & Utilities - 11.2%
Allegheny Energy, Inc. (a) 12,750 585
Baker Hughes, Inc. 10,001 747
ConocoPhillips 24,341 1,750
Devon Energy Corp. 8,957 601
Patterson-UTI Energy, Inc. 26,292 611
Transocean, Inc. (a) 6,802 550
UGI Corp. 28,412 775
------
5,619
Financial - Diversified - 11.0%
Capital One Financial Corp. 13,561 1,042
JPMorgan Chase & Co. 24,421 1,180
Lehman Brothers Holdings, Inc. 9,440 737
Merrill Lynch & Co., Inc. 10,358 964
MetLife, Inc. 10,741 634
Wachovia Corp. 16,788 956
------
5,513
Foods - 5.2%
Bunge, Ltd. 10,906 791
Kellogg Co. 19,474 975
PepsiCo, Inc. 13,387 837
------
2,603
Healthcare - 11.0%
Baxter International, Inc. 15,490 719
Becton, Dickinson & Co. 7,856 551
Coventry Health Care, Inc. (a) 11,091 555
Johnson & Johnson, Inc. 15,562 1,027
Omnicare, Inc. 21,941 848
Pfizer, Inc. 39,914 1,034
WellPoint, Inc. (a) 9,499 747
------
5,481
Insurance - 6.0%
American International Group, Inc. 10,602 760
The Allstate Corp. 11,656 759
The Chubb Corp. 14,092 746
The Hartford Financial Services Group, Inc. 7,656 714
------
2,979
</Table>
SEE FINANCIAL NOTES
42
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
VALUE FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
Investment Banking & Brokerage - 1.4%
The Goldman Sachs Group, Inc. 3,489 696
Manufacturing - 6.4%
3M Co. 9,378 730
Eagle Materials, Inc. 14,423 624
Ingersoll-Rand Co. 13,154 515
National-Oilwell Varco, Inc. (a) 9,648 590
Precision Castparts Corp. 9,000 705
------
3,164
Pharmaceuticals - 1.0%
Hospira, Inc. (a) 14,700 494
Railroads - 1.3%
Norfolk Southern Corp. 13,011 654
Real Estate - 1.0%
Simon Property Group, Inc. 4,794 486
Restaurants - 1.7%
McDonald's Corp. 19,233 853
Retail - 4.7%
CVS Corp. 32,529 1,006
Nordstrom, Inc. 16,892 833
Target Corp. 8,817 503
------
2,342
Services - 4.2%
Affiliated Computer Services, Inc. (a) 13,092 639
Apollo Group, Inc., Class A (a) 9,415 367
Getty Images, Inc. (a) 11,562 495
URS Corp. (a) 14,330 614
------
2,115
Telecommunications - 5.7%
AT&T, Inc. 25,151 899
Motorola, Inc. 52,326 1,076
Sprint Nextel Corp. 44,810 846
------
2,821
------
TOTAL COMMON STOCKS 49,508
Cost: $41,743
<Caption>
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 4.8%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $2,368,
collateralized by Federal Home Loan Bank security, 5.30%,
06/20/08, market value $2,438)
Cost: $2,367 2,367 2,367
------
TOTAL INVESTMENTS - 104.2% 51,875
Cost: $44,110
</Table>
Percentages indicated are based on net assets of $49,784.
(a) Non-income producing security.
ADR - American Depositary Receipt
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
43
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
GLOBAL EQUITY FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
COMMON STOCKS - 98.1%
Air Freight - 1.0%
FedEx Corp. 7,500 815
Automobile Manufacturing - 4.2%
Toyota Motor Co. ADR 8,000 1,074
Volvo AB ADR 34,000 2,340
------
3,414
Banks - 13.8%
Australia and New Zealand Banking Group Ltd.
ADR 9,500 1,060
Banco Santander Central Hispano SA ADR 56,000 1,045
Bank of America Corp. 23,000 1,228
Bank of Ireland (a) 45,000 1,037
Bank of New York Co., Inc. 36,000 1,417
Bank of Nova Scotia 24,000 1,075
ICICI Bank Ltd. ADR 20,000 835
Julius Baer Holding Ltd. (a) 11,000 1,206
Royal Bank of Scotland Group plc (a) 25,301 983
UBS AG ADR 21,600 1,303
------
11,189
Biotechnology - 2.2%
Roche Holding AG (a) 10,000 1,790
Chemicals - 1.1%
Sigma-Aldrich Corp. 12,000 933
Computers - 4.1%
International Business Machines Corp. 10,000 972
Intuit, Inc. (b) 44,000 1,342
SAP AG (a) 20,000 1,064
------
3,378
Electronics - 2.6%
Agilent Technologies, Inc. (b) 30,000 1,046
Cisco Systems, Inc. (b) 40,000 1,093
------
2,139
Energy & Utilities - 9.4%
Apache Corp. 12,000 798
BG Group plc ADR 18,000 1,231
CONSOL Energy, Inc. 20,000 643
EnCana Corp. 25,000 1,149
Questar Corp. 10,000 831
Statoil ASA ADR 44,000 1,158
The AES Corp. (b) 50,000 1,102
Valero Energy Corp. 14,000 716
------
7,628
Entertainment - 5.4%
Comcast Corp., Class A (b) 40,000 1,675
Nintendo Co., Ltd. (a) 4,000 1,037
The Walt Disney Co. 50,000 1,714
------
4,426
Financial - Diversified - 6.3%
American Express Co. 16,000 971
Deutsche Boerse AG (a) 12,000 2,211
HSBC Holdings plc ADR 10,000 917
JPMorgan Chase & Co. 21,000 1,014
------
5,113
Foods - 6.5%
Groupe Danone ADR 40,000 1,304
McCormick & Co., Inc. 30,000 1,157
Nestle SA (a) 4,000 1,419
PepsiCo, Inc. 22,000 1,376
------
5,256
Healthcare - 9.5%
Becton, Dickinson & Co. 16,000 1,122
C.R. Bard, Inc. 14,000 1,162
Fresenius Medical Care AG & Co. KGaA ADR 27,000 1,200
Johnson & Johnson, Inc. 20,000 1,320
Laboratory Corp. of America Holdings (b) 15,000 1,102
Novartis AG ADR 31,000 1,781
------
7,687
Insurance - 4.1%
Allianz SE ADR 45,000 919
ING Groep NV (a) 29,000 1,285
Lincoln National Corp. 17,000 1,129
------
3,333
Manufacturing - 6.3%
FANUC Ltd. (a) 9,000 883
Johnson Matthey plc (a) 33,000 909
Komatsu, Ltd. (a) 45,000 907
L'Air Liquide ADR 33,000 1,565
Taiwan Semiconductor Manufacturing Co. Ltd.
ADR 77,249 844
------
5,108
Office Equipment & Supplies - 3.8%
Avery Dennison Corp. 13,500 917
CANON, Inc. ADR 39,000 2,207
------
3,124
</Table>
SEE FINANCIAL NOTES
44
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
GLOBAL EQUITY FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
Personal Care - 1.8%
Colgate-Palmolive Co. 23,000 1,501
Pharmaceuticals - 1.1%
Eisai Co. Ltd. (a) 16,300 896
Real Estate - 1.4%
Simon Property Group, Inc. 11,000 1,114
Retail - 5.9%
Kohl's Corp. (b) 26,000 1,779
Luxottica Group SpA ADR 45,000 1,380
Marks & Spencer
Group plc ADR 20,000 1,684
------
4,843
Services - 2.9%
Ecolab, Inc. 23,000 1,040
WPP Group plc (a) 99,000 1,340
------
2,380
Telecommunications - 4.7%
America Movil SA de C.V. ADR 19,000 859
PT Telekomunikasi
Indonesia ADR 22,000 1,003
Telenor ASA ADR 20,000 1,129
Vodafone Group plc (a) 300,000 827
------
3,818
------
TOTAL COMMON STOCKS 79,885
Cost: $61,223
<Caption>
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 2.1%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $1,739,
collateralized by Federal Home Loan Bank security, 5.30%,
06/20/08, market value $1,790)
Cost: $1,738 1,738 1,738
------
TOTAL INVESTMENTS - 100.2% 81,623
Cost: $62,961
</Table>
<Table>
<Caption>
- -------------------------------------------------------------------------
GLOBAL EQUITY FUND
- -------------------------------------------------------------------------
Percentages indicated are based on net assets of $81,461.
(a) Fair valued security. The approximate
market value and percentage of investments of
securities that were fair valued for the
Global Equity Fund were $17,794 and 21.8%.
(b) Non-income producing security.
ADR - American Depositary Receipt
</Table>
<Table>
The fund's portfolio holdings as of December 31, 2006, were distributed
among the following countries:
-------------------------
PERCENTAGE OF NET ASSETS
SHORT TERM
EQUITY & OTHER TOTAL
-------------------------
Australia 1.3% 1.3%
Canada 2.7% 2.7%
France 3.5% 3.5%
Germany 6.6% 6.6%
India 1.0% 1.0%
Indonesia 1.2% 1.2%
Ireland 1.3% 1.3%
Italy 1.7% 1.7%
Japan 8.6% 8.6%
Mexico 1.1% 1.1%
Netherlands 1.6% 1.6%
Norway 2.8% 2.8%
Spain 1.3% 1.3%
Sweden 2.9% 2.9%
Switzerland 9.2% 9.2%
Taiwan 1.0% 1.0%
United Kingdom 9.7% 9.7%
United States 40.4% 2.1% 42.5%
----------------------------
TOTAL 97.9% 2.1% 100.0%
</Table>
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
45
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
BALANCED FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
COMMON STOCKS - 63.4%
Air Freight - 0.9%
FedEx Corp. 950 103
Apparel Manufacturers - 0.9%
VF Corp. 1,300 107
Banks - 3.1%
Bank of America Corp. 2,200 117
Compass Bancshares, Inc. 2,000 120
SunTrust Banks, Inc. 1,350 114
------
351
Biotechnology - 0.6%
Gilead Sciences, Inc. (a) 1,000 65
Chemicals - 0.7%
Praxair, Inc. 1,275 76
Computers - 4.9%
Autodesk, Inc. (a) 3,000 121
Hewlett-Packard Co. 3,000 124
Intuit, Inc. (a) 2,000 61
Oracle Corp. (a) 8,000 137
SAP AG ADR 2,200 117
------
560
Construction - 0.5%
Fluor Corp. 750 61
Electrical Equipment - 1.0%
Emerson Electric Co. 2,600 115
Electronics - 2.4%
Agilent Technologies, Inc. (a) 3,850 134
Cisco Systems, Inc. (a) 5,200 142
------
276
Energy & Utilities - 7.5%
Baker Hughes, Inc. 1,600 119
Cameron International Corp. (a) 2,300 122
ConocoPhillips 1,850 133
Questar Corp. 1,500 125
Suncor Energy, Inc. 1,000 79
UGI Corp. 4,000 109
Valero Energy Corp. 1,400 72
XTO Energy, Inc. 2,000 94
------
853
Entertainment - 0.9%
The Walt Disney Co. 3,150 108
Financial - Diversified - 4.0%
JPMorgan Chase & Co. 3,400 164
State Street Corp. 2,325 157
Wachovia Corp. 2,450 140
------
461
Financial Services - 0.8%
T. Rowe Price Group, Inc. 2,150 94
Foods - 4.3%
Campbell Soup Co. 2,500 97
Groupe Danone ADR 3,500 114
McCormick & Co., Inc. 2,250 87
PepsiCo, Inc. 1,600 100
Sysco Corp. 2,450 90
------
488
Healthcare - 7.7%
Allergan, Inc. 1,275 153
Baxter International, Inc. 1,600 74
C.R. Bard, Inc. 950 79
Fresenius Medical Care AG & Co. KGaA ADR 3,000 133
Johnson & Johnson, Inc. 2,000 132
Laboratory Corp. of America Holdings (a) 2,575 188
Stryker Corp. 2,000 110
------
869
Insurance - 3.0%
American International Group, Inc. 1,000 72
The Chubb Corp. 2,800 148
The St. Paul Travelers
Cos., Inc. 2,200 118
------
338
Investment Banking & Brokerage - 0.9%
Affiliated Managers Group, Inc. (a) 1,000 105
Manufacturing - 4.1%
Deere & Co. 800 76
PACCAR, Inc. 2,400 156
Precision Castparts Corp. 2,000 156
Taiwan Semiconductor Manufacturing Co. Ltd.
ADR 7,000 77
------
465
Multimedia - 0.8%
News Corp., Class B 4,300 96
</Table>
SEE FINANCIAL NOTES
46
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
BALANCED FUND
SECURITY SHARES VALUE($)
- -------------------------------------------------------------------------
Personal Care - 1.1%
Colgate-Palmolive Co. 2,000 130
Railroads - 0.6%
Norfolk Southern Corp. 1,350 68
Real Estate - 1.9%
CB Richard Ellis Group, Inc., Class A (a) 2,700 90
Simon Property Group, Inc. 1,250 126
------
216
Restaurants - 1.1%
McDonald's Corp. 2,800 124
Retail - 4.0%
American Eagle Outfitters, Inc. 4,500 141
J.C. Penney Co., Inc. 1,500 116
Polo Ralph Lauren 1,600 124
Staples, Inc. 2,700 72
------
453
Services - 3.4%
Accenture Ltd., Class A 3,100 114
Cognizant Technology Solutions Corp. (a) 1,750 135
Ecolab, Inc. 3,000 136
------
385
Telecommunications - 2.3%
America Movil SA de C.V. ADR 3,000 136
Verizon Communications, Inc. 3,500 130
------
266
------
TOTAL COMMON STOCKS 7,233
Cost: $6,558
PREFERRED STOCK - 0.4%
Financial - Diversified - 0.4%
Citigroup Capital XV, 6.50%, 9/15/66 2,000 51
Cost: $50
<Caption>
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS - 0.2%
First Horizon Alternative Mortgage
Securities, 4.75%, 06/25/34 (b) 9 9
5.50%, 03/25/35 (b) 13 13
------
Cost: $23 22
CORPORATE BONDS - 8.0%
Banks - 1.0%
Bank of America Corp., 4.38%, 12/01/10 50 49
Capital One Bank, 6.50%, 06/13/13 50 53
------
102
Chemicals - 0.4%
Amgen, Inc., 6.50%, 12/01/07 40 40
Computers - 0.1%
Corning, Inc., 6.20%, 03/15/16 15 15
Construction - 0.2%
KB Home, 5.88%, 01/15/15 15 14
Pulte Homes, Inc., 6.00%, 02/15/35 10 9
------
23
Energy & Utilities - 0.6%
Atmos Energy, 4.95%, 10/15/14 15 14
Chesapeake Energy Corp., 6.88%, 01/15/16 20 20
Enterprise Products Partners LP, 4.95%,
06/01/10 20 20
XTO Energy, Inc., 5.30%, 06/30/15 20 19
------
73
Entertainment - 0.2%
Comcast Cable Communications, 8.38%, 05/01/07 25 25
Financial - Diversified - 2.9%
Chase Issuance Trust, 3.22%, 06/15/10 100 99
CIT Group, Inc., 5.00%, 02/01/15 50 48
Citigroup, Inc., 5.52%, 05/18/10 (b) 50 50
HSBC Finance Corp., 4.63%, 09/15/10 50 49
International Lease Finance Corp., 5.80%,
08/15/07 50 50
</Table>
SEE FINANCIAL NOTES
47
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
BALANCED FUND
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
Financial - Diversified (continued)
Liberty Mutual Group, 5.75%, 03/15/14 (c) 10 10
Riddell Bell Holdings, 8.38%, 10/01/12 15 15
------
321
Financial Services - 0.4%
Franklin Resources, Inc., 3.70%, 04/15/08 48 47
Food - 0.4%
The Pepsi Bottling Group, Inc., 5.63%,
02/17/09 (c) 50 50
Healthcare - 0.4%
Medtronic, Inc., 4.75%, 09/15/15 50 47
Investment Banking & Brokerage - 0.1%
The Goldman Sachs Group, Inc., 5.00%,
10/01/14 15 15
Manufacturing - 0.0%*
American Standard, Inc., 7.38%, 02/01/08 5 5
Real Estate - 0.0%*
Brandywine Realty Trust, 5.40%, 11/01/14 5 5
Restaurants - 0.5%
Domino's, Inc., 8.25%, 07/01/11 7 7
McDonald's Corp., 5.00%, 02/15/15 50 48
------
55
Telecommunications - 0.8%
AT&T, Inc., 5.88%, 02/01/12 50 51
Directv Holdings, 6.38%, 06/15/15 30 29
Sprint Nextel Corp., 7.38%, 08/01/15 10 10
------
90
------
TOTAL CORPORATE BONDS 913
Cost: $927
FOREIGN GOVERNMENT BOND - 0.1%
United Mexican States, 6.75%, 09/27/34 15 16
Cost: $15
U.S. GOVERNMENT AGENCY OBLIGATIONS - 18.1%
Federal Farm Credit Bank - 1.1%
5.83%, 01/14/08 25 25
5.43%, 10/24/12 100 99
------
124
Federal Home Loan Bank - 4.0%
4.28%, 11/05/07 100 100
4.50%, 02/15/08 100 99
5.50%, 01/12/11 50 50
5.20%, 05/11/12 15 15
6.00%, 12/28/15 100 99
4.88%, 03/11/16 100 99
------
462
Federal Home Loan Mortgage Corporation - 4.6%
4.55%, 01/20/11 5 5
4.50%, 01/15/13 9 9
5.00%, 10/01/18 87 86
5.50%, 10/01/18 55 55
5.20%, 03/05/19 40 39
5.50%, 08/20/19 20 20
6.00%, 12/01/20 42 43
5.50%, 03/01/21 91 90
5.50%, 04/01/21 90 89
5.00%, 06/01/35 90 86
------
522
Federal National Mortgage Association - 8.4%
5.25%, 01/15/09 14 14
5.00%, 08/10/10 100 99
6.00%, 05/10/12 25 25
4.38%, 09/15/12 4 4
5.00%, 04/15/15 20 20
5.55%, 08/04/15 100 99
6.00%, 02/25/17 92 93
5.00%, 10/01/18 81 80
4.50%, 06/01/19 126 122
5.00%, 09/01/19 34 34
5.50%, 03/25/29 100 100
6.50%, 07/01/32 2 2
6.00%, 11/01/32 1 1
5.50%, 03/01/33 24 24
4.58%, 12/01/34 33 33
4.85%, 01/01/35 (b) 18 18
</Table>
SEE FINANCIAL NOTES
48
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
BALANCED FUND
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
Federal National Mortgage Association (continued)
4.82%, 08/01/35 89 88
5.50%, 10/01/35 99 97
------
953
------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 2,061
Cost: $2,078
U.S. TREASURY NOTES - 5.4%
6.50%, 02/15/10 100 106
4.00%, 03/15/10 100 98
3.88%, 05/15/10 35 34
4.75%, 05/15/14 10 10
4.00%, 02/15/15 100 95
4.13%, 05/15/15 30 29
4.50%, 11/15/15 100 98
4.50%, 02/15/16 100 98
5.38%, 02/15/31 50 54
------
Cost: $625 622
REPURCHASE AGREEMENTS - 4.5%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $517,
collateralized by Federal Home Loan Bank security, 5.30%,
06/20/08, market value $533)
Cost: $517 517 517
------
TOTAL INVESTMENTS - 100.1% 11,435
Cost: $10,793
</Table>
Percentages indicated are based on net assets of $11,426.
(a) Non-income producing security.
(b) Variable rate security. The rate presented represents the rate in effect
at December 31, 2006.
(c) Rule 144A security.
* Rounds to less than 0.1%.
ADR - American Depositary Receipt
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
49
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
INCOME FUND
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
COLLATERALIZED MORTGAGE OBLIGATIONS - 22.7%
Capital One Multi-Asset Execution Trust,
5.50%, 09/15/11 (a) 700 703
Chase Manhattan Auto Owner Trust,
4.88%, 06/15/12 240 239
Citibank Credit Card Issuance Trust,
3.50%, 08/16/10 285 278
Citigroup Commercial Mortgage Trust,
4.22%, 09/20/51 (b) 500 488
Crusade Global Trust,
5.43%, 11/15/37 (a) 488 488
5.51%, 11/19/37 (a) 384 384
First Horizon Alternative Mortgage
Securities,
4.75%, 06/25/34 (a) 738 733
First Union National Bank Commercial
Mortgage,
6.94%, 10/15/32 (a) 133 133
6.42%, 08/15/33 (a) 300 313
Greenwich Capital Commercial Funding Corp.,
4.95%, 01/11/35 525 517
3.92%, 08/10/42 331 325
GS Mortgage Securities Corp. II,
4.61%, 01/10/40 800 773
Harley-Davidson Motorcycle Trust,
3.20%, 05/15/12 658 645
LB-UBS Commercial Mortgage Trust,
3.27%, 09/15/26 253 251
6.65%, 11/15/27 425 447
6.37%, 12/15/28 (a) 500 522
5.02%, 09/15/40 407 398
MBNA Credit Card Master Note Trust,
4.95%, 06/15/09 987 986
MLCC Mortgage Investors, Inc.,
5.58%, 03/25/30 (a) 311 311
Puma Finance Limited,
5.58%, 08/09/35 (a) (b) 912 913
Wachovia Bank Commercial Mortgage Trust,
4.96%, 11/15/35 500 490
5.18%, 07/15/42 498 504
------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS 10,841
Cost: $10,830
CORPORATE BONDS - 16.7%
Airlines - 0.5%
Delta Air Lines,
6.42%, 07/02/12 110 111
6.72%, 01/02/23 124 126
------
237
Banking - 1.1%
Barclays Bank plc,
5.93%, 12/15/16 (b) 500 506
Broadcasting - 0.5%
Rogers Cable, Inc.,
5.50%, 03/15/14 250 239
Construction - 0.5%
KB Home,
5.88%, 01/15/15 250 229
Electrical Equipment - 0.5%
Flextronics International, Ltd.,
6.50%, 05/15/13 250 247
Energy & Utilities - 1.8%
Chesapeake Energy Corp.,
6.50%, 08/15/17 250 244
Devon Financing Corp.,
7.88%, 09/30/31 500 602
------
846
Financial - Diversified - 0.9%
Countrywide Financial Corp.,
6.25%, 05/15/16 400 408
Insurance - 2.2%
W.R. Berkley Corp.,
5.60%, 05/15/15 300 295
Fidelity National Financial,
5.25%, 03/15/13 250 237
Lincoln National Corp.,
7.00%, 05/17/66 500 530
------
1,062
</Table>
SEE FINANCIAL NOTES
50
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
INCOME FUND
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
Multimedia - 3.1%
Comcast Corp.,
6.45%, 03/15/37 500 500
Time Warner, Inc.,
5.88%, 11/15/16 400 399
8.38%, 07/15/33 500 604
------
1,503
Real Estate - 2.1%
iStar Financial, Inc.,
5.88%, 03/15/16 500 496
Simon Property Group LP,
5.10%, 06/15/15 500 486
------
982
Restaurants - 0.5%
Domino's, Inc.,
8.25%, 07/01/11 250 259
Telecommunications - 3.0%
Embarq Corp.,
8.00%, 06/01/36 520 541
Sprint Nextel Corp.,
7.38%, 08/01/15 310 318
Verizon Communications, Inc.,
5.55%, 02/15/16 600 598
------
1,457
------
TOTAL CORPORATE BONDS 7,975
Cost: $7,931
U.S. GOVERNMENT AGENCY OBLIGATIONS - 38.0%
Federal Home Loan Mortgage Corporation - 10.4%
4.50%, 04/01/20 1,365 1,316
5.00%, 10/01/35 1,844 1,780
6.00%, 07/01/36 1,845 1,859
------
4,955
------
Federal National Mortgage Association - 27.6%
5.76%, 12/25/11 200 207
4.50%, 01/01/20 1,566 1,510
5.00%, 07/01/20 1,654 1,626
5.00%, 08/01/20 1,518 1,493
4.40%, 11/25/33 890 880
5.50%, 03/01/36 1,912 1,889
5.50%, 04/01/36 1,878 1,857
5.50%, 05/01/36 1,840 1,818
6.00%, 07/01/36 1,955 1,967
------
13,247
------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 18,202
Cost: $18,012
U.S. TREASURY NOTES - 17.3%
4.63%, 11/30/08 4,280 4,265
4.63%, 11/15/16 3,400 3,378
5.38%, 02/15/31 213 228
4.50%, 02/15/36 443 421
------
Cost: $8,320 8,292
REPURCHASE AGREEMENTS - 5.0%
Fifth Third Bank, Inc.,
4.80%, 01/02/07
(Date of Agreement 12/29/06, proceeds at maturity $2,396,
collateralized by Federal Home Loan Bank security, 5.30%,
06/20/08, market value $2,467)
Cost: $2,395 2,395 2,395
------
TOTAL INVESTMENTS - 99.7% 47,705
Cost: $47,488
</Table>
Percentages indicated are based on net assets of $47,835.
(a) Variable rate security. The rate presented represents the rate in effect at
December 31, 2006.
(b) Rule 144A security.
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
51
CITIZENS FUNDS HOLDINGS (UNAUDITED)
<Table>
<Caption>
- -------------------------------------------------------------------------
MONEY MARKET FUND
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT - 6.0%
City National Bank of New Jersey,
4.25%, 03/14/07 (a) 100 100
PNC Bank,
4.79%, 01/24/07 2,000 1,999
Self Help Credit Union,
4.73%, 03/14/07 (a) 100 100
Wilmington Trust Corp.,
5.60%, 04/05/07 1,000 1,000
5.27%, 06/08/07 2,000 2,001
------
TOTAL CERTIFICATES OF DEPOSIT 5,200
Cost: $5,200
COMMERCIAL PAPER - 63.8%
American General Finance Corp.,
5.41%, 02/12/07 1,000 994
5.41%, 02/16/07 1,950 1,937
APRECO LLC,
5.38%, 02/15/07 (b) 1,000 993
5.42%, 04/16/07 (b) 550 542
Atlantis One Funding Corp.,
5.38%, 01/04/07 (b) 1,382 1,381
5.38%, 01/11/07 (b) 1,500 1,498
5.39%, 02/21/07 (b) 1,325 1,315
Barclays Capital plc,
5.39%, 02/02/07 1,400 1,393
Barton Capital LLC,
5.42%, 01/11/07 (b) 362 361
5.35%, 01/18/07 (b) 1,325 1,322
5.37%, 02/09/07 (b) 1,000 995
CAFCO, Inc.,
5.38%, 01/30/07 (b) 1,255 1,250
Chariot Funding,
5.37%, 01/05/07 (b) 1,060 1,059
5.40%, 01/18/07 (b) 527 526
5.37%, 01/23/07 (b) 1,150 1,146
Cooperative Association of Tractor Dealers,
5.42%, 01/03/07 122 122
5.50%, 01/05/07 550 550
5.50%, 01/08/07 124 124
5.46%, 02/09/07 336 334
5.41%, 03/16/07 1,462 1,446
5.41%, 03/19/07 160 158
5.41%, 03/20/07 1,000 989
5.44%, 04/26/07 120 118
Countrywide Home Loans,
5.48%, 01/02/07 1,000 1,000
5.39%, 01/29/07 1,379 1,373
CRC Funding,
5.39%, 01/12/07 (b) 1,700 1,697
5.38%, 01/23/07 (b) 1,600 1,595
Fountain Square,
5.38%, 02/09/07 (b) 1,690 1,681
5.45%, 03/15/07 (b) 650 643
Galaxy Funding, Inc.,
5.39%, 02/07/07 (b) 1,240 1,233
Galleon Capital,
5.37%, 01/24/07 (b) 1,147 1,143
Harley-Davidson Funding,
5.33%, 01/11/07 (b) 1,239 1,237
5.33%, 02/08/07 (b) 2,000 1,989
ING America Insurance,
5.39%, 01/09/07 350 350
5.37%, 01/16/07 3,175 3,168
Ivory Funding,
5.40%, 03/15/07 (b) 1,766 1,747
Merrill Lynch & Co., Inc.,
5.37%, 02/23/07 950 943
Metlife Funding, Inc.,
5.38%, 01/17/07 (b) 1,878 1,873
5.34%, 02/14/07 (b) 138 137
Procter & Gamble,
5.36%, 02/06/07 (b) 1,631 1,622
Rabobank,
5.33%, 01/02/07 2,294 2,293
5.35%, 02/01/07 1,000 995
Societe Generale,
5.38%, 01/08/07 2,250 2,248
5.40%, 03/01/07 1,860 1,844
UBS Finance Corp.,
5.49%, 01/10/07 150 150
5.36%, 01/22/07 1,480 1,475
5.38%, 01/26/07 100 100
5.42%, 03/01/07 500 496
5.39%, 03/08/07 611 605
Verizon Network Funding,
5.45%, 01/23/07 (b) 321 320
5.39%, 01/25/07 (b) 1,200 1,196
------
TOTAL COMMERCIAL PAPER 55,706
Cost: $55,706
</Table>
SEE FINANCIAL NOTES
52
DECEMBER 31, 2006 ($ X 1,000)
<Table>
<Caption>
- -------------------------------------------------------------------------
MONEY MARKET FUND
SECURITY, RATE, MATURITY DATE PRINCIPAL($) VALUE($)
- -------------------------------------------------------------------------
CORPORATE BONDS - 9.7%
Allstate Financial Global Funding,
5.25%, 02/01/07 (b) 2,000 1,999
SLM Corp.,
5.50%, 01/25/07 (c) 950 950
The Goldman Sachs Group, Inc.,
5.46%, 03/30/07 (c) 3,000 3,002
Verizon Global Funding Corp.,
6.13%, 06/15/07 2,500 2,508
------
TOTAL CORPORATE BONDS 8,459
Cost: $8,459
MUNICIPAL NOTES - 7.5%
Massachusetts State
Development Finance Agency,
5.38%, 12/01/40 (c) 3,000 3,000
New York State Housing Finance Agency,
5.35%, 11/15/29 (c) 3,500 3,500
------
TOTAL MUNICIPAL NOTES 6,500
Cost: $6,500
U.S. GOVERNMENT AGENCY OBLIGATIONS - 10.4%
Federal Home Loan Bank - 4.4%
3.38%, 02/15/07 2,250 2,245
4.25%, 04/16/07 870 867
4.25%, 05/08/07 750 747
------
3,859
Federal Home Loan Mortgage Corporation - 1.7%
5.35%, 11/21/07 1,510 1,510
Federal National Mortgage Association - 4.3%
4.75%, 01/02/07 500 500
5.25%, 04/20/07 1,200 1,200
5.41%, 12/28/07 2,000 2,000
------
3,700
------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS 9,069
------
Cost: $9,069
TOTAL INVESTMENTS - 97.4% 84,934
Cost: $84,934
</Table>
Percentages indicated are based on net assets of $87,228.
(a) Restricted security which may not be publicly sold without registration
under the Securities Act of 1933.
(b) Rule 144A security.
(c) Variable rate security. The rate presented represents the rate in effect at
December 31, 2006.
- --------------------------------------------------------------------------------
SEE FINANCIAL NOTES
53
STATEMENTS OF ASSETS
AND LIABILITIES (UNAUDITED)
<Table>
<Caption>
Core Growth Emerging Growth Small Cap Core
Fund Fund Growth Fund
- ------------------------------------------------------------------------------------------------
ASSETS
Investments, at value $278,394,597 $ 165,358,016 $37,404,250
Repurchase agreements 11,303,451 7,828,897 1,108,718
------------------------------------------------
Total investments 289,698,048 173,186,913 38,512,968
Cash -- -- --
Receivables:
Interest and dividends 543,366 78,409 5,946
Investments sold 6,776,584 -- --
Tax reclaims -- -- --
Capital shares issued 224,475 132,485 38,143
Due from investment adviser -- -- --
Prepaid expenses 25,459 19,163 9,667
------------------------------------------------
Total assets 297,267,932 173,416,970 38,566,724
LIABILITIES
Payables:
Dividends to shareholders -- -- --
Investments purchased -- -- --
Capital shares redeemed 322,791 227,125 15,050
Investment management fees 250,558 292,598 32,298
Administrative fees 75,168 43,890 9,689
Distribution fees 108,204 72,908 16,149
Shareholder service fees 95,768 20,713 3,976
Transfer agent expenses 144,529 90,969 15,539
Other accrued expenses 101,356 53,295 9,926
------------------------------------------------
Total liabilities 1,098,374 801,498 102,627
- ------------------------------------------------------------------------------------------------
NET ASSETS $296,169,558 $ 172,615,472 $38,464,097
- ------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------
NET ASSETS
Standard Shares:
Net assets $253,728,593 $ 167,260,126 $38,464,097
Number of shares outstanding 12,162,842 10,011,463 3,121,783
Net asset value, offering and redemption
price per share $ 20.86 $ 16.71 $ 12.32
Institutional Shares:
Net assets $ 40,763,776 $ 575,044 --
Number of shares outstanding 2,332,234 32,906 --
Net asset value, offering and redemption
price per share $ 17.48 $ 17.48 --
Administrative Shares:
Net assets $ 1,677,189 $ 4,780,302 --
Number of shares outstanding 78,281 279,348 --
Net asset value, offering and redemption
price per share $ 21.43 $ 17.11 --
Net assets consist of:
Paid-in capital $294,510,700 $ 300,878,124 $31,987,280
Accumulated (Distributions in excess of) net
investment income/loss 320,924 (937,496) (148,288)
Accumulated net realized gains/losses on
investments and foreign currencies (22,981,622) (168,453,055) 10,681
Net unrealized appreciation/depreciation on
investments and foreign currencies 24,319,556 41,127,899 6,614,424
- ------------------------------------------------------------------------------------------------
NET ASSETS $296,169,558 $ 172,615,472 $38,464,097
- ------------------------------------------------------------------------------------------------
Investments, at cost $265,378,492 $ 132,059,014 $31,898,544
Foreign currency, at cost -- -- --
</Table>
SEE FINANCIAL NOTES
54
AS OF DECEMBER 31, 2006
<Table>
<Caption>
Value Global Equity Balanced Income Money Market
Fund Fund Fund Fund Fund
- --------------------------------------------------------------------------
$49,508,015 $ 79,885,315 $10,917,959 $45,310,189 $84,934,318
2,366,954 1,737,810 517,184 2,394,601 --
- --------------------------------------------------------------------------
51,874,969 81,623,125 11,435,143 47,704,790 84,934,318
-- -- -- -- 1,783,366
43,198 119,594 54,129 306,519 283,345
-- -- 109,697 -- --
-- 86,505 -- -- --
82,355 42,146 42,704 144,458 878,366
21,857 -- 9,380 -- --
9,574 16,671 9,127 7,055 14,168
- --------------------------------------------------------------------------
52,031,953 81,888,041 11,660,180 48,162,822 87,893,563
-- -- 48,733 157,667 326,224
1,981,035 -- 156,414 -- --
160,434 147,588 -- 35,650 192,512
55,516 136,069 12,354 53,079 51,234
11,896 20,408 2,851 12,249 21,958
16,899 33,810 4,751 20,415 --
4,020 9,554 1,379 5,490 9,416
12,520 49,142 4,146 23,780 39,609
5,991 29,972 4,004 19,200 24,127
- --------------------------------------------------------------------------
2,248,311 426,543 234,632 327,530 665,080
- --------------------------------------------------------------------------
$49,783,642 $ 81,461,498 $11,425,548 $47,835,292 $87,228,483
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
$42,679,919 $ 79,657,889 $11,425,548 $47,835,292 $75,661,699
3,048,233 4,029,781 907,534 4,916,792 75,760,378
$ 14.00 $ 19.77 $ 12.59 $ 9.73 $ 1.00
$ 7,103,723 $ 501,472 -- -- $11,566,784
507,510 24,329 -- -- 11,572,130
$ 14.00 $ 20.61 -- -- $ 1.00
-- $ 1,302,137 -- -- --
-- 64,612 -- -- --
-- $ 20.15 -- -- --
$47,004,375 $ 182,052,528 $10,689,137 $54,238,235 $87,266,457
(18,658) (119,512) 2,898 14,254 622
(4,967,045) (119,139,620) 91,013 (6,634,283) (38,596)
7,764,970 18,668,102 642,500 217,086 --
- --------------------------------------------------------------------------
$49,783,642 $ 81,461,498 $11,425,548 $47,835,292 $87,228,483
- --------------------------------------------------------------------------
$44,109,999 $ 62,960,994 $10,792,643 $47,487,704 $84,934,318
-- -- -- -- --
</Table>
SEE FINANCIAL NOTES
55
STATEMENTS OF OPERATIONS (UNAUDITED)
<Table>
<Caption>
Core Growth Emerging Growth Small Cap Core
Fund Fund Growth Fund
- -----------------------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $ 443,434 $ 220,605 $ 54,032
Dividend (1) 2,343,293 471,272 63,358
- -----------------------------------------------------------------------------------------------
Total investment income 2,786,727 691,877 117,390
EXPENSES
Investment management fees 761,658 862,934 94,089
Administrative fees 228,499 129,440 28,227
Distribution fees:
Standard shares 325,225 208,798 47,044
Administrative shares 2,068 6,035 --
Shareholder service fees:
Standard shares 331,664 54,192 10,662
Institutional shares 398 61 --
Administrative shares -- -- --
Transfer agent expenses:
Standard shares 308,393 228,403 51,010
Institutional shares 1,137 184 --
Administrative shares 614 858 --
Accounting expenses 66,569 36,001 8,579
Custody expenses 6,037 3,310 1,963
Registration expenses 22,155 19,824 8,280
Trustee expenses 33,853 17,892 3,217
Other expenses 106,277 61,441 12,607
- -----------------------------------------------------------------------------------------------
Total expenses before reimbursements or
waivers 2,194,547 1,629,373 265,678
Reimbursements or waivers from adviser -- -- --
- -----------------------------------------------------------------------------------------------
Net expenses 2,194,547 1,629,373 265,678
- -----------------------------------------------------------------------------------------------
NET INVESTMENT INCOME/LOSS $ 592,180 $ (937,496) $(148,288)
REALIZED AND UNREALIZED GAINS/LOSSES ON
INVESTMENTS AND FOREIGN CURRENCY
TRANSACTIONS
Realized gains on investments and foreign
currency transactions $4,028,459 $5,455,501 $ 684,740
Change in unrealized
appreciation/depreciation on investments
and foreign currencies 1,855,178 (1,446,648) 135,630
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gains/losses on
investments and foreign currencies 5,883,637 4,008,853 820,370
CHANGE IN NET ASSETS FROM OPERATIONS $6,475,817 $3,071,357 $ 672,082
(1) Dividend income net of withholding taxes. For the six months ended December 31, 2006,
withholding taxes for the Global Equity Fund were $1,994.
</Table>
SEE FINANCIAL NOTES
56
FOR THE SIX MONTHS ENDED DECEMBER 31, 2006
<Table>
<Caption>
Value Global Equity Balanced Income Money Market
Fund Fund Fund Fund Fund
- ---------------------------------------------------------------------
$ 77,769 $ 100,387 $113,616 $1,356,893 $2,333,478
304,892 602,560 50,628 -- --
- ---------------------------------------------------------------------
382,661 702,947 164,244 1,356,893 2,333,478
150,723 406,312 36,659 164,073 153,363
32,298 60,947 8,460 37,863 65,727
46,214 99,199 14,100 63,105 --
-- 1,613 -- -- --
10,320 25,177 3,732 13,996 23,761
-- 34 -- -- 214
-- 21 -- -- --
44,667 130,264 11,199 52,274 90,367
244 95 -- -- 736
-- 797 -- -- --
9,009 26,714 8,654 15,747 17,873
1,167 6,350 2,959 2,000 4,663
16,819 18,762 8,033 9,351 18,317
3,064 9,379 518 5,763 9,363
14,743 32,177 3,953 17,073 28,433
- ---------------------------------------------------------------------
329,268 817,841 98,267 381,245 412,817
(63,004) -- (24,937) -- --
- ---------------------------------------------------------------------
266,264 817,841 73,330 381,245 412,817
- ---------------------------------------------------------------------
$ 116,397 $ (114,894) $ 90,914 $ 975,648 $1,920,661
1,838,193 2,364,368 115,442 220,317 --
2,311,190 3,867,670 353,994 955,498 --
- ---------------------------------------------------------------------
4,149,383 6,232,038 469,436 1,175,815 --
$4,265,780 $6,117,144 $560,350 $2,151,463 $1,920,661
</Table>
SEE FINANCIAL NOTES
57
STATEMENTS OF CHANGES
IN NET ASSETS
<Table>
<Caption>
CORE GROWTH FUND EMERGING GROWTH FUND
- ----------------------------------------------------------------------------------------------------------
For the For the
six months six months
ended For the ended For the
12/31/06 year ended 12/31/06 year ended
(Unaudited) 06/30/06 (Unaudited) 06/30/06
- ----------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income/loss $ 592,180 $ (1,068,071) $ (937,496) $ (2,244,099)
Realized gains/losses on investments and
foreign currency transactions 4,028,459 46,437,932 5,455,501 16,391,277
Change in unrealized appreciation/depreciation
on investments and foreign currency
transactions 1,855,178 (32,840,999) (1,446,648) 11,851,314
- ----------------------------------------------------------------------------------------------------------
Change in net assets from operations 6,475,817 12,528,862 3,071,357 25,998,492
Dividends to Shareholders:
From net investment income:
Standard Shares -- -- -- --
Institutional Shares (267,821) -- -- --
Administrative Shares (3,435) -- -- --
From net realized gains on investments:
Standard Shares -- -- -- --
- ----------------------------------------------------------------------------------------------------------
Total dividends (271,256) -- -- --
Change in net assets from capital transactions (25,122,925) (21,131,884) (7,129,603) (15,191,378)
CHANGE IN NET ASSETS $(18,918,364) $ (8,603,022) $ (4,058,246) $ 10,807,114
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period $315,087,922 $323,690,944 $176,673,718 $165,866,604
End of period $296,169,558 $315,087,922 $172,615,472 $176,673,718
- ----------------------------------------------------------------------------------------------------------
Accumulated (distributions in excess of) net
investment income/loss $ 320,924 -- $ (937,496) --
- ----------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Standard Shares
Proceeds from shares issued $ 5,246,227 $ 19,766,782 $ 7,746,806 $ 23,763,198
Dividends reinvested -- -- -- --
Cost of shares redeemed (25,527,827) (40,508,379) (14,168,638) (36,013,649)
------------------------------------------------------
Net change (20,281,600) (20,741,597) (6,421,832) (12,250,451)
------------------------------------------------------
Institutional Shares
Proceeds from shares issued $ 5,848,308 $ 28,867,126 $ 8,282 $ 232,979
Dividends reinvested 260,617 -- -- --
Cost of shares redeemed (10,930,691) (29,194,052) (343,311) (2,151,187)
------------------------------------------------------
Net change (4,821,766) (326,926) (335,029) (1,918,208)
------------------------------------------------------
Administrative Shares
Proceeds from shares issued $ 140,197 $ 531,600 $ 182,798 $ 854,234
Dividends reinvested 3,435 -- -- --
Cost of shares redeemed (163,191) (594,961) (555,540) (1,876,953)
------------------------------------------------------
Net change (19,559) (63,361) (372,742) (1,022,719)
------------------------------------------------------
CHANGE IN NET ASSETS FROM CAPITAL TRANSACTIONS $(25,122,925) $(21,131,884) $ (7,129,603) $(15,191,378)
- ----------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Standard Shares
Issued 259,559 933,592 475,311 1,485,237
Reinvested -- -- -- --
Redeemed (1,254,372) (1,923,535) (872,950) (2,282,753)
------------------------------------------------------
Net change (994,813) (989,943) (397,639) (797,516)
------------------------------------------------------
Institutional Shares
Issued 341,894 1,646,381 490 13,737
Reinvested 14,850 -- -- --
Redeemed (638,541) (1,651,566) (20,138) (141,270)
------------------------------------------------------
Net change (281,797) (5,185) (19,648) (127,533)
------------------------------------------------------
Administrative Shares
Issued 6,759 24,473 10,919 51,723
Reinvested 160 -- -- --
Redeemed (7,770) (28,026) (33,909) (116,060)
------------------------------------------------------
Net change (851) (3,553) (22,990) (64,337)
------------------------------------------------------
CHANGE IN SHARES FROM SHARE TRANSACTIONS (1,277,461) (998,681) (440,277) (989,386)
- ----------------------------------------------------------------------------------------------------------
* The Value Fund Institutional shares commenced operations on March 31, 2006.
</Table>
SEE FINANCIAL NOTES
58
<Table>
<Caption>
SMALL CAP CORE GROWTH FUND VALUE FUND GLOBAL EQUITY FUND
- ----------------------------------------------------------------------------------------
For the For the For the
six months six months six months
ended For the year ended For the year ended For the year
12/31/06 ended 12/31/06 ended 12/31/06 ended
(Unaudited) 06/30/06 (Unaudited) 6/30/2006 * (Unaudited) 06/30/06
- ----------------------------------------------------------------------------------------
$ (148,288) $ (283,687) $ 116,397 $ 54,391 $ (114,894) $ (38,404)
684,740 3,401,326 1,838,193 1,120,508 2,364,368 3,754,241
135,630 938,778 2,311,190 1,764,193 3,867,670 8,302,807
- ----------------------------------------------------------------------------------------
672,082 4,056,417 4,265,780 2,939,092 6,117,144 12,018,644
-- -- (156,486) -- -- --
-- -- (32,960) -- -- --
-- -- -- -- -- --
(1,113,792) -- -- -- -- --
- ----------------------------------------------------------------------------------------
(1,113,792) -- (189,446) -- -- --
995,865 3,794,453 7,189,821 7,787,498 (6,214,905) (15,299,387)
$ 554,155 $ 7,850,870 $11,266,155 $10,726,590 $ (97,761) $ (3,280,743)
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
$37,909,942 $30,059,072 $38,517,487 $27,790,897 $81,559,259 $ 84,840,002
$38,464,097 $37,909,942 $49,783,642 $38,517,487 $81,461,498 $ 81,559,259
- ----------------------------------------------------------------------------------------
$ (148,288) -- $ (18,658) $ 54,391 $ (119,512) $ (4,618)
- ----------------------------------------------------------------------------------------
$ 4,212,012 $10,643,513 $ 9,326,048 $13,809,233 $ 3,390,115 $ 7,340,857
1,065,024 -- 147,501 -- -- --
(4,281,171) (6,849,060) (3,390,264) (11,505,434) (9,154,042) (19,880,961)
- ----------------------------------------------------------------------------------------
995,865 3,794,453 6,083,285 2,303,799 (5,763,927) (12,540,104)
- ----------------------------------------------------------------------------------------
-- -- $ 1,073,576 $ 5,483,699 $ -- $ 5,389
-- -- 32,960 -- -- --
-- -- -- -- (275,391) (2,346,225)
- ----------------------------------------------------------------------------------------
-- -- 1,106,536 5,483,699 (275,391) (2,340,836)
- ----------------------------------------------------------------------------------------
-- -- -- -- $ 93,670 $ 267,371
-- -- -- -- -- --
-- -- -- -- (269,257) (685,818)
- ----------------------------------------------------------------------------------------
-- -- -- -- (175,587) (418,447)
- ----------------------------------------------------------------------------------------
$ 995,865 $ 3,794,453 $ 7,189,821 $ 7,787,498 $(6,214,905) $(15,299,387)
- ----------------------------------------------------------------------------------------
349,509 873,576 694,263 1,115,039 181,353 416,762
86,799 -- 10,528 -- -- --
(351,750) (569,176) (253,609) (913,517) (486,631) (1,148,666)
- ----------------------------------------------------------------------------------------
84,558 304,400 451,182 201,522 (305,278) (731,904)
- ----------------------------------------------------------------------------------------
-- -- 77,788 427,368 -- 116
-- -- 2,354 -- -- --
-- -- -- -- (14,159) (137,975)
- ----------------------------------------------------------------------------------------
-- -- 80,142 427,368 (14,159) (137,859)
- ----------------------------------------------------------------------------------------
-- -- -- -- 4,930 14,995
-- -- -- -- -- --
-- -- -- -- (14,574) (37,945)
- ----------------------------------------------------------------------------------------
-- -- -- -- (9,644) (22,950)
- ----------------------------------------------------------------------------------------
84,558 304,400 531,324 628,890 (329,081) (892,713)
- ----------------------------------------------------------------------------------------
</Table>
SEE FINANCIAL NOTES
59
STATEMENTS OF CHANGES
IN NET ASSETS
<Table>
<Caption>
BALANCED FUND INCOME FUND
- ------------------------------------------------------------------------------------------------------
For the For the
six months six months
ended For the year ended For the year
12/31/06 ended 12/31/06 ended
(Unaudited) 06/30/06 (Unaudited) 06/30/06
- ------------------------------------------------------------------------------------------------------
OPERATIONS
Net investment income/loss $ 90,914 $ 100,799 $ 975,648 $ 1,795,793
Realized gains/losses on investments and
foreign currency transactions 115,442 215,779 220,317 (1,579,679)
Change in unrealized
appreciation/depreciation on investments and
foreign currencies 353,994 (140,549) 955,498 (1,158,558)
- ------------------------------------------------------------------------------------------------------
Change in net assets from operations 560,350 176,029 2,151,463 (942,444)
Dividends to Shareholders:
From net investment income:
Standard Shares (88,016) (101,583) (961,394) (1,825,925)
Institutional Shares -- -- -- --
From net realized gains on investments:
Standard Shares (160,217) -- -- --
- ------------------------------------------------------------------------------------------------------
Total dividends (248,233) (101,583) (961,394) (1,825,925)
Change in net assets from capital
transactions 32,855 5,514,670 (3,675,451) (3,507,745)
CHANGE IN NET ASSETS $ 344,972 $ 5,589,116 $(2,485,382) $ (6,276,114)
- ------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------
NET ASSETS
Beginning of period $11,080,576 $ 5,491,460 $50,320,674 $ 56,596,788
End of period $11,425,548 $11,080,576 $47,835,292 $ 50,320,674
- ------------------------------------------------------------------------------------------------------
Accumulated (distributions in excess of) net
investment income/loss $ 2,898 -- $ 14,254 --
- ------------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS
Standard Shares
Proceeds from shares issued $ 856,940 $ 7,086,693 $ 2,598,993 $ 6,731,817
Dividends reinvested 235,288 87,089 872,427 1,653,835
Cost of shares redeemed (1,059,373) (1,659,112) (7,146,871) (11,893,397)
-----------------------------------------------------
Net change 32,855 5,514,670 (3,675,451) (3,507,745)
-----------------------------------------------------
Institutional Shares
Proceeds from shares issued -- -- -- --
Dividends reinvested -- -- -- --
Cost of shares redeemed -- -- -- --
-----------------------------------------------------
Net change -- -- -- --
-----------------------------------------------------
Administrative Shares
Proceeds from shares issued -- -- -- --
Dividends reinvested -- -- -- --
Cost of shares redeemed -- -- -- --
-----------------------------------------------------
Net change -- -- -- --
-----------------------------------------------------
CHANGE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 32,855 $ 5,514,670 $(3,675,451) $ (3,507,745)
- ------------------------------------------------------------------------------------------------------
SHARE TRANSACTIONS
Standard Shares
Issued 69,534 568,623 268,806 687,649
Reinvested 18,657 6,975 89,832 169,782
Redeemed (85,654) (133,278) (735,213) (1,222,490)
-----------------------------------------------------
Net change 2,537 442,320 (376,575) (365,059)
-----------------------------------------------------
Institutional Shares
Issued -- -- -- --
Reinvested -- -- -- --
Redeemed -- -- -- --
-----------------------------------------------------
Net change -- -- -- --
-----------------------------------------------------
Administrative Shares
Issued -- -- -- --
Reinvested -- -- -- --
Redeemed -- -- -- --
-----------------------------------------------------
Net change -- -- -- --
-----------------------------------------------------
CHANGE IN SHARES FROM SHARE TRANSACTIONS 2,537 442,320 (376,575) (365,059)
- ------------------------------------------------------------------------------------------------------
</Table>
SEE FINANCIAL NOTES
60
<Table>
<Caption>
MONEY MARKET FUND
- --------------------------------
For the
six months
ended For the year
12/31/06 ended
(Unaudited) 06/30/06
- --------------------------------
$ 1,920,661 $ 2,837,876
-- (62)
-- --
- --------------------------------
1,920,661 2,837,814
(1,672,883) (2,416,825)
(248,145) (420,062)
-- --
- --------------------------------
(1,921,028) (2,836,887)
3,068,161 (5,327,092)
$ 3,067,794 $ (5,326,165)
- --------------------------------
- --------------------------------
$ 84,160,689 $ 89,486,854
$ 87,228,483 $ 84,160,689
- --------------------------------
$ 622 $ 989
- --------------------------------
$ 31,967,816 $ 62,680,511
1,618,986 2,342,559
(32,184,830) (67,488,052)
- --------------------------------
1,401,972 (2,464,982)
- --------------------------------
$ 2,940,661 $ 3,178,033
247,641 419,204
(1,522,113) (6,459,347)
- --------------------------------
1,666,189 (2,862,110)
- --------------------------------
-- --
-- --
-- --
- --------------------------------
-- --
- --------------------------------
$ 3,068,161 $ (5,327,092)
- --------------------------------
31,967,816 62,680,511
1,618,986 2,342,559
(32,184,830) (67,488,052)
- --------------------------------
1,401,972 (2,464,982)
- --------------------------------
2,940,661 3,178,033
247,641 419,204
(1,522,113) (6,459,347)
- --------------------------------
1,666,189 (2,862,110)
- --------------------------------
-- --
-- --
-- --
- --------------------------------
-- --
- --------------------------------
3,068,161 (5,327,092)
- --------------------------------
</Table>
SEE FINANCIAL NOTES
61
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
SELECTED PER SHARE DATA INVESTMENT ACTIVITIES DIVIDENDS
- ------------------------------------------------------------------------------------------------------------------
Net asset Net realized
value, Net and unrealized Total from From net
beginning investment gains/losses investment investment
of period income/loss on investments operations income
- ------------------------------------------------------------------------------------------------------------------
CORE GROWTH FUND
STANDARD SHARES
- ------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $20.41 0.03 0.42 0.45 --
Year ended June 30, 2006 19.72 (0.09) 0.78 0.69 --
Year ended June 30, 2005 18.10 (0.06) 1.68 1.62 --
Year ended June 30, 2004 16.44 (0.12) 1.78 1.66 --
Year ended June 30, 2003 16.73 (0.04) (0.25) (0.29) --
Year ended June 30, 2002 22.12 (0.09) (5.30) (5.39) --
INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $17.15 0.10 0.35 0.45 (0.12)
Year ended June 30, 2006 16.45 0.06 0.64 0.70 --
Year ended June 30, 2005 14.99 0.07 1.39 1.46 --
Year ended June 30, 2004 13.52 0.01 1.46 1.47 --
Year ended June 30, 2003 13.66 0.05 (0.19) (0.14) --
Year ended June 30, 2002 17.94 0.04 (4.32) (4.28) --
ADMINISTRATIVE SHARES
- ------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $20.96 0.07 0.44 0.51 (0.04)
Year ended June 30, 2006 20.17 --(3) 0.79 0.79 --
Year ended June 30, 2005 18.44 0.02 1.71 1.73 --
Year ended June 30, 2004 16.68 (0.08) 1.84 1.76 --
Year ended June 30, 2003 16.91 0.01 (0.24) (0.23) --
Year ended June 30, 2002 22.27 (0.01) (5.35) (5.36) --
- ------------------------------------------------------------------------------------------------------------------
EMERGING GROWTH FUND
STANDARD SHARES
- ------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $16.40 (0.09) 0.40 0.31 --
Year ended June 30, 2006 14.10 (0.20)(4) 2.50 2.30 --
Year ended June 30, 2005 13.01 (0.18)(4) 1.27 1.09 --
Year ended June 30, 2004 10.96 (0.20) 2.25 2.05 --
Year ended June 30, 2003 11.82 (0.17) (0.69) (0.86) --
Year ended June 30, 2002 15.79 (0.20) (3.77) (3.97) --
INSTITUTIONAL SHARES
- ------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $17.11 (0.06) 0.43 0.37 --
Year ended June 30, 2006 14.62 (0.12)(4) 2.61 2.49 --
Year ended June 30, 2005 13.41 (0.10)(4) 1.31 1.21 --
Year ended June 30, 2004 11.23 (0.15) 2.33 2.18 --
Year ended June 30, 2003 12.02 (0.10) (0.69) (0.79) --
Year ended June 30, 2002 15.96 (0.11)(4) (3.83) (3.94) --
ADMINISTRATIVE SHARES
- ------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $16.77 (0.07) 0.41 0.34 --
Year ended June 30, 2006 14.37 (0.16)(4) 2.56 2.40 --
Year ended June 30, 2005 13.22 (0.14)(4) 1.29 1.15 --
Year ended June 30, 2004 11.11 (0.14) 2.25 2.11 --
Year ended June 30, 2003 11.92 (0.10) (0.71) (0.81) --
Year ended June 30, 2002 15.87 (0.13) (3.82) (3.95) --
- ------------------------------------------------------------------------------------------------------------------
(1) Not Annualized.
(2) Annualized.
(3) Less than $0.005 per share.
(4) Based on average shares outstanding.
</Table>
SEE FINANCIAL NOTES
62
<Table>
<Caption>
TO SHAREHOLDERS RATIOS AND SUPPLEMENTAL DATA
- ----------------------------------------------------------------------------------------------------
Net Ratio of
From Net asset assets, expenses to
net Total value, Total end of average net
realized dividends to Redemption end return period assets, net of
gains shareholders fee of period (%) ($ X 1,000) reimbursement (%)
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
-- -- -- $20.86 2.20(1) $253,729 1.55(2)
-- -- -- 20.41 3.50 268,593 1.52
-- -- -- 19.72 8.95 278,940 1.55
-- -- -- 18.10 10.10 290,352 1.50
-- -- -- 16.44 (1.73) 285,339 1.37
-- -- -- 16.73 (24.37) 326,793 1.34
- ----------------------------------------------------------------------------------------------------
-- (0.12) -- $17.48 2.59(1) $ 40,764 0.81(2)
-- -- -- 17.15 4.26 44,836 0.80
-- -- -- 16.45 9.74 43,083 0.80
-- -- -- 14.99 10.96 52,842 0.77
-- -- -- 13.52 (1.02) 63,571 0.69
-- -- -- 13.66 (23.86) 85,140 0.68
- ----------------------------------------------------------------------------------------------------
-- (0.04) -- $21.43 2.45(1) $ 1,677 1.13(2)
-- -- -- 20.96 3.92 1,659 1.12
-- -- -- 20.17 9.38 1,667 1.14
-- -- -- 18.44 10.55 1,635 1.11
-- -- -- 16.68 (1.36) 2,426 1.00
-- -- -- 16.91 (24.07) 2,029 0.94
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
-- -- -- $16.71 1.89(1) $167,260 1.90(2)
-- -- -- 16.40 16.31 170,704 1.90
-- -- -- 14.10 8.38 157,963 1.96
-- -- -- 13.01 18.70 165,782 1.93
-- -- -- 10.96 (7.28) 157,911 1.95
-- -- -- 11.82 (25.14) 190,812 1.80
- ----------------------------------------------------------------------------------------------------
-- -- -- $17.48 2.16(1) $ 575 1.38(2)
-- -- -- 17.11 17.03 899 1.35
-- -- -- 14.62 9.02 2,633 1.33
-- -- -- 13.41 19.41 3,534 1.30
-- -- -- 11.23 (6.57) 5,379 1.25
-- -- -- 12.02 (24.69) 6,428 1.20
- ----------------------------------------------------------------------------------------------------
-- -- -- $17.11 2.03(1) $ 4,780 1.60(2)
-- -- -- 16.77 16.70 5,071 1.60
-- -- -- 14.37 8.70 5,270 1.64
-- -- -- 13.22 18.99 11,584 1.60
-- -- -- 11.11 (6.80) 8,561 1.51
-- -- -- 11.92 (24.89) 8,444 1.47
- ----------------------------------------------------------------------------------------------------
<Caption>
RATIOS AND SUPPLEMENTAL DATA
- --- ----------------------------------------------
Ratio of net Ratio of
investment expenses to
income/loss average net Portfolio
to average net assets, prior to turnover
assets (%) reimbursement (%) rate (%)
- -------------------------------------------------------------
0.29(2) 1.55(2) 80.85(1)
(0.43) 1.52 101.35
(0.32) 1.55 101.34
(0.65) 1.52 228.43
(0.28) 1.53 183.75
(0.43) 1.44 76.40
- -------------------------------------------------------------
1.01(2) 0.81(2) 80.85(1)
0.30 0.80 101.35
0.42 0.80 101.34
0.08 0.79 228.43
0.36 0.76 183.75
0.23 0.73 76.40
- -------------------------------------------------------------
0.71(2) 1.13(2) 80.85(1)
(0.02) 1.12 101.35
0.09 1.14 101.34
(0.27) 1.13 228.43
0.09 1.06 183.75
(0.05) 1.01 76.40
- -------------------------------------------------------------
- -------------------------------------------------------------
(1.10)(2) 1.90(2) 17.22(1)
(1.30) 1.90 60.19
(1.39) 1.96 109.56
(1.47) 1.94 151.80
(1.56) 1.97 315.89
(1.39) 1.86 202.57
- -------------------------------------------------------------
(0.58)(2) 1.38(2) 17.22(1)
(0.77) 1.35 60.19
(0.76) 1.33 109.56
(0.85) 1.31 151.80
(0.86) 1.28 315.89
(0.78) 1.26 202.57
- -------------------------------------------------------------
(0.79)(2) 1.60(2) 17.22(1)
(1.00) 1.60 60.19
(1.08) 1.64 109.56
(1.13) 1.62 151.80
(1.13) 1.54 315.89
(1.07) 1.53 202.57
- -------------------------------------------------------------
</Table>
SEE FINANCIAL NOTES
63
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
SELECTED PER SHARE DATA INVESTMENT ACTIVITIES DIVIDENDS
- --------------------------------------------------------------------------------------------------------------------------
Net realized
Net asset and unrealized
value, Net gains/losses Total from From net
beginning investment on investments investment investment
of period income/loss and foreign currencies operations income
- --------------------------------------------------------------------------------------------------------------------------
SMALL CAP CORE GROWTH FUND
STANDARD SHARES
- --------------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $12.48 (0.05) 0.26 0.21 --
Year ended June 30, 2006 11.00 (0.09) 1.57 1.48 --
Year ended June 30, 2005 10.84 (0.11) 0.77 0.66 --
Year ended June 30, 2004 8.67 (0.13) 2.30 2.17 --
Year ended June 30, 2003 9.18 (0.09) (0.42) (0.51) --
Year ended June 30, 2002 9.52 (0.08) (0.26) (0.34) --
- --------------------------------------------------------------------------------------------------------------------------
VALUE FUND
STANDARD SHARES
- --------------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $12.74 0.02 1.29 1.31 (0.05)
Year ended June 30, 2006 11.60 0.02 1.12 1.14 --
Year ended June 30, 2005 10.51 (0.01) 1.10 1.09 --
Year ended June 30, 2004 8.64 (0.02) 1.89 1.87 --
Year ended June 30, 2003 8.74 (0.05) (0.05) (0.10) --
One month period ended June 30, 2002(4) 10.21 (0.01) (1.46) (1.47) --
Year ended May 31, 2002 15.29 (0.08) (3.57) (3.65) --
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $12.72 0.05 1.30 1.35 (0.07)
For the period ended June 30, 2006(5) 12.81 0.02 (0.11) (0.09) --
- --------------------------------------------------------------------------------------------------------------------------
GLOBAL EQUITY FUND
STANDARD SHARES
- --------------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $18.33 (0.03)(1) 1.47 1.44 --
Year ended June 30, 2006 15.86 (0.01)(1) 2.48 2.47 --
Year ended June 30, 2005 15.18 0.02(1) 0.66 0.68 --
Year ended June 30, 2004 13.39 (0.10)(1) 1.89 1.79 --
Year ended June 30, 2003 14.22 (0.03)(1) (0.82) (0.85) --
Year ended June 30, 2002 18.31 (0.11)(1) (3.99) (4.10) --
INSTITUTIONAL SHARES
- --------------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $19.05 0.04(1) 1.52 1.56 --
Year ended June 30, 2006 16.39 0.07(1) 2.59 2.66 --
Year ended June 30, 2005 15.58 0.12(1) 0.69 0.81 --
Year ended June 30, 2004 13.65 0.04(1) 1.89 1.93 --
Year ended June 30, 2003 14.40 0.05(1) (0.82) (0.77) --
Year ended June 30, 2002 18.46 (0.01)(1) (4.06) (4.07) --
ADMINISTRATIVE SHARES
- --------------------------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006 (Unaudited) $18.66 --(1,6) 1.49 1.49 --
Year ended June 30, 2006 16.11 0.04(1) 2.51 2.55 --
Year ended June 30, 2005 15.36 0.06(1) 0.69 0.75 --
Year ended June 30, 2004 13.51 (0.02)(1) 1.87 1.85 --
Year ended June 30, 2003 14.30 0.01(1) (0.82) (0.81) --
Year ended June 30, 2002 18.38 (0.06)(1) (4.03) (4.09) --
- --------------------------------------------------------------------------------------------------------------------------
(1) Based on average shares outstanding.
(2) Not annualized.
(3) Annualized.
(4) Subsequent to the annual report as of May 31, 2002, the Citizens Value Fund changed its fiscal year end to June 30.
(5) For the period March 31, 2006, commencement of operations, to June 30,2006.
(6) Less than $0.005 per share.
</Table>
SEE FINANCIAL NOTES
64
<Table>
<Caption>
TO SHAREHOLDERS RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net Ratio of Ratio of net
From Net asset assets, expenses to investment
net Total value, Total end of average net income/loss
realized dividends to Redemption end return period assets, net of to average net
gains shareholders fee (1) of period (%) ($ X 1,000) reimbursement (%) assets (%)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
(0.37) (0.37) -- $12.32 1.68(2) $ 38,464 1.41(3) (0.79)(3)
-- -- -- 12.48 13.45 37,910 1.44 (0.83)
(0.50) (0.50) -- 11.00 6.21 30,059 1.51 (1.07)
-- -- -- 10.84 25.03 29,701 1.53 (1.37)
-- -- -- 8.67 (5.56) 17,821 1.45 (1.12)
-- -- -- 9.18 (3.57) 18,459 1.34 (0.93)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-- (0.05) -- $14.00 10.30(2) $ 42,680 1.29(3) 0.48(3)
-- -- -- 12.74 9.83 33,081 1.29 0.15
-- -- -- 11.60 10.37 27,791 1.70 (0.11)
-- -- -- 10.51 21.64 23,871 1.78 (0.23)
-- -- -- 8.64 (1.14) 16,226 1.90 (0.62)
-- -- -- 8.74 (14.40)(2) 21,060 1.95(3) (1.33)(3)
(1.43) (1.43) -- 10.21 (25.58) 24,981 1.95 (1.04)
- ---------------------------------------------------------------------------------------------------------------------
-- (0.07) -- $14.00 10.58(2) $ 7,104 0.90(3) 0.90(3)
-- -- -- 12.72 (0.70)(2) 5,436 0.90(3) 0.64(3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-- -- --(6) $19.77 7.86(2) $ 79,658 2.02(3) (0.29)(3)
-- -- --(6) 18.33 15.57 79,441 2.01 (0.06)
-- -- --(6) 15.86 4.48 80,384 2.05 0.13
-- -- --(6) 15.18 13.37 95,625 2.01 (0.60)
-- -- 0.02 13.39 (5.84) 101,846 1.91 (0.26)
-- -- 0.01 14.22 (22.34) 135,881 1.84 (0.66)
- ---------------------------------------------------------------------------------------------------------------------
-- -- --(6) $20.61 8.19(2) $ 501 1.42(3) 0.36(3)
-- -- --(6) 19.05 16.23 733 1.40 0.38
-- -- --(6) 16.39 5.20 2,891 1.39 0.75
-- -- --(6) 15.58 14.14 5,244 1.37 0.25
-- -- 0.02 13.65 (5.21) 6,688 1.26 0.42
-- -- 0.01 14.40 (21.99) 9,531 1.27 (0.05)
- ---------------------------------------------------------------------------------------------------------------------
-- -- --(6) $20.15 8.04(2) $ 1,302 1.76(3) (0.03)(3)
-- -- --(6) 18.66 15.83 1,385 1.73 0.20
-- -- --(6) 16.11 4.88 1,566 1.73 0.40
-- -- --(6) 15.36 13.69 2,142 1.71 (0.11)
-- -- 0.02 13.51 (5.52) 2,059 1.59 0.11
-- -- 0.01 14.30 (22.20) 2,207 1.64 (0.39)
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
RATIOS AND SUPPLEMENTAL DATA
- --- -----------------------------
Ratio of
expenses to
average net Portfolio
assets, prior to turnover
reimbursement (%) rate (%)
- --------------------------------------------
1.41(3) 24.07(2)
1.44 96.80
1.51 120.89
1.53 207.80
1.58 349.79
1.40 294.26
- --------------------------------------------
- --------------------------------------------
1.59(3) 23.41(2)
1.62 58.32
1.70 172.95
1.78 130.18
1.90 209.72
2.05(3) 5.87(2)
2.54 34.77
- --------------------------------------------
1.13(3) 23.41(2)
1.26(3) 58.32(2)
- --------------------------------------------
- --------------------------------------------
2.02(3) 30.86(2)
2.01 36.77
2.05 80.36
2.01 49.16
1.91 42.05
1.84 132.82
- --------------------------------------------
1.42(3) 30.86(2)
1.40 36.77
1.39 80.36
1.37 49.16
1.26 42.05
1.27 132.82
- --------------------------------------------
1.76(3) 30.86(2)
1.73 36.77
1.73 80.36
1.71 49.16
1.59 42.05
1.64 132.82
- --------------------------------------------
</Table>
SEE FINANCIAL NOTES
65
FINANCIAL HIGHLIGHTS
<Table>
<Caption>
SELECTED PER SHARE DATA INVESTMENT ACTIVITIES DIVIDENDS
- ---------------------------------------------------------------------------------------------------------
Net asset Net realized
value, Net and unrealized Total from From net
beginning investment gains/losses investment investment
of period income/loss on investments operations income
- ---------------------------------------------------------------------------------------------------------
BALANCED FUND
STANDARD SHARES
- ---------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006
(Unaudited) $12.24 0.10 0.53 0.63 (0.10)
Year ended June 30, 2006 11.87 0.13 0.37 0.50 (0.13)
Year ended June 30, 2005 11.35 0.12 0.75 0.87 (0.12)
Year ended June 30, 2004 10.47 0.06 1.12 1.18 (0.06)
Period ended June 30, 2003(3) 10.00 0.02 0.47 0.49 (0.02)
- ---------------------------------------------------------------------------------------------------------
INCOME FUND
STANDARD SHARES
- ---------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006
(Unaudited) $ 9.51 0.19 0.22 0.41 (0.19)
Year ended June 30, 2006 10.00 0.32 (0.48) (0.16) (0.33)
Year ended June 30, 2005 9.86 0.37 0.15 0.52 (0.38)
Year ended June 30, 2004 10.28 0.34 (0.40) (0.06) (0.36)
Year ended June 30, 2003 9.62 0.37 0.69 1.06 (0.40)
Year ended June 30, 2002 10.28 0.58 (0.66) (0.08) (0.58)
- ---------------------------------------------------------------------------------------------------------
MONEY MARKET FUND
STANDARD SHARES
- ---------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006
(Unaudited) $ 1.00 0.02 -- 0.02 (0.02)
Year ended June 30, 2006 1.00 0.03 -- 0.03 (0.03)
Year ended June 30, 2005 1.00 0.01 -- 0.01 (0.01)
Year ended June 30, 2004 1.00 --(4) -- --(4) --(4)
Year ended June 30, 2003 1.00 0.01 -- 0.01 (0.01)
Year ended June 30, 2002 1.00 0.02 -- 0.02 (0.02)
INSTITUTIONAL SHARES
- ---------------------------------------------------------------------------------------------------------
Six months ended December 31, 2006
(Unaudited) $ 1.00 0.02 -- 0.02 (0.02)
Year ended June 30, 2006 1.00 0.04 -- 0.04 (0.04)
Year ended June 30, 2005 1.00 0.02 -- 0.02 (0.02)
Year ended June 30, 2004 1.00 --(4) -- --(4) --(4)
Year ended June 30, 2003 1.00 0.01 -- 0.01 (0.01)
Year ended June 30, 2002 1.00 0.02 -- 0.02 (0.02)
- ---------------------------------------------------------------------------------------------------------
(1) Not Annualized.
(2) Annualized.
(3) For the period December 20, 2002, commencement of operations, to June 30, 2003.
(4) Less than $0.005 per share.
</Table>
SEE FINANCIAL NOTES
66
<Table>
<Caption>
TO SHAREHOLDERS RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------------------------
Net Ratio of Ratio of net
From Net asset assets, expenses to investment
net Total value, Total end of average net income/loss
realized dividends to Redemption end return period assets, net of to average net
gains shareholders fee of period (%) ($ X 1,000) reimbursement (%) assets (%)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
(0.18) (0.28) -- $12.59 5.14(1) $ 11,426 1.30(2) 1.61(2)
-- (0.13) -- 12.24 4.17 11,081 1.30 1.10
(0.23) (0.35) -- 11.87 7.76 5,491 1.30 1.07
(0.24) (0.30) -- 11.35 11.31 2,804 1.30 0.60
-- (0.02) -- 10.47 4.87(1) 1,061 1.30(2) 0.41(2)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-- (0.19) -- $ 9.73 4.30(1) $ 47,835 1.51(2) 3.87(2)
-- (0.33) -- 9.51 (1.66) 50,321 1.49 3.28
-- (0.38) -- 10.00 5.34 56,597 1.48 3.66
-- (0.36) -- 9.86 (0.63) 59,562 1.45 3.28
-- (0.40) -- 10.28 11.28 69,137 1.37 3.80
-- (0.58) -- 9.62 (0.87) 67,488 1.38 5.77
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
-- (0.02) -- $ 1.00 2.21(1) $ 75,662 0.98(2) 4.35(2)
-- (0.03) -- 1.00 3.27 74,260 0.98 3.22
-- (0.01) -- 1.00 1.21 76,724 1.00 1.19
-- --(4) -- 1.00 0.10 83,231 0.98 0.10
-- (0.01) -- 1.00 0.65 104,641 0.93 0.65
-- (0.02) -- 1.00 1.71 114,271 0.92 1.72
- ---------------------------------------------------------------------------------------------------------------------
-- (0.02) -- $ 1.00 2.35(1) $ 11,567 0.70(2) 4.62(2)
-- (0.04) -- 1.00 3.57 9,901 0.69 3.48
-- (0.02) -- 1.00 1.53 12,763 0.68 1.55
-- --(4) -- 1.00 0.41 11,011 0.67 0.41
-- (0.01) -- 1.00 0.95 10,892 0.63 0.98
-- (0.02) -- 1.00 1.97 16,539 0.67 1.95
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
TO RATIOS AND SUPPLEMENTAL DATA
- --- -----------------------------
Ratio of
expenses to
average net Portfolio
assets, prior to turnover
reimbursement (%) rate (%)
- ---------------------------------------
- ---------------------------------------
1.74(2) 35.83(1)
1.80 89.13
2.33 109.56
4.30 98.20
16.73(2) 140.42(1)
- ---------------------------------------
- ---------------------------------------
1.51(2) 118.97(1)
1.49 490.92
1.48 111.76
1.45 64.37
1.37 195.73
1.38 54.05
- ---------------------------------------
- ---------------------------------------
0.98(2) NA
0.98 NA
1.00 NA
0.98 NA
0.93 NA
0.92 NA
- ---------------------------------------
0.70(2) NA
0.69 NA
0.68 NA
0.67 NA
0.63 NA
0.67 NA
- ---------------------------------------
</Table>
SEE FINANCIAL NOTES
67
FINANCIAL NOTES (UNAUDITED)
ORGANIZATION
Citizens Funds (the "trust"), a Massachusetts Business Trust, is registered as
an open-end management investment company under the Investment Company Act of
1940, as amended (the "1940 Act"). The trust offers the following funds
(individually a "fund," collectively the "funds"):
FUND SHORT NAME
- ---- -----------
Citizens Core Growth Fund Core Growth Fund
Citizens Emerging Growth Fund Emerging Growth Fund
Citizens Small Cap Core Growth Fund Small Cap Core Growth Fund
Citizens Value Fund Value Fund
Citizens Global Equity Fund Global Equity Fund
Citizens Balanced Fund Balanced Fund
Citizens Income Fund Income Fund
Citizens Money Market Fund Money Market Fund
The funds are authorized to issue an unlimited number of shares of beneficial
interest with no par value. The Core Growth Fund, Emerging Growth Fund and
Global Equity Fund currently offer three classes of shares: Standard shares,
Institutional shares and Administrative shares. The Money Market Fund and Value
Fund offers two classes of shares: Standard shares and Institutional shares. The
Small Cap Core Growth Fund, Balanced Fund and Income Fund offer one class of
shares: Standard shares. Each class of shares in the funds has identical rights
and privileges except with respect to fees paid under class-specific agreements,
voting rights on matters affecting a single class of shares, and the exchange
privilege of each class of shares.
INDEMNIFICATIONS
Under the funds' organizational documents, its officers and trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the trust. In addition, in the normal course of business, the funds
enter into contracts with their vendors and others that provide for general
indemnifications. The funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the funds.
68
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the
funds in the preparation of their financial statements. The policies are in
conformity with accounting principles generally accepted in the United States of
America ("GAAP"). The preparation of financial statements requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION
The board of trustees has approved procedures to be used to value each fund's
securities for the purpose of determining the fund's net asset value (NAV).
Equity securities traded on an exchange are valued at the market price
determined as the closing sale or official closing price on that exchange. For
securities not traded on an exchange, or if an exchange price is not readily
available, securities are valued at a market price determined by independent
third-party pricing vendors approved by the funds' valuation committee. The
market price for debt obligations is determined by an independent third-party
pricing service which uses a matrix, formula or other objective method that
considers the effect of market indices, yield curves and other specific
adjustments. Short-term securities maturing within 60 days and all securities in
the Money Market Fund are valued at amortized cost, unless it is determined that
using this method would not reflect a security's fair value. Under the amortized
cost method, premium or discount, if any, is amortized or accreted,
respectively, on a constant basis to the maturity of the security. If a price
for a given security is unavailable or deemed unreliable by the adviser, the
market price may be determined using quotations received from one or more
brokers that make a market in the security. When such prices or quotations are
not available, or when the adviser believes they are unreliable, the funds'
valuation committee will value securities using fair value procedures approved
by the funds' board of trustees. Fair value procedures may also be used if the
adviser determines that a significant event has occurred between the time at
which a market price is determined and the time at which a fund's NAV is
calculated. The Global Equity Fund uses a fair value model developed by an
independent third party pricing service in its valuation considerations for
foreign equity securities on days when there is a specific percentage change in
the value of a domestic equity security index. This percentage is determined by
the funds' valuation committee.
69
FINANCIAL NOTES (UNAUDITED)
SECURITIES TRANSACTION AND RELATED INVESTMENT INCOME
During the period, security transactions were accounted for no later than one
business day following the trade date for purposes of calculating daily net
asset values. For financial reporting purposes, however, security transactions
are accounted for on trade date. The cost of securities sold is determined on
the identified cost basis, unless otherwise specified. Interest income is
recorded on an accrual basis and includes, where applicable, the amortization or
accretion of a premium or discount. Dividend income is recorded on the
ex-dividend date.
FOREIGN CURRENCY TRANSLATION
The accounting records of the funds are maintained in U.S. dollars. Investment
securities and other assets and liabilities denominated in a foreign currency
are translated into U.S. dollars at the current rate of exchange. Purchases and
sales of securities, and income and expenses, are translated into U.S. dollars
at the prevailing rate of exchange on the respective dates of such transactions.
The changes in foreign exchange rates on investments are not isolated on the
Statement of Operations. Such fluctuations are included with the net realized
and unrealized gain or loss on investments.
FOREIGN CURRENCY CONTRACTS
Foreign currency contracts are used to facilitate transactions in
foreign-denominated securities. Losses may arise from changes in the value of
the foreign currency or if the counterparties do not perform under the
contract's terms. The U.S. dollar value of foreign currency contracts is
determined using the current rate of exchange. There were no foreign currency
contracts open at December 31, 2006.
REPURCHASE AGREEMENTS
The funds may acquire repurchase agreements with an entity that is a member bank
of the Federal Reserve System and government securities dealers that are on the
Federal Reserve Bank of New York's list of primary dealers, collateralized by
instruments issued by the U.S. government, its agencies or instrumentalities.
The repurchase price generally equals the price paid by a fund plus interest
negotiated on the basis of current short-term rates, which may be more or less
than the rate on the underlying securities. It is the funds' policy to receive
collateral securities of which the value, including accrued interest, is at
least equal to 102% of the amount to
70
be repaid to the funds under each agreement at its maturity. Collateral subject
to repurchase agreements is held by the funds' custodian. If the counterparty
defaults, and the fair value of the collateral declines, realization of the
collateral by the funds may be delayed or limited.
RESTRICTED SECURITIES
The funds are permitted to invest in privately placed securities. These
securities may be resold in transactions exempt from registration, or to the
public, if the securities are registered under the Securities Act of 1933.
Disposal of these securities may involve time-consuming negotiations and
expense, and the prompt sale at an acceptable price may be difficult.
REDEMPTION FEE
The Global Equity Fund charges a redemption fee of 2% (paid to the fund) with
respect to shares of the fund redeemed or exchanged within 60 days of purchase.
The fee does not apply to shares purchased through the reinvestment of dividends
or other distributions, redemptions by the fund of accounts below minimum
balances, redemptions due to shareholder death or disability, or certain omnibus
accounts or retirement plans. For the period ended December 31, 2006, the Global
Equity Fund collected $507 in redemption fees. These fees are included in the
"change in net assets from capital transactions" amounts in the Statements of
Changes in Net Assets.
DIVIDENDS TO SHAREHOLDERS
The Core Growth Fund, Emerging Growth Fund, Small Cap Core Growth Fund, Value
Fund, and Global Equity Fund declare and distribute dividends from net
investment income, if any, to shareholders annually. The Balanced Fund declares
and distributes dividends from net investment income to shareholders quarterly.
The Income Fund declares and distributes dividends from net investment income to
shareholders monthly. Dividends from net investment income for the Money Market
Fund are declared daily and paid monthly. The funds' net realized gains, if any,
are distributed to shareholders at least annually.
Additional dividends may also be paid to the funds' shareholders to the extent
necessary to avoid federal excise tax on certain undistributed income and net
realized gains. The amount of dividends from net investment income and net
realized gains are determined in accordance with federal income tax regulations,
which may differ from GAAP. These "book/tax" differences are either considered
temporary or permanent in
71
FINANCIAL NOTES (UNAUDITED)
nature. To the extent these differences are permanent in nature (i.e.,
reclassification of market discounts, gain/loss, paydowns, and distributions),
such amounts are reclassified to capital; temporary differences do not require
reclassification.
FEDERAL INCOME TAXES
Each fund is a separate taxable entity for federal tax purposes. Each fund has
qualified and intends to qualify each year as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended, and distributes
substantially all of its taxable net investment income and net realized gains,
if any, to its shareholders.
FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGEMENT FEE
Citizens Advisers, Inc. (the "adviser") serves as adviser to each of the funds.
Under the terms of the management contract, the adviser is paid a fee that is
computed daily based on an annual rate for each fund's average daily net assets.
Those rates are as follows:
FUND FEE RATE
- ---- --------
Core Growth Fund 0.50%
Emerging Growth Fund 1.00%
Small Cap Core Growth Fund 0.50%
Value Fund 0.70%
Global Equity Fund 1.00%
Balanced Fund 0.65%
Income Fund 0.65%
Money Market Fund 0.35%
Dwight Asset Management Company serves as the subadviser for the Income Fund.
For its services, the subadviser receives a fee computed daily based on an
annual rate of 0.25% of the fund's average daily net assets. The subadvisory fee
is paid by the adviser.
DISTRIBUTION FEE
Citizens Securities, Inc. (the "distributor") is a wholly owned subsidiary of
the adviser and serves as the funds' distributor. Pursuant to Rule 12b-1 under
the 1940 Act, the trust's shareholders have adopted a separate distribution plan
with respect to the funds' Standard and Administrative
72
shares pursuant to which the funds, except the Money Market Fund, compensate the
distributor for services in an amount equal to 0.25% per annum of average annual
net assets represented by such shares.
ADMINISTRATIVE AND SHAREHOLDER SERVICE FEES
The adviser, with whom certain officers and a trustee are affiliated, performs
administrative duties for the trust under a separate administrative contract,
which provides for the reimbursement of out-of-pocket expenses as well as fees
for services rendered. In accordance with the terms of the administrative
contract, fees are accrued daily based on average daily net assets of each fund
at the annual rate of 0.15%. In addition, Citizens Advisers provides a number of
administrative services to the trust, relating primarily to shareholder services
and communications, and is paid a per account fee and is reimbursed for
out-of-pocket expenses as well, for providing such services and communications
for each of the individual funds with the exception of the Core Growth Fund,
Standard shares. The Core Growth Fund, Standard shares may be charged a
shareholder service fee of up to 0.35% based on the average daily net assets of
the class. For the period ended December 31, 2006, a fee of 0.25% was charged.
TRANSFER AGENCY, FUND ACCOUNTING AND CUSTODY
BISYS Fund Services Ohio, Inc. provides transfer agency and fund accounting
services to the funds pursuant to certain fee arrangements. As transfer agent
for the funds, BISYS is paid a fee based on the number of funds and shareholder
accounts, other service fees, and is reimbursed for out-of-pocket expenses as
well. Transfer agent expenses also include the cost of services rendered by
third parties to provide sub-transfer agency services. As fund accountant for
the funds, BISYS is paid a fee based on assets (ranging from 0.0125% -- 0.035%)
and the number of share classes per fund, subject to certain minimums, other
service fees, and is reimbursed for out-of-pocket expenses as well. Fifth Third
Bank acts as a custodian for the funds and is paid a fee based on the funds'
assets and other transaction based fees, subject to certain minimums. Custody
expenses may be incurred or offset from fees or credits arising from cash
balances maintained on deposit. There were no custody credits received for the
period ended December 31, 2006.
TRUSTEE FEES
All of the officers and one of the trustees of the trust are "interested
persons," as defined in the 1940 Act, of the adviser. Currently, each trustee
73
FINANCIAL NOTES (UNAUDITED)
who is not an "interested person" receives an annual retainer of $12,000 and
$1,250 for each day's attendance at a trustee meeting. The independent trustees
include a chair of the board, who receives an additional annual retainer of
$5,000; and an audit committee chair, social responsibility committee chair, and
nominating committee chair who each receive an additional annual retainer of
$2,500.
ALLOCATIONS
Expenses directly attributable to a fund are charged to that fund. Expenses not
directly attributable to a fund are allocated proportionately among various or
all funds within the trust in relation to the net assets of each fund or on
another reasonable basis. Expenses specific to a class are charged to that
class.
FEE REDUCTIONS AND REIMBURSEMENTS
For the period ended December 31, 2006, the adviser limited the total expenses,
exclusive of taxes, brokerage commissions and extraordinary expenses, for
certain funds to the extent they exceeded the following limits:
FUND EXPENSE LIMITATION
- ---- ------------------
Value Fund -- Standard shares 1.29%
Value Fund -- Institutional shares 0.90%
Balanced Fund -- Standard shares 1.30%
The Value Fund Standard shares and Institutional shares expense limitations
listed above are contractual. The adviser may recoup the investment management
fees waived or limited and other expenses reimbursed by it within three years
from the fiscal year in which they were waived/reimbursed. Such repayments may
be made twice monthly, but in no event less frequently than semi-annually, but
only to the extent that such repayments would not cause annualized operating
expenses of the Value Fund to exceed any expense limitation. As of December 31,
2006, the amount that may potentially be recouped by the adviser from the Value
Fund is $107,185 expiring on June 30, 2009.
The Balanced Fund expense limitation listed above is voluntary, may be removed
by the adviser at any time and is not subject to recoupment in subsequent fiscal
periods.
74
INVESTMENT TRANSACTIONS
The following summarizes purchases and sales of investment securities, other
than short-term investments and U.S. Government securities, by fund for the
period ended December 31, 2006:
FUND PURCHASES SALES
- ---- ------------ ------------
Core Growth Fund $231,086,196 $264,968,161
Emerging Growth Fund 28,173,235 34,269,579
Small Cap Core Growth Fund 9,352,418 8,570,518
Value Fund 19,270,243 9,418,743
Global Equity Fund 23,736,966 27,628,011
Balanced Fund 3,871,755 3,787,320
Income Fund 30,058,178 28,760,305
The following summarizes purchases and sales of U.S. Government securities by
fund for the period ended December 31, 2006:
FUND PURCHASES SALES
- ---- ----------- -----------
Income Fund $27,063,701 $35,875,873
FEDERAL INCOME TAX INFORMATION
At December 31, 2006 the cost, gross unrealized appreciation and gross
unrealized depreciation on securities, for federal income tax purposes, were as
follows:
NET UNREALIZED
TAX UNREALIZED TAX UNREALIZED APPRECIATION/
FUND TAX COST APPRECIATION DEPRECIATION DEPRECIATION
- ---- ------------ -------------- -------------- --------------
Core Growth Fund $265,378,492 $27,773,839 $(3,454,283) $24,319,556
Emerging Growth Fund 132,073,539 43,310,709 (2,197,335) 41,113,374
Small Cap Core Growth Fund 31,898,544 7,325,568 (711,144) 6,614,424
Value Fund 44,200,362 8,235,359 (560,752) 7,674,607
Global Equity Fund 63,090,900 19,093,868 (561,643) 18,532,225
Balanced Fund 10,792,067 730,592 (87,516) 643,076
Income Fund 47,562,953 355,618 (213,781) 141,837
Money Market Fund 84,934,318 -- -- --
75
FINANCIAL NOTES (UNAUDITED)
NEW ACCOUNTING PRONOUNCEMENTS
In September 2006 the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current GAAP from the application of this Statement relate to the
definition of fair value, the methods used to measure fair value, and the
expanded disclosures about fair value measurements. As of December 31, 2006, the
funds do not believe the adoption of SFAS No. 157 will impact the financial
statement amounts, however, additional disclosures may be required about the
inputs used to develop the measurements and the effect of certain of the
measurements on changes in net assets for the period.
In July 2006, FASB issued FASB Interpretation No. 48 - "Accounting for
Uncertainty in Income Taxes," which requires for all entities, including
pass-through entities such as the funds, a minimum threshold for financial
statement recognition of the benefit of positions taken in filing tax returns
(including whether an entity is taxable in a particular jurisdiction), and
requires certain expanded tax disclosures. The Interpretation is required to be
implemented no later than the last net asset value calculation in the first
required financial statement reporting period for fiscal years beginning after
December 15, 2006. Management has not yet begun to evaluate the impact of this
interpretation to the funds.
76
SUPPLEMENTAL INFORMATION (UNAUDITED)
PORTFOLIO HOLDINGS DISCLOSURE
Each fund, except the Money Market Fund, posts its full portfolio holdings
monthly, with a 30-day lag, on www.citizensfunds.com. The portfolio holdings are
posted within approximately five business days after month end. The funds'
portfolio holdings will remain available until the following month's information
is posted.
In addition, each fund's, except the Citizens Money Market Fund's, top ten
portfolio holdings in order of position size and as a percentage of the total
portfolio as well as sector breakdowns and portfolio characteristics are
available quarterly, within approximately fifteen business days after quarter
end on www.citizensfunds.com. Each fund's top ten portfolio holdings, sector
breakdown and portfolio characteristics will remain available until the
following quarter's information is posted.
Details of the funds' portfolio holdings policies and procedures, including a
discussion of any exceptions, are contained in the funds' SAI.
Each fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year within 60 days of such quarters'
end on Form N-Q. You can receive a copy of each funds' Form N-Q without charge
by calling 800.223.7010 or by visiting the website at www.citizensfunds.com. The
fund's Form N-Q is also available through a variety of methods. You can:
- - find it on the EDGAR Database of the SEC internet site at www.sec.gov
- - have copies sent to you (after paying a copying fee) by writing the SEC's
Public Reference Section, Washington, D.C. 20549-0102, or by electronic
request to publicinfo@sec.gov
- - view and copy it in person at the SEC's Public Reference Room in Washington
D.C.; for more information call 202.942.8090.
77
SUPPLEMENTAL INFORMATION (UNAUDITED)
TABLE OF SHAREHOLDER EXPENSES
As a shareholder of the funds, you may incur two types of costs: (1) redemption
fees (for Global Equity Fund only) and (2) ongoing costs, including management
fees; distribution fees; and other fund expenses. This example is intended to
help you understand your ongoing costs (in dollars) of investing in the funds
and to compare these costs with the ongoing costs of investing in other mutual
funds.
ACTUAL EXPENSES
The table on the opposite page provides information about actual account values
and actual expenses. You may use the information below, together with the amount
you invested, to estimate the expenses that you paid over the period. Simply
divide your account value by $1,000 (for example, an $8,600 account value
divided by $1,000 = 8.6), then multiply the result by the number in the table
under the heading entitled "Expenses paid during period" to estimate the
expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The table on the opposite page also provides information about hypothetical
account values and hypothetical expenses based on each fund's actual expense
ratio and an assumed rate of return of 5% per year before expenses, which is not
the fund's actual return. The hypothetical account values and expenses may not
be used to estimate the actual ending account balance or expenses you paid for
the period. You may use this information to compare this 5% hypothetical example
with the 5% hypothetical examples that appear in the shareholder reports of
other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs, such as
redemption fees and other individual shareholder fees mentioned in the
prospectus. Therefore, the table is useful in comparing ongoing costs only, and
will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have
been higher.
78
DECEMBER 31, 2006
ANNUALIZED
EXPENSES EXPENSE
BEGINNING ENDING PAID DURING RATIO DURING
ACCOUNT ACCOUNT PERIOD(1) THE PERIOD
VALUE VALUE 07/01/06 -- 07/01/06 --
07/01/06 12/31/06 12/31/06 12/31/06
--------- --------- ----------- ------------
CORE GROWTH FUND
Standard -- actual $1,000.00 $1,022.00 $ 7.90 1.55%
Standard -- hypothetical 1,000.00 1,017.39 7.88 1.55%
Institutional -- actual 1,000.00 1,025.90 4.14 0.81%
Institutional -- hypothetical 1,000.00 1,021.12 4.13 0.81%
Administrative -- actual 1,000.00 1,024.50 5.77 1.13%
Administrative -- hypothetical 1,000.00 1,019.51 5.75 1.13%
EMERGING GROWTH FUND
Standard -- actual $1,000.00 $1,018.90 $ 9.67 1.90%
Standard -- hypothetical 1,000.00 1,015.63 9.65 1.90%
Institutional -- actual 1,000.00 1,021.60 7.03 1.38%
Institutional -- hypothetical 1,000.00 1,018.25 7.02 1.38%
Administrative -- actual 1,000.00 1,020.30 8.15 1.60%
Administrative -- hypothetical 1,000.00 1,017.14 8.13 1.60%
SMALL CAP CORE GROWTH FUND
Standard -- actual $1,000.00 $1,016.80 $ 7.17 1.41%
Standard -- hypothetical 1,000.00 1,018.10 7.17 1.41%
VALUE FUND
Standard -- actual $1,000.00 $1,103.00 $ 6.84 1.29%
Standard -- hypothetical 1,000.00 1,018.70 6.56 1.29%
Institutional -- actual 1,000.00 1,105.80 4.78 0.90%
Institutional -- hypothetical 1,000.00 1,020.67 4.58 0.90%
GLOBAL EQUITY FUND
Standard -- actual $1,000.00 $1,078.60 $10.58 2.02%
Standard -- hypothetical 1,000.00 1,015.02 10.26 2.02%
Institutional -- actual 1,000.00 1,081.90 7.45 1.42%
Institutional -- hypothetical 1,000.00 1,018.05 7.22 1.42%
Administrative -- actual 1,000.00 1,080.40 9.23 1.76%
Administrative -- hypothetical 1,000.00 1,016.33 8.94 1.76%
BALANCED FUND
Standard -- actual $1,000.00 $1,051.40 $ 6.72 1.30%
Standard -- hypothetical 1,000.00 1,018.65 6.61 1.30%
INCOME FUND
Standard -- actual $1,000.00 $1,043.00 $ 7.78 1.51%
Standard -- hypothetical 1,000.00 1,017.59 7.68 1.51%
MONEY MARKET FUND
Standard -- actual $1,000.00 $1,022.10 $ 4.99 0.98%
Standard -- hypothetical 1,000.00 1,020.27 4.99 0.98%
Institutional -- actual 1,000.00 1,023.50 3.57 0.70%
Institutional -- hypothetical 1,000.00 1,021.68 3.57 0.70%
(1) Expenses equal the average account value times the fund's annualized
expense ratio multiplied by 184/365 (to reflect the one-half year period).
79
SHAREHOLDER SERVICES (UNAUDITED)
At Citizens Funds, we want our investors to know how much we value their
business. That's why we offer a comprehensive range of services that includes
everything from highly trained client shareholder representatives to an
informative website.
EXCHANGES BETWEEN CITIZENS FUNDS*
You can move your money from any one of our funds to another.
RETIREMENT INVESTING
You have the opportunity to invest in a variety of IRAs, including Traditional,
Roth and Rollover. Citizens Funds are also available for 401(k), 403(b), SEP and
SIMPLE retirement plans.
AUTOMATIC INVESTMENT PLAN
You can invest automatically on a monthly or quarterly basis with payroll
deduction or electronic transfer from your bank.
UNARALLELED CUSTOMER SERVICE
Our representatives are well trained professionals whose goal is to satisfy your
request during the first phone call. Representatives are available from 9 AM to
6 PM (ET) Monday -- Friday at 800.223.7010.
CLIENT WEALTH MANAGEMENT
You have access to receive personal, one on one advice and consultation from a
Client Wealth Management specialist.
WWW.CITIZENS FUNDS.COM
Citizens Funds' website offers daily fund prices and monthly performance
updates, fund and manager profiles, the funds' prospectus and applications,
shareholder activism updates, online account access and transactions and much
more.
INTELLIGENT COMMUNICATIONS
Citizens Funds was a pioneer of the plain English prospectus well before it
became the standard for the rest of the mutual fund industry. We try to bring
that same spirit of innovation, plain-speak and respect for our shareholders to
all our communications.
PROXY VOTING
A description of the policies and procedures that the funds use to determine how
to vote proxies relating to portfolio securities and a copy of the funds' voting
record for the 12-month period ended December 31, 2006 are available online at
www.citizensfunds.com without charge, or upon request, by calling 800.223.7010,
or on the SEC's website at www.sec.gov.
* Citizens Global Equity Fund charges a redemption fee of 2% on shares
redeemed or exchanged within 60 days of purchase.
80
NOTES
81
NOTES
82
NOTES
83
NOTES
84
NOTES
85
(CITIZENS FUNDS LOGO)
TRUSTEES
Walter D. Bristol, Jr.
Sophia Collier
Jeannie H. Diefenderfer
Pablo S. Eisenberg
Orlando Hernandez
Martha S. Pope
Henry L.P. Schmelzer
MANAGER
Citizens Advisers, Inc.
One Harbour Place
Suite 400
Portsmouth, NH 03801
800.223.7010
603.436.5152
DISTRIBUTOR
Citizens Securities, Inc.
One Harbour Place
Suite 400
Portsmouth, NH 03801
800.223.7010
603.436.5152
CUSTODIAN
Fifth Third Bank
Cincinnati, OH 45263
TRANSFER AND ACCOUNTING AGENT
BISYS Fund Services Ohio, Inc.
Columbus, OH 43219
LEGAL COUNSEL
Bingham McCutchen LLP
Boston, MA 02110
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP
Columbus, OH 43215
Citizens Funds are distributed by Citizens Securities, Inc., Portsmouth, NH
03801 and are available through such popular mutual fund supermarkets as Charles
Schwab's Mutual Fund OneSource(R) and Fidelity Investments' FundsNetwork(R).
Citizens Funds(R) is a trademark of Citizens Advisers, Inc.
This report is intended for shareholders of Citizens Funds and is not authorized
for distribution to other persons unless accompanied or preceded by a
prospectus.
PLEASE CONSIDER THE INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES OF
CITIZENS FUNDS CAREFULLY BEFORE INVESTING. FOR THIS AND OTHER INFORMATION,
PLEASE VISIT WWW.CITIZENSFUNDS.COM OR CALL 800.223.7010 FOR A FREE PROSPECTUS
AND READ IT CAREFULLY BEFORE INVESTING.
(C) 2007 CITIZENS ADVISERS, INC. NOT A PART OF THE SEMI-ANNUAL REPORT
ITEM 2. CODE OF ETHICS.
Not Applicable to Semi-Annual Report.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not Applicable to Semi-Annual Report.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not Applicable to Semi-Annual Report.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not Applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
A schedule of investments for each series of the registrant is included as part
of the report to shareholders of such series under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not Applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not Applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS
Not Applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer
have concluded, based on their evaluation of the registrant's disclosure
controls and procedures as conducted within 90 days of the filing date of this
report, that these disclosure controls and procedures are adequately designed
and are operating effectively to ensure that information required to be
disclosed by the registrant is (i) accumulated and communicated to the
investment company's management, including its certifying officers to allow
timely decision regarding required disclosure, and (ii) recorded, processed,
summarized and reported within the time periods specified in the Securities and
Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial
reporting that occurred during the second fiscal quarter of the period covered
by this report that have materially affected or are reasonably likely to
materially affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not Applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) are attached hereto.
(a)(3) Not Applicable.
(b) Certifications pursuant to Rule 30a-2(b) are furnished herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Citizens Funds
By: /s/ Sophia Collier
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Sophia Collier
President
Date: February 28, 2007
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Sophia Collier
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Sophia Collier
President
Date: February 28, 2007
By: /s/ Sean P. Driscoll
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Sean P. Driscoll
Treasurer
Date: February 28, 2007