-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, U460ct9N4ZflpuJL4DgP6fOTLKPBNjH92yAQaROaz60oP+gKgZqUy9g/Zlg9DQIr D1Wx5XerTFf8NCKqIBFwQg== 0000935069-08-002928.txt : 20081208 0000935069-08-002928.hdr.sgml : 20081208 20081208125850 ACCESSION NUMBER: 0000935069-08-002928 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20081208 DATE AS OF CHANGE: 20081208 EFFECTIVENESS DATE: 20081208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CNI CHARTER FUNDS CENTRAL INDEX KEY: 0001026977 IRS NUMBER: 911766001 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07923 FILM NUMBER: 081235301 BUSINESS ADDRESS: STREET 1: 400 NORTH ROXBURY DRIVE CITY: BEVERLY HILLS STATE: CA ZIP: 90210 BUSINESS PHONE: (800) 708-8881 MAIL ADDRESS: STREET 1: 400 NORTH ROXBURY DRIVE CITY: BEVERLY HILLS STATE: CA ZIP: 90210 FORMER COMPANY: FORMER CONFORMED NAME: BERKELEY FUNDS TRUST DATE OF NAME CHANGE: 19980319 FORMER COMPANY: FORMER CONFORMED NAME: BERKELEY CAPITAL MANAGEMENT FUNDS DATE OF NAME CHANGE: 19961113 0001026977 S000005827 CNI CHARTER LARGE CAP GROWTH EQUITY FUND C000015985 CNI CHARTER LARGE CAP GROWTH EQUITY FUND - CLASS N CLEAX C000015986 CNI CHARTER LARGE CAP GROWTH EQUITY FUND - INSTITUTIONAL CNGIX 0001026977 S000005828 CNI CHARTER HIGH YIELD BOND FUND C000015987 CNI CHARTER HIGH YIELD BOND FUND - CLASS N CHBAX C000015988 CNI CHARTER HIGH YIELD BOND FUND - INSTITUTIONAL CHYIX 0001026977 S000005829 CNI LARGE CAP VALUE EQUITY FUND C000015989 CNI LARGE CAP VALUE EQUITY FUND - CLASS N CVEAX C000015990 CNI LARGE CAP VALUE EQUITY FUND - INSTITUTIONAL CNLIX 0001026977 S000005831 CNI CHARTER RCB SMALL CAP VALUE FUND C000015993 CNI CHARTER RCB SMALL CAP VALUE FUND - CLASS N RCBAX C000015994 CNI CHARTER RCB SMALL CAP VALUE FUND - INSTITUTIONAL RCBIX C000015995 CNI CHARTER RCB SMALL CAP VALUE FUND - CLASS R RCBSX 0001026977 S000005832 CNI CHARTER PRIME MONEY MARKET FUND C000015996 CNI CHARTER PRIME MONEY MARKET FUND - CLASS N CNPXX C000015997 CNI CHARTER PRIME MONEY MARKET FUND - INSTITUTIONAL CNMXX C000015998 CNI CHARTER PRIME MONEY MARKET FUND - CLASS S CNSXX 0001026977 S000005833 CNI CHARTER GOVERNMENT MONEY MARKET FUND C000015999 CNI CHARTER GOVERNMENT MONEY MARKET FUND - CLASS N CNGXX C000016000 CNI CHARTER GOVERNMENT MONEY MARKET FUND - INSTITUTIONAL CNIXX C000016001 CNI CHARTER GOVERNMENT MONEY MARKET FUND - CLASS S CNFXX 0001026977 S000005834 CNI CHARTER CALIFORNIA TAX EXEMPT MONEY MARKET FUND C000016002 CNI CHARTER CALIFORNIA TAX EXEMPT MONEY MARKET FUND - CLASS N CNEXX C000016003 CNI CHARTER CALIFORNIA TAX EXEMPT MONEY MARKET FUND - INSTITUTIONAL CNTXX C000016004 CNI CHARTER CALIFORNIA TAX EXEMPT MONEY MARKET FUND - CLASS S CEMXX 0001026977 S000005835 CNI CHARTER CALIFORNIA TAX - EXEMPT BOND FUND C000016005 CNI CHARTER CALIFORNIA TAX - EXEMPT BOND FUND - CLASS N CCTEX C000016006 CNI CHARTER CALIFORNIA TAX - EXEMPT BOND FUND - INSTITUTIONAL CNTIX 0001026977 S000005836 CNI CHARTER CORPORATE BOND FUND C000016007 CNI CHARTER CORPORATE BOND FUND - CLASS N CCBAX C000016008 CNI CHARTER CORPORATE BOND FUND - INSTITUTIONAL CNCIX 0001026977 S000005837 CNI CHARTER GOVERNMENT BOND FUND C000016009 CNI CHARTER GOVERNMENT BOND FUND - CLASS N CGBAX C000016010 CNI CHARTER GOVERNMENT BOND FUND - INSTITUTIONAL CNBIX 0001026977 S000018801 CNI CHARTER MULTI-ASSET FUND C000052022 Institutional Class C000052023 Class N 0001026977 S000022389 Opportunistic Value Fund C000064397 Class E C000064398 Institutional Class C000064399 Class N N-CSR 1 cniar9_08comb.txt CNI AR 9_08 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------- FORM N-CSR -------- CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES INVESTMENT COMPANY ACT FILE NUMBER 811-0792 CNI CHARTER FUNDS (Exact name of registrant as specified in charter) -------- 400 North Roxbury Drive Beverly Hills, CA 90210 (Address of principal executive offices) (Zip code) SEI Investments Distributors 1 Freedom Valley Drive Oaks, PA 19456 (Name and address of agent for service) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-888-889-0799 DATE OF FISCAL YEAR END: SEPTEMBER 30, 2008 DATE OF REPORTING PERIOD: SEPTEMBER 30, 2008 ITEM 1. REPORTS TO STOCKHOLDERS. (CNI CHARTER FUNDS(SM) LOGO)(LOGO) (GRAPHIC) 2008 ANNUAL REPORT September 30, 2008 This report and the financial statements contained herein are provided for the general information of the shareholders of the CNI Charter Funds. This report is not authorized for distribution to prospective investors in the CNI Charter Funds unless preceded or accompanied by an effective prospectus. Please remember that past performance is no guarantee of future results. Shares of CNI Charter Funds are not deposits or obligations of any bank, are not guaranteed by any bank, are not insured by the FDIC or any other agency and involve investment risks, including the possible loss of the principal amount invested. TABLE OF CONTENTS CNI Charter Funds Annual Report 2 Letter to Our Shareholders 4 Equity Funds Investment Adviser's Report 7 Equity Funds Overview 12 Fixed Income Funds Investment Adviser's Report 14 Fixed Income Funds Overview 18 Money Market Funds Investment Adviser's Report 20 Schedules of Investments 64 Statements of Assets & Liabilities 67 Statements of Operations 70 Statements of Changes in Net Assets 74 Financial Highlights 77 Notes to Financial Statements 85 Report of Independent Registered Public Accounting Firm 86 Trustees and Officers 89 Notice to Shareholders 90 Disclosure of Fund Expenses 92 Board Approval of Investment Advisory Agreements
The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q within sixty days after the end of the period. The Funds' Form N-Q is available on the Commission's website at http://www.sec.gov, and may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The most current Form N-Q is also available on the Funds' website at www.cnicharterfunds.com and without charge, upon request, by calling 1-888-889-0799. A description of the policies and procedures that the Funds use to determine how to vote proxies relating to the Funds' portfolio securities, and information on how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ending June 30 is available (1) without charge, upon request, by calling 1-888-889-0799, (2) on the Funds' website at www.cnicharterfunds.com, and (3) on the Securities and Exchange Commission's website at www.sec.gov. CNI CHARTER FUNDS | PAGE 1 letter to our shareholders SEPTEMBER 30, 2008 This annual report covers the CNI Charter Funds for the fiscal year ended September 30, 2008. On the following pages, you will find the specific details of each Fund's portfolio and investment performance. Our unique philosophy and disciplined approach to capital market investment continued to show well over the last twelve months. Despite significant turmoil in the global financial markets and extreme price dislocations, strict adherence to our underlying investment philosophy proved successful once again. The past twelve months witnessed an otherwise innocuous slowdown in global economic growth that was interrupted and exacerbated by a credit and liquidity crisis of historic proportions. The financial markets virtually came to a halt during the final weeks of this fiscal year (mid-September), demanding significant and repeated intervention by the central banking authorities around the world. Fears of a global financial meltdown, not seen since the Great Depression, were further fueling a "flight to quality" in the investment markets that pushed pricing to extreme levels. At one end of the spectrum, gold and short-term U.S. Treasury bill prices were driven to all time highs, while virtually all other asset classes were discarded. Consumer and investor confidence hit all-time lows and drove risky-asset prices to extreme levels. "AA"-rated debt spreads widened to junk bond levels. Stock prices plummeted around the world, led by the emerging markets, which slid by 50-70% in a matter of weeks. During this period, the only safe havens were in the fixed income markets, as equity, commodity, and other risky-asset prices tumbled:
Twelve-Month October 2007 - Index Watch: September 2008 - ------------ -------------- EQUITIES: S&P 500 Stock Index ................... - 22.0% Russell 2000 Small Cap Index .......... - 14.5% MSCI EAFE Index ....................... - 30.51% Dow Jones AIG Commodity Index ......... - 3.7%
Twelve-Month October 2007 - Index Watch: September 2008 - ------------ -------------- BONDS: Barclays U.S. Government/Credit Bond Index ......................... +2.4% Barclays U.S. Aggregate Bond Index .... +3.7% Barclays CA Intermediate Muni Index ... +2.5%
City National Asset Management, Inc.'s underlying investment philosophy is to pursue the long-term goals and objectives specified for each of the Funds. With an active yet disciplined style, all Funds are managed to achieve competitive rates of return consistent with their respective, prescribed risk parameters. CNI Charter Funds follow a disciplined investment process that begins with a thorough assessment of the macroeconomic environment and the financial markets. Our broad based research process takes advantage of the most advanced investment technology, fundamental valuation, and quantitative tools to determine the most attractive sectors and securities within each Fund's area of concentration. The final step is to construct and continuously monitor precise portfolios that meet the objectives of the specific Funds, without being swayed by short-term trends and fads. This approach continued to serve shareholders well during the maturing phase of this economic cycle encountered in the period ended September 30, 2008. CNI CHARTER FUND PERFORMANCE AND HIGHLIGHTS (ALL RETURNS LISTED REFER TO INSTITUTIONAL CLASS SHARES) By adhering to our basic investment discipline and maintaining the appropriate amount of risk control in the various portfolios, the Funds continued to provide returns that are competitive in their respective investment arenas. Although our equity funds dropped in value during the year ending September 30, 2008, two showed extremely well vis-a-vis their respective investment benchmarks, outperforming by over 300 basis points. CNI CHARTER FUNDS | PAGE 2 Our LARGE CAP GROWTH EQUITY FUND lost 16.4% over the twelve-month period, versus a 19.4% loss for its S&P/Citigroup Growth Index benchmark. The LARGE CAP VALUE EQUITY FUND lost 21.6% vis-a-vis a 24.5% loss for its S&P 500/Citigroup Value Index benchmark. The RCB SMALL CAP VALUE EQUITY FUND was hardest hit during this tumultuous period and showed a 35.0% drop in value. Our newly minted MULTI-ASSET FUND, designed to buffer against the harmful effects of a bear market did just that during the period, and showed a 9.8% drop for the nine-month period ending September 30, 2008, since inception. Our three, high-grade CNI Charter Bond Funds eked out positive returns for the year. The GOVERNMENT BOND FUND led the pack by gaining 4.9%, while the CALIFORNIA TAX-EXEMPT BOND FUND rose 1.4%, and the CORPORATE BOND FUND returned 0.04%. Only the HIGHYIELD BOND FUND showed a loss of 9.8% during the twelve-month period in keeping with market averages for the junk bond sector. Lastly, all three of the CNI Charter Money Market Funds produced steady, consistent, and competitive returns. These returns were in line with their respective investment mandates. Please read the following pages carefully as they contain important information on the assets and financial condition of the Funds. If you have any questions about this report or the CNI Charter Funds, please call your investment professional or (888) 889-0799. Thank you for choosing CNI Charter Funds. Sincerely, /s/ Richard A. Weiss Richard A. Weiss PRESIDENT CITY NATIONAL ASSET MANAGEMENT, INC. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. CERTAIN SHAREHOLDERS MAY BE SUBJECT TO THE ALTERNATIVE MINIMUM TAX (AMT). FEDERAL INCOME TAX RULES APPLY TO ANY CAPITAL GAIN DISTRIBUTIONS. FUND EXPENSES HAVE BEEN WAIVED DURING THE PERIOD ON WHICH THE PERFORMANCE IS BASED. WITHOUT WAIVERS, PERFORMANCE WOULD BE LOWER. THIS INFORMATION MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING. INVESTING IN MUTUAL FUNDS INVOLVES RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL. IN ADDITIONAL TO THE NORMAL RISKS ASSOCIATED WITH INVESTING, INVESTMENTS IN SMALLER COMPANIES TYPICALLY EXHIBIT HIGHER VOLATILITY. AN INVESTMENT IN THE FUNDS IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY. *NOT FDIC INSURED *NO BANK GUARANTEE *MAY LOSE VALUE INTRODUCING THE CNI CHARTER OPPORTUNISTIC VALUE FUND In turbulent markets, a disciplined approach to identifying and capitalizing on fundamental valuation makes sense. The latest addition to the CNI Charter Fund family, managed by SKBA Capital Management, LLC, is an equity fund that relies on proven, value-based disciplines to uncover opportunities when prices deviate from their underlying, true value. SKBA Capital Management, LLC is a registered investment advisor with $582 million in assets under management and a strong track record of proven investment success. For more information about the Opportunistic Value Fund or other CNI Charter Funds visit cnicharterfunds.com. CNI CHARTER FUNDS | PAGE 3 investment adviser's report SEPTEMBER 30, 2008 EQUITY FUNDS For the fiscal year ending September 30, 2008, the U.S. equity market, as measured by the S&P 500 Index, returned -22.0%. Equities responded to a market that was hoping for an economic recovery by mid 2008, but instead was dealt a global credit crisis and financial contagion. This poor performance finds the market in an official bear market, ending the five-year bull market that effectively started in March 2003. The housing market and the issue of sub-prime mortgages continued to be the main culprit. Investors worried about the strength of financial institutions burdened by this toxic debt. The concern also reflected the impact weak financial institutions would have on the rest of the economy. This concern evidenced itself in early January 2008, as the Federal Reserve lowered interest rates 75 basis points in a surprise move, as the risk to economic growth increased. The market continued to trade lower in March 2008 with JPMorgan Chase's government assisted takeover of Bear Stearns. This was just the sign of things to come with respect to the actions of the Federal Reserve in keeping the U.S. financial system, and de facto the global markets, functioning. September brought increased price declines with the government's takeover of Fannie Mae and Freddie Mac. These "Sunday Night Specials" continued with Lehman Brothers' bankruptcy, followed closely by the Federal Reserve's loan to American International Group, effectively taking control of the company. Credit markets froze worldwide and the Federal Reserve was using every conceivable vehicle to inject liquidity into the various credit markets. The fiscal year ended with Congress failing to pass a $700 billion rescue package putting further downside pressure on the markets. Ultimately, Congress passed the legislation, but this action provided little relief to a market where fear was the predominant sentiment. EQUITY FUND PERFORMANCE (ALL RETURNS FOR CNI CHARTER FUNDS REFER TO INSTITUTIONAL CLASS SHARES) - The LARGE CAP VALUE EQUITY FUND fell 21.6% during the 12 months ending September 30, 2008. This performance outperformed both the S&P500/Citigroup Value Index return of -24.5% and the Lipper Large Cap Value Funds Classification return of -23.8%. Norfolk Southern and CSX gained 30.1% and 29.3%, respectively, as railroad companies benefited by higher charges to customers and improved railway efficiencies. Rohm & Haas, a chemical producer specializing in acrylic technology, gained 29.1% due to the announced purchase by Dow Chemical. Keycorp, the provider of multi-line financial services in the U.S., lost 63.2% as the company increased its loan loss reserve and continued to write down sizeable loan losses. Constellation Energy, which distributes electricity and gas, fell 71.0% due to the credit crisis and investors' fear that it would not be able to find a partner for its energy-trading business. - The LARGE CAP GROWTH EQUITY FUND lost 16.4% during the 12 months ending September 30, 2008. This performance outperformed both the S&P500/Citigroup Growth Index return of -19.4% and the Lipper Large Cap Growth Funds Classification return of -23.0%. Revenue for the world's largest retailer, Wal-Mart Stores, increased during the weak economy. The company gained 39.6% as it positioned itself as the low-price leader. Genzyme, a company that focuses on treating genetic disorders and other chronic debilitating diseases, gained 30.6% as its core CNI CHARTER FUNDS | PAGE 4 investment adviser's report SEPTEMBER 30, 2008 products still show strong growth. SanDisk, a manufacturer of data storage products, fell 52.3% as the prices for the company's memory products continued to drop sharply. The global real estate service firm, CB Richard Ellis, fell 52.0% as the real estate sales and leasing activities dropped due to the troubled global credit markets. - The RCB SMALL CAP VALUE FUND returned -35.0% during the 12 months ending September 30, 2008. The Russell 2000 Value Index returned -12.3%, the Russell 2000 Index returned -14.5%, and the Lipper Small Cap Value Funds Classification returned -16.4%. This bear market has caused liquidity driven selling which disproportionately affected the price of several of our holdings. Performance was punished by some of our more economically sensitive stocks in the consumer discretionary sector, a sector which represents 23% of the Fund. An example is LodgeNet Interactive, a provider of in-room movies, internet and games for hotel properties, which declined 92% because of expectations of a decline in hotel occupancy rates and the company's leverage risk. Among the Fund's positive contributors was Ralcorp Holdings, a private label food manufacturer, considered a defensive stock in this economic environment. During the summer the company completed its acquisition of Post cereals, which expands and enhances Ralcorp's product offerings. The stock returned 22% for the period. While the markets may be unstable, the Fund continues to focus on the long-term outlook for the issuers that are in the portfolio. - The OPPORTUNISTIC VALUE FUND declined 6.9% during the period from June 26, 2008 (Fund inception date) to September 30, 2008. This performance was in line with the Russell 1000 Value Index return of -6.1% and the S&P 500 Index return of -8.4% for the same period. Materials and financials were bright spots in the Fund. Rohm and Haas announced it would be acquired by Dow Chemical for a significant premium. Despite its 50% return during the period, however, it was not the top contributor to the strategy's overall performance. That honor goes to International Bancshares. Other top contributors included HCC Insurance, Capital One Financial and Nasdaq. Unit, Chesapeake and ConocoPhilips were three detractors to overall performance during the period. Consumer discretionary issues also detracted from the Fund's performance. With valuations compressing significantly, long-term attraction of stocks over alternative asset classes has increased. We are reaching levels not experienced in years and intend to capitalize on recent turmoil by purchasing exceptional franchises at bargain basement prices. - The MULTI-ASSET FUND declined 9.8% during the year ending September 30, 2008. This compares favorably to the Lipper Flexible Portfolio Funds Classification return which declined 14.0% for the same period. The Fund returns were negatively affected by exposure to the U.S. equity market over the course of the year. Commodity investments benefited returns during the first half of the year, as did investments in international bonds which appreciated largely due to favorable currency exposures. During the course of the year, the Fund divested international equities which limited overall Fund declines. The Fund ended the fiscal year with a large cash position that has provided some stability during a period of extreme price volatility in virtually every asset class. CNI CHARTER FUNDS | PAGE 5 investment adviser's report SEPTEMBER 30, 2008 EQUITY FUNDS LOOKING FORWARD Most economists believe the economy will experience negative real growth in the third and fourth quarters of 2008 and possibly on into the first quarter of 2009. The most pessimistic forecasts expect this economic slowdown to be longer than normal, possibly lasting through all of 2009. We are confident, though, that the Federal Reserve's actions will dampen the magnitude of the economic slowdown and remain hopeful that the market lows reached in October 2008 will be the low water mark for this most recent bear run. Ultimately, these low price levels represent a fantastic opportunity for future price returns. In this historic period, as in all market environments, we will continue to apply our disciplined investment approach with the objective of providing superior investment results across the various strategies we manage. Sincerely, /s/ Brian L. Garbe Brian L. Garbe DIRECTOR OF RESEARCH CITY NATIONAL ASSET MANAGEMENT, INC. THIS MATERIAL REPRESENTS THE MANAGER'S ASSESSMENT OF THE PORTFOLIO AND MARKET ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE READER AS RESEARCH OR INVESTMENT ADVICE. CNI CHARTER FUNDS | PAGE 6 fund overview SEPTEMBER 30, 2008 LARGE CAP VALUE EQUITY FUND The Fund seeks to provide capital appreciation and moderate income consistent with current returns available in the marketplace by investing in large U.S. corporations and U.S. dollar denominated American Depositary Receipts of large foreign corporations which are undervalued and whose market valuations compare favorably relative to similar companies. Comparison of Change in the Value of a $10,000 Investment in the CNI Large Cap Value Equity Fund, Institutional Class or Class N Shares, versus the S&P 500/ Citigroup Value Index, and the Lipper Large Cap Value Funds Classification(1) (PERFORMANCE GRAPH)
CNI Large Cap CNI Large Cap Value Equity Fund, Value Equity Lipper Large Cap Institutional Fund, Class N S&P 500/Citigroup Value Funds Class Shares Shares+ Value Index Classification ------------------ ------------- ----------------- ---------------- 1/14/00 $10,000 $10,000 $10,000 $10,000 9/30/00 $10,099 $10,094 $ 9,871 $10,463 9/30/01 $ 8,447 $ 8,410 $ 8,508 $ 9,710 9/30/02 $ 6,852 $ 6,814 $ 6,989 $ 7,957 9/30/03 $ 8,499 $ 8,433 $ 8,579 $ 9,745 9/30/04 $10,148 $10,036 $10,271 $11,393 9/30/05 $11,608 $11,455 $11,951 $12,987 9/30/06 $13,291 $13,087 $13,796 $14,584 9/30/07 $15,365 $15,081 $16,018 $16,742 9/30/08 $12,051 $11,806 $12,093 $12,757
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year Inception Shares Symbol Return Return Return to Date - ------ ------ ------ ------ ------ --------- Institutional Class (1)## CNLIX -21.57% 1.26% 7.23% 2.16% Class N (2) CVEAX -21.72% 1.01% 6.96% 1.92%
(1) Commenced operations on January 14, 2000. (2) Commenced operations on April 13, 2000. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + Class N Shares' performance for the period prior to April 13, 2000 reflects the performance of the Fund's Institutional Shares. The performance of the Institutional Shares has not been adjusted to reflect the higher Rule 12b-1 Fees and expenses applicable to Class N Shares. If it had, performance would have been lower than that shown. Top Ten Holdings
% OF PORTFOLIO -------------- JPMorgan Chase 3.9 AT&T 3.6 Wells Fargo 3.6 Verizon Communications 2.7 Bank of America 2.6 Procter & Gamble 2.0 Wal-Mart Stores 1.8 Pfizer 1.8 US Bancorp 1.7 Occidental Petroleum 1.7
CNI CHARTER FUNDS | PAGE 7 fund overview SEPTEMBER 30, 2008 LARGE CAP GROWTH EQUITY FUND The Fund seeks to provide capital appreciation by investing in large U.S. corporations and U.S. dollar denominated American Depositary Receipts of large foreign corporations with the potential for growth and that possess superior management, strong market position, consistent records of increased earnings and a strong operating and financial position. Comparison of Change in the Value of a $10,000 Investment in the CNI Large Cap Growth Equity Fund, Institutional Class or Class N Shares, versus the S&P 500/ Citigroup Growth Index, and the Lipper Large Cap Growth Funds Classification(1) (PERFORMANCE GRAPH)
CNI Large Cap Growth Equity Fund, CNI Large Cap Lipper Large Cap Institutional Growth Equity Fund, S&P 500/Citigroup Growth Funds Class Shares Class N Shares+ Growth Index Classification ------------------- ------------------- ----------------- ---------------- 1/14/00 $10,000 $10,000 $10,000 $10,000 9/30/00 $ 9,370 $ 9,350 $ 9,764 $10,370 9/30/01 $ 6,360 $ 6,330 $ 5,950 $ 6,287 9/30/02 $ 5,250 $ 5,210 $ 4,538 $ 5,008 9/30/03 $ 6,379 $ 6,320 $ 5,717 $ 6,063 9/30/04 $ 6,774 $ 6,691 $ 6,202 $ 6,552 9/30/05 $ 7,489 $ 7,379 $ 6,709 $ 7,407 9/30/06 $ 7,833 $ 7,714 $ 7,138 $ 7,704 9/30/07 $ 9,001 $ 8,833 $ 8,336 $ 9,273 9/30/08 $ 7,525 $ 7,371 $ 6,715 $ 7,146
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year Inception Shares Symbol Return Return Return to Date - ------ ------ ------ ------ ------ --------- Institutional Class (1)## CNGIX -16.40% 0.16% 3.36% -3.21% Class N (2) CLEAX -16.55% -0.03% 3.12% -3.44%
(1) Commenced operations on January 14, 2000. (2) Commenced operations on March 28, 2000. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + Class N Shares' performance for the period prior to March 28, 2000 reflects the performance of the Fund's Institutional Shares. The performance of the Institutional Shares has not been adjusted to reflect the higher Rule 12b-1 Fees and expenses applicable to Class N Shares. If it had, performance would have been lower than that shown. Top Ten Holdings
% OF PORTFOLIO -------------- Exxon Mobil 5.8 Microsoft 3.9 Chevron 3.5 Johnson & Johnson 3.3 Wal-Mart Stores 2.9 Procter & Gamble 2.8 IBM 2.8 Qualcomm 2.6 Google 2.4 PepsiCo 2.4
CNI CHARTER FUNDS | PAGE 8 fund overview SEPTEMBER 30, 2008 RCB SMALL CAP VALUE FUND The Fund seeks to provide capital appreciation by investing primarily in smaller U.S. corporations which are considered undervalued. Comparison of Change in the Value of a $10,000 Investment in the CNI RCB Small Cap Value Fund, Institutional Class, Class N or Class R Shares, versus the Russell 2500 Value Index, the Russell 2000 Index, the Russell 2000 Value Index, the Lipper Small Cap Value Funds Classification, and the Lipper Small Cap Core Funds Classification(1) (PERFORMANCE GRAPH)
CNI RCB Small Cap Value Fund, CNI RCB Small CNI RCB Small Lipper Small Cap Institutional Cap Value Fund, Cap Value Fund, Russell 2500 Russell 2000 Russell 2000 Value Funds Class Shares Class N Shares+ Class R Shares Value Index Index Value Index Classification --------------- --------------- --------------- ------------ ------------ ------------ ---------------- 9/30/1998 $10,000 $10,000 $ 9,650 $10,000 $10,000 $10,000 $10,000 9/30/1999 $15,120 $15,120 $14,591 $10,840 $11,907 $10,583 $11,271 9/30/2000 $16,858 $16,858 $16,268 $12,547 $14,692 $12,208 $13,345 9/30/2001 $18,394 $18,394 $17,751 $12,863 $11,576 $12,893 $13,884 9/30/2002 $16,353 $16,331 $15,739 $12,783 $10,499 $12,704 $13,741 9/30/2003 $23,802 $23,715 $22,854 $16,778 $14,331 $16,727 $17,800 9/30/2004 $29,744 $29,559 $28,483 $20,898 $17,022 $21,019 $22,136 9/30/2005 $32,679 $32,381 $31,206 $25,353 $20,078 $24,750 $26,307 9/30/2006 $32,810 $32,437 $31,251 $28,175 $22,070 $28,217 $28,624 9/30/2007 $36,306 $35,802 $34,510 $30,651 $24,793 $29,934 $31,527 9/30/2008 $23,596 $23,213 $22,426 $25,810 $21,203 $26,267 $26,353
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year 10-Year Inception Shares Symbol Return Return Return Return to Date - ------ ------ ------ ------ ------ ------- --------- Institutional Class (1)## RCBIX -35.01% -10.29% -0.17% 8.96% 3.48% Class N (1) RCBAX -35.16% -10.50% -0.43% 8.79% 3.24% Class R (2) RCBSX -35.02% -10.43% -0.38% 8.80% 8.80% Class R with load RCBSX -37.29% -11.49% -1.08% 8.41% 8.41%
(1) Commenced operations on October 3, 2001. (2) Commenced operations on September 30, 1998. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + The performance of the Institutional Class and Class N Shares for the period prior to October 3, 2001 reflect the performance of the Class R Shares of a predecessor mutual fund. The performance of the Class R Shares has not been adjusted to reflect the expenses applicable to Institutional and Class N Shares. Fees for the Institutional Class Shares are lower than the fees for the Class R Shares; correspondingly, Institutional Class performance would have been higher than that shown. Top Ten Holdings
% OF PORTFOLIO -------------- Central Garden & Pet 7.7 Alleghany 6.8 White Mountains Insurance Group 5.5 Ralcorp Holdings 5.3 Wendy's/Arby's Group 4.6 Fisher Communications 4.4 Annaly Capital Management 3.9 Exterran Holdings 3.5 United Online 3.5 Fair Isaac 3.4
CNI CHARTER FUNDS | PAGE 9 fund overview SEPTEMBER 30, 2008 OPPORTUNISTIC VALUE FUND The Fund seeks to achieve long-term capital appreciation by investing in a diversified portfolio of equity securities which are undervalued. Comparison of Change in the Value of a $10,000 Investment in the CNI Opportunistic Value Fund, Institutional Class, Class E, or Class N Shares, versus the Russell 1000 Value Index, the S&P 500 Index, and the Lipper Multi-Cap Value Funds Classification(1) (PERFORMANCE GRAPH)
CNI Opportunistic Value Fund, CNI Opportunistic CNI Opportunistic Lipper Multi-Cap Institutional Value Fund, Value Fund, Russell 1000 S&P 500 Value Funds Class Shares Class E Shares Class N Shares Value Index Index Classification ----------------- ----------------- ----------------- ------------ ------- ---------------- 3/31/04 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 9/30/04 $10,000 $10,026 $ 9,987 $10,244 $ 9,982 $10,051 9/30/05 $11,873 $11,933 $11,841 $11,953 $11,205 $11,613 9/30/06 $12,879 $12,964 $12,799 $13,701 $12,414 $12,876 9/30/07 $14,382 $14,523 $14,262 $15,680 $14,455 $14,633 9/30/08 $11,860 $11,985 $11,740 $11,986 $11,278 $10,990
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year Inception Shares Symbol Return+ Return+ to Date+ - ------ ------ ------- ------- --------- Institutional Class (1)## OPVIX -17.54% -0.04% 3.86% Class E (1) OPVEX -17.48% 0.14% 4.10% Class N (1) OPVNX -17.68% -0.28% 3.63%
(1) Commenced operations on June 26, 2008. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + For periods prior to June 26, 2008 the performance data quoted above represents past performance of an institutional account that converted into Class N shares of the Fund (the "Predecessor Account"), adjusted to reflect fees and expenses borne by the Fund. The Predecessor Account was not a registered mutual fund so it was not subject to the same investment and tax restrictions as the Fund. If it had been, the Predecessor Account's performance may have been lower.The cumulative returns for the Institutional Class, Class N and Class E shares, from their inception to September 30, 2008, were -6.90%, -6.90% and -7.00, respectively. Top Ten Holdings*
% OF PORTFOLIO -------------- Nasdaq OMX Group 3.9 Cardinal Health 3.4 Quest Diagnostics 3.4 Unit 3.1 3M 3.1 Brookfield Asset Management 3.1 Tyco International 3.1 Johnson & Johnson 3.0 ConocoPhillips 3.0 Portland General Electric 2.9
* Excludes Cash Equivalents CNI CHARTER FUNDS | PAGE 10 fund overview SEPTEMBER 30, 2008 MULTI-ASSET FUND The Fund seeks to generate a positive total return in excess of inflation in a manner consistent with capital preservation in all market environments. Comparison of Change in the Value of a $10,000 Investment in the CNI Multi-Asset Fund, Institutional Class or Class N Shares, versus the Barclays U.S. TIPS Index, a 60/40 hybrid of the following two indexes: the S&P 500 Index, and the Barclays Intermediate U.S. Government/Credit Index, and a CPI +500 Basis Points benchmark. (PERFORMANCE GRAPH)
Lipper CNI Multi- CNI Multi- 60/40 Hybrid Barclays Flexible Asset Fund, Asset Fund, of the Intermediate Barclays CPI + 500 Portfolio Institutional N Class following S&P 500 US Government/ US TIPS basic Funds Class Shares Shares two indexes: Index Credit Index Index points Classification ------------- ----------- ------------ ------- -------------- -------- ---------- -------------- 10/01/07 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 9/30/08 $ 9,016 $ 8,988 $ 8,686 $ 7,700 $10,316 $10,619 $11,016 $ 8,606
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Cumulative Ticker Inception Shares Symbol to Date - ------ ------ ---------- Institutional Class (1)## CNLIX -9.84% Class N (1) CVEAX -10.12%
(1) Commenced operations on October 1, 2007. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. Top Ten Holdings*
% OF PORTFOLIO -------------- SPDR S&P 500 Fund 19.8 iShares Lehman TIPS Bond Fund 9.8 CNI Corporate Bond Fund, Institutional Class 8.2 U.S. Treasury Inflation Protection Security 7.9 CNI Government Bond Fund, Institutional Class 6.8 T. Rowe Price International Bond Fund 5.7 Powershares DB Agricultural Fund 5.2 Market Vectors Gold Miners Fund 4.2 iShares Lehman 1-3 Year T-Bill 3.7 PIMCO Commodity Real Return Strategy Fund 3.6
* Excludes Cash Equivalents CNI CHARTER FUNDS | PAGE 11 investment adviser's report SEPTEMBER 30, 2008 FIXED INCOME FUNDS The credit markets were once again front and center during the third quarter of 2008, as investors worried about the severity and duration of the morphing financial market and economic downturn. Indeed, bids for a wide array of credit instruments (mortgage backed securities, corporate and municipal bonds) all but vanished as investors re-evaluated risk. The yield curve has since steepened, with shorter-term rates declining in the face of monetary policy changes and importantly, yield spreads/premiums seem to be stabilizing. During the fiscal year, City National Asset Management, Inc. altered its strategy by moving to a more defensive posture in terms of duration and quality. This strategy shift came on the heels of the liquidity crisis and unprecedented government intervention. The Fed looks poised to continue to inject liquidity into the markets as needed through the many new programs instituted this year. BOND FUND PERFORMANCE (ALL RETURNS FOR CNI CHARTER FUNDS REFER TO INSTITUTIONAL CLASS SHARES) - The CORPORATE BOND FUND produced a total return of 0.04% for the last 12 months. For the same period, the Barclays Intermediate U.S. Corporate Index returned -5.3%. The strategy of underweighting lower quality issues in favor of higher quality issues fared well during this period of slower economic growth. Furthermore, our conservative maturity profile also enabled the Fund to outperform both the benchmark and its peer group, as the Lipper Short/Intermediate Investment Grade Objective was down 1.0%. - The GOVERNMENT BOND FUND produced a total return of 4.9% for the last 12 months. For the same period, the Barclays Intermediate U.S. Government Bond Index returned 7.5%. The Fund trailed the benchmark due to its underweight in U.S. Treasuries and the flight to quality during the credit crunch. We maintain our neutral maturity stance versus the benchmark due to an uncertain economic environment. Active sector allocation has helped the Fund to outperform its peer group during this period as evidenced by the Lipper Short/Intermediate U.S. Government Objective return of 4.6%. - The CALIFORNIA TAX EXEMPT BOND FUND produced a total return of 1.4% for the last 12 months. For the same period, the Barclays CA Intermediate-Short Municipal Bond Index returned 3.6%. The past fiscal year was a historically volatile one for the municipal asset class which resulted in disparate returns. In general, the Fund was modestly longer duration with more focus on insured issues than the Index. During the period, longer maturity and insured issues underperformed in the market. The Fund did fare better against its peer group, as the Lipper California Short/Intermediate Municipal Fund Objective returned 0.3%. - The HIGH YIELD BOND FUND produced a total return of -9.8% for the last 12 months. For the same period, the Citigroup High Yield Market Capped Index returned -8.4%. The Fund's sector allocation helped relative performance in an otherwise very difficult operating environment. The Fund's relative performance vis-a-vis its peer group remained competitive, as the Lipper High Current Yield Funds Objective returned -11.0%. CNI CHARTER FUNDS | PAGE 12 investment adviser's report SEPTEMBER 30, 2008 STRATEGIES OUTLOOK FOR BOND FUNDS As the fiscal year closed, fixed income investors were very focused on the duration of the economic and financial market slowdown and the accessibility of credit for corporate America and the public sector municipalities. While we do feel that the macro outlook is not yet positive, many of the requisite signs are pointing toward more positive territory. Indeed, factors such as looser monetary policy bias, lower money market rates, and narrowing yield spreads are all positive signs that the markets are finding a bottom. Against that backdrop, we are also keeping a watchful eye on unemployment, the consumer and corporate earnings momentum. There may still be more fallout ahead for the economy from the continued weakness in residential housing and tighter credit markets. Given this, we maintain our higher quality tilt along with a neutral duration bias (vs. the indexes) until we see signs the economy is rebounding from its current trajectory. Sincerely, /s/ Rodney J. Olea Rodney J. Olea DIRECTOR OF FIXED INCOME CITY NATIONAL ASSET MANAGEMENT, INC. THIS MATERIAL REPRESENTS THE MANAGER'S ASSESSMENT OF THE PORTFOLIO AND MARKET ENVIRONMENT AT A SPECIFIC POINT IN TIME AND SHOULD NOT BE RELIED UPON BY THE READER AS RESEARCH OR INVESTMENT ADVICE. CNI CHARTER FUNDS | PAGE 13 fund overview SEPTEMBER 30, 2008 CORPORATE BOND FUND The Fund seeks to provide current income (as the primary component of a total return, intermediate duration strategy) by investing in a diversified portfolio of investment grade fixed income securities, primarily corporate bonds issued by domestic and international companies denominated in U.S. dollars. Comparison of Change in the Value of a $10,000 Investment in the CNI Corporate Bond Fund, Institutional Class or Class N Shares, versus the Barclays Intermediate U.S. Corporate Index, and Lipper Short/Intermediate Investment Grade Debt Objective(1) (PERFORMANCE GRAPH)
CNI Corporate Lipper Short/ Bond Fund, CNI Corporate Barclays Intermediate Institutional Bond Fund, Intermediate U.S. Investment Grade Class Shares Class N Shares+ Corporate Index Debt Objective ------------- --------------- ----------------- ---------------- 1/14/00 $10,000 $10,000 $10,000 $10,000 9/30/00 $10,576 $10,593 $10,645 $10,562 9/30/01 $11,860 $11,872 $11,993 $11,728 9/30/02 $12,578 $12,548 $12,853 $12,374 9/30/03 $13,425 $13,359 $14,130 $12,973 9/30/04 $13,714 $13,625 $14,686 $13,240 9/30/05 $13,887 $13,749 $14,946 $13,419 9/30/06 $14,330 $14,151 $15,479 $13,840 9/30/07 $14,984 $14,760 $16,166 $14,434 9/30/08 $14,990 $14,744 $15,313 $14,293
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year Inception Shares Symbol Return Return Return to Date - ------ ------ ------ ------ ------ --------- Institutional Class (1)## CNCIX 0.04% 2.58% 2.23% 4.76% Class N (2) CCBAX -0.11% 2.36% 1.99% 4.56%
(1) Commenced operations on January 14, 2000. (2) Commenced operations on April 13, 2000. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + Class N Shares' performance for the period prior to April 13, 2000 reflects the performance of the Fund's Institutional Shares. The performance of the Institutional Shares has not been adjusted to reflect the higher Rule 12b-1 Fees and expenses applicable to Class N Shares. If it had, performance would have been lower than that shown. Top Ten Holdings*
% OF PORTFOLIO -------------- ING US Funding 2.570%, 10/07/08 3.1 Caterpillar 2.150%, 10/30/08 2.9 Toyota Motor Credit 4.350%, 12/15/10 2.7 General Electric Capital, Ser A, MTN 6.000%, 06/15/12 2.1 Berkshire Hathaway Finance 4.125%, 01/15/10 2.1 Walt Disney, MTN 5.700%, 07/15/11 2.1 Bottling Group 4.625%, 11/15/12 2.0 Dexia Delaware 2.830%, 11/10/08 2.0 FHLMC 5.125%, 04/18/11 1.9 Anheuser Busch 7.500%, 03/15/12 1.7
* Excludes Cash Equivalents CNI CHARTER FUNDS | PAGE 14 fund overview SEPTEMBER 30, 2008 GOVERNMENT BOND FUND The Fund seeks to provide current income (as the primary component of a total return, intermediate duration strategy) by investing primarily in U.S. government securities either issued or guaranteed by the U.S. government or its agencies or instrumentalities. Comparison of Change in the Value of a $10,000 Investment in the CNI Government Bond Fund, Institutional Class or Class N Shares, versus the Barclays Intermediate U.S. Government Bond Index, and the Lipper Short/Intermediate U.S. Government Objective(1) (PERFORMANCE GRAPH)
CNI Government Barclays Lipper Short/ Bond Fund, CNI Government Intermediate U.S. Intermediate Institutional Bond Fund, Government U.S. Government Class Shares Class N Shares+ Bond Index Objective -------------- --------------- ----------------- --------------- 1/14/00 $10,000 $10,000 $10,000 $10,000 9/30/00 $10,564 $10,534 $10,659 $10,539 9/30/01 $11,796 $11,720 $12,031 $11,699 9/30/02 $12,685 $12,596 $13,046 $12,471 9/30/03 $13,025 $12,937 $13,502 $12,813 9/30/04 $13,130 $13,008 $13,760 $12,973 9/30/05 $13,317 $13,159 $13,940 $13,099 9/30/06 $13,702 $13,505 $14,432 $13,513 9/30/07 $14,392 $14,149 $15,279 $14,130 9/30/08 $15,093 $14,799 $16,427 $14,781
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year Inception Shares Symbol Return Return Return to Date - ------ ------ ------ ------ ------ --------- Institutional Class (1)## CNBIX 4.87% 4.26% 2.99% 4.84% Class N (2) CGBAX 4.59% 3.99% 2.73% 4.60%
(1) Commenced operations on January 14, 2000. (2) Commenced operations on April 13, 2000. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + Class N Shares' performance for the period prior to April 13, 2000 reflects the performance of the Fund's Institutional Shares. The performance of the Institutional Shares has not been adjusted to reflect the higher Rule 12b-1 Fees and expenses applicable to Class N Shares. If it had, performance would have been lower than that shown. Top Ten Holdings*
% OF PORTFOLIO -------------- U.S. Treasury Note 6.000%, 08/15/09 7.4 FFCB REMIC, Ser IA4, Cl 1 5.770%, 02/21/14 6.2 FNMA 6.250%, 02/01/11 5.9 GNMA REMIC, Ser 31, Cl PB 5.500%, 02/16/32 5.9 FHLMC REMIC, Ser R010, Cl AB 5.500%, 12/15/19 5.8 FFCB REMIC, Ser IA3, Cl 1 5.370%, 09/25/13 4.9 FFCB REMIC, Ser IA8, Cl 1 4.650%, 01/21/14 4.7 FNMA 6.625%, 09/15/09 4.1 FHLB 5.000%, 12/11/15 3.7 FHLB 5.250%, 10/14/11 3.6
* Excludes Cash Equivalents CNI CHARTER FUNDS | PAGE 15 fund overview SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND The Fund seeks to provide current income exempt from Federal and California state income tax (as the primary component of a total return strategy) by investing primarily in investment grade California municipal bonds and notes. Comparison of Change in the Value of a $10,000 Investment in the CNI California Tax Exempt Bond Fund, Institutional Class or Class N Shares, versus the Barclays CA Intermediate-Short Municipal Index, and the Lipper CA Short/Intermediate Municipal Debt Objective(1) (PERFORMANCE GRAPH)
CNI California CNI California Lipper CA Short/ Tax-Exempt Bond Tax-Exempt Bond Barclays CA Intermediate Fund, Institutional Fund, Class N Intermediate-Short Municipal Debt Class Shares Shares+ Municipal Index Objective ------------------- --------------- ------------------ ---------------- 1/14/00 $10,000 $10,000 $10,000 $10,000 9/30/00 $10,543 $10,532 $10,545 $10,449 9/30/01 $11,303 $11,277 $11,403 $11,132 9/30/02 $12,160 $12,112 $12,272 $11,810 9/30/03 $12,480 $12,399 $12,633 $12,051 9/30/04 $12,730 $12,627 $13,000 $12,238 9/30/05 $12,940 $12,803 $13,250 $12,627 9/30/06 $13,351 $13,163 $13,677 $13,018 9/30/07 $13,749 $13,534 $14,185 $13,357 9/30/08 $13,938 $13,685 $14,690 $13,395
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year Inception Shares Symbol Return Return Return to Date - ------ ------ ------ ------ ------ --------- Institutional Class (1)## CNTIX 1.38% 2.51% 2.24% 3.88% Class N (2) CCTEX 1.12% 2.25% 1.99% 3.67%
(1) Commenced operations on January 14, 2000. (2) Commenced operations on April 13, 2000. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. + Class N Shares' performance for the period prior to April 13, 2000 reflects the performance of the Fund's Institutional Shares. The performance of the Institutional Shares has not been adjusted to reflect the higher Rule 12b-1 Fees and expenses applicable to Class N Shares. If it had, performance would have been lower than that shown. Top Ten Holdings
% OF PORTFOLIO -------------- Arizona School Facilities Board, Ser C, COP, FSA Callable 09/01/14 @ 100 5.000%, 09/01/15 2.3 Golden State, Tobacco Settlement, Ser A-3, RB Pre-Refunded @ 100 7.875%, 06/01/13 2.3 Escondido, Union School District, Refunding & Financing Project, COP, MBIA 4.750%, 07/01/19 2.2 California State, Public Works Board Lease, Department of Corrections-State Prisons Project, Ser A, RB, AMBAC 5.250%, 12/01/13 1.8 North Orange County, Community College District, Ser A, GO, MBIA Pre-Refunded @ 101 5.375%, 08/01/12 1.6 California State, Department of Water Resources, Water Systems Project J-2, RB 7.000%, 12/01/12 1.6 Los Angeles, Unified School District, GO, MBIA 5.750%, 07/01/16 1.6 University of California, Ser B, RB, AMBAC Pre-Refunded @ 100 5.500%, 05/15/14 1.6 New York State, Local Assistance Correction Authority, Ser E, RB 6.000%, 04/01/14 1.6 California State, Health Facilities Financing Authority, Valley Care Project, Ser A, RB Pre-Refunded @ 100 5.375%, 05/01/12 1.5
CNI CHARTER FUNDS | PAGE 16 fund overview SEPTEMBER 30, 2008 HIGH YIELD BOND FUND The Fund seeks to maximize total return by investing primarily in fixed income securities rated below investment grade including corporate bonds and debentures, convertible and preferred securities, and zero coupon obligations. The Fund may also invest in fixed income securities rated below investment grade issued by governments and agencies, both U.S. and foreign, and in equity securities. The Fund seeks to invest in securities that offer a high current yield as well as total return potential and diversifies across issuers, industries and sectors to control risks. Comparison of Change in the Value of a $10,000 Investment in the CNI High Yield Bond Fund, Institutional Class or Class N Shares, versus the Citigroup High Yield Market Capped Index and the Lipper High Current Yield Bond Funds Objective(1) (PERFORMANCE GRAPH)
CNI High Yield Lipper High Bond Fund, CNI High Yield Citigroup High Current Yield Institutional Bond Fund, Yield Market Bond Fund Class Shares Class N Shares Capped Index Objective -------------- -------------- -------------- ------------- 1/14/00 $10,000 $10,000 $10,000 $10,000 9/30/00 $10,421 $10,394 $ 9,973 $ 9,905 9/30/01 $10,165 $10,109 $ 9,372 $ 9,103 9/30/02 $10,654 $10,563 $ 9,458 $ 8,951 9/30/03 $12,757 $12,611 $12,390 $11,258 9/30/04 $14,349 $14,142 $13,914 $12,543 9/30/05 $15,044 $14,784 $14,792 $13,341 9/30/06 $16,082 $15,756 $15,793 $14,249 9/30/07 $17,251 $16,852 $16,985 $15,257 9/30/08 $15,556 $15,150 $15,563 $13,580
(1) The performance in the above graph does not reflect the deduction of taxes the shareholder will pay on Fund distributions or the redemptions of Fund shares. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Past performance is no indication of future performance. The Fund's comparative benchmarks do not include the annual operating expenses incurred by the Fund. Please note that one cannot invest directly in an unmanaged index. AVERAGE ANNUAL TOTAL RETURNS
Ticker 1-Year 3-Year 5-Year Inception Shares Symbol Return Return Return to Date - ------ ------ ------ ------ ------ --------- Institutional Class (1)## CHYIX -9.83% 1.12% 4.05% 5.20% Class N (1) CHBAX -10.10% 0.82% 3.74% 4.88%
(1) Commenced operations on January 14, 2000. ## The Fund's Institutional Class Shares are currently offered only to accounts for which City National Bank serves as trustee or in a fiduciary capacity. Top Ten Holdings
% OF PORTFOLIO -------------- Energy Future Holdings 10.875%, 11/01/17 1.5 El Paso 7.000%, 05/15/11 0.9 Charter Communications Holdings II 10.250%, 09/15/10 0.9 Whiting Petroleum 7.000%, 02/01/14 0.8 Qwest 7.625%, 06/15/15 0.8 Cablevision Systems, Ser B 8.000%, 04/15/12 0.8 Koppers Holdings 13.995%, 11/15/14 0.7 Allied Waste North America, Ser B 7.125%, 05/15/16 0.7 Southern States Cooperative 10.500%, 11/01/10 0.7 Allegheny Energy Supply 7.800%, 03/15/11 0.6
CNI CHARTER FUNDS | PAGE 17 investment adviser's report SEPTEMBER 30, 2008 MONEY MARKET FUNDS In last year's annual report, we reflected on the prepositioning of our Funds for a slowing economy, the (as we now know) beginning effects of a credit crisis, easing monetary policy, the ongoing housing crisis and its impact on consumer spending. In 2008, these problems combined to cause a complete seizing of the liquidity and credits markets. The failure of Lehman Brothers in mid-September ignited a chain of events that left every asset class in a complete standstill. The Federal Reserve (the "Fed") and Treasury took unprecedented steps to restore confidence in the world financial system. The impact of the credit crunch on the fixed income markets has been severe, with September being one of the worst performing months on record for fixed income assets (other than U.S. Treasuries, which benefited from a flight to safety even at abnormally low yields.) Most municipal bond portfolios and taxable (non-Treasury) bond portfolios had negative total returns of -1% to -3% during September. However, since the end of the Funds' fiscal year, the massive flight to quality eased as investors weighed the effects of the financial rescue plan and fixed income asset prices began to normalize. An area we are watching closely is overnight borrowing rates, specifically the Libor (London Interbank Offered Rate). Libor is a benchmark for the valuation of most money market instruments. Recent bank failures have made financial institutions wary of lending to each other, except at highly elevated rates. This caused a spike in Libor rates accompanied by sharply lower valuations for commercial paper and other short-term credit instruments. This, along with the collapse of Lehman Brothers and the failure of a major money market fund to maintain the critical $1 a share level, precipitated a near-run on money market funds, which in turn led the U.S. Treasury to offer a guarantee program for these widely held vehicles. Our funds opted to participate in this program as an extra layer of protection for our shareholders. The Treasury's goal, successful so far, was to stem the outflow of funds from panicky money market fund shareholders into Treasury obligations. As we go to press, we believe that the worst of the credit and liquidity crisis tsunami is behind us. We may still experience some dislocations in the credit markets, but with the successful passage of the economic stabilization plan and the Treasury's Troubled Assets Relief Program (TARP), we believe investor confidence will gradually return to the markets as time passes. - The PRIME MONEY MARKET FUND continued to emphasize high quality liquid issuers as a way to weather the credit crunch felt in certain types of asset-backed commercial paper (ABCP). With our strategy focusing primarily on the highest quality and liquid issuers, the Fund fared well during this period. Furthermore, we added short term agency debt as a way to capture some of the flight to quality in the short-term markets. That strategy played out well as those holdings appreciated with the Fed ease and increased demand. We've also managed the average portfolio maturity of the Fund to around 47 days in order to maintain higher yielding holdings as a slight hedge against further Fed movements. - The GOVERNMENT MONEY MARKET FUND was positioned well for changes in Fed policy and the slower economic growth environment. We have maintained our maturity profile to over 40 days average portfolio maturity in the Fund in order to benefit from higher yielding holdings in the face of continued easing of monetary policy and lower rates. - Our objective for the CALIFORNIA TAX EXEMPT MONEY MARKET FUND continues to focus on the fundamental objective of safety and liquidity. We have maintained a 34 day average portfolio maturity in the fund by emphasizing high quality short term assets. Additionally, we continue to watch the state of California very closely as the economic slowdown takes hold. The size of the CNI CHARTER FUNDS | PAGE 18 investment adviser's report SEPTEMBER 30, 2008 state and the diverse nature of its economic makeup should help to weather the slowdown and we remain confident in our positioning. We will look to increase the average days to maturity as we see opportunities in the supply and yields. STRATEGIC OUTLOOK Our outlook remains favorable for money market instruments due to the high demand for liquid assets in these uncertain economic times. The Money Market Funds are positioned well for a declining rate environment and slower economic growth in coming quarters. Our focus on safety and liquidity remains a key element as we have positioned ourselves for economic weakness. We will attempt to maintain around a 50 day portfolio maturity in our Funds to protect against reinvestment risk as we manage inflows, yields and supply available in the marketplace. City National Asset Management, Inc. continues to monitor the objectives of the Funds very closely and seek opportunities in the markets to best serve our shareholders. Sincerely, /s/ Rodney J. Olea Rodney J. Olea DIRECTOR OF FIXED INCOME CITY NATIONAL ASSET MANAGEMENT, INC. THE ABOVE COMMENTARY EXPRESSES THE PORTFOLIO MANAGERS' VIEWS AS OF THE DATE SHOWN AND SHOULD NOT BE RELIED UPON BY THE READER AS RESEARCH OR ADVICE REGARDING ANY INVESTMENT. THESE VIEWS AND THE PORTFOLIO HOLDINGS ARE SUBJECT TO CHANGE. THERE IS NO GUARANTEE THAT ANY FORECASTS MADE WILL COME TO PASS. CNI CHARTER FUNDS | PAGE 19 schedule of investments SEPTEMBER 30, 2008 LARGE CAP VALUE EQUITY FUND SECTOR WEIGHTINGS (UNAUDITED)*: (BAR CHART) Financials 27.6% Industrials 13.3% Consumer Staples 10.7% Healthcare 9.7% Consumer Discretionary 8.9% Information Technology 6.8% Utilities 6.7% Telecommunication Services 6.3% Energy 4.4% Materials 4.2% Short-Term Investments 1.4%
* Percentages based on total investments.
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- COMMON STOCK [98.9%] AEROSPACE & DEFENSE [4.5%] Goodrich 16,400 $ 682 Lockheed Martin 13,000 1,426 Northrop Grumman 17,000 1,029 Raytheon 25,200 1,349 ----------- TOTAL AEROSPACE & DEFENSE 4,486 =========== AIR FREIGHT & LOGISTICS [0.8%] FedEx 9,600 759 =========== AUTO COMPONENTS [0.2%] Johnson Controls 7,900 240 =========== BEVERAGES [3.2%] Coca-Cola 24,700 1,306 Coca-Cola Enterprises 37,700 632 Molson Coors Brewing, Cl B 15,400 720 Pepsi Bottling Group 17,300 505 ----------- TOTAL BEVERAGES 3,163 =========== CAPITAL MARKETS [3.5%] Bank of New York Mellon 28,900 942 Goldman Sachs Group 11,200 1,434 Morgan Stanley 12,700 292 State Street 15,000 853 ----------- TOTAL CAPITAL MARKETS 3,521 =========== CHEMICALS [2.3%] Dow Chemical 36,000 1,144
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- EI Du Pont de Nemours 9,000 $ 363 PPG Industries 14,000 816 ----------- TOTAL CHEMICALS 2,323 =========== COMMERCIAL BANKS [7.2%] BB&T 21,100 798 PNC Financial Services Group 14,300 1,068 US Bancorp 48,000 1,729 Wells Fargo 94,960 3,564 ----------- TOTAL COMMERCIAL BANKS 7,159 =========== COMMUNICATIONS EQUIPMENT [0.6%] Corning 37,100 580 =========== COMPUTERS & PERIPHERALS [3.6%] Hewlett-Packard 36,600 1,692 IBM 14,300 1,673 Lexmark International, Cl A* 5,800 189 ----------- TOTAL COMPUTERS & PERIPHERALS 3,554 =========== CONSTRUCTION & ENGINEERING [0.3%] Fluor 5,800 323 =========== CONSUMER FINANCE [0.3%] Capital One Financial 6,000 306 =========== CONTAINERS & PACKAGING [0.3%] Ball 7,200 284 =========== DIVERSIFIED FINANCIAL SERVICES [6.8%] Bank of America 75,896 2,656 CIT Group 36,400 253 JPMorgan Chase 83,200 3,886 ----------- TOTAL DIVERSIFIED FINANCIAL SERVICES 6,795 =========== DIVERSIFIED TELECOMMUNICATION SERVICES [6.3%] AT&T 129,917 3,627 Verizon Communications 83,509 2,680 ----------- TOTAL DIVERSIFIED TELECOMMUNICATION SERVICES 6,307 =========== ELECTRIC UTILITIES [3.7%] Edison International 32,600 1,301 Entergy 9,300 828
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 20 schedule of investments SEPTEMBER 30, 2008 LARGE CAP VALUE EQUITY FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- FPL Group 13,000 $ 654 PPL 24,100 892 ----------- TOTAL ELECTRIC UTILITIES 3,675 =========== ELECTRICAL EQUIPMENT [0.4%] Emerson Electric 10,200 416 =========== ELECTRONIC EQUIPMENT [0.4%] Tyco Electronics 16,200 448 =========== FOOD & STAPLES RETAILING [3.5%] Kroger 30,800 846 Safeway 21,400 508 SUPERVALU 14,200 308 Wal-Mart Stores 31,000 1,857 ----------- TOTAL FOOD & STAPLES RETAILING 3,519 =========== FOOD PRODUCTS [2.1%] Archer-Daniels-Midland 22,400 491 ConAgra Foods 8,000 155 General Mills 13,200 907 Sara Lee 42,500 537 ----------- TOTAL FOOD PRODUCTS 2,090 =========== HEALTH EQUIPMENT & PROVIDERS [1.3%] Baxter International 19,400 1,273 =========== HEALTH CARE PROVIDERS & SERVICES [2.7%] Aetna 27,600 997 Cigna 19,500 663 McKesson 20,000 1,076 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 2,736 =========== HOTELS, RESTAURANTS & LEISURE [0.8%] Darden Restaurants 17,000 487 Wyndham Worldwide 17,100 268 ----------- TOTAL HOTELS, RESTAURANTS & LEISURE 755 =========== HOUSEHOLD DURABLES [0.7%] Whirlpool 8,700 690 ===========
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- HOUSEHOLD PRODUCTS [2.0%] Procter & Gamble 28,500 $ 1,986 =========== INDUSTRIAL CONGLOMERATES [1.8%] General Electric 33,500 854 Tyco International 27,600 967 ----------- TOTAL INDUSTRIAL CONGLOMERATES 1,821 =========== INSURANCE [9.4%] ACE 24,600 1,331 Aflac 9,600 564 Allstate 5,000 231 Assurant 9,600 528 Chubb 27,100 1,488 Hartford Financial Services Group 12,300 504 MetLife 23,806 1,333 Principal Financial Group 5,800 252 Prudential Financial 15,300 1,102 Reinsurance Group of America, Cl B* 1,132 54 Travelers 27,000 1,220 Unum Group 31,000 778 ----------- TOTAL INSURANCE 9,385 =========== LIFE SCIENCES TOOLS & SERVICES [0.8%] PerkinElmer 32,000 799 =========== MACHINERY [1.9%] Caterpillar 10,600 632 Eaton 8,400 472 Illinois Tool Works 9,700 431 Parker Hannifin 7,700 408 ----------- TOTAL MACHINERY 1,943 =========== MEDIA [4.4%] CBS, Cl B 38,750 565 Comcast, Cl A 36,200 710 Omnicom Group 14,700 567 Time Warner 83,800 1,099 Viacom, Cl B* 15,000 372 Walt Disney 35,900 1,102 ----------- TOTAL MEDIA 4,415 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 21 schedule of investments SEPTEMBER 30, 2008 LARGE CAP VALUE EQUITY FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- METALS & MINING [0.4%] United States Steel 5,800 $ 450 =========== MULTILINE RETAIL [0.8%] Target 15,500 760 =========== MULTI-UTILITIES [3.0%] Dominion Resources 9,200 394 PG&E 24,100 902 Public Service Enterprise Group 32,100 1,053 Sempra Energy 13,700 691 ----------- TOTAL MULTI-UTILITIES 3,040 =========== OIL, GAS & CONSUMABLE FUELS [4.4%] Chevron 20,240 1,670 ConocoPhillips 11,580 848 Marathon Oil 4,800 191 Occidental Petroleum 24,400 1,719 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 4,428 =========== PAPER & FOREST PRODUCTS [1.1%] International Paper 24,500 641 MeadWestvaco 20,400 476 ----------- TOTAL PAPER & FOREST PRODUCTS 1,117 =========== PHARMACEUTICALS [5.0%] Abbott Laboratories 14,200 818 Bristol-Myers Squibb 66,000 1,376 Merck 14,100 445 Pfizer 95,500 1,761 Wyeth 15,500 572 ----------- TOTAL PHARMACEUTICALS 4,972 =========== REAL ESTATE INVESTMENT TRUSTS [0.5%] Host Hotels & Resorts 41,000 545 =========== ROAD & RAIL [3.6%] CSX 31,400 1,714 Norfolk Southern 12,600 834 Union Pacific 14,500 1,032 ----------- TOTAL ROAD & RAIL 3,580 ===========
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT [1.2%] Intel 15,000 $ 281 Texas Instruments 44,900 965 ----------- TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 1,246 =========== SOFTWARE [1.0%] Microsoft 37,500 1,001 =========== SPECIALTY RETAIL [0.9%] Best Buy 12,200 457 Sherwin-Williams 8,200 469 ----------- TOTAL SPECIALTY RETAIL 926 =========== TEXTILES, APPAREL & LUXURY GOODS [1.2%] Nike, Cl B 17,900 1,198 ----------- TOTAL COMMON STOCK (Cost $100,126) 99,014 =========== CASH EQUIVALENTS [1.4%] Fidelity Institutional Domestic Money Market Portfolio, Cl I, 2.660%** 194,735 195 Goldman Sachs Financial Square Funds - Government Fund, 2.040%** 1,167,502 1,167 ----------- TOTAL CASH EQUIVALENTS (Cost $1,362) 1,362 =========== TOTAL INVESTMENTS [100.3%] (Cost $101,488) $ 100,376 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $100,073 ($ THOUSANDS). * NON-INCOME PRODUCING SECURITY. ** THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. CL -- CLASS SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 22 schedule of investments SEPTEMBER 30, 2008 LARGE CAP GROWTH EQUITY FUND SECTOR WEIGHTINGS (UNAUDITED)*: (BAR CHART) Information Technology 23.4% Energy 20.9% Healthcare 15.7% Consumer Staples 13.4% Industrials 8.4% Consumer Discretionary 7.9% Financials 4.9% Materials 2.5% Short-Term Investments 2.4% Utilities 0.5%
* Percentages based on total investments.
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- COMMON STOCK [98.2%] AEROSPACE & DEFENSE [2.7%] Boeing 6,000 $ 344 L-3 Communications Holdings, Cl 3 3,000 295 Lockheed Martin 2,000 219 Precision Castparts 3,600 284 ----------- TOTAL AEROSPACE & DEFENSE 1,142 =========== AIR FREIGHT & LOGISTICS [0.6%] Expeditors International of Washington 7,700 268 =========== AUTOMOBILES [0.5%] Harley-Davidson 6,200 231 =========== BEVERAGES [3.4%] Coca-Cola 7,600 402 PepsiCo 14,500 1,033 ----------- TOTAL BEVERAGES 1,435 =========== BIOTECHNOLOGY [4.9%] Biogen Idec* 7,000 352 Celgene* 4,400 279 Genentech* 3,000 266 Genzyme - General Division* 6,500 526 Gilead Sciences* 14,400 656 ----------- TOTAL BIOTECHNOLOGY 2,079 =========== CAPITAL MARKETS [2.8%] Franklin Resources 4,500 397 Goldman Sachs Group 3,400 435
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- T Rowe Price Group 7,000 $ 376 ----------- TOTAL CAPITAL MARKETS 1,208 =========== CHEMICALS [1.2%] Hercules 11,400 226 Monsanto 2,700 267 ----------- TOTAL CHEMICALS 493 =========== COMMERCIAL SERVICES & SUPPLIES [0.6%] RR Donnelley & Sons 9,900 243 =========== COMMUNICATIONS EQUIPMENT [2.6%] Qualcomm 25,500 1,096 =========== COMPUTERS & PERIPHERALS [5.2%] Apple* 5,375 611 Hewlett-Packard 8,723 403 IBM 10,200 1,193 ----------- TOTAL COMPUTERS & PERIPHERALS 2,207 =========== CONSTRUCTION & ENGINEERING [0.9%] Fluor 3,500 195 Jacobs Engineering Group* 3,700 201 ----------- TOTAL CONSTRUCTION & ENGINEERING 396 =========== DIVERSIFIED FINANCIAL SERVICES [1.0%] CME Group, Cl A 1,200 446 =========== ELECTRIC UTILITIES [0.3%] Edison International 3,100 124 =========== ENERGY EQUIPMENT & SERVICES [7.1%] Baker Hughes 4,500 272 ENSCO International 10,300 594 National Oilwell Varco* 6,100 306 Noble 13,100 575 Schlumberger 11,300 882 Smith International 6,200 364 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 2,993 =========== FOOD & STAPLES RETAILING [3.2%] Sysco 3,300 102 Wal-Mart Stores 20,775 1,244 ----------- TOTAL FOOD & STAPLES RETAILING 1,346 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 23 schedule of investments SEPTEMBER 30, 2008 LARGE CAP GROWTH EQUITY FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- FOOD PRODUCTS [1.8%] General Mills 4,300 $ 296 Kellogg 8,700 488 ----------- TOTAL FOOD PRODUCTS 784 =========== HEALTH CARE EQUIPMENT & SUPPLIES [2.8%] Bard (C.R.) 3,200 304 Stryker 9,300 579 Zimmer Holdings* 4,900 316 ----------- TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 1,199 =========== HEALTH CARE PROVIDERS & SERVICES [2.7%] Cardinal Health 4,600 227 DaVita* 3,400 194 McKesson 4,300 231 UnitedHealth Group 18,700 475 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 1,127 =========== HOUSEHOLD PRODUCTS [4.7%] Colgate-Palmolive 10,400 783 Procter & Gamble 17,202 1,199 ----------- TOTAL HOUSEHOLD PRODUCTS 1,982 =========== INDEPENDENT POWER PRODUCERS & ENERGY TRADERS [0.2%] AES* 7,600 89 =========== INSURANCE [0.9%] Aflac 6,600 388 =========== INTERNET & CATALOG RETAIL [0.8%] Amazon.Com* 4,400 320 =========== INTERNET SOFTWARE & SERVICES [4.7%] eBay* 30,575 684 Google, Cl A* 2,600 1,041 Yahoo!* 15,000 260 ----------- TOTAL INTERNET SOFTWARE & SERVICES 1,985 =========== MACHINERY [2.9%] Caterpillar 10,700 638 Cummins 4,100 179
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- Danaher 4,100 $ 284 Manitowoc 7,900 123 ----------- TOTAL MACHINERY 1,224 =========== MEDIA [2.2%] Comcast, Cl A 18,150 356 DIRECTV Group* 12,700 332 Omnicom Group 6,000 232 ----------- TOTAL MEDIA 920 =========== METALS & MINING [1.3%] Freeport-McMoRan Copper & Gold 6,800 386 Nucor 4,200 166 ----------- TOTAL METALS & MINING 552 =========== MULTILINE RETAIL [0.5%] Target 4,000 196 =========== OIL, GAS & CONSUMABLE FUELS [13.9%] Anadarko Petroleum 2,200 107 Apache 3,300 344 Chevron 18,000 1,484 ConocoPhillips 5,600 410 EOG Resources 2,300 206 Exxon Mobil 32,000 2,485 Occidental Petroleum 8,200 578 XTO Energy 6,400 298 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 5,912 =========== PERSONAL PRODUCTS [0.4%] Avon Products 4,300 179 =========== PHARMACEUTICALS [5.4%] Johnson & Johnson 20,064 1,390 Pfizer 26,400 487 Wyeth 11,050 408 ----------- TOTAL PHARMACEUTICALS 2,285 =========== PROFESSIONAL SERVICES [0.7%] Robert Half International 12,400 307 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 24 schedule of investments SEPTEMBER 30, 2008 LARGE CAP GROWTH EQUITY FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- REAL ESTATE MANAGEMENT & DEVELOPMENT [0.2%] CB Richard Ellis Group, Cl A* 5,100 $ 68 =========== SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT [1.4%] Broadcom, Cl A* 4,900 91 MEMC Electronic Materials* 6,500 184 Texas Instruments 14,400 310 ----------- TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 585 =========== SOFTWARE [9.7%] Adobe Systems* 4,900 193 Autodesk* 17,000 570 Citrix Systems* 8,275 209 Microsoft 62,180 1,660 Oracle* 43,265 879 Symantec* 31,300 613 ----------- TOTAL SOFTWARE 4,124 =========== SPECIALTY RETAIL [2.3%] Autozonex* 2,500 308 Best Buy 9,200 345 GameStop, Cl A* 4,500 154 Lowe's 7,200 171 ----------- TOTAL SPECIALTY RETAIL 978 =========== TEXTILES, APPAREL & LUXURY GOODS [1.7%] Coach* 18,100 453 Nike, Cl B 4,300 288 ----------- TOTAL TEXTILES, APPAREL & LUXURY GOODS 741 =========== TOTAL COMMON STOCK (Cost $40,866) 41,652 ===========
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- CASH EQUIVALENTS [2.4%] Fidelity Institutional Domestic Money Market Portfolio, Cl I, 2.660%** 351,377 $ 351 Goldman Sachs Financial Square Funds - Government Fund, 2.040%** 671,510 672 ----------- TOTAL CASH EQUIVALENTS (Cost $1,023) 1,023 =========== TOTAL INVESTMENTS [100.6%] (Cost $41,889) $ 42,675 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $42,415 ($ THOUSANDS). * NON-INCOME PRODUCING SECURITY. ** THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. CL -- CLASS SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 25 schedule of investments SEPTEMBER 30, 2008 RCB SMALL CAP VALUE FUND SECTOR WEIGHTINGS (UNAUDITED)*: (BAR CHART) Consumer Discretionary 23.1% Financials 22.8% Consumer Staples 14.9% Information Technology 10.0% Materials 9.0% Energy 7.2% Industrials 7.0% Telecommunication Services 2.2% Healthcare 2.0% Short-Term Investments 1.8%
* Percentages based on total investments.
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- COMMON STOCK [99.6%] BEVERAGES [2.0%] PepsiAmericas 24,300 $ 503 =========== CHEMICALS [5.1%] Nalco Holding 26,500 491 Spartech 81,200 804 ----------- TOTAL CHEMICALS 1,295 =========== COMMERCIAL SERVICES & SUPPLIES [2.0%] PHH* 38,800 516 =========== DIVERSIFIED CONSUMER SERVICES [2.0%] Coinstar* 16,000 512 =========== ENERGY EQUIPMENT & SERVICES [6.1%] Exterran Holdings* 28,200 901 Global Industries* 92,700 644 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 1,545 =========== FOOD PRODUCTS [5.4%] Ralcorp Holdings* 20,000 1,348 =========== HOTELS, RESTAURANTS & LEISURE [4.7%] Wendy's/Arby's Group, Cl A 225,100 1,184 =========== HOUSEHOLD PRODUCTS [10.2%] Central Garden & Pet, Cl A* 330,400 1,966 Scotts Miracle-Gro, Cl A 25,000 591 ----------- TOTAL HOUSEHOLD PRODUCTS 2,557 ===========
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- INSURANCE [14.6%] Alleghany* 4,794 $ 1,750 Conseco* 144,000 507 White Mountains Insurance Group 3,000 1,409 ----------- TOTAL INSURANCE 3,666 =========== INTERNET SOFTWARE & SERVICES [3.6%] United Online 95,500 899 =========== LIFE SCIENCES TOOLS & SERVICES [2.0%] PerkinElmer 20,100 502 =========== MACHINERY [5.0%] Actuant, Cl A 19,900 502 Crane 16,000 475 IDEX 9,400 292 ----------- TOTAL MACHINERY 1,269 =========== MEDIA [14.4%] Cox Radio, Cl A* 66,500 702 Fisher Communications 28,747 1,133 Liberty Media - Capital* 48,500 649 LodgeNet Interactive* 275,000 558 Virgin Media 73,100 577 ----------- TOTAL MEDIA 3,619 =========== METALS & MINING [1.6%] Novamerican Steel* 253,300 395 =========== MULTILINE RETAIL [2.3%] 99 Cents Only Stores* 53,600 588 =========== OIL, GAS & CONSUMABLE FUELS [1.2%] Edge Petroleum* 170,500 305 =========== REAL ESTATE INVESTMENT TRUSTS [8.6%] Annaly Capital Management 75,000 1,009 Capital Trust, Cl A 38,000 589 Chimera Investment 89,500 556 ----------- TOTAL REAL ESTATE INVESTMENT TRUSTS 2,154 =========== SOFTWARE [6.6%] Fair Isaac 37,500 865 PLATO Learning* 279,700 794 ----------- TOTAL SOFTWARE 1,659 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 26 schedule of investments SEPTEMBER 30, 2008 RCB SMALL CAP VALUE FUND (CONCLUDED)
SHARES/FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- WIRELESS TELECOMMUNICATION SERVICES [2.2%] iPCS* 25,300 $ 563 =========== TOTAL COMMON STOCK (Cost $31,828) 25,079 =========== REPURCHASE AGREEMENT [1.8%] Morgan Stanley 1.750%, dated 09/30/08, to be repurchased on 10/01/08, repurchase price $470,538 (collateralized by a U.S.Treasury Note, par value $429,405, 2.625%, 07/15/17; with total market value $479,929) (A) $ 471 471 ----------- TOTAL REPURCHASE AGREEMENT (Cost $471) 471 =========== WARRANTS [0.1%] Novamerican Steel, Expires 03/07/11* 72,000 18 ----------- TOTAL WARRANTS (Cost $103) 18 =========== TOTAL INVESTMENTS [101.5%] (Cost $32,402) $ 25,568 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $25,187 ($ THOUSANDS). * NON-INCOME PRODUCING SECURITY. (A) TRI-PARTY REPURCHASE AGREEMENT. CL -- CLASS SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 27 schedule of investments SEPTEMBER 30, 2008 OPPORTUNISTIC VALUE FUND SECTOR WEIGHTINGS (UNAUDITED)*: (BAR CHART) Financials 18.5% Healthcare 16.3% Energy 13.4% Information Technology 10.5% Industrials 8.4% Short-Term Investments 8.1% Consumer Staples 7.4% Consumer Discretionary 7.0% Materials 5.2% Utilities 4.0% Telecommunication Services 1.2%
* Percentages based on total investments.
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- COMMON STOCK [93.2%] AUTOMOBILES [1.9%] Honda Motor, ADR 28,000 $ 843 =========== CHEMICALS [1.2%] Rohm & Haas 8,000 560 =========== COMMERCIAL BANKS [1.9%] US Bancorp 24,400 879 =========== COMMUNICATIONS EQUIPMENT [2.4%] Nokia, ADR 59,000 1,100 =========== COMPUTERS & PERIPHERALS [2.4%] Dell* 65,000 1,071 =========== CONSUMER FINANCE [1.4%] Capital One Financial 12,500 638 =========== CONTAINERS & PACKAGING [4.0%] Packaging Corp of America 41,000 950 Sealed Air 40,000 880 ----------- TOTAL CONTAINERS & PACKAGING 1,830 =========== DIVERSIFIED FINANCIAL SERVICES [4.0%] Nasdaq OMX Group* 58,500 1,788 =========== DIVERSIFIED TELECOMMUNICATION SERVICES [1.2%] Windstream 50,000 547 ===========
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- ELECTRIC UTILITIES [3.0%] Portland General Electric 56,600 $ 1,339 =========== ELECTRICAL EQUIPMENT [2.3%] Baldor Electric 36,000 1,037 =========== ELECTRONIC EQUIPMENT [1.8%] Tyco Electronics 30,000 830 =========== ENERGY EQUIPMENT & SERVICES [4.6%] Exterran Holdings* 19,500 623 Unit* 29,000 1,445 ----------- TOTAL ENERGY EQUIPMENT & SERVICES 2,068 =========== FOOD & STAPLES RETAILING [4.8%] Safeway 53,000 1,257 Walgreen 30,000 929 ----------- TOTAL FOOD & STAPLES RETAILING 2,186 =========== FOOD PRODUCTS [2.6%] Del Monte Foods 153,600 1,198 =========== GAS UTILITIES [1.1%] Atmos Energy 18,000 479 =========== HEALTH CARE EQUIPMENT & SUPPLIES [2.4%] Covidien 20,000 1,075 =========== HEALTH CARE PROVIDERS & SERVICES [7.9%] Cardinal Health 32,000 1,577 Patterson* 15,000 456 Quest Diagnostics 30,000 1,550 ----------- TOTAL HEALTH CARE PROVIDERS & SERVICES 3,583 =========== INDUSTRIAL CONGLOMERATES [6.2%] 3M 20,900 1,428 Tyco International 40,000 1,401 ----------- TOTAL INDUSTRIAL CONGLOMERATES 2,829 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 28 schedule of investments SEPTEMBER 30, 2008 OPPORTUNISTIC VALUE FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- INSURANCE [8.3%] Chubb 10,000 $ 549 Fidelity National Financial, Cl A 59,000 868 HCC Insurance Holdings 46,000 1,242 Unum Group 43,000 1,079 ----------- TOTAL INSURANCE 3,738 =========== IT SERVICES [1.5%] Western Union 28,000 691 =========== LEISURE EQUIPMENT & PRODUCTS [1.1%] Mattel 28,000 505 =========== MEDIA [4.1%] DISH Network, Cl A* 35,000 735 Time Warner 84,700 1,110 ----------- TOTAL MEDIA 1,845 =========== OFFICE ELECTRONICS [0.8%] Xerox 29,500 340 =========== OIL, GAS & CONSUMABLE FUELS [9.1%] Chesapeake Energy 30,000 1,076 ConocoPhillips 18,500 1,355 Spectra Energy 48,000 1,143 Valero Energy 17,500 530 ----------- TOTAL OIL, GAS & CONSUMABLE FUELS 4,104 =========== PHARMACEUTICALS [6.2%] Abbott Laboratories 9,000 518 Johnson & Johnson 20,000 1,386 ScheringPlough 49,000 905 ----------- TOTAL PHARMACEUTICALS 2,809 =========== REAL ESTATE MANAGEMENT & DEVELOPMENT [3.2%] Brookfield Asset Management, Cl A 52,000 1,427 ===========
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT [1.8%] Applied Materials 54,000 $ 817 =========== TOTAL COMMON STOCK (Cost $47,259) 42,156 =========== CASH EQUIVALENT [8.2%] First American Prime Obligations Fund, Cl Y, 2.110%** 3,730,762 3,731 ----------- TOTAL CASH EQUIVALENT (Cost $3,731) 3,731 =========== TOTAL INVESTMENTS [101.4%] (Cost $50,990) $ 45,887 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $45,246 ($ THOUSANDS). * NON-INCOME PRODUCING SECURITY. ** THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. ADR -- AMERICAN DEPOSITARY RECEIPT CL -- CLASS SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 29 schedule of investments SEPTEMBER 30, 2008 MULTI-ASSET FUND TYPE OF SECURITY WEIGHTINGS (UNAUDITED)*: (BAR CHART) Exchange Traded Funds 43.0% Affiliated Investment Funds 15.0% Short-Term Investments 9.8% Commercial Paper 9.5% Registered Investment Company 9.3% U.S. Treasury Obligation 7.9% U.S. Government Agency Obligation 2.8% Corporate Bond 2.7%
* Percentages based on total investments.
SHARES/FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- EXCHANGE TRADED FUNDS [44.3%] iPath Dow Jones-AIG Commodity Index Total Return Fund 2 $ 110 iShares Lehman 1-3 Year Treasury Bond Fund 13 1,052 iShares Lehman TIPS Bond Fund 27 2,759 Market Vectors Gold Miners Fund 35 1,177 Powershares DB Agricultural Fund 49 1,473 SPDR S&P 500 Fund, Ser 1 48 5,595 ----------- TOTAL EXCHANGE TRADED FUNDS (Cost $14,428) 12,166 =========== AFFILIATED INVESTMENT FUNDS [15.5%] CNI Corporate Bond Fund, Institutional Class 236 2,307 CNI Government Bond Fund, Institutional Class 186 1,934 ----------- TOTAL AFFILIATED INVESTMENT FUNDS (Cost $4,355) 4,241 =========== REGISTERED INVESTMENT COMPANIES [9.6%] PIMCO Commodity Real Return Strategy Fund 74 1,016 T. Rowe Price International Bond Fund 170 1,614 ----------- TOTAL REGISTERED INVESTMENT COMPANIES (Cost $3,013) 2,630 =========== U.S. TREASURY OBLIGATION [8.1%] U.S. Treasury Inflation Protection Security 0.875%, 04/15/10 $ 2,271 2,231 ----------- TOTAL U.S. TREASURY OBLIGATION (Cost $2,292) 2,231 ===========
FACE AMOUNT (000) DESCRIPTION /SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- U.S. GOVERNMENT AGENCY OBLIGATION [2.9%] FHLB 3.650%, 10/02/09 $ 800 $ 802 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATION (Cost $800) 802 =========== CORPORATE BOND [2.8%] FINANCIAL SERVICES [2.8%] John Deere Capital, MTN 4.625%, 04/15/09 750 748 ----------- TOTAL CORPORATE BOND (Cost $755) 748 =========== CASH EQUIVALENTS [10.1%] AIM STIT-Treasury Portfolio, 0.800%* 3,010 3 Goldman Sachs Financial Square Funds - Government Fund, 2.040%* 2,770,541 2,771 ----------- TOTAL CASH EQUIVALENT (Cost $2,774) 2,774 =========== COMMERCIAL PAPER (A) [9.8%] BANKS [3.3%] Dexia Delaware 2.830%, 11/10/08 900 897 =========== INVESTMENT BANKER/BROKER DEALER [2.9%] ING US Funding 2.570%, 10/07/08 800 800 =========== MACHINERY [3.6%] Caterpillar (B) 2.150%, 10/30/08 1,000 998 =========== TOTAL COMMERCIAL PAPER (Cost $2,695) 2,695 =========== TOTAL INVESTMENTS [103.1%] (Cost $31,112) $ 28,287 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 30 schedule of investments SEPTEMBER 30, 2008 MULTI-ASSET FUND (CONCLUDED) DESCRIPTION PERCENTAGES ARE BASED ON NET ASSETS OF $27,449 ($ THOUSANDS). * THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. (A) RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE. (B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES ARE DEEMED LIQUID. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONS. ON SEPTEMBER 30, 2008, THE VALUE OF THESE SECURITIES AMOUNTED TO $998 (000), REPRESENTING 3.6% OF THE NET ASSETS OF THE FUND. FHLB -- FEDERAL HOME LOAN BANK MTN -- MEDIUM TERM NOTE SER -- SERIES SPDR -- STANDARD & POOR'S DEPOSITORY RECEIPTS TIPS -- TREASURY INFLATION PROTECTION SECURITIES SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 31 schedule of investments SEPTEMBER 30, 2008 CORPORATE BOND FUND ISSUER INDUSTRY WEIGHTINGS (UNAUDITED)*: (BAR CHART) Financials 34.1% Industrials 27.0% Banks 9.9% U.S. Government Obligations 9.6% Short-Term Investment 8.6% Telephone 4.0% Municipal Bonds 2.9% Utilities 2.4% U.S. Treasury Obligation 0.8% Foreign Governments 0.7% Mortgage-Backed Securities 0.0%
* Percentages based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- CORPORATE BONDS [69.6%] AUTOMOTIVE [0.8%] DaimlerChrysler 5.875%, 03/15/11 $ 570 $ 568 ============ =========== BANKS [7.9%] Bank of America 5.300%, 03/15/17 1,000 831 Barclays Bank (A) 6.050%, 12/04/17 1,000 930 Deutsche Bank 7.500%, 04/25/09 500 502 7.250%, 10/15/11 500 500 Wachovia Bank 4.800%, 11/01/14 1,270 753 Wells Fargo Bank 7.550%, 06/21/10 1,000 1,034 4.625%, 08/09/10 1,000 996 ----------- TOTAL BANKS 5,546 =========== BEAUTY PRODUCTS [1.2%] Avon Products 7.150%, 11/15/09 800 817 =========== COMMUNICATION & MEDIA [4.0%] AOL Time Warner 6.750%, 04/15/11 415 414 Comcast Cable Communications Holdings 8.375%, 03/15/13 440 461
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- News America Holdings 9.250%, 02/01/13 $ 450 $ 481 Walt Disney, MTN 5.700%, 07/15/11 1,395 1,437 ----------- TOTAL COMMUNICATION & MEDIA 2,793 =========== COMPUTER SYSTEM DESIGN & SERVICES [2.6%] Cisco Systems 5.500%, 02/22/16 1,000 961 IBM, MTN 4.375%, 06/01/09 900 904 ----------- TOTAL COMPUTER SYSTEM DESIGN & SERVICES 1,865 =========== DIVERSIFIED OPERATIONS [0.7%] 3M, MTN 4.375%, 08/15/13 500 505 =========== DRUGS [1.4%] Abbott Laboratories 5.375%, 05/15/09 1,000 1,008 =========== ELECTRICAL SERVICES [2.4%] American Electric Power 5.250%, 06/01/15 490 449 Iowa Electric Light & Power 6.000%, 10/01/08 200 200 WPS Resources 7.000%, 11/01/09 1,000 1,020 ----------- TOTAL ELECTRICAL SERVICES 1,669 =========== FINANCE AUTO LOANS [4.1%] American Honda Finance, MTN (A) 5.125%, 12/15/10 1,000 988 Toyota Motor Credit 4.350%, 12/15/10 1,800 1,862 ----------- TOTAL FINANCE AUTO LOANS 2,850 =========== FINANCIAL SERVICES [11.6%] American General Finance, MTN 5.750%, 09/15/16 500 229 American General Finance, Ser I, MTN 4.625%, 05/15/09 1,000 711
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 32 schedule of investments SEPTEMBER 30, 2008 CORPORATE BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- AXA Financial 7.750%, 08/01/10 $ 1,000 $ 1,025 Boeing Capital 6.500%, 02/15/12 930 988 CIT Group 5.400%, 03/07/13 1,000 557 General Electric Capital, Ser A, MTN 6.875%, 11/15/10 250 251 6.000%, 06/15/12 1,540 1,486 HSBC Finance 5.250%, 04/15/15 1,250 1,140 John Deere Capital, MTN 4.625%, 04/15/09 750 749 National Rural Utilities, Ser C, MTN 7.250%, 03/01/12 1,000 1,038 ----------- TOTAL FINANCIAL SERVICES 8,174 =========== FOOD, BEVERAGE & TOBACCO [6.0%] Anheuser-Busch 7.500%, 03/15/12 1,190 1,220 Bottling Group 5.500%, 04/01/16 1,000 991 4.625%, 11/15/12 1,435 1,412 General Mills 6.000%, 02/15/12 560 571 ----------- TOTAL FOOD, BEVERAGE & TOBACCO 4,194 =========== FOREIGN GOVERNMENTS [0.6%] United Mexican States, MTN 5.875%, 01/15/14 450 453 =========== INSURANCE [3.8%] Aflac 6.500%, 04/15/09 1,150 1,161 Berkshire Hathaway Finance 4.125%, 01/15/10 1,475 1,481 ----------- TOTAL INSURANCE 2,642 =========== INVESTMENT BANKER/BROKER DEALER [11.3%] Citigroup 5.850%, 08/02/16 1,000 844 5.500%, 02/15/17 250 192 Credit Suisse 5.500%, 08/15/13 1,250 1,160 Goldman Sachs Group 5.625%, 01/15/17 1,260 894
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Jefferies Group 5.500%, 03/15/16 $ 665 $ 523 JPMorgan Chase 7.125%, 06/15/09 675 674 6.750%, 02/01/11 500 502 JPMorgan Chase, MTN (B) 7.330%, 06/28/09 1,000 1,021 Merrill Lynch, Ser C, MTN 4.250%, 02/08/10 1,275 1,212 Morgan Stanley 6.750%, 04/15/11 30 22 3.875%, 01/15/09 1,000 920 ----------- TOTAL INVESTMENT BANKER/BROKER DEALER 7,964 =========== PETROLEUM & FUEL PRODUCTS [2.1%] ConocoPhillips 6.375%, 03/30/09 305 307 ConocoPhillips Canada Funding I 5.625%, 10/15/16 600 583 Duke Capital 5.500%, 03/01/14 625 596 ----------- TOTAL PETROLEUM & FUEL PRODUCTS 1,486 =========== RETAIL [4.1%] Home Depot 5.250%, 12/16/13 1,000 921 Kohl's 6.300%, 03/01/11 1,000 1,020 Kroger 5.500%, 02/01/13 450 438 Target 5.875%, 07/15/16 500 492 ----------- TOTAL RETAIL 2,871 =========== TELEPHONES & TELECOMMUNICATIONS [4.0%] BellSouth 4.200%, 09/15/09 1,000 986 Deutsche Telekom International Finance 5.250%, 07/22/13 475 441 New Cingular Wireless Services 8.125%, 05/01/12 400 427 Verizon Communications 5.550%, 02/15/16 1,000 922 Verizon Global Funding 7.250%, 12/01/10 25 26 ----------- TOTAL TELEPHONES & TELECOMMUNICATIONS 2,802 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 33 schedule of investments SEPTEMBER 30, 2008 CORPORATE BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- WASTE DISPOSAL [1.0%] Waste Management 6.875%, 05/15/09 $ 735 $ 737 =========== TOTAL CORPORATE BONDS (Cost $52,156) 48,944 =========== U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS [7.0%] FFCB REMIC, Ser IA4, Cl 1 5.770%, 02/21/14 858 871 FHLMC REMIC, Ser 2982, Cl NB 5.500%, 02/15/29 450 459 FHLMC REMIC, Ser R004, Cl A1 5.125%, 12/15/13 756 769 FHLMC REMIC, Ser R015, Cl AN 3.750%, 02/15/13 856 846 FNMA REMIC, Ser 2002-56, Cl MC 5.500%, 09/25/17 870 883 FNMA REMIC, Ser 2006-B1, Cl AB 6.000%, 06/25/16 216 220 FNMA REMIC, Ser 2007-B1, Cl BE 5.450%, 12/25/20 857 860 ----------- TOTAL U.S. GOVERNMENT MORTGAGE- BACKED OBLIGATIONS (Cost $4,871) 4,908 =========== MUNICIPAL BONDS [2.9%] CALIFORNIA [1.4%] California State, City of Industry, Sales Tax Project, RB, MBIA 5.000%, 01/01/12 955 965 =========== WISCONSIN [1.5%] De Pere, Unified School District, GO, FGIC Pre-Refunded @ 100 (C) 4.500%, 10/01/11 995 1,039 =========== TOTAL MUNICIPAL BONDS (Cost $2,010) 2,004 ===========
FACE AMOUNT (000) DESCRIPTION /SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS [2.5%] FHLMC 5.500%, 09/15/11 $ 460 $ 487 5.125%, 04/18/11 1,250 1,306 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost$1,781) 1,793 =========== U.S. TREASURY OBLIGATION [0.8%] U.S.Treasury Inflation Protection Security 2.000%, 01/15/14 595 594 ----------- TOTAL U.S. TREASURY OBLIGATION (Cost $610) 594 =========== MORTGAGE-BACKED SECURITY [0.0%] Residential Asset Mortgage Products, Ser 2003-RS5, Cl AI4 3.700%, 09/25/31 26 26 ----------- TOTAL MORTGAGE-BACKED SECURITY (Cost $26) 26 =========== COMMERCIAL PAPER [8.0%] BANKS [2.0%] Dexia Delaware 2.830%, 11/10/08 1,400 1,396 =========== INVESTMENT BANKER/BROKER DEALER [3.1%] ING US Funding 2.570%, 10/07/08 2,200 2,199 =========== MACHINERY [2.9%] Caterpillar (A) 2.150%, 10/30/08 2,000 1,996 =========== TOTAL COMMERCIAL PAPER (Cost $5,591) 5,591 =========== CASH EQUIVALENT [8.6%] Goldman Sachs Financial Square Funds-Government Fund, 2.040%* 6,025,662 6,026 ----------- TOTAL CASH EQUIVALENT (Cost $6,026) 6,026 =========== TOTAL INVESTMENTS [99.4%] (Cost $73,071) $ 69,886 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 34 schedule of investments SEPTEMBER 30, 2008 CORPORATE BOND FUND (CONCLUDED) DESCRIPTION PERCENTAGES ARE BASED ON NET ASSETS OF $70,317 ($ THOUSANDS). * THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. (A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES ARE DEEMED LIQUID.THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONS. ON SEPTEMBER 30, 2008, THE VALUE OF THESE SECURITIES AMOUNTED TO $3,914 (000), REPRESENTING 5.6% OF THE NET ASSETS OF THE FUND. (B) FLOATING RATE SECURITY -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. (C) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE. CL -- CLASS FFCB -- FEDERAL FARM CREDIT BANK FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION GO -- GENERAL OBLIGATION MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION MTN -- MEDIUM TERM NOTE RB -- REVENUE BOND REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT SER -- SERIES SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 35 schedule of investments SEPTEMBER 30, 2008 GOVERNMENT BOND FUND TYPE OF SECURITY WEIGHTINGS (UNAUDITED)*: (BAR CHART) U.S. Government Mortgage-Backed Obligations 62.9% U.S. Government Agency Obligations 22.0% U.S. Treasury Obligations 8.9% Short-Term Investments 6.2%
* Percentages based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS [62.8%] FFCB REMIC, Ser IA2, Cl 1 5.220%, 10/21/13 $ 1,281 $ 1,293 FFCB REMIC, Ser IA3, Cl 1 5.370%, 09/25/13 3,335 3,374 FFCB REMIC, Ser IA4, Cl 1 5.770%, 02/21/14 4,182 4,247 FFCB REMIC, Ser IA8, Cl 1 4.650%, 01/21/14 3,237 3,226 FHLMC REMIC, Ser R002, Cl AH 4.750%, 07/15/15 1,728 1,731 FHLMC REMIC, Ser R003, Cl AG 5.125%, 10/15/15 1,991 2,009 FHLMC REMIC, Ser R005, Cl AB 5.500%, 12/15/18 945 959 FHLMC REMIC, Ser R007, Cl AC 5.875%, 05/15/16 1,807 1,845 FHLMC REMIC, Ser R009, Cl AK 5.750%, 12/15/18 1,972 2,018 FHLMC REMIC, Ser R010, Cl AB 5.500%, 12/15/19 3,948 3,976 FHLMC REMIC, Ser R011, Cl AB 5.500%, 12/15/20 1,644 1,654 FHLMC REMIC, Ser R012, Cl AB 5.500%, 12/15/20 1,653 1,676 FHLMC REMIC, Ser R013, Cl AB 6.000%, 12/15/21 2,244 2,281 FHLMC REMIC, Ser R014, Cl AL 5.500%, 10/15/14 1,096 1,109 FHLMC REMIC, Ser R015, Cl AN 3.750%, 02/15/13 1,399 1,383
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- FHLMC REMIC, Ser R016, Cl AM 5.125%, 06/15/18 $ 1,474 $ 1,480 FNMA ARM (A) 4.549%, 03/01/34 704 706 FNMA REMIC, Ser 119, Cl DG 5.500%, 01/25/36 941 943 FNMA REMIC, Ser R009, Cl AJ 5.750%, 12/15/18 2,341 2,377 GNMA 8.000%, 08/15/22 12 13 7.500%, 06/15/24 7 7 7.500%, 05/15/26 6 6 7.500%, 04/15/32 31 34 7.000%, 12/15/16 15 15 6.000%, 01/15/29 13 13 GNMA ARM (A) 5.000%, 08/20/35 170 173 3.625%, 04/20/35 703 686 GNMA REMIC, Ser 31, Cl PB 5.500%, 02/16/32 3,986 4,041 ----------- TOTAL U.S. GOVERNMENT MORTGAGE-BACKED OBLIGATIONS (Cost $42,994) 43,275 =========== U.S. GOVERNMENT AGENCY OBLIGATIONS [22.0%] FHLB 5.250%, 10/14/11 2,500 2,502 5.000%, 12/11/15 2,500 2,574 FNMA 7.125%, 06/15/10 2,000 2,131 6.625%, 09/15/09 2,750 2,835 6.250%, 02/01/11 3,870 4,048 5.500%, 03/15/11 1,000 1,053 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $14,976) 15,143 =========== U.S. TREASURY OBLIGATIONS [8.9%] U.S.Treasury Note 6.000%, 08/15/09 4,950 5,123 4.500%, 02/28/11 880 931 4.250%, 08/15/13 45 48 ----------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $6,119) 6,102 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 36 schedule of investments SEPTEMBER 30, 2008 GOVERNMENT BOND FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- CASH EQUIVALENT [6.2%] Goldman Sachs Financial Square Funds - Government Fund, 2.040%* 4,298,006 $ 4,298 ----------- TOTAL CASH EQUIVALENT (Cost $4,298) 4,298 =========== TOTAL INVESTMENTS [99.9%] (Cost $68,387) $ 68,818 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $68,858 ($ THOUSANDS). * THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. (A) FLOATING RATE SECURITY -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. ARM -- ADJUSTABLE RATE MORTGAGE CL -- CLASS FFCB -- FEDERAL FARM CREDIT BANK FHLB -- FEDERAL HOME LOAN BANK FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT SER -- SERIES SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 37 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND ISSUER INDUSTRY WEIGHTINGS (UNAUDITED)*: (BAR CHART) Education 26.7% General Revenue 22.9% General Obligation 13.3% Water 8.7% Public Facilities 7.3% Healthcare 6.5% Industrial Development 6.2% Utilities 2.6% Transportation 1.7% Short-Term Investment 1.5% Equipment 0.9% Airport 0.7% Housing 0.7% Power 0.3%
* Percentages based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- MUNICIPAL BONDS [97.2%] ARIZONA [2.2%] Arizona School Facilities Board, Ser C, COP, FSA Callable 09/01/14 @ 100 5.000%, 09/01/15 $ 750 $ 794 =========== CALIFORNIA [82.5%] Antelope Valley, Unified High School District, Ser A, GO, MBIA Callable 08/01/12 @ 101 5.000%, 08/01/23 250 241 Azusa, Redevelopment Agency, Mortgage-Backed Securities Program, Ser A, RB, ETM (A) 6.875%, 10/01/12 200 227 Bay Area, Infrastructure Financing Authority, State Payment Acceleration Project, RB, XLCA Callable 08/01/11 @ 100 5.000%, 08/01/14 500 512 Bay Area, Infrastructure Financing Authority, State Payment Acceleration Project, RB, FGIC Callable 08/01/14 @ 100 5.000%, 08/01/17 350 357 Big Bear Lake,Water Authority, RB, MBIA 6.000%, 04/01/11 200 209
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Burbank, Public Financing Authority, Golden State Redevelopment Project, Ser A, TA, AMBAC Callable 12/01/13 @ 100 5.250%, 12/01/18 $ 100 $ 102 Burbank, Public Financing Authority, Golden State Redevelopment Project, Ser A, TA, AMBAC Pre-Refunded @ 100 (B) 5.250%, 12/01/13 75 82 California State, Department of Water Resources,Water Systems Project J-2, RB 7.000%, 12/01/12 500 568 California State, Economic Recovery Authority, Ser A, GO 5.250%, 01/01/11 500 525 California State, Educational Facilities Authority, Pooled College & University Projects, Ser A, RB 4.300%, 04/01/09 100 101 California State, Educational Facilities Authority, Stanford University Project, Ser T-4, RB 5.000%, 03/15/14 350 373 California State, GO Callable 02/01/12 @ 100 5.000%, 02/01/18 175 178 California State, GO Pre-Refunded @ 100 (B) 5.250%, 09/01/10 165 172 California State, GO Pre-Refunded @ 100 (B) 5.250%, 09/01/10 10 10 California State, GO Pre-Refunded @ 100 (B) 5.250%, 09/01/10 25 26 California State, GO Pre-Refunded @ 100 (B) 5.250%, 10/01/10 20 21 California State, GO Pre-Refunded @ 100 (B) 5.250%, 10/01/10 50 53 California State, GO Pre-Refunded @ 100 (B) 5.000%, 02/01/12 400 426 California State, GO Pre-Refunded @ 100 (B) 5.250%, 04/01/12 200 215
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 38 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- California State, GO 5.000%, 04/01/10 $ 215 $ 223 California State, Health Facilities Financing Authority, Cedars-Sinai Medical Center Projects, Ser A, RB Pre-Refunded @ 101 (B) 6.250%, 12/01/09 490 516 California State, Health Facilities Financing Authority,Valley Care Project, Ser A, RB Pre-Refunded @ 100 (B) 5.375%, 05/01/12 500 539 California State, Infrastructure & Economic Authority, Bay Area Toll Bridges Project, Ser A, RB, FSA Pre-Refunded @ 100 (B) 5.250%, 07/01/13 125 136 California State, Infrastructure & Economic Authority, Energy Efficiency Master Trust Project, Ser A, RB 5.000%, 03/01/11 315 330 California State, Public Works Board Lease, Department of Corrections Project, Ser B, RB, MBIA Callable 11/03/08 @ 101 5.000%, 09/01/21 100 101 California State, Public Works Board Lease, Department of Corrections-Administration Project, Ser A, RB, AMBAC Callable 03/01/12 @100 5.250%, 03/01/18 155 159 California State, Public Works Board Lease, Department of Corrections-State Prisons Project, Ser A, RB, AMBAC 5.250%, 12/01/13 600 626 California State, Public Works Board Lease, Department of General Services - Butterfield Street Project, Ser A, RB 5.000%, 06/01/10 500 515 California State, Public Works Board Lease, Department of Mental Health Project, Ser A, RB 5.250%, 06/01/13 200 212
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- California State, Public Works Board Lease, Various University Projects, Ser A, RB, MBIA 5.500%, 06/01/14 $ 250 $ 268 California Statewide, Communities Development Authority, Irvine-UCI East Apartments Project, RB Pre-Refunded @ 100 (B) 5.625%, 05/15/15 360 403 Carlsbad, Public Financing Authority, Municipal Golf Course Project, Ser A, RB, AMBAC 4.500%, 09/01/16 350 361 Castaic Lake, Water Agency, Water Systems Improvement Project, Ser A, COP, MBIA 7.000%, 08/01/13 300 344 Chaffey, Unified High School District, Ser B, GO, FGIC Pre-Refunded @ 101 (B) 5.500%, 08/01/10 400 425 Coachella Valley, Water District Authority, Flood Control Project, COP, AMBAC Callable 11/03/08 @ 101 5.000%, 10/01/11 250 253 Colton, Joint Unified School District, Election 2001 Project, Ser B, GO, FSA Callable 08/01/14 @ 100 5.250%, 08/01/19 250 259 Contra Costa County, Public Financing Authority, Medical Center Project, Ser B, RB, MBIA 5.000%, 06/01/11 250 261 Corona, Public Financing Authority, City Hall Project, Ser B, RB, MBIA Callable 09/01/12 @100 5.250%, 09/01/16 350 365 Culver City, Redevelopment Finance Authority, TA, AMBAC 5.500%, 11/01/14 75 77 Dry Creek Joint Elementary School District, Ser A, GO, FSA 3.000%, 08/01/11 200 182 East Bay, Regional Park District, GO 5.000%, 09/01/13 250 268
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 39 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Eastern California, Municipal Water District, Ser A, COP, MBIA 5.000%, 07/01/14 $ 500 $ 532 Escondido, Union School District, Refunding & Financing Project, COP, MBIA 4.750%, 07/01/19 735 754 Fresno, Unified School District, Election 2001 Project, Ser D, GO, MBIA Callable 08/01/13 @102 5.000%, 08/01/17 200 207 Fruitvale, School District, GO, FSA Callable 08/01/09 @ 102 5.000%, 08/01/19 200 202 Golden State Tobacco Securitization, Ser B, RB Pre-Refunded @ 100 (B) 5.625%, 06/01/13 500 535 Golden State Tobacco Securitization, Ser B, RB Pre-Refunded @ 100 (B) 5.500%, 06/01/13 500 533 Golden State,Tobacco Settlement, Ser A, RB Callable 06/01/09 @ 100 5.000%, 06/01/19 250 227 Golden State,Tobacco Settlement, Ser A, RB, AMBAC Callable 06/01/10 @ 100 5.000%, 06/01/20 500 478 Golden State,Tobacco Settlement, Ser A-1, RB Pre-Refunded @ 100 (B) 6.750%, 06/01/13 370 414 Golden State,Tobacco Settlement, Ser A-3, RB Pre-Refunded @ 100 (B) 7.875%, 06/01/13 675 787 Golden State,Tobacco Settlement, Ser B, RB, FGIC Pre-Refunded @ 100 (B) 5.500%, 06/01/13 100 107 Golden State,Tobacco Settlement, Ser B, RB Pre-Refunded @ 100 (B) 5.600%, 06/01/10 170 177 Grossmont Unified High School District, GO, MBIA Callable 08/01/15 @ 100 5.000%, 08/01/23 265 257
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Hawthorne, School District, COP, FSA Pre-Refunded @ 101 (B) 6.000%, 11/01/10 $ 485 $ 514 Indio, Public Financing Authority, Public Capital Improvement Project, Ser B, RB, AMBAC (C) 3.800%, 11/01/37 500 487 Kern, High School District, GO, ETM 7.100%, 08/01/12 290 332 Los Angeles County, Capital Asset Leasing, Ser A, RB 3.250%, 06/01/10 310 312 Los Angeles, Municipal Improvement Authority, Central Library Project, RB, MBIA Callable 06/01/12 @ 100 5.500%, 06/01/18 500 518 Los Angeles, Ser A, GO, MBIA 4.000%, 09/01/09 250 254 Los Angeles, Unified School District, GO, MBIA 5.750%, 07/01/16 500 557 Los Angeles, Unified School District, Ser A-1, GO, MBIA Callable 07/01/14 @ 100 5.000%, 07/01/17 125 130 Los Angeles,Wastewater Systems Authority, Sub-Ser B, RB, MBIA 5.000%, 06/01/10 500 518 Metropolitan Water District, Southern California Waterworks Authority, RB 5.750%, 07/01/09 500 513 Metropolitan Water District, Southern California Waterworks Authority, Ser A, RB, MBIA 5.250%, 07/01/11 200 212 Metropolitan Water District, Southern California Waterworks Authority, Ser A, RB 5.750%, 07/01/21 280 308 North Orange County, Community College District, Ser A, GO, MBIA Pre-Refunded @ 101 (B) 5.375%, 08/01/12 525 571 Northern California,Transmission Resource Authority, Ore Transmission Project, Ser A, RB, MBIA 7.000%, 05/01/13 250 273
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 40 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Oakland, Redevelopment Agency, Central District Redevelopment Project, TA, AMBAC 5.500%, 02/01/14 $ 475 $ 502 Oakland, Ser A, GO, MBIA Callable 01/15/13 @ 100 5.000%, 01/15/21 500 493 Oakley, Civic Center Project, COP 4.000%, 05/01/12 230 231 Oxnard, School District, Election 2006 Project, Ser A, GO, CIFG 6.750%, 08/01/11 300 329 Palm Springs, Financing Authority, Public Capital Improvement Lease Project, RB, AMBAC Callable 04/01/17 @ 100 5.000%, 04/01/20 470 467 Pinole, Redevelopment Agency, Pinole Vista Redevelopment Project,TA, FSA Callable 08/01/09 @ 101 5.250%, 08/01/14 100 102 Redwoods, Community College District, 2004 Election Project, Ser A, GO, MBIA Callable 08/01/14 @ 100 5.000%, 08/01/23 420 398 Riverside,Water Authority, RB Callable 11/03/08 @ 101 5.375%, 10/01/12 90 91 Riverside,Water Authority, RB Pre-Refunded @ 101 (B) 5.375%, 10/01/08 10 10 Sacramento, City Unified School District, Ser A, GO, FSA 4.250%, 07/01/09 75 76 San Diego, Unified School District, Election 1998 Project, Ser E, GO, FSA Callable 07/01/13 @ 101 5.250%, 07/01/16 100 107 San Diego, Unified School District, Ser D, GO, FGIC Callable 07/01/12 @ 100 5.000%, 07/01/27 500 525 San Francisco (City & County), Airports Commission Authority, Ser 27B, RB, FGIC Callable 05/01/11 @ 100 5.250%, 05/01/12 250 259 San Francisco (City & County), GO Callable 06/15/10 @ 102 5.000%, 06/15/11 235 248
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- San Francisco (City & County), Ser R1, GO 5.000%, 06/15/14 $ 500 $ 533 San Jose, Unified School District, Ser A, GO, FSA Callable 08/01/11 @ 101 5.375%, 08/01/19 150 156 San Ysidro, School District, Election 1997 Project, Ser C, GO, MBIA 6.000%, 08/01/11 205 221 Sanger, Unified School District, GO, MBIA 5.350%, 08/01/15 250 256 Santa Margarita, Dana Point Authority, Ser A, RB, AMBAC Callable 08/01/14 @ 100 5.000%, 08/01/15 165 175 Santa Monica, Community College District, 2004 Election Project, Ser A, GO, MBIA Pre-Refunded @ 100 (B) 5.000%, 05/01/15 400 433 Santa Monica, Public Financing Authority, Public Safety Facilities Project, RB Callable 07/01/09 @ 101 5.250%, 07/01/14 100 102 Solano County, COP, MBIA Pre-Refunded @ 100 (B) 5.250%, 11/01/12 100 108 Southern Kern, Unified School District, Ser A, GO, FGIC Callable 11/01/13 @ 100 4.500%, 11/01/18 220 220 Tamalpais, Unified High School District, GO, MBIA Callable 08/01/11 @ 101 4.875%, 08/01/17 100 102 University of California, Ser B, RB, AMBAC Pre-Refunded @ 100 (B) 5.500%, 05/15/14 500 551 University of California, Ser Q, RB, FSA Callable 09/01/11 @ 101 5.000%, 09/01/22 500 495 ----------- TOTAL CALIFORNIA 29,120 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 41 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- ILLINOIS [0.6%] Illinois State, Civic Center Authority, RB, FSA Callable 12/15/10 @ 100 5.500%, 12/15/14 $ 200 $ 208 =========== MISSOURI [0.6%] St Louis, Parking Facilities Authority, Downtown Parking Facilities Project, Sub-Ser A, RB Pre-Refunded @ 100 (B) 6.000%, 02/01/12 200 218 =========== NEW JERSEY [1.0%] New Jersey State,Turnpike Authority, Ser C, RB, MBIA, ETM 6.500%, 01/01/16 315 354 =========== NEW MEXICO [1.1%] Santa Fe, Educational Facilities Authority, College of Santa Fe Project, RB Pre-Refunded @ 100 (B) 5.750%, 10/01/14 350 384 =========== NEW YORK [1.6%] New York State, Local Assistance Correction Authority, Ser E, RB 6.000%, 04/01/14 500 547 =========== SOUTH CAROLINA [2.3%] Columbia,Tourism Development Fee Pledge Project, COP, AMBAC Callable 06/01/13 @ 100 5.250%, 06/01/16 350 365 South Carolina, Jobs & Economic Development Authority, Palmetto Health Project, Ser C, RB Pre-Refunded @ 100 (B) 6.875%, 08/01/13 400 456 ----------- TOTAL SOUTH CAROLINA 821 ===========
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- TEXAS [0.3%] San Angelo,Waterworks & Sewer System Authority, Refunding & Improvements Projects, RB, FSA Callable 04/01/11 @ 100 5.250%, 04/01/19 $ 100 $ 102 =========== UTAH [0.4%] Central Utah,Water Conservancy District, Ser D, GO Pre-Refunded @ 100 (B) 4.600%, 04/01/09 140 142 =========== WASHINGTON [1.7%] Clark County, GO, MBIA Pre-Refunded @ 100 (B) 5.125%, 12/01/11 250 267 King County, NJB Properties Project, Ser A, RB 5.000%, 12/01/14 325 344 ----------- TOTAL WASHINGTON 611 =========== WEST VIRGINIA [1.5%] West Virginia State, Economic Development Authority, Correctional Juvenile Project, Ser A, RB, MBIA Callable 06/01/12 @ 101 5.500%, 06/01/17 500 517 =========== PUERTO RICO [1.4%] Puerto Rico, Electric Power Authority, Ser CC, RB, MBIA Callable 11/03/08 @ 101 5.250%, 07/01/09 100 101 Puerto Rico, Highway & Transportation Authority, RB, FSA 5.500%, 07/01/09 250 254 Puerto Rico, Municipal Finance Agency, Ser A, RB, FSA Callable 11/03/08 @ 101 5.250%, 07/01/10 130 131 ----------- TOTAL PUERTO RICO 486 =========== TOTAL MUNICIPAL BONDS (Cost $34,785) 34,304 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 42 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT BOND FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- CASH EQUIVALENT [1.5%] Federated California Municipal Money Market Fund, Cl I, 4.670%* 535,533 $ 535 ----------- TOTAL CASH EQUIVALENT (Cost $536) 535 =========== TOTAL INVESTMENT [98.7%] (Cost $35,321) $ 34,839 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $35,311 ($ THOUSANDS). * THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. (A) SECURITIES ARE COLLATERALIZED UNDER AN AGREEMENT FROM FHLMC & FNMA. (B) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE. (C) FLOATING RATE SECURITY -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY CIFG -- CDC IXIS FINANCIAL GUARANTEE CL -- CLASS COP -- CERTIFICATE OF PARTICIPATION ETM -- ESCROW TO MATURITY FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION FSA -- FINANCIAL SECURITY ASSISTANCE GO -- GENERAL OBLIGATION MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION RB -- REVENUE BOND SER -- SERIES TA -- TAX ALLOCATION XLCA -- XL CAPITAL ASSURANCE SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 43 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND ISSUER INDUSTRY WEIGHTINGS (UNAUDITED)*: (BAR CHART) Industrials 68.3% Gas Transmission 11.0% Utilities 8.7% Telecommunication Services 5.7% Financials 3.6% Transportation 2.1% Short-Term Investments 0.4% Common Stock 0.2%
* Percentages based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- CORPORATE BONDS [97.1%] AEROSPACE & DEFENSE [2.1%] BE Aerospace 8.500%, 07/01/18 $ 100 $ 97 DRS Technologies 6.625%, 02/01/16 100 101 Esterline Technologies 7.750%, 06/15/13 100 98 L-3 Communications 5.875%, 01/15/15 200 181 Sequa (A) 11.750%, 12/01/15 100 84 TransDigm (F) 7.750%, 07/15/14 100 94 ----------- TOTAL AEROSPACE & DEFENSE 655 =========== AIRLINES [0.4%] DAE Aviation Holdings (A) 11.250%, 08/01/15 150 139 =========== APPAREL/TEXTILES [0.8%] Hanesbrands (B) 6.508%, 12/15/14 100 83 Levi Strauss 9.750%, 01/15/15 100 83 Phillips-Van Heusen 7.250%, 02/15/11 75 74 ----------- TOTAL APPAREL/TEXTILES 240 =========== AUTO RENT & LEASE [1.3%] Avis Budget Car Rental 7.750%, 05/15/16 100 62 H&E Equipment Services 8.375%, 07/15/16 100 74 Hertz 10.500%, 01/01/16 150 125
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- RSC Equipment Rental 9.500%, 12/01/14 $ 100 $ 76 United Rentals North America 6.500%, 02/15/12 100 84 ----------- TOTAL AUTO RENT & LEASE 421 =========== AUTOMOTIVE [1.1%] General Motors 7.700%, 04/15/16 200 80 7.125%, 07/15/13 250 115 UCI Holdco (B) 11.708%, 12/15/13 184 140 ----------- TOTAL AUTOMOTIVE 335 =========== AUTOPARTS [1.0%] Accuride 8.500%, 02/01/15 150 95 Asbury Automotive Group 7.625%, 03/15/17 100 64 Pep Boys 7.500%, 12/15/14 100 68 TRW Automotive (A) 7.250%, 03/15/17 100 79 ----------- TOTAL AUTOPARTS 306 =========== BEAUTY PRODUCTS [0.3%] Chattem 7.000%, 03/01/14 100 94 =========== BROADCASTING & CABLE [6.5%] Allbritton Communications 7.750%, 12/15/12 150 128 Atlantic Broadband Finance 9.375%, 01/15/14 100 88 Barrington Broadcasting Group 10.500%, 08/15/14 100 64 Bonten Media Acquisition (A) 9.000%, 06/01/15 150 88 Cablevision Systems, Ser B 8.000%, 04/15/12 250 235 Charter Communications Holdings II 10.250%, 09/15/10 300 270 CSC Holdings 7.625%, 07/15/18 100 87 DirecTV Holdings (A) 7.625%, 05/15/16 50 45 Echostar DBS 6.625%, 10/01/14 200 160
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 44 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Fisher Communications 8.625%, 09/15/14 $ 150 $ 151 Kabel Deutschland 10.625%, 07/01/14 200 196 Local TV Finance (A) 9.250%, 06/15/15 100 65 Mediacom Capital 7.875%, 02/15/11 150 136 Newport Television (A) 13.000%, 03/15/17 100 71 Nexstar Finance Holdings (D) 11.375%, 04/01/13 128 106 Olympus Communications (C) 10.625%, 07/15/04 100 -- Quebecor Media 7.750%, 03/15/16 75 66 Videotron Ltee 6.875%, 01/15/14 100 95 ----------- TOTAL BROADCASTING & CABLE 2,051 =========== BUILDING & CONSTRUCTION [1.7%] DR Horton 5.625%, 01/15/16 125 92 Esco (A) 8.625%, 12/15/13 50 49 Interline Brands 8.125%, 06/15/14 50 50 International Utility Structures (C) 10.750%, 02/01/08 100 1 KB Home 8.625%, 12/15/08 50 50 Nortek 8.500%, 09/01/14 200 114 Panolam Industries International 10.750%, 10/01/13 250 150 Ply Gem Industries (A) 11.750%, 06/15/13 50 43 ----------- TOTAL BUILDING & CONSTRUCTION 549 =========== BUSINESS SERVICES [1.0%] Corrections 7.500%, 05/01/11 100 99 FTI Consulting 7.625%, 06/15/13 50 51 Geo Group 8.250%, 07/15/13 150 149 ----------- TOTAL BUSINESS SERVICES 299 ===========
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- CHEMICALS [3.8%] Airgas (A) 7.125%, 10/01/18 $ 100 $ 97 Basell (A) 8.375%, 08/15/15 200 94 Chemtura (F) 6.875%, 06/01/16 50 40 Georgia Gulf 9.500%, 10/15/14 150 92 Huntsman International 7.875%, 11/15/14 115 99 Innophos 8.875%, 08/15/14 100 100 Momentive Performance Materials 9.750%, 12/01/14 100 79 Mosaic (A) 7.375%, 12/01/14 75 78 Nalco 8.875%, 11/15/13 150 150 Nova Chemicals 6.500%, 01/15/12 150 134 Polymer Holdings (D) (E) (F) 18.387%, 07/15/14 250 144 Terra Capital, Ser B 7.000%, 02/01/17 100 95 ----------- TOTAL CHEMICALS 1,202 =========== CIRCUIT BOARDS [0.2%] Viasystems 10.500%, 01/15/11 50 49 =========== COMMERCIAL SERVICES [2.3%] ARAMARK 8.500%, 02/01/15 100 94 6.301%, 02/01/15 (B) 100 87 Iron Mountain 8.750%, 07/15/18 (F) 150 152 8.625%, 04/01/13 100 99 Mobile Mini 6.875%, 05/01/15 75 65 Mobile Services Group 9.750%, 08/01/14 150 140 Tube City IMS 9.750%, 02/01/15 100 89 ----------- TOTAL COMMERCIAL SERVICES 726 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 45 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- COMPUTER SYSTEM DESIGN & SERVICES [0.4%] Activant Solutions 9.500%, 05/01/16 $ 100 $ 74 Unisys 12.500%, 01/15/16 65 62 ----------- TOTAL COMPUTER SYSTEM DESIGN & SERVICES 136 =========== CONGLOMERATE [0.3%] KAR Holdings 8.750%, 05/01/14 100 82 =========== CONSUMER PRODUCTS & SERVICES [4.8%] Central Garden & Pet 9.125%, 02/01/13 100 77 Jarden 7.500%, 05/01/17 75 62 Johnsondiversey Holdings (D) 10.670%, 05/15/13 200 194 Johnsondiversey, Ser B 9.625%, 05/15/12 150 150 Libbey Glass (B) 9.928%, 06/01/11 100 92 MSX International (A) 12.500%, 04/01/12 100 65 Prestige Brands 9.250%, 04/15/12 90 85 Sealy Mattress 8.250%, 06/15/14 200 157 Sotheby's (A) 7.750%, 06/15/15 100 91 Southern States Cooperative (A) 10.500%, 11/01/10 200 202 Spectrum Brands 7.375%, 02/01/15 275 118 Steinway Musical Instruments (A) 7.000%, 03/01/14 100 87 Visant Holding 8.750%, 12/01/13 100 92 Yankee Acquisition, Ser B 9.750%, 02/15/17 50 29 ----------- TOTAL CONSUMER PRODUCTS & SERVICES 1,501 =========== CONTAINERS & PACKAGING [2.5%] Crown Americas 7.750%, 11/15/15 150 146 Exopack Holding 11.250%, 02/01/14 100 84
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Intertape Polymer US 8.500%, 08/01/14 $ 100 $ 84 Owens Brockway Glass Container 6.750%, 12/01/14 150 142 Plastipak Holdings (A) 8.500%, 12/15/15 100 85 Solo Cup 8.500%, 02/15/14 200 160 Stone Container Finance 7.375%, 07/15/14 100 77 ----------- TOTAL CONTAINERS & PACKAGING 778 =========== DIVERSIFIED OPERATIONS [0.8%] Bombardier (A) 8.000%, 11/15/14 75 74 Trinity Industries 6.500%, 03/15/14 200 189 ----------- TOTAL DIVERSIFIED OPERATIONS 263 =========== EDUCATIONAL SERVICES [0.3%] Education Management 10.250%, 06/01/16 50 40 8.750%, 06/01/14 60 50 ----------- TOTAL EDUCATIONAL SERVICES 90 =========== ELECTRIC UTILITIES [5.9%] AES 8.000%, 10/15/17 100 90 8.000%, 06/01/20 (A) 50 44 Allegheny Energy Supply 7.800%, 03/15/11 200 199 Aquila 7.625%, 11/15/09 100 101 Calpine Generating (B) (C) 11.070%, 04/01/10 200 15 CMS Energy 6.875%, 12/15/15 150 137 Edison Mission Energy 7.000%, 05/15/17 150 135 Energy Future Holdings (A) 10.875%, 11/01/17 500 451 ESI Tractebel Acquisition, Ser B 7.990%, 12/30/11 47 47 Mirant North America 7.375%, 12/31/13 150 141 NRG Energy 7.375%, 02/01/16 100 90
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 46 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- PNM Resources 9.250%, 05/15/15 $ 100 $ 99 Reliant Energy 7.625%, 06/15/14 200 150 Sierra Pacific Resources 8.625%, 03/15/14 70 72 Teco Finance, MTN 6.572%, 11/01/17 100 91 ----------- TOTAL ELECTRIC UTILITIES 1,862 =========== ENERGY & POWER [0.2%] VeraSun Energy 9.375%, 06/01/17 200 79 =========== ENTERTAINMENT & GAMING [9.8%] AMC Entertainment 11.000%, 02/01/16 100 98 Buffalo Thunder Development Authority (A) 9.375%, 12/15/14 75 31 CCM Merger (A) 8.000%, 08/01/13 175 142 Choctaw Resort Development Enterprise (A) 7.250%, 11/15/19 188 141 Chukchansi Economic Development Authority (A) 8.000%, 11/15/13 150 120 Circus & Eldorado Joint Venture/Silver Legacy Capital 10.125%, 03/01/12 150 127 Fontainebleau Las Vegas Holdings (A) 10.250%, 06/15/15 150 42 Gaylord Entertainment 8.000%, 11/15/13 100 87 Greektown Holdings (A) (C) 10.750%, 12/01/13 100 69 Herbst Gaming (C) 8.125%, 06/01/12 150 8 Indianapolis Downs & Capital (A) 11.000%, 11/01/12 100 68 Inn of the Mountain Gods Resort & Casino 12.000%, 11/15/10 150 102 Isle of Capri Casinos 7.000%, 03/01/14 200 134 Jacobs Entertainment 9.750%, 06/15/14 75 50
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Mashantucket Western Pequot Tribe (A) 8.500%, 11/15/15 $ 170 $ 111 MGM Mirage 8.500%, 09/15/10 200 184 6.750%, 09/01/12 100 78 6.000%, 10/01/09 100 94 Mohegan Tribal Gaming Authority 7.125%, 08/15/14 150 107 MTR Gaming Group, Ser B 9.750%, 04/01/10 200 190 OED/Diamond Jo 8.750%, 04/15/12 100 91 Penn National Gaming 6.875%, 12/01/11 100 94 San Pasqual Casino (A) 8.000%, 09/15/13 100 90 Scientific Games 6.250%, 12/15/12 100 97 Seminole Hard Rock Entertainment (A) (B) 5.319%, 03/15/14 100 75 Seneca Gaming 7.250%, 05/01/12 100 87 Shingle Springs Tribal Gaming Authority (A) 9.375%, 06/15/15 100 72 Snoqualmie Entertainment Authority (A)(B) 6.875%, 02/01/14 100 72 Speedway Motorsports 6.750%, 06/01/13 100 94 Tunica-Biloxi Gaming Authority (A) 9.000%, 11/15/15 125 115 Waterford Gaming (A) 8.625%, 09/15/14 86 68 Wynn Las Vegas Capital 6.625%, 12/01/14 175 149 ----------- TOTAL ENTERTAINMENT & GAMING 3,087 =========== FINANCIAL SERVICES [1.2%] Ford Motor Credit 7.375%, 10/28/09 200 161 7.375%, 02/01/11 100 66 GMAC 6.750%, 12/01/14 425 163 ----------- TOTAL FINANCIAL SERVICES 390 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 47 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- FOOD, BEVERAGE & TOBACCO [2.5%] Alliance One International 8.500%, 05/15/12 $ 100 $ 92 Beverages & More (A) 9.250%, 03/01/12 100 94 Chiquita Brands International 7.500%, 11/01/14 100 77 Constellation Brands 8.375%, 12/15/14 150 148 Del Monte 8.625%, 12/15/12 50 49 Land O' Lakes 8.750%, 11/15/11 100 101 Leiner Health Products (C) 11.000%, 06/01/12 100 5 Le-Nature's (A) (C) 9.000%, 06/15/13 150 23 National Beef Packing 10.500%, 08/01/11 100 100 Smithfield Foods, Ser B 8.000%, 10/15/09 100 97 ----------- TOTAL FOOD, BEVERAGE & TOBACCO 786 =========== GAS/NATURAL GAS [2.3%] Colorado Interstate Gas 6.800%, 11/15/15 150 142 El Paso 7.000%, 05/15/11 275 275 7.000%, 06/15/17 150 134 Targa Resources 8.500%, 11/01/13 200 177 ----------- TOTAL GAS/NATURAL GAS 728 =========== INSURANCE [0.3%] USI Holdings (A)(B) 6.679%, 11/15/14 125 95 =========== MACHINERY [1.5%] Baldor Electric 8.625%, 02/15/17 125 119 Case New Holland 7.125%, 03/01/14 100 91 Terex (F) 8.000%, 11/15/17 75 68 7.375%, 01/15/14 100 91 Trimas 9.875%, 06/15/12 115 98 ----------- TOTAL MACHINERY 467 ===========
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- MEDICAL PRODUCTS & SERVICES [2.4%] Advanced Medical Optics 7.500%, 05/01/17 $ 100 $ 87 Bio-Rad Laboratories 7.500%, 08/15/13 100 100 Community Health Systems 8.875%, 07/15/15 150 142 DJO Finance 10.875%, 11/15/14 25 24 HCA 9.250%, 11/15/16 50 49 5.750%, 03/15/14 100 78 Tenet Healthcare 9.250%, 02/01/15 200 189 Vanguard Health Holding II 9.000%, 10/01/14 100 97 ----------- TOTAL MEDICAL PRODUCTS & SERVICES 766 =========== METALS & MINING [1.7%] American Rock Salt 9.500%, 03/15/14 150 154 Freeport-McMoRan Copper & Gold 8.250%, 04/01/15 125 123 Noranda Aluminium Acquisition (B) 6.828%, 05/15/15 150 114 Novelis 7.250%, 02/15/15 150 131 ----------- TOTAL METALS & MINING 522 =========== MISCELLANEOUS BUSINESS SERVICES [1.5%] Affinion Group 11.500%, 10/15/15 100 93 Carriage Services 7.875%, 01/15/15 200 176 Compagnie Generale de Geophysique 7.500%, 05/15/15 100 96 Lamar Media 6.625%, 08/15/15 100 83 MCBC Holdings (A) (B) 9.086%, 10/15/14 50 35 ----------- TOTAL MISCELLANEOUS BUSINESS SERVICES 483 =========== MISCELLANEOUS MANUFACTURING [3.1%] AGY Holding 11.000%, 11/15/14 100 89
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 48 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Altra Industrial Motion 9.000%, 12/01/11 $ 100 $ 103 Coleman Cable 9.875%, 10/01/12 100 90 Dresser-Rand Group 7.375%, 11/01/14 133 124 General Cable 7.125%, 04/01/17 100 90 Hawker Beechcraft Acquisition 9.750%, 04/01/17 75 67 8.500%, 04/01/15 100 91 Koppers Holdings (D) 13.995%, 11/15/14 250 224 MAAX (C) 9.750%, 06/15/12 175 3 Mueller Water Products (F) 7.375%, 06/01/17 100 79 ----------- TOTAL MISCELLANEOUS MANUFACTURING 960 =========== PAPER & RELATED PRODUCTS [3.3%] Abitibi-Consolidated of Canada (A) 13.750%, 04/01/11 100 99 Appleton Papers, Ser B 9.750%, 06/15/14 100 77 Catalyst Paper 7.375%, 03/01/14 250 170 Cellu Tissue Holdings 9.750%, 03/15/10 100 92 Domtar 7.125%, 08/15/15 150 138 Georgia-Pacific 7.700%, 06/15/15 100 92 Newark Group 9.750%, 03/15/14 200 70 Norampac Industries 6.750%, 06/01/13 100 75 Smurfit Kappa Funding 7.750%, 04/01/15 150 125 Verso Paper Holdings 9.125%, 08/01/14 100 86 ----------- TOTAL PAPER & RELATED PRODUCTS 1,024 =========== PETROLEUM & FUEL PRODUCTS [11.2%] Atlas Pipeline Partners 8.125%, 12/15/15 200 184 Chesapeake Energy 6.875%, 01/15/16 100 91 6.250%, 01/15/18 100 85
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Cimarex Energy 7.125%, 05/01/17 $ 100 $ 92 Clayton Williams Energy 7.750%, 08/01/13 150 131 Comstock Resources 6.875%, 03/01/12 150 136 Copano Energy (A) 7.750%, 06/01/18 100 87 Dynegy Holdings 7.750%, 06/01/19 100 80 6.875%, 04/01/11 100 91 Forest Oil 8.000%, 12/15/11 100 100 Frontier Oil 6.625%, 10/01/11 150 142 Helix Energy Solutions Group (A) 9.500%, 01/15/16 100 93 Linn Energy (A) 9.875%, 07/01/18 100 87 MarkWest Energy Partners, Ser B 8.500%, 07/15/16 150 142 Newfield Exploration 6.625%, 09/01/14 150 135 OPTI Canada 7.875%, 12/15/14 100 88 Pacific Energy Partners 7.125%, 06/15/14 100 98 Parker Drilling 9.625%, 10/01/13 150 145 Petroplus Finance (A) 7.000%, 05/01/17 150 125 Pioneer Natural Resources 5.875%, 07/15/16 100 86 Plains Exploration & Production 7.750%, 06/15/15 150 138 7.625%, 06/01/18 100 89 Pride International 7.375%, 07/15/14 100 96 Regency Energy Partners 8.375%, 12/15/13 65 59 Southern Star Central 6.750%, 03/01/16 100 92 Southwestern Energy (A) 7.500%, 02/01/18 100 97 Swift Energy 7.625%, 07/15/11 100 95 Tesoro 6.625%, 11/01/15 100 82 Whiting Petroleum 7.000%, 02/01/14 300 255
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 49 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Williams 7.625%, 07/15/19 $ 50 $ 49 6.375%, 10/01/10 (A) 150 147 Williams Partners 7.250%, 02/01/17 100 93 ----------- TOTAL PETROLEUM & FUEL PRODUCTS 3,510 =========== PRINTING & PUBLISHING [2.0%] Dex Media (D) 10.042%, 11/15/13 150 69 Dex Media West, Ser B 8.500%, 08/15/10 100 88 Idearc (F) 8.000%, 11/15/16 100 27 MediMedia USA (A) 11.375%, 11/15/14 50 49 R.H. Donnelley 11.750%, 05/15/15 (A) 168 103 6.875%, 01/15/13 3 1 Sheridan Group 10.250%, 08/15/11 150 134 Valassis Communications 8.250%, 03/01/15 100 69 Warner Music Group 7.375%, 04/15/14 100 74 ----------- TOTAL PRINTING & PUBLISHING 614 =========== RADIO [0.2%] XM Satellite Radio Holdings (A) 13.000%, 08/01/13 100 59 =========== REAL ESTATE INVESTMENT TRUSTS [0.4%] Host Marriott, Ser O 6.375%, 03/15/15 150 122 =========== RETAIL [3.8%] ACE Hardware (A) 9.125%, 06/01/16 100 85 Autonation (A) 7.000%, 04/15/14 100 87 Buffets (C) 12.500%, 11/01/14 100 1 Claire's Stores 9.625%, 06/01/15 100 27 Ferrellgas Partners (A) 6.750%, 05/01/14 100 81 Group 1 Automotive 8.250%, 08/15/13 100 91
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Inergy 8.250%, 03/01/16 $ 200 $ 184 Landry's Restaurants 9.500%, 12/15/14 100 90 Leslie's Poolmart 7.750%, 02/01/13 100 85 NPC International 9.500%, 05/01/14 100 82 Penske Auto Group 7.750%, 12/15/16 100 72 Rare Restaurant Group (A) 9.250%, 05/15/14 100 70 Sbarro 10.375%, 02/01/15 50 34 Sonic Automotive 8.625%, 08/15/13 70 48 Suburban Propane Partners 6.875%, 12/15/13 100 89 True Temper Sports 8.375%, 09/15/11 150 84 ----------- TOTAL RETAIL 1,210 =========== RUBBER & PLASTIC [0.6%] Cooper Tire & Rubber 8.000%, 12/15/19 100 76 Cooper-Standard Automotive 8.375%, 12/15/14 50 32 Goodyear Tire & Rubber 9.000%, 07/01/15 98 97 ----------- TOTAL RUBBER & PLASTIC 205 =========== SEMI-CONDUCTORS [1.1%] Amkor Technology 9.250%, 06/01/16 100 84 Flextronics International 6.250%, 11/15/14 100 84 Freescale Semiconductor 10.125%, 12/15/16 150 96 Sensata Technologies 8.000%, 05/01/14 100 85 ----------- TOTAL SEMI-CONDUCTORS 349 =========== STEEL & STEEL WORKS [1.6%] AK Steel 7.750%, 06/15/12 150 144 ArcelorMittal USA 6.500%, 04/15/14 150 152
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 50 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Gerdau Ameristeel 10.375%, 07/15/11 $ 100 $ 103 Ryerson (A) 12.000%, 11/01/15 75 64 Steel Dynamics 7.375%, 11/01/12 50 46 ----------- TOTAL STEEL & STEEL WORKS 509 =========== TELEPHONES & TELECOMMUNICATIONS [5.5%] American Tower 7.125%, 10/15/12 150 148 Broadview Networks Holdings 11.375%, 09/01/12 100 77 Centennial Communications 10.125%, 06/15/13 100 99 8.125%, 02/01/14 50 49 Cincinnati Bell 8.375%, 01/15/14 150 130 Citizens Communications 7.125%, 03/15/19 150 119 Fairpoint Communications (A) 13.125%, 04/01/18 100 91 MetroPCS Wireless 9.250%, 11/01/14 100 93 Nordic Telephone (A) 8.875%, 05/01/16 50 46 Qwest 7.625%, 06/15/15 289 251 Radio One 8.875%, 07/01/11 100 82 Rogers Wireless 9.625%, 05/01/11 100 107 7.250%, 12/15/12 50 51 Sprint Capital 8.375%, 03/15/12 150 135 Time Warner Telecom Holdings 9.250%, 02/15/14 100 93 Virgin Media Finance 9.125%, 08/15/16 150 126 West 11.000%, 10/15/16 55 40 ----------- TOTAL TELEPHONES & TELECOMMUNICATIONS 1,737 ===========
FACE AMOUNT (000) DESCRIPTION /SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- TRANSPORTATION SERVICES [2.1%] Kansas City Southern Railway 8.000%, 06/01/15 $ 100 $ 98 Navios Maritime Holdings 9.500%, 12/15/14 100 92 Pegasus Solutions (A) 10.500%, 04/15/15 100 69 Ship Finance International 8.500%, 12/15/13 200 194 Stena 7.000%, 12/01/16 150 141 Swift Transportation (A)(B) 10.554%, 05/15/15 200 62 ----------- TOTAL TRANSPORTATION SERVICES 656 =========== WASTE DISPOSAL [1.3%] Allied Waste North America, Ser B 7.125%, 05/15/16 225 210 Waste Services 9.500%, 04/15/14 100 98 WCA Waste 9.250%, 06/15/14 100 94 ----------- TOTAL WASTE DISPOSAL 402 =========== TOTAL CORPORATE BONDS (Cost $ 36,885) 30,538 =========== COMMON STOCK [0.2%] BROADCASTING & CABLE [0.2%] Olympus* (E) (F) 8,500 9 Time Warner Cable, Cl A* 1,967 48 ----------- TOTAL BROADCASTING & CABLE 57 =========== BUILDING & CONSTRUCTION SUPPLIES [0.0%] Dayton Superior* 149 -- =========== PAPER & FOREST PRODUCTS [0.0%] Tembec* 5,625 14 =========== TOTAL COMMON STOCK (Cost $221) 71 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 51 schedule of investments SEPTEMBER 30, 2008 HIGH YIELD BOND FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000) - --------------------------------------------------- ------------ ----------- CASH EQUIVALENTS [0.4%] Evergreen Select Money Market Fund, Institutional Class, 2.790%** 53,112 $ 53 Fidelity Institutional Domestic Money Market Portfolio, Cl I, 2.660%** 53,112 53 ----------- TOTAL CASH EQUIVALENTS (Cost $106) 106 =========== TOTAL INVESTMENTS [97.7%] (Cost $37,212) $ 30,715 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $31,447 ($ THOUSANDS). * NON-INCOME PRODUCING SECURITY. ** THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. (A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES ARE DEEMED LIQUID. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONS. ON SEPTEMBER 30, 2008, THE VALUE OF THESE SECURITIES AMOUNTED TO $5,097 (000), REPRESENTING 16.2% OF THE NET ASSETS OF THE FUND. (B) FLOATING RATE SECURITY -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. (C) IN DEFAULT ON INTEREST PAYMENTS. RATE SHOWN REPRESENTS THE LAST COUPON RATE PRIOR TO DEFAULT. (D) STEP BOND -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. THE COUPON ON A STEP BOND CHANGES ON A SPECIFIC DATE. (E) SECURITY IS FAIR VALUED. (F) SECURITY IS CONSIDERED ILLIQUID. CL -- CLASS MTN -- MEDIUM TERM NOTE SER -- SERIES AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 52 schedule of investments SEPTEMBER 30, 2008 PRIME MONEY MARKET FUND TYPE OF SECURITY WEIGHTINGS (UNAUDITED)*: (BAR CHART) Commercial Paper 34.3% Short-Term Investments 24.2% Certificates of Deposit 19.8% U.S. Government Agency Obligations 10.8% Corporate Bonds 10.0% Municipal Bond 0.9%
* Percentages are based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- COMMERCIAL PAPER (A) [34.3%] BANKS [17.0%] ANZ National International (B) 2.830%, 11/19/08 $ 50,000 $ 49,810 Bank of America (B) 2.970%, 03/11/09 50,000 50,000 Bayerische Landesbank 3.019%, 11/12/08 50,000 49,826 HSBC USA 2.634%, 10/08/08 50,000 49,975 Landesbank Baden-Wuerttemberg 2.983%, 10/29/08 50,000 49,885 UBS Finance Delaware 2.820%, 10/16/08 50,000 49,942 Wells Fargo Bank 2.570%, 10/27/08 50,000 50,000 Westpac Banking 2.933%, 01/02/09 40,000 40,000 ----------- TOTAL BANKS 389,438 =========== FINANCIAL SERVICES [8.7%] AIG Funding 3.046%, 12/09/08 50,000 49,713 General Elelctric Capital 2.625%, 10/30/08 50,000 49,896 Rabobank USA Financial 2.678%, 12/03/08 50,000 49,767 Toyota Motor Credit 2.674%, 12/29/08 50,000 49,672 ----------- TOTAL FINANCIAL SERVICES 199,048 =========== SECURITY BROKERS & DEALERS [8.6%] Citigroup Funding 3.149%, 03/03/09 50,000 49,341 ING US Funding 3.052%, 03/10/09 50,000 49,332 JPMorgan Chase 2.689%, 12/17/08 50,000 49,717
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Morgan Stanley 2.763%, 10/28/08 $ 50,000 $ 49,897 ----------- TOTAL SECURITY BROKERS & DEALERS 198,287 =========== TOTAL COMMERCIAL PAPER (Cost $786,773) 786,773 =========== U.S. GOVERNMENT AGENCY OBLIGATIONS [10.8%] FHLB DN (C) 2.202%, 10/06/08 50,000 49,985 2.323%, 10/10/08 50,000 49,971 2.131%, 12/09/08 50,000 49,797 2.172%, 12/15/08 50,000 49,775 3.863%, 12/23/08 47,729 47,319 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $246,847) 246,847 =========== CORPORATE BONDS [10.1%] BANKS [6.6%] Barclays (D) 2.778%, 02/05/09 50,000 50,000 National Australian Bank, MTN (B) (D) 3.009%, 02/19/09 50,000 50,000 US Bank, MTN (D) 2.588%, 06/15/09 50,000 50,000 ----------- TOTAL BANKS 150,000 =========== FINANCIAL SERVICES [2.9%] American Honda, MTN (B) (D) 2.924%, 02/05/09 35,000 35,000 John Deere Capital, MTN 4.625%, 04/15/09 32,000 32,229 ----------- TOTAL FINANCIAL SERVICES 67,229 =========== SECURITY BROKERS & DEALERS [0.6%] Credit Suisse USA 3.875%, 01/15/09 13,041 13,056 =========== TOTAL CORPORATE BONDS (Cost $230,285) 230,285 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 53 schedule of investments SEPTEMBER 30, 2008 PRIME MONEY MARKET FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- MUNICIPAL BOND [0.8%] CALIFORNIA [0.8%] County of Los Angeles California, Ser C, RB, MBIA 3.836%, 06/30/09 $ 20,000 $ 19,438 ----------- TOTAL MUNICIPAL BOND (Cost $19,438) 19,438 =========== CERTIFICATES OF DEPOSIT [19.8%] Bank of Ireland 3.477%, 01/26/09 50,000 50,000 Bank of Nova Scotia 2.690%, 11/06/08 50,000 50,001 Banque Nationale de Paris 2.700%, 10/08/08 50,000 50,000 Calyon 3.130%, 02/18/09 50,000 50,004 Depfa Bank 3.140%, 02/19/09 50,000 50,002 Deutsche Bank 2.550%, 11/05/08 50,000 50,000 Dexia Credit 2.830%, 10/29/08 50,000 50,000 Natixis 3.050%, 01/06/09 50,000 50,000 Toronto Dominion Bank 2.610%, 10/20/08 53,500 53,504 ----------- TOTAL CERTIFICATES OF DEPOSIT (Cost $453,511) 453,511 =========== CASH EQUIVALENT [0.0%] Goldman Sachs Financial Square Funds - Government Fund, 2.040%* 157,498 158 ----------- TOTAL CASH EQUIVALENT (Cost $158) 158 ===========
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- REPURCHASE AGREEMENTS (E) [24.2%] Banc of America 1.400%, dated 09/30/08, repurchased on 10/01/08, repurchase price $125,004,861 (collateralized by U.S. Government agency obligations, ranging in par value, $10,523,000-$117,812,000, 2.311%-2.679%, 11/19/08-12/31/08; with total market value $127,500,205) $ 125,000 $ 125,000 Barclays 1.500%, dated 09/30/08, repurchased on 10/01/08, repurchase price $178,307,429 (collateralized by a Freddie Mac obligation, par value, $182,081,000, 5.815%, 03/17/23; with total market value $181,866,119) 178,300 178,300 Deutsche Bank 2.000%, dated 09/30/08, repurchased on 10/01/08, repurchase price $125,006,944 (collateralized by U.S. Government agency obligations, ranging in par value, $16,304,000-$75,790,000, 0.514%-4.000%, 10/07/08-01/28/13; with total market value $127,500,655) 125,000 125,000 JPMorgan Chase 1.500%, dated 09/30/08, repurchased on 10/01/08, repurchase price $125,005,208 (collateralized by U.S. Government agency obligations, ranging in par value, $15,795,000-$76,160,000, 2,922%-5.170%, 02/09/09-07/15/11; with total market value $127,501,616) 125,000 125,000 ----------- TOTAL REPURCHASE AGREEMENTS (Cost $553,300) 553,300 =========== TOTAL INVESTMENTS [100.0%] (Cost $2,290,312) $ 2,290,312 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 54 schedule of investments SEPTEMBER 30, 2008 PRIME MONEY MARKET FUND (CONCLUDED) DESCRIPTION PERCENTAGES ARE BASED ON NET ASSETS OF $2,290,646 ($ THOUSANDS). * THE RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2008. (A) THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE. (B) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF 1933. THESE SECURITIES ARE DEEMED LIQUID.THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONS.ON SEPTEMBER 30, 2008,THE VALUE OF THESE SECURITIES AMOUNTED TO $184,810 (000), REPRESENTING 8.1% OF THE NET ASSETS OF THE FUND. (C) ZERO COUPON SECURITY -- THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE. (D) FLOATING RATE SECURITY -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. (E) TRI-PARTY REPURCHASE AGREEMENT. DN -- DISCOUNT NOTE FHLB -- FEDERAL HOME LOAN BANK MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION MTN -- MEDIUM TERM NOTE RB -- REVENUE BOND SER -- SERIES SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 55 schedule of investments SEPTEMBER 30, 2008 GOVERNMENT MONEY MARKET FUND TYPE OF SECURITY WEIGHTINGS (UNAUDITED)*: (BAR CHART) U.S. Government Agency Obligations 66.9% Repurchase Agreements 33.1%
* Percentages are based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- U.S. GOVERNMENT AGENCY OBLIGATIONS [67.8%] FAMC DN (A) 2.092%, 10/14/08 $ 50,000 $ 49,963 FHLB 2.200%, 10/09/08 49,475 49,475 5.250%, 12/24/08 40,000 40,190 2.500%, 01/22/09 50,000 50,021 3.250%, 02/02/09 50,000 50,000 3.050%, 06/18/09 30,000 30,000 2.900%, 06/30/09 30,000 30,000 2.800%, 09/24/09 30,000 30,000 3.000%, 09/25/09 37,710 37,710 FHLB DN (A) 2.075%, 10/01/08 100,000 100,000 2.287%, 10/02/08 50,000 49,997 2.019%, 10/03/08 100,000 99,989 2.202%, 10/06/08 50,000 49,985 2.152%, 10/07/08 33,926 33,914 2.323%, 10/10/08 50,000 49,971 2.349%, 10/15/08 50,000 49,954 2.002%, 10/16/08 50,000 49,958 2.330%, 10/17/08 50,000 49,948 2.510%, 10/20/08 50,000 49,934 2.379%, 10/21/08 50,000 49,934 2.400%, 10/27/08 50,000 49,914 2.465%, 10/29/08 50,000 49,905 2.440%, 10/31/08 75,000 74,848 2.450%, 11/03/08 50,000 49,888 2.456%, 11/07/08 50,000 49,875 2.157%, 11/21/08 50,000 49,848 2.596%, 11/24/08 50,000 49,806 2.525%, 11/25/08 75,000 74,712 2.612%, 11/26/08 50,000 49,798 2.536%, 12/01/08 75,000 74,680 2.309%, 12/02/08 45,000 44,822 2.546%, 12/03/08 75,000 74,668 2.172%, 12/15/08 50,000 49,775 2.111%, 12/16/08 50,000 49,778 2.172%, 12/17/08 60,934 60,652 2.818%, 12/18/08 50,000 49,697 3.025%, 01/05/09 50,000 49,600 3.025%, 01/06/09 50,000 49,596 FHLMC, MTN 2.300%, 04/01/09 33,760 33,753 2.450%, 04/09/09 50,000 50,000
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- FHLMC DN (A) 2.410%, 10/22/08 $ 50,000 $ 49,930 3.522%, 11/10/08 50,000 49,810 FNMA DN (A) 2.411%, 10/06/08 50,000 49,983 2.411%, 10/07/08 50,000 49,980 2.412%, 10/08/08 50,000 49,977 2.371%, 10/28/08 50,000 49,912 ----------- TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS (Cost $2,386,150) 2,386,150 =========== REPURCHASE AGREEMENTS (B) [33.6%] Bank of America 1.400%, dated 09/30/08, repurchased on 10/01/08, repurchase price $250,009,722 (collateralized by U.S. Government agency obligations, ranging in par value, $52,815,000- $203,790,000, 2.500%- 2.906%, 01/05/09-03/17/09; with total market value $255,001,106) 250,000 250,000 Barclays 1.500%, dated 09/30/08, repurchased on 10/01/08, repurchase price $380,515,854 (collateralized by U.S. Government agency obligations, ranging in par value, $60,620,000- $250,000, 000,2.924%- 5.500%, 05/29/09-04/03/18; with total market value $388,110,389) 380,500 380,500 Deutsche Bank 2.000%, dated 09/30/08, repurchased on 10/01/08, repurchase price $225,012,500 (collateralized by U.S. Government agency obligations, ranging in par value, $2,687,000- $95,441,000, 0.348%- 5.000%, 10/20/08--01/30/14; with total market value $229,500,000) 225,000 225,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 56 schedule of investments SEPTEMBER 30, 2008 GOVERNMENT MONEY MARKET FUND (CONCLUDED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- JPMorgan Chase 1.500%, dated 09/30/08, repurchased on 10/01/08, repurchase price $125,005,208 (collateralized by U.S. Government agency obligations,ranging in par value,$5,000-$50,138,000, 0.600%-9.375%, 10/15/18- 04/15/30; with total market value $127,500,969) $ 125,000 $ 125,000 UBS Warburg 0.950%, dated 09/30/08, repurchased on 10/01/08, repurchase price $200,005,278 (collateralized by U.S. Government agency obligations, ranging in par value, $44,881,000- $155,340,000, 0.000%- 4.250%, 10/06/08-08/15/14; with total market value $204,002,957) 200,000 200,000 ----------- TOTAL REPURCHASE AGREEMENTS (Cost $1,180,500) 1,180,500 =========== TOTAL INVESTMENTS [101.4%] (Cost $3,566,650) $ 3,566,650 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $3,516,356 ($ THOUSANDS). (A) ZERO COUPON SECURITY. THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE. (B) TRI-PARTY REPURCHASE AGREEMENT. DN -- DISCOUNT NOTE FAMC -- FEDERAL AGRICULTURAL MORTGAGE CORPORATION FHLB -- FEDERAL HOME LOAN BANK FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION MTN -- MEDIUM TERM NOTE SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 57 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT MONEY MARKET FUND ISSUER INDUSTRY WEIGHTINGS (UNAUDITED)*: (BAR CHART) General Obligation 19.4% Education 17.2% General Revenue 14.3% Industrial Development 10.9% Water 10.4% Power 9.9% Utilities 6.7% Transportation 5.1% Healthcare 3.1% Public Facilities 2.7% Equipment 0.3%
* Percentages based on total investments.
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- MUNICIPAL BONDS [86.4%] CALIFORNIA [76.3%] ABAG, Finance Authority for Non-Profit Corporations, Public Policy Institute, Ser A, RB (A) (B) (C) 8.000%, 11/01/31 $ 2,870 $ 2,870 ABAG, Finance Authority for Non-Profit Corporations, Ser C, COP (A) (B) (C) 5.050%, 10/01/27 7,820 7,820 ABAG, Finance Authority for Non-Profit Corporations, Ser D, COP (A) (B) (C) 5.050%, 10/01/27 6,310 6,310 Bay Area Toll Authority, RB (B) (C) 7.750%, 04/01/45 5,000 5,000 California Educational Facilities Authority, Ser B, RB (B) (C) 7.000%, 01/01/54 6,000 6,000 California Infrastructure & Economic Development Bank, Ser A, RB (A) (B) (C) 3.950%, 07/01/38 9,900 9,900 California Infrastructure & Economic Development Bank, Ser C, RB (A) (B) (C) 7.050%, 07/01/34 6,000 6,000 California State, Bay Area Toll Authority, San Francisco Bay Area Project, Ser A-1, RB (B) (C) 7.660%, 04/01/45 12,000 12,000
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- California State, Community College Financing Authority, Ser A,TRAN 3.500%, 06/30/09 $ 10,000 $ 10,128 California State, Daily Kindergarten University Project, Ser A-3, GO (A) (B) (C) 6.250%, 05/01/34 5,000 5,000 California State, Daily Kindergarten University Project, Ser B-3, GO (A) (B) (C) 5.050%, 05/01/34 1,200 1,200 California State, Department of Water Resource & Power, Ser B-4, RB (A) (B) (C) 5.000%, 05/01/22 11,900 11,900 California State, Department of Water Resource & Power, Ser C-15, RB (A) (B) (C) 7.000%, 05/01/22 5,000 5,000 California State, Department of Water Resource & Power, Ser C-7, RB, FSA (B) (C) 7.500%, 05/01/22 14,925 14,925 California State, Department of Water Resource & Power, Sub-Ser F-2, RB (A) (B) (C) 3.650%, 05/01/20 10,000 10,000 California State, Department of Water Resource & Power, Sub-Ser I-1, RB (A) (B) (C) 3.950%, 05/01/22 11,500 11,500 California State, Economic Development Financing Authority, KQED Incorporated Project, RB (A) (B) (C) 7.300%, 04/01/20 1,335 1,335 California State, Economic Recovery Authority, Ser C-1, GO (B) (C) 6.250%, 07/01/23 21,470 21,470 California State, Economic Recovery Authority, Ser C-16, GO, FSA (B) (C) 8.000%, 07/01/23 14,250 14,250 California State, Economic Recovery Authority, Ser C-4, GO (B) (C) 3.750%, 07/01/23 16,080 16,080
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 58 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- California State, Educational Facilities Authority, Chapman University Project, RB (A) (B) (C) 7.300%, 12/01/30 $ 1,000 $ 1,000 California State, Educational Facilities Authority, Pitzer College Project, Ser B, RB (A) (B) (C) 7.000%, 04/01/45 3,215 3,215 California State, Educational Facilities Authority, University of San Francisco Project, RB (A) (B) (C) 7.200%, 05/01/30 5,000 5,000 California State, GO Pre-Refunded @ 100 (D) 5.100%, 02/01/09 6,000 6,063 California State, Infrastructure & Economic Authority, J Paul Getty Trust Project, Ser B, RB (B) (C) 3.950%, 05/01/16 8,210 8,210 California State, Infrastructure & Economic Authority, J Paul Getty Trust Project, Ser B, RB (B) (C) 3.750%, 04/01/33 13,425 13,425 California State, Infrastructure & Economic Authority, J Paul Getty Trust Project, Ser D, RB (B) (C) 3.750%, 04/01/33 3,700 3,700 California State, Ser A-1, GO (A) (B) (C) 6.250%, 05/01/33 5,000 5,000 California State, Ser A-2, GO (A) (B) (C) 5.000%, 05/01/33 21,050 21,050 California State, Ser A-3, GO (A) (B) (C) 5.050%, 05/01/33 11,100 11,100 California State, Ser B, Sub-Ser B-6, GO (A) (B) (C) 3.650%, 05/01/40 16,480 16,480 California State, Ser B, Sub-Ser B-7, GO (A) (B) (C) 3.650%, 05/01/40 18,175 18,175 California State, Ser B-1, GO (A) (B) (C) 7.650%, 05/01/33 7,000 7,000
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- California State, Ser C-2, GO (A) (B) (C) 7.850%, 05/01/33 $ 7,700 $ 7,700 California State, Sub-Ser B-3, GO (A) (B) (C) 8.500%, 05/01/40 3,145 3,145 California State, Sub-Ser B-4, GO (A) (B) (C) 8.000%, 05/01/40 6,880 6,880 California State, Weekly Kindergarten University Project, Ser A-7, GO (A) (B) (C) 7.000%, 05/01/34 2,695 2,695 California State, Weekly Kindergarten University Project, Ser A-8, GO (A) (B) (C) 6.500%, 05/01/34 20,600 20,600 California State, Weekly Kindergarten University Project, Ser B-5, GO (A) (B) (C) 7.600%, 05/01/34 12,725 12,725 California Statewide, Communities Development Authority, Masters College Project, RB (A) (B) (C) 7.050%, 02/01/37 3,000 3,000 California Statewide, Communities Development Authority, Park Century School Project, RB (A) (B) (C) 7.050%, 11/01/32 4,000 4,000 East Bay, Municipal Utilities District Authority, Sub-Ser A, RB, FSA (B) (C) 7.800%, 06/01/25 10,310 10,310 East Bay, Municipal Utilities District Authority, Sub-Ser A-1, RB (B) (C) 8.500%, 06/01/38 10,000 10,000 East Bay, Municipal Utilities District Authority, Sub-Ser C1, RB (B) (C) 7.600%, 06/01/26 7,355 7,355 East Bay, Municipal Utilities District Authority, Sub-Ser C2, RB (B) (C) 8.000%, 06/01/26 5,000 5,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 59 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- East Bay, Municipal Utilities District Authority, Sub-Ser C3, RB (B) (C) 8.000%, 06/01/26 $ 2,775 $ 2,775 Glendale, Police Building Project, COP (B) (C) 7.750%, 06/01/30 13,800 13,800 Irvine, Ser B, RB (A) (B) (C) 4.250%, 09/02/30 1,382 1,382 Irvine Ranch,Water District, Ser B, GO (A) (B) (C) 4.000%, 05/01/37 5,000 5,000 Irvine, Improvement Board, Act 1915 Project, District #03-19, Ser A, SAB (A) (B) (C) 4.750%, 09/02/29 9,388 9,388 Irvine, Improvement Board, Act 1915 Project, District #04-20, Ser A, RB (A) (B) (C) 4.750%, 09/02/30 6,760 6,760 Irvine, Improvement Board, Act 1915 Project, District #05-21, Ser A, RB (A) (B) (C) 4.250%, 09/02/31 19,430 19,430 Irvine, Improvement Board, Act 1915 Project, District #07-22, Ser A, RB (A) (B) (C) 4.250%, 09/02/32 9,950 9,950 Irvine, Improvement Board, Act 1915 Project, District #87-8, SAB (A) (B) (C) 4.750%, 09/02/24 5,889 5,889 Irvine, Improvement Board, Act 1915 Project, District #89-10, SAB (A) (B) (C) 4.750%, 09/02/15 4,905 4,905 Irvine, Improvement Board, Act 1915 Project, District #97-17, SAB (A) (B) (C) 4.750%, 09/02/23 7,150 7,150 Kern County,TRAN 3.000%, 06/30/09 14,000 14,146 Los Angeles,TRAN 3.000%, 06/30/09 11,000 11,117 Los Angeles County, Ser A,TRAN 3.000%, 06/30/09 20,000 20,210 Los Angeles Unified School District, Ser A,TRAN 3.000%, 07/30/09 13,000 13,157
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Los Angeles, Department of Water & Power, Sub-Ser B-1, RB (B) (C) 7.700%, 07/01/35 $ 7,000 $ 7,000 Los Angeles, Department of Water & Power, Sub-Ser B-2, RB (B) (C) 4.500%, 07/01/35 20,250 20,250 Los Angeles, Unified School District, Ser A-1,TRAN 4.000%, 12/29/08 17,500 17,535 Los Angeles,Wastewater Systems Authority, Sub-Ser F-2, RB (A) (B) (C) 7.050%, 06/01/32 7,000 7,000 Los Angeles,Water & Power Resource Authority, Power System Project, Sub-Ser A-7, RB (B) (C) 7.670%, 07/01/35 5,000 5,000 Los Angeles,Water & Power Resource Authority, Sub-Ser B-1, RB (B) (C) 6.000%, 07/01/34 3,500 3,500 Los Angeles,Water & Power Resource Authority, Sub-Ser B-2, RB (B) (C) 7.000%, 07/01/34 12,600 12,600 Los Angeles,Water & Power Resource Authority, Sub-Ser B-3, RB (B) (C) 3.750%, 07/01/34 19,850 19,850 Los Angeles,Water & Power Resource Authority, Sub-Ser B-6, RB (B) (C) 4.000%, 07/01/34 12,600 12,600 Metropolitan Water District of Southern California, Ser B-2, RB (B) (C) 6.250%, 07/01/28 1,900 1,900 Oakland, Capital Equipment Project, COP (A) (B) (C) 7.780%, 12/01/15 3,300 3,300 Oakland-Alameda County, Coliseum Project, Ser C-1, RB (A) (B) (C) 7.750%, 02/01/25 15,000 15,000 Orange County, Sanitation District Authority, Ser A, COP (B) (C) 4.250%, 08/01/29 10,420 10,420
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 60 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Orange County, Sanitation District Authority, Ser B, COP (B) (C) 4.250%, 08/01/30 $ 10,240 $ 10,240 Orange County,Water District Authority, Ser A, COP (B) (C) 7.630%, 08/01/42 2,800 2,800 Pasadena, Public Financing Authority, Rose Bowl Refinancing & Improvement Project, RB (A) (B) (C) 8.500%, 12/01/23 17,425 17,425 Riverside County, Public Facilities Authority, Ser C, COP (A) (B) (C) 7.700%, 12/01/15 13,500 13,500 Sacramento County, Sanitation District Authority, Sub-Ser B, RB (B) (C) 4.250%, 12/01/37 6,000 6,000 Sacramento County, Sanitation District Authority, Sub-Ser E, RB (A) (B) (C) 7.700%, 12/01/40 6,500 6,500 San Diego County, Museum of Art Project, COP (A) (B) (C) 7.050%, 09/01/30 1,400 1,400 San Diego County, Regional Transportation Commission, Ser B, RB (B) (C) 7.250%, 04/01/38 13,650 13,650 San Diego County, Regional Transportation Commission, Ser C, RB (B) (C) 7.900%, 04/01/38 5,000 5,000 San Francisco (City & County), Unified School District, TRAN 4.000%, 11/14/08 4,000 4,003 San Francisco Bay, Area Transit Financing Authority, RB, FGIC Pre-Refunded @ 101 (D) 5.500%, 07/01/09 5,000 5,200 San Jose, Redevelopment Agency, Merged Area Redevelopment Project, Ser A, RB (A) (B) (C) 7.630%, 07/01/26 7,450 7,450 Santa Clara County, Financing Authority, Multiple Facilities Projects, Ser M, RB (A) (B) (C) 7.300%, 05/15/35 17,105 17,105
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Santa Clara County, Financing Authority,VMC Facility Replacement Project, Ser B, RB (B) (C) 8.000%, 11/15/25 $ 13,475 $ 13,475 Santa Clara Valley,Transportation Authority, Ser C, RB (B) (C) 7.720%, 04/01/36 8,000 8,000 Santa Clara Valley,Transportation Authority, Ser D, RB (B) (C) 6.250%, 04/01/36 6,000 6,000 Santa Clara, Electric Authority, Sub-Ser B, RB (A) (B) (C) 7.970%, 07/01/27 5,000 5,000 Santa Cruz County,TRAN 3.000%, 07/06/09 5,000 5,051 Southern California, Metropolitan Water District Authority, Ser A, RB (B) (C) 7.720%, 07/01/25 3,600 3,600 Southern California, Metropolitan Water District Authority, Ser B, RB (B) (C) 6.000%, 07/01/27 4,200 4,200 Southern California, Metropolitan Water District Authority, Ser C-1, RB (B) (C) 6.250%, 07/01/30 5,700 5,700 Southern California, Metropolitan Water District Authority, Ser C-3, RB (B) (C) 7.670%, 07/01/30 8,375 8,375 Southern California, Metropolitan Water District Authority,Water Works Authorization Project, Ser B, RB (B) (C) 6.000%, 07/01/28 10,135 10,135 Southern California, Public Power Authority, Southern Transmission Project, Ser A, RB, FSA (B) (C) 8.500%, 07/01/23 6,000 6,000 State of California, GO Pre-Refunded @ 101 (D) 5.000%, 08/01/09 1,000 1,038
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 61 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Turlock, Irrigation District, Capital Improvement & Refunding Project, COP (A) (B) (C) 4.000%, 01/01/31 $ 4,760 $ 4,760 Tustin, Improvement Board Act, Reassessment District No. 95-2-A, Ser A, SAB (A) (B) (C) 5.500%, 09/02/13 8,050 8,050 University of California, Regents Medical Center, Ser B-1, RB (B) (C) 4.000%, 05/15/32 4,660 4,660 University of California, Regents Medical Center, Ser B-2, RB (B) (C) 3.500%, 05/15/32 5,480 5,480 University of California, Ser M, RB, FGIC Pre-Refunded @ 101 (D) 5.125%, 09/01/09 7,850 8,181 Ventura County,TRAN 3.500%, 07/01/09 10,000 10,140 ----------- TOTAL CALIFORNIA 900,648 =========== CONNECTICUT [2.5%] Connecticut State, Health & Educational Facility Authority, Yale University Project, Ser V-1, RB (B) (C) 3.750%, 07/01/36 15,000 15,000 Connecticut State, Health & Educational Facility Authority, Yale University Project, Ser X-2, RB (B) (C) 7.628%, 07/01/37 6,000 6,000 Connecticut State, Health & Educational Facility Authority, Yale University Project, Ser Y-2, RB (B) (C) 3.750%, 07/01/35 8,850 8,850 ----------- TOTAL CONNECTICUT 29,850 =========== ILLINOIS [1.0%] Illinois State, Development Finance Authority, Museum Contemporary Art Project, RB (A) (B) (C) 7.950%, 02/01/29 2,300 2,300
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- Illinois State, Finance Authority, Northwestern Memorial Project, Sub-Ser B-1, RB (B) (C) 4.250%, 08/15/38 $ 5,000 $ 5,000 Illinois State, Finance Authority, Northwestern University Project, Sub-Ser A, RB (B) (C) 7.500%, 12/01/34 4,600 4,600 ----------- TOTAL ILLINOIS 11,900 =========== MASSACHUSETTS [2.4%] Massachusetts State, Development Finance Agency, Harvard University Project, Ser B-2, RB (B) (C) 7.450%, 07/15/36 8,000 8,000 Massachusetts State, Development Finance Agency, Harvard University Project, Ser HH, RB (B) (C) 6.400%, 07/15/33 5,950 5,950 Massachusetts State, Health & Educational Facilities Authority,Tufts University Project, Ser N-1, RB (B) (C) 7.400%, 08/15/40 14,200 14,200 ----------- TOTAL MASSACHUSETTS 28,150 =========== MICHIGAN [0.5%] University of Michigan, Ser B, RB (B) (C) 7.750%, 04/01/28 6,000 6,000 =========== NEVADA [1.0%] Clark County, School District, Ser A, GO, FSA (B) (C) 4.350%, 06/15/21 11,995 11,995 =========== NEW HAMPSHIRE [0.4%] New Hampshire Health & Education Facilities Authority, Ser A, RB (B) (C) 4.350%, 06/01/31 5,120 5,120 ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 62 schedule of investments SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONCLUDED)
FACE DESCRIPTION AMOUNT (000) VALUE (000) - --------------------------------------------------- ------------ ----------- NORTH CAROLINA [0.3%] North Carolina State, Educational Facilities Finance Agency, Charlotte Day School Project, RB (A) (B) (C) 7.250%, 08/01/20 $ 2,915 $ 2,915 =========== TEXAS [1.6%] University of Texas, Ser A, RB (B) (C) 7.680%, 08/15/13 4,695 4,695 University of Texas, Ser B, RB (B) (C) 7.750%, 08/01/33 13,600 13,600 ----------- TOTAL TEXAS 18,295 =========== VIRGINIA [0.4%] University of Virginia, Ser A, RB (B) (C) 7.700%, 06/01/34 4,965 4,965 =========== TOTAL MUNICIPAL BONDS (Cost $1,019,838) 1,019,838 =========== COMMERCIAL PAPER [3.9%] California State, Regional Authority 1.580%, 12/09/08 7,500 7,500 California State, Educational Facilities Authority 1.820%, 10/02/08 13,000 13,000 Contra Costa, Water District Authority, Ser A 1.250%, 10/14/08 10,150 10,150 San Diego County, Water Authority 1.500%, 02/04/09 15,000 15,000 ----------- TOTAL COMMERCIAL PAPER (Cost $45,650) 45,650 =========== TOTAL INVESTMENTS [90.3%] (Cost $1,065,488) $ 1,065,488 ===========
PERCENTAGES ARE BASED ON NET ASSETS OF $1,179,978 ($ THOUSANDS). (A) SECURITIES ARE HELD IN CONJUNCTION WITH A LETTER OF CREDIT FROM A MAJOR BANK OR FINANCIAL INSTITUTION. (B) FLOATING RATE SECURITY -- THE RATE REPORTED IS THE RATE IN EFFECT ON SEPTEMBER 30, 2008. (C) PUT AND DEMAND FEATURE -- THE DATE REPORTED IS THE FINAL MATURITY, NOT THE NEXT RESET OR PUT DATE. (D) PRE-REFUNDED SECURITY -- THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE. ABAG -- ASSOCIATION OF BAY AREA GOVERNMENTS COP -- CERTIFICATE OF PARTICIPATION FSA -- FINANCIAL SECURITY ASSISTANCE GO -- GENERAL OBLIGATION RB -- REVENUE BOND SAB -- SPECIAL ASSESSMENT BOND SER -- SERIES TRAN -- TAX & REVENUE ANTICIPATION NOTE SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 63 statements of assets and liabilities (000) SEPTEMBER 30, 2008
Large Cap Large Cap RCB Small Value Growth Cap Opportunistic Equity Fund Equity Fund Value Fund Value Fund* ----------- ----------- ----------- ------------- ASSETS: Cost of securities (including repurchase agreements) $ 101,488 $ 41,889 $ 32,402 $ 50,990 ----------- ----------- ----------- ----------- Investments in securities, at value $ 100,376 $ 42,675 $ 25,097 $ 45,887 Repurchase agreements, at value -- -- 471 -- Receivable for investment securities sold 1,347 279 -- -- Income receivable 190 27 74 84 Receivable for capital shares sold 120 19 12 -- Deferred offering costs -- -- -- 18 Prepaid expenses 2 1 5 -- ----------- ----------- ----------- ----------- Total Assets 102,035 43,001 25,659 45,989 ----------- ----------- ----------- ----------- LIABILITIES: Payable for investment securities purchased 1,350 282 207 718 Payable for capital shares redeemed 384 241 181 -- Payable for income distributions 141 23 -- -- Investment adviser fees payable 54 24 19 18 Shareholder servicing & distribution fees payable 24 12 52 -- Administrative fees payable 4 2 1 2 Accrued expenses 5 2 12 5 ----------- ----------- ----------- ----------- Total Liabilities 1,962 586 472 743 ----------- ----------- ----------- ----------- NET ASSETS $ 100,073 $ 42,415 $ 25,187 $ 45,246 ----------- ----------- ----------- ----------- NET ASSETS Paid-in Capital (unlimited authorization--$0.01 par value) $ 103,310 $ 43,772 $ 32,249 $ 50,900 Undistributed (distribution in excess of) net investment income (127) 10 436 174 Accumulated net realized loss on investments (1,998) (2,153) (664) (725) Net unrealized appreciation (depreciation) on investments (1,112) 786 (6,834) (5,103) ----------- ----------- ----------- ----------- NET ASSETS $ 100,073 $ 42,415 $ 25,187 $ 45,246 ----------- ----------- ----------- ----------- Institutional Class Shares ($Dollars): Net Assets $88,361,319 $31,074,220 $ 1,742,290 $ 93 Total shares outstanding at end of year 10,710,529 4,208,734 106,125 10 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ 8.25 $ 7.38 $ 16.42 $ 9.31 Class N Shares ($Dollars): Net Assets $11,711,726 $11,340,543 $ 4,261,677 $ 7,358 Total shares outstanding at end of year 1,421,895 1,551,973 264,081 790 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ 8.24 $ 7.31 $ 16.14 $ 9.31 Class E Shares ($Dollars): Net Assets $ -- $ -- $ -- $45,238,633 Total shares outstanding at end of year -- -- -- 4,863,172 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ -- $ -- $ -- $ 9.30 Class R Shares ($Dollars): Net Assets $ -- $ -- $19,183,221 $ -- Total shares outstanding at end of year -- -- 1,188,052 -- Net asset value and redemption price per share (net assets / shares outstanding) $ -- $ -- $ 16.15 $ -- Maximum offering price per share (net asset value / 96.50%) $ -- $ -- $ 16.74 $ --
* FUND COMMENCED OPERATIONS ON JUNE 26, 2008. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 64 statements of assets and liabilities (000) SEPTEMBER 30, 2008
California Multi-Asset Corporate Government Tax Exempt Fund* Bond Fund Bond Fund Bond Fund ----------- ----------- ----------- ----------- ASSETS: Cost of securities and affiliated investments $ 31,112 $ 73,071 $ 68,387 $ 35,321 ----------- ----------- ----------- ----------- Investments in securities, at value $ 24,046 $ 69,886 $ 68,818 $ 34,839 Affiliated investments, at value 4,241 -- -- -- Receivable for capital shares sold 9 48 55 55 Income receivable 76 800 394 493 Prepaid expenses -- 1 1 -- ----------- ----------- ----------- ----------- Total Assets 28,372 70,735 69,268 35,387 ----------- ----------- ----------- ----------- LIABILITIES: Payable for investment securities purchased 800 -- -- -- Payable for capital shares redeemed -- 182 216 6 Payable for income distributions 99 192 154 56 Investment adviser fees payable 12 24 18 4 Shareholder servicing & distribution fees payable 9 15 15 8 Administrative fees payable 1 3 3 1 Accrued expenses 2 2 4 1 ----------- ----------- ----------- ----------- Total Liabilities 923 418 410 76 ----------- ----------- ----------- ----------- NET ASSETS $ 27,449 $ 70,317 $ 68,858 $ 35,311 ----------- ----------- ----------- ----------- NET ASSETS Paid-in Capital (unlimited authorization--$0.01 par value) $ 30,642 $ 74,043 $ 68,964 $ 35,887 Undistributed (distribution in excess of) net investment income 1 1 (1) -- Accumulated net realized loss on investments (369) (542) (536) (94) Net unrealized appreciation (depreciation) on investments (2,825) (3,185) 431 (482) ----------- ----------- ----------- ----------- NET ASSETS $ 27,449 $ 70,317 $ 68,858 $ 35,311 ----------- ----------- ----------- ----------- Institutional Class Shares ($Dollars): Net Assets $10,741,010 $69,709,403 $66,097,357 $34,261,353 Total shares outstanding at end of year 1,107,311 7,143,231 6,357,337 3,405,700 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ 9.70 $ 9.76 $ 10.40 $ 10.06 Class N Shares ($Dollars): Net Assets $16,708,026 $ 607,658 $ 2,761,065 $ 1,049,307 Total shares outstanding at end of year 1,723,386 62,223 264,994 104,024 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ 9.69 $ 9.77 $ 10.42 $ 10.09
* FUND COMMENCED OPERATIONS ON OCTOBER 1, 2007. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 65 statements of assets and liabilities (000) SEPTEMBER 30, 2008
California Government Tax Exempt High Yield Prime Money Money Market Money Market Bond Fund Market Fund Fund Fund ----------- -------------- -------------- ------------ ASSETS: Cost of securities (including repurchase agreements) $ 37,212 $ 2,290,312 $ 3,566,650 $ 1,065,488 ----------- -------------- -------------- ------------ Investments in securities, at value $ 30,715 $ 1,737,012 $ 2,386,150 $ 1,065,488 Repurchase agreements, at value -- 553,300 1,180,500 -- Receivable for investment securities sold -- -- -- 43,110 Receivable for capital shares sold 3 -- -- -- Income receivable 835 4,380 3,182 4,635 Prepaid expenses -- 53 88 14 Cash 1 -- 178 68,417 ----------- -------------- -------------- ------------ Total Assets 31,554 2,294,745 3,570,098 1,181,664 ----------- -------------- -------------- ------------ LIABILITIES: Payable for investment securities purchased -- -- 50,000 -- Payable for capital shares redeemed 3 -- -- -- Payable for income distributions 73 2,495 1,482 926 Investment adviser fees payable 17 490 694 189 Shareholder servicing & distribution fees payable 12 960 1,349 471 Administrative fees payable 1 87 119 44 Trustees' fees payable -- 3 6 2 Accrued expenses 1 64 92 54 ----------- -------------- -------------- ------------ Total Liabilities 107 4,099 53,742 1,686 ----------- -------------- -------------- ------------ NET ASSETS $ 31,447 $ 2,290,646 $ 3,516,356 $ 1,179,978 ----------- -------------- -------------- ------------ NET ASSETS: Paid-in Capital (unlimited authorization--$0.01 par value) $ 39,241 $ 2,290,560 $ 3,516,341 $ 1,179,975 Undistributed (distribution in excess of) net investment income 57 (1) (1) 2 Accumulated net realized gain (loss) on investments (1,354) 87 16 1 Net unrealized depreciation on investments (6,497) -- -- -- ----------- -------------- -------------- ------------ NET ASSETS $ 31,447 $ 2,290,646 $ 3,516,356 $ 1,179,978 ----------- -------------- -------------- ------------ Institutional Class Shares ($Dollars): Net Assets $13,925,654 $ 532,930,545 $ 100,673,871 $157,426,904 Total shares outstanding at end of year 1,882,116 532,960,195 100,674,962 157,428,518 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ 7.40 $ 1.00 $ 1.00 $ 1.00 Class N Shares ($Dollars): Net Assets $17,520,867 $1,123,900,212 $3,006,935,107 $880,793,647 Total shares outstanding at end of year 2,368,057 1,123,931,789 3,006,920,369 880,793,866 Net asset value, offering and redemption price per share (net assets / shares outstanding) $ 7.40 $ 1.00 $ 1.00 $ 1.00 Class S Shares ($ Dollars): Net Assets $ -- $ 633,815,136 $ 408,746,948 $141,757,614 Total shares outstanding at end of year -- 633,761,000 408,745,947 141,753,711 Net asset value and redemption price per share (net assets / shares outstanding) $ -- $ 1.00 $ 1.00 $ 1.00
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 66 statements of operations FOR THE YEAR/PERIOD ENDED SEPTEMBER 30, 2008
Large Cap Large Cap RCB Small Value Growth Cap Opportunistic Equity Fund Equity Fund Value Fund Value Fund (000) (000) (000) (000)* ----------- ----------- ---------- ------------- INCOME: Dividend Income $ 2,945 $ 712 $ 801 $ 259 Interest Income -- -- 84 -- Less: Foreign Taxes Withheld -- -- -- (1) -------- ------- -------- -------- Total Investment Income 2,945 712 885 258 -------- ------- -------- -------- EXPENSES: Investment Advisory Fee 705 347 353 61 Shareholder Servicing Fees--Institutional Class 249 100 12 -- Shareholder Servicing Fees--Class N(1) 70 68 32 -- Shareholder Servicing Fees--Class R(1) -- -- 151 -- Administration Fee 52 24 19 5 Transfer Agent Fees 8 4 33 1 Trustee Fees 3 2 1 -- Professional Fees 14 6 5 2 Printing Fees 5 2 6 4 Custody Fees 5 2 1 2 Registration Fees 3 2 2 2 Deferred Offering Costs -- -- -- 7 Insurance and Other Expenses 11 5 4 2 -------- ------- -------- -------- Total Expenses 1,125 562 619 86 -------- ------- -------- -------- Less,Waiver of: Investment Advisory fees -- -- -- (1) Shareholder Servicing Fees--Class R(1) -- -- (95) -- Transfer Agent Fees (8) (4) (3) (1) -------- ------- -------- -------- Net Expenses 1,117 558 521 84 -------- ------- -------- -------- NET INVESTMENT INCOME 1,828 154 364 174 -------- ------- -------- -------- Net Realized Gain (Loss) from Securities Transactions (2,121) 229 53 (725) Net Change in Unrealized Depreciation on Investments (27,129) (9,483) (18,035) (5,103) -------- ------- -------- -------- NET DECREASE IN NET ASSETS FROM OPERATIONS $(27,422) $(9,100) $(17,618) $ (5,654) ======== ======= ======== ========
* FUND COMMENCED OPERATIONS ON JUNE 26, 2008. (1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 67 statements of operations FOR THE YEAR/PERIOD ENDED SEPTEMBER 30, 2008
California Multi-Asset Corporate Government Tax Exempt Fund Bond Fund Bond Fund Bond Fund (000)* (000) (000) (000) ----------- --------- ---------- ---------- INCOME: Interest Income $ 176 $ 3,299 $2,989 $1,223 Dividend Income 487 90 101 12 Income from Affiliated Investments 106 -- -- -- ------- ------- ------ ------ Total Income 769 3,389 3,090 1,235 ------- ------- ------ ------ EXPENSES: Investment Advisory Fee 103 272 280 92 Shareholder Servicing Fees--Institutional Class 22 168 156 83 Shareholder Servicing Fees--Class N(1) 59 4 14 4 Administration Fee 9 31 30 16 Trustee Fees -- 2 2 1 Transfer Agent Fees 2 5 5 3 Professional Fees 3 9 8 4 Custody Fees 1 3 2 1 Printing Fees 1 3 3 1 Registration Fees 1 1 2 1 Deferred Offering Costs 94 -- -- -- Insurance and Other Expenses 2 5 5 3 ------- ------- ------ ------ Total Expenses 297 503 507 209 ------- ------- ------ ------ Less,Waiver of: Investment Advisory Fees -- -- (39) (34) Transfer Agent Fees (2) (5) (5) (3) ------- ------- ------ ------ Net Expenses 295 498 463 172 ------- ------- ------ ------ NET INVESTMENT INCOME 474 2,891 2,627 1,063 ------- ------- ------ ------ Net Realized Gain (Loss) from Securities Transactions (369) (66) 42 (52) Net Change in Unrealized Appreciation (Depreciation) on Investments (2,825) (3,019) 250 (573) ------- ------- ------ ------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(2,720) $ (194) $2,919 $ 438 ======= ======= ====== ======
* FUND COMMENCED OPERATIONS ON OCTOBER 1, 2007. (1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 68 statements of operations FOR THE YEAR ENDED SEPTEMBER 30, 2008
California Government Tax Exempt High Yield Prime Money Money Market Money Market Bond Fund Market Fund Fund Fund (000) (000) (000) (000) ---------- ----------- ------------ ------------ INCOME: Interest Income $ 3,196 $ 80,601 $ 99,352 $ 26,086 Dividend Income 19 84 -- -- -------- -------- -------- -------- Total Income 3,215 80,685 99,352 26,086 -------- -------- -------- -------- EXPENSES: Investment Advisory Fee 263 5,796 8,036 3,111 Shareholder Servicing Fees--Institutional Class 38 1,251 150 337 Shareholder Servicing Fees--Class N(1) 108 8,733 20,171 6,391 Shareholder Servicing Fees--Class S(1) -- 4,892 2,545 1,233 Administration Fee 16 1,055 1,407 523 Trustee Fees 1 61 86 31 Transfer Agent Fees 3 171 228 85 Professional Fees 4 272 387 153 Custody Fees 1 76 98 43 Printing Fees 2 85 116 51 Registration Fees 1 40 34 38 Insurance and Other Expenses 3 165 234 94 -------- -------- -------- -------- Total Expenses 440 22,597 33,492 12,090 -------- -------- -------- -------- Less Waiver of: Investment Advisory Fees (29) -- -- (583) Shareholder Servicing Fees--Class N(1) -- (3,158) (7,307) (2,298) Shareholder Servicing Fees--Class S(1) -- (470) (243) (115) Transfer Agent Fees (3) (171) (228) (85) -------- -------- -------- -------- Net Expenses 408 18,798 25,714 9,009 -------- -------- -------- -------- NET INVESTMENT INCOME 2,807 61,887 73,638 17,077 -------- -------- -------- -------- Net Realized Gain (Loss) From Securities Transactions (526) 297 17 -- Net change in Unrealized Depreciation on Investments (5,822) -- -- -- -------- -------- -------- -------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ (3,541) $ 62,184 $ 73,655 $ 17,077 ======== ======== ======== ========
(1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 69 statements of changes in net assets FOR THE YEAR/PERIOD ENDED SEPTEMBER 30,
Large Cap Value Large Cap Growth Equity Fund (000) Equity Fund (000) ------------------- ------------------ 2008 2007 2008 2007 -------- -------- -------- ------- OPERATIONS: Net Investment Income (Loss) $ 1,828 $ 2,036 $ 154 $ 252 Net Realized Gain (Loss) from Security Transactions (2,121) 5,793 229 1,288 Net Change in Unrealized Appreciation (Depreciation) on Investments (27,129) 8,799 (9,483) 5,813 -------- -------- -------- ------- Net Increase (Decrease) in Net Assets Resulting from Operations (27,422) 16,628 (9,100) 7,353 -------- -------- -------- ------- DIVIDENDS AND DISTRIBUTIONS FROM: Net Investment Income: INSTITUTIONAL CLASS (1,637) (1,807) (138) (212) CLASS N (190) (232) (14) (34) CLASS R -- -- -- -- Realized Capital Gains: INSTITUTIONAL CLASS (4,754) (4,815) -- -- CLASS N (735) (687) -- -- CLASS R -- -- -- -- -------- -------- -------- ------- Total Dividends and Distributions (7,316) (7,541) (152) (246) -------- -------- -------- ------- CAPITAL SHARE TRANSACTIONS:(1) INSTITUTIONAL CLASS: Shares Issued 22,976 21,253 5,320 10,554 Shares Issued from Merger(2) -- -- -- 1,372 Shares Issued in Lieu of Dividends and Distributions 4,640 4,589 47 70 Shares Redeemed (18,936) (16,697) (13,229) (7,459) -------- -------- -------- ------- Increase (Decrease) in Net Assets from Institutional Class Share Transactions 8,680 9,145 (7,862) 4,537 -------- -------- -------- ------- CLASS N: Shares Issued 623 4,148 909 3,787 Shares Issued from Merger(2) -- -- -- 1,547 Shares Issued in Lieu of Dividends and Distributions 660 728 9 23 Shares Redeemed (2,366) (1,944) (2,236) (2,359) -------- -------- -------- ------- Increase (Decrease) in Net Assets from Class N Share Transactions (1,083) 2,932 (1,318) 2,998 -------- -------- -------- ------- CLASS E: Shares Issued -- -- -- -- Shares Redeemed -- -- -- -- -------- -------- -------- ------- Increase in Net Assets from Class E Share Transactions -- -- -- -- -------- -------- -------- ------- CLASS R: Shares Issued -- -- -- -- Shares Issued in Lieu of Dividends and Distributions -- -- -- -- Shares Redeemed -- -- -- -- -------- -------- -------- ------- Decrease in Net Assets from Class R Share Transactions -- -- -- -- -------- -------- -------- ------- Net Increase (Decrease) in Net Assets from Share Transactions 7,597 12,077 (9,180) 7,535 -------- -------- -------- ------- Total Increase (Decrease) in Net Assets (27,141) 21,164 (18,432) 14,642 -------- -------- -------- ------- NET ASSETS: Beginning of Period 127,214 106,050 60,847 46,205 -------- -------- -------- ------- End of Period $100,073 $127,214 $ 42,415 $60,847 ======== ======== ======== ======= Undistributed (Distributions in Excess of) Net Investment Income $ (127) $ (5) $ 10 $ 7 -------- -------- -------- -------
* FUND COMMENCED OPERATIONS ON OCTOBER 1, 2007. ** FUND COMMENCED OPERATIONS ON JUNE 26, 2008. (1) SEE NOTE 9 FOR SHARES ISSUED AND REDEEMED. (2) SEE NOTE 8. (3) INCLUDES SUBSCRIPTIONS AS A RESULT OF AN IN-KIND TRANSFER OF SECURITIES (SEE NOTE 10). AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 70
RCB Small Cap Opportunistic Value Multi-Asset Corporate Bond Value Fund (000) Fund (000) Fund (000) Fund (000) - ------------------- ------------------- ----------- ------------------ 2008 2007 2008** 2008* 2008 2007 - -------- -------- ------- ------- -------- ------- $ 364 $ (87) $ 174 $ 474 $ 2,891 $ 2,601 53 9,056 (725) (369) (66) (149) (18,035) (1,504) (5,103) (2,825) (3,019) 209 - -------- -------- ------- ------- -------- ------- (17,618) 7,465 (5,654) (2,720) (194) 2,661 - -------- -------- ------- ------- -------- ------- -- (2) -- (205) (2,857) (2,546) -- -- -- (268) (31) (49) -- -- -- -- -- -- (1,426) (213) -- -- -- -- (1,567) (165) -- -- -- -- (6,612) (730) -- -- -- -- - -------- -------- ------- ------- -------- ------- (9,605) (1,110) -- (473) (2,888) (2,595) - -------- -------- ------- ------- -------- ------- 944 2,351 -- 13,719 23,936 14,720 -- -- -- -- -- -- 1,255 188 -- 50 605 498 (6,104) (8,112) -- (1,732) (13,983) (8,362) - -------- -------- ------- ------- -------- ------- (3,905) (5,573) -- 12,037 10,558 6,856 - -------- -------- ------- ------- -------- ------- 111 620 8 20,655 39 214 -- -- -- -- -- -- 1,250 136 -- 118 16 23 (2,424) (2,427) -- (2,168) (467) (528) - -------- -------- ------- ------- -------- ------- (1,063) (1,671) 8 18,605 (412) (291) - -------- -------- ------- ------- -------- ------- -- -- 50,892(3) -- -- -- -- -- -- -- -- -- - -------- -------- ------- ------- -------- ------- -- -- 50,892 -- -- -- - -------- -------- ------- ------- -------- ------- 5,853 5,384 -- -- -- -- 6,293 690 -- -- -- -- (14,527) (15,167) -- -- -- -- - -------- -------- ------- ------- -------- ------- (2,381) (9,093) -- -- -- -- - -------- -------- ------- ------- -------- ------- (7,349) (16,337) 50,900 30,642 10,146 6,565 - -------- -------- ------- ------- -------- ------- (34,572) (9,982) 45,246 27,449 7,064 6,631 - -------- -------- ------- ------- -------- ------- 59,759 69,741 -- -- 63,253 56,622 - -------- -------- ------- ------- -------- ------- $ 25,187 $ 59,759 $45,246 $27,449 $ 70,317 $63,253 ======== ======== ======= ======= ======== ======= $ 436 $ -- $ 174 $ 1 $ 1 $ 1 - -------- -------- ------- ------- -------- -------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 71 statements of changes in net assets FOR THE YEAR ENDED SEPTEMBER 30,
California Tax Government Exempt Bond Fund (000) Bond Fund (000) ------------------- ------------------ 2008 2007 2008 2007 -------- -------- -------- ------- OPERATIONS: Net Investment Income $ 2,627 $ 2,087 $ 1,063 $ 951 Net Realized Gain (Loss) from Security Transactions 42 (168) (52) 1 Net Change in Unrealized Appreciation (Depreciation) on Investments 250 413 (573) 14 -------- ------- ------- ------- Net Increase (Decrease) in Net Assets Resulting from Operations 2,919 2,332 438 966 -------- ------- ------- ------- DIVIDENDS AND DISTRIBUTIONS FROM: Net Investment Income: INSTITUTIONAL CLASS (2,532) (1,976) (1,041) (922) CLASS N (107) (96) (22) (29) Class S -- -- -- -- Realized Capital Gains: INSTITUTIONAL CLASS -- -- -- -- CLASS N -- -- -- -- CLASS S -- -- -- -- -------- ------- ------- ------- Total Dividends and Distributions (2,639) (2,072) (1,063) (951) -------- ------- ------- ------- CAPITAL SHARE TRANSACTIONS:(1) INSTITUTIONAL CLASS: Shares Issued 24,102 21,995 10,565 15,567 Shares Issued in Lieu of Dividends and Distributions 699 570 369 334 Shares Redeemed (11,579) (5,878) (9,859) (8,190) -------- ------- ------- ------- Increase (Decrease) in Net Assets from Institutional Class Share Transactions 13,222 16,687 1,075 7,711 -------- ------- ------- ------- CLASS N: Shares Issued 780 1,002 776 58 Shares Issued in Lieu of Dividends and Distributions 44 30 4 5 Shares Redeemed (706) (194) (643) (273) -------- ------- ------- ------- Increase (Decrease) in Net Assets from Class N Share Transactions 118 838 137 (210) -------- ------- ------- ------- CLASS S: Shares Issued -- -- -- -- Shares Issued in Lieu of Dividends and Distributions -- -- -- -- Shares Redeemed -- -- -- -- -------- ------- ------- ------- Increase (Decrease) in Net Assets from Class S Share Transactions -- -- -- -- -------- ------- ------- ------- Net Increase (Decrease) in Net Assets from Share Transactions 13,340 17,525 1,212 7,501 -------- ------- ------- ------- Total Increase (Decrease) in Net Assets 13,620 17,785 587 7,516 -------- ------- ------- ------- NET ASSETS: Beginning of Period 55,238 37,453 34,724 27,208 -------- ------- ------- ------- End of Period $ 68,858 $55,238 $35,311 $34,724 ======== ======= ======= ======= Undistributed (Distribution in Excess of) Net Investment Income $ (1) $ -- $ -- $ -- -------- ------- ------- -------
(1) SEE NOTE 9 FOR SHARES ISSUED AND REDEEMED. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 72
High Yield Prime Money Government Money California Tax Exempt Bond Fund (000) Market Fund (000) Market Fund (000) Money Market Fund (000) - ------------------- ------------------------ ------------------------- ------------------------- 2008 2007 2008 2007 2008 2007 2008 2007 - -------- -------- ----------- ---------- ----------- ----------- ----------- ----------- $ 2,807 $ 2,936 $ 61,887 $ 73,660 $ 73,638 $ 106,410 $ 17,077 $ 22,975 (526) 427 297 192 17 (1) -- -- (5,822) (638) -- -- -- -- -- -- - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- (3,541) 2,725 62,184 73,852 73,655 106,409 17,077 22,975 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- (1,258) (1,375) (14,508) (19,843) (1,571) (2,098) (2,286) (2,775) (1,548) (1,505) (30,822) (33,868) (64,510) (92,518) (12,486) (17,180) -- -- (16,569) (19,939) (7,574) (11,780) (2,303) (3,020) -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- (2,806) (2,880) (61,899) (73,650) (73,655) (106,396) (17,075) (22,975) - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- 1,173 1,609 1,704,267 1,324,934 553,021 532,859 1,830,572 2,517,017 862 849 2,772 3,872 3 4 -- -- (2,455) (6,173) (1,612,805) (1,278,386) (500,209) (537,787) (1,762,382) (2,512,794) - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- (420) (3,715) 94,234 50,420 52,815 (4,924) 68,190 4,223 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- 1,645 1,427 3,333,223 2,695,734 6,290,498 5,523,344 2,477,610 2,143,730 1,000 904 13,996 12,208 43,391 62,437 9,947 13,108 (1,689) (2,135) (3,093,998) (2,477,866) (5,618,090) (5,235,257) (2,302,084) (2,092,998) - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- 956 196 253,221 230,076 715,799 350,524 185,473 63,840 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- -- -- 1,657,732 1,873,534 801,055 775,804 409,458 390,230 -- -- -- -- -- -- -- -- -- -- (1,644,197) (1,577,751) (713,370) (686,827) (446,618) (318,443) - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- -- -- 13,535 295,783 87,685 88,977 (37,160) 71,787 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- 536 (3,519) 360,990 576,279 856,299 434,577 216,503 139,850 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- (5,811) (3,674) 361,275 576,481 856,299 434,590 216,505 139,850 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- 37,258 40,932 1,929,371 1,352,890 2,660,057 2,225,467 963,473 823,623 - ------- ------- ----------- ---------- ----------- ----------- ----------- ----------- $31,447 $37,258 $ 2,290,646 $1,929,371 $ 3,516,356 $ 2,660,057 $ 1,179,978 $ 963,473 ======= ======= =========== ========== =========== =========== =========== =========== $ 57 $ 56 $ (1) $ 11 $ (1) $ 16 $ 2 $ -- - ------- ------- ----------- ---------- ----------- ----------- ----------- -----------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 73 financial highlights FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD FOR THE YEAR/PERIOD ENDED SEPTEMBER 30,
NET NET REALIZED AND DISTRIBUTIONS NET ASSET NET UNREALIZED DIVIDENDS FROM ASSET VALUE INVESTMENT GAINS FROM NET REALIZED VALUE BEGINNING INCOME (LOSSES) ON INVESTMENT CAPITAL END OF OF PERIOD (LOSS)+ SECURITIES INCOME GAINS PERIOD --------- ---------- ------------ ----------- ------------- ------ LARGE CAP VALUE EQUITY FUND Institutional Class (commenced operations on January 14, 2000) 2008 $11.21 $ 0.16 $(2.48) $(0.15) $(0.49) $ 8.25 2007 10.36 0.19 1.38 (0.19) (0.53) 11.21 2006 9.54 0.13 1.21 (0.13) (0.39) 10.36 2005 8.77 0.10 1.13 (0.10) (0.36) 9.54 2004 7.41 0.08 1.36 (0.08) -- 8.77 Class N (commenced operations on April 13, 2000) 2008 $11.19 $ 0.13 $(2.46) $(0.13) $(0.49) $ 8.24 2007 10.35 0.16 1.37 (0.16) (0.53) 11.19 2006 9.53 0.11 1.20 (0.10) (0.39) 10.35 2005 8.76 0.09 1.12 (0.08) (0.36) 9.53 2004 7.41 0.05 1.36 (0.06) -- 8.76 LARGE CAP GROWTH EQUITY FUND Institutional Class (commenced operations on January 14, 2000) 2008 $ 8.86 $ 0.03 $(1.48) $(0.03) $ -- $ 7.38 2007 7.75 0.05 1.10 (0.04) -- 8.86 2006 7.43 0.02 0.32 (0.02) -- 7.75 2005 6.76 0.04 0.67 (0.04) -- 7.43 2004 6.37 0.01 0.38 --## -- 6.76 Class N (commenced operations on March 28, 2000) 2008 $ 8.77 $ 0.01 $(1.46) $(0.01) $ -- $ 7.31 2007 7.68 0.01 1.10 (0.02) -- 8.77 2006 7.35 -- 0.33 --## -- 7.68 2005 6.69 0.02 0.67 (0.03) -- 7.35 2004 6.32 (0.01) 0.38 --## -- 6.69 RCB SMALL CAP VALUE FUND Institutional Class (commenced operations on October 3, 2001) 2008 $30.79 $ 0.19 $(9.57) $ -- $(4.99) $16.42 2007 28.25 0.02 3.00 (0.01) (0.47) 30.79 2006 28.58 0.06 0.05 (0.07) (0.37) 28.25 2005 27.30 0.07 2.58 -- (1.37) 28.58 2004 21.92 0.06 5.40 -- (0.08) 27.30 Class N (commenced operations on October 3, 2001) 2008 $30.42 $ 0.15 $(9.44) $ -- $(4.99) $16.14 2007 27.98 (0.05) 2.96 -- (0.47) 30.42 2006 28.31 (0.01) 0.05 --## (0.37) 27.98 2005 27.13 0.00 2.55 -- (1.37) 28.31 2004 21.84 (0.02) 5.39 -- (0.08) 27.13 Class R (commenced operations on September 30, 1998) 2008 $30.38 $ 0.20 $(9.44) $ -- $(4.99) $16.15 2007 27.93 (0.05) 2.97 -- (0.47) 30.38 2006 28.27 (0.01) 0.04 --## (0.37) 27.93 2005 27.09 0.01 2.54 -- (1.37) 28.27 2004 21.81 (0.02) 5.38 -- (0.08) 27.09 OPPORTUNISTIC VALUE FUND Institutional Class (commenced operations on June 26, 2008) 2008 $10.00 $ 0.05 $(0.74) $ -- $ -- $ 9.31 Class N (commenced operations on June 26, 2008) 2008 $10.00 $ 0.04 $(0.73) $ -- $ -- $ 9.31 Class E (commenced operations on June 26, 2008) 2008 $10.00 $ 0.04 $(0.74) $ -- $ -- $ 9.30 MULTI-ASSET FUND Institutional Class (commenced operations on October 1, 2007) 2008 $11.00 $ 0.25 $(1.32) $(0.23) $ -- $ 9.70 Class N (commenced operations on October 1, 2007) 2008 $11.00 $ 0.23 $(1.33) $(0.21) $ -- $ 9.69 RATIO OF EXPENSES RATIO TO AVERAGE NET RATIO OF NET NET ASSETS ASSETS OF EXPENSES INVESTMENT (EXCLUDING END OF TO AVERAGE INCOME (LOSS) WAIVERS & PORTFOLIO TOTAL PERIOD NET ASSETS TO AVERAGE RECOVERED TURNOVER RETURN+++ (000) (1)(2) NET ASSETS(1) FEES)(1) RATE --------- -------- ----------- ------------- ----------- --------- LARGE CAP VALUE EQUITY FUND Institutional Class (commenced operations on January 14, 2000) 2008 (21.57)% $ 88,361 0.95% 1.64% 0.96% 36% 2007 15.60 110,024 0.96 1.73 0.97 24 2006 14.50 92,946 0.96 1.36 0.97 31 2005 14.39 42,974 0.96 1.12 0.97 34 2004 19.40 38,344 0.97 0.92 0.97 36 Class N (commenced operations on April 13, 2000) 2008 (21.72)% $ 11,712 1.20% 1.38% 1.21% 36% 2007 15.24 17,190 1.21 1.47 1.22 24 2006 14.24 13,104 1.21 1.13 1.22 31 2005 14.14 10,664 1.21 0.87 1.22 34 2004 19.01 6,281 1.22 0.64 1.22 36 LARGE CAP GROWTH EQUITY FUND Institutional Class (commenced operations on January 14, 2000) 2008 (16.40)% $ 31,074 0.98% 0.35% 0.99% 26% 2007 14.91 45,784 0.99 0.52 1.00 30 2006 4.59 35,842 0.99 0.27 1.00 34 2005 10.55 34,164 0.98 0.57 1.00 27 2004 6.20 25,575 1.01 0.10 1.01 50 Class N (commenced operations on March 28, 2000) 2008 (16.55)% $ 11,341 1.23% 0.11% 1.24% 26% 2007 14.51 15,063 1.24 0.28 1.25 30 2006 4.55 10,363 1.24 0.03 1.25 34 2005 10.28 8,278 1.23 0.33 1.25 27 2004 5.87 5,223 1.26 (0.14) 1.26 50 RCB SMALL CAP VALUE FUND Institutional Class (commenced operations on October 3, 2001) 2008 (35.01)% $ 1,742 1.19% 0.85% 1.20% 78% 2007 10.65 9,062 1.19 0.08 1.20 57 2006 0.40 13,435 1.20 0.20 1.21 66 2005 9.87 13,975 1.18 0.26 1.20 41 2004 24.97 8,955 1.21 0.23 1.20 40 Class N (commenced operations on October 3, 2001) 2008 (35.16)% $ 4,262 1.44% 0.70% 1.45% 78% 2007 10.37 9,753 1.44 (0.16) 1.45 57 2006 0.17 10,470 1.45 (0.04) 1.46 66 2005 9.55 12,754 1.43 0.01 1.45 41 2004 24.64 7,551 1.49 (0.07) 1.48 40 Class R (commenced operations on September 30, 1998) 2008 (35.02)% $ 19,183 1.23% 0.92% 1.55% 78% 2007 10.43 40,944 1.44 (0.17) 1.45 57 2006 0.14 45,836 1.45 (0.04) 1.46 66 2005 9.56 57,787 1.43 0.02 1.45 41 2004 24.63 36,473 1.49 (0.07) 1.48 40 OPPORTUNISTIC VALUE FUND Institutional Class (commenced operations on June 26, 2008) 2008 (6.90)% $ -- 0.23%(3) 1.83% 0.23%(3) 5% Class N (commenced operations on June 26, 2008) 2008 (6.90)% $ 7 1.20%(3) 1.50% 1.23%(3) 5% Class E (commenced operations on June 26, 2008) 2008 (7.00)% $ 45,239 0.69%(3) 1.44% 0.70%(3) 5% MULTI-ASSET FUND Institutional Class (commenced operations on October 1, 2007) 2008 (9.84)% $ 10,741 1.29% 2.37% 1.30% 141% Class N (commenced operations on October 1, 2007) 2008 (10.12)% $ 16,708 1.53% 2.22% 1.54% 141%
+ PER SHARE CALCULATIONS ARE BASED ON AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD. +++ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. FEE WAIVERS ARE IN EFFECT; IF THEY HAD NOT BEEN IN EFFECT, PERFORMANCE WOULD HAVE BEEN LOWER. TOTAL RETURN FIGURES DO NOT INCLUDE APPLICABLE SALES LOADS. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. ## AMOUNT REPRESENTS LESS THAN $0.01 PER SHARE. (1) ANNUALIZED FOR PERIODS LESS THAN ONE YEAR. (2) RATIO INCLUDES WAIVERS AND PREVIOUSLY WAIVED INVESTMENT ADVISORY FEES RECOVERED.THE IMPACT OF THE RECOVERED FEES MAY CAUSE A HIGHER NET EXPENSE RATIO. (3) RATIO REFLECTS THE IMPACT OF THE INITIAL LOW LEVEL OF AVERAGE NET ASSETS ASSOCIATED WITH COMMENCEMENT OF OPERATIONS. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 74
NET NET REALIZED AND DISTRIBUTIONS NET ASSET UNREALIZED DIVIDENDS FROM ASSET VALUE NET GAINS (LOSSES) FROM NET REALIZED VALUE BEGINNING INVESTMENT ON INVESTMENT CAPITAL END OF PERIOD INCOME+ SECURITIES+ INCOME GAINS OF PERIOD --------- ---------- -------------- ---------- ------------- --------- CORPORATE BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 $10.18 $0.43 $(0.41) $(0.44) $ -- $ 9.76 2007 10.17 0.45 -- (0.44) -- 10.18 2006 10.27 0.42 (0.10) (0.42) -- 10.17 2005 10.60 0.40 (0.27) (0.40) (0.06) 10.27 2004 10.89 0.41 (0.18) (0.41) (0.11) 10.60 Class N (commenced operations on April 13, 2000) 2008 $10.18 $0.41 $(0.41) $(0.41) $ -- $ 9.77 2007 10.17 0.42 0.01 (0.42) -- 10.18 2006 10.27 0.39 (0.10) (0.39) -- 10.17 2005 10.61 0.37 (0.28) (0.37) (0.06) 10.27 2004 10.89 0.37 (0.16) (0.38) (0.11) 10.61 GOVERNMENT BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 $10.33 $0.42 $ 0.08 $(0.43) $ -- $10.40 2007 10.28 0.46 0.05 (0.46) -- 10.33 2006 10.40 0.41 (0.12) (0.41) -- 10.28 2005 10.62 0.31 (0.16) (0.31) (0.06) 10.40 2004 10.93 0.25 (0.17) (0.25) (0.14) 10.62 Class N (commenced operations on April 13, 2000) 2008 $10.35 $0.40 $ 0.07 $(0.40) $ -- $10.42 2007 10.30 0.44 0.04 (0.43) -- 10.35 2006 10.42 0.39 (0.12) (0.39) -- 10.30 2005 10.64 0.29 (0.17) (0.28) (0.06) 10.42 2004 10.95 0.23 (0.17) (0.23) (0.14) 10.64 CALIFORNIA TAX EXEMPT BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 $10.24 $0.32 $(0.18) $(0.32) $ -- $10.06 2007 10.25 0.31 (0.01) (0.31) -- 10.24 2006 10.26 0.29 0.03 (0.29) (0.04) 10.25 2005 10.41 0.28 (0.11) (0.28) (0.04) 10.26 2004 10.60 0.27 (0.06) (0.27) (0.13) 10.41 Class N (commenced operations on April 13, 2000) 2008 $10.27 $0.30 $(0.18) $(0.30) $ -- $10.09 2007 10.27 0.28 -- (0.28) -- 10.27 2006 10.29 0.26 0.02 (0.26) (0.04) 10.27 2005 10.44 0.25 (0.11) (0.25) (0.04) 10.29 2004 10.62 0.24 (0.05) (0.24) (0.13) 10.44 HIGH YIELD BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 $ 8.91 $0.64 $(1.47) $(0.68) $ -- $ 7.40 2007 8.96 0.70 (0.06) (0.69) -- 8.91 2006 9.04 0.68 (0.08) (0.68) -- 8.96 2005 9.31 0.71 (0.27) (0.71) -- 9.04 2004 8.95 0.72 0.36 (0.72) -- 9.31 Class N (commenced operations on January 14, 2000) 2008 $ 8.91 $0.62 $(1.47) $(0.66) $ -- $ 7.40 2007 8.96 0.68 (0.07) (0.66) -- 8.91 2006 9.04 0.65 (0.08) (0.65) -- 8.96 2005 9.31 0.69 (0.27) (0.69) -- 9.04 2004 8.95 0.70 0.35 (0.69) -- 9.31 RATIO OF EXPENSES RATIO TO AVERAGE NET OF NET NET ASSETS ASSETS RATIO INVESTMENT (EXCLUDING END OF EXPENSES INCOME WAIVERS & PORTFOLIO TOTAL OF PERIOD TO AVERAGE TO AVERAGE RECOVERED TURNOVER RETURN+++ (000) NET ASSETS(1)(2) NET ASSETS(1) FEES)(1) RATE --------- --------- ---------------- ------------- ----------- --------- CORPORATE BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 0.04% $69,709 0.73% 4.25% 0.74% 12% 2007 4.57 62,210 0.74 4.39 0.75 30 2006 3.19 55,290 0.75 4.14 0.75 25 2005 1.26 51,193 0.75 3.80 0.76 25 2004 2.15 47,080 0.75 3.82 0.79 57 Class N (commenced operations on April 13, 2000) 2008 (0.11)% $ 608 0.98% 4.02% 0.99% 12% 2007 4.30 1,043 0.99 4.13 1.00 30 2006 2.93 1,332 1.00 3.88 1.00 25 2005 0.91 1,530 1.00 3.55 1.01 25 2004 1.99 1,522 1.00 3.51 1.04 57 GOVERNMENT BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 4.87% $66,097 0.70% 4.05% 0.77% 36% 2007 5.04 52,606 0.70 4.50 0.77 83 2006 2.89 35,671 0.70 4.04 0.78 62 2005 1.42 28,132 0.70 2.98 0.79 58 2004 0.81 20,901 0.70 2.39 0.81 169 Class N (commenced operations on April 13, 2000) 2008 4.59% $ 2,761 0.95% 3.80% 1.02% 36% 2007 4.77 2,632 0.95 4.25 1.02 83 2006 2.63 1,782 0.95 3.81 1.03 62 2005 1.16 554 0.95 2.70 1.04 58 2004 0.55 436 0.95 2.14 1.06 169 CALIFORNIA TAX EXEMPT BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 1.38% $34,262 0.50% 3.13% 0.61% 55% 2007 2.98 33,802 0.50 3.04 0.62 43 2006 3.18 26,074 0.50 2.85 0.62 43 2005 1.65 22,768 0.50 2.70 0.63 54 2004 2.00 17,789 0.50 2.55 0.65 51 Class N (commenced operations on April 13, 2000) 2008 1.12% $ 1,049 0.75% 2.87% 0.86% 55% 2007 2.82 922 0.75 2.78 0.87 43 2006 2.81 1,134 0.75 2.59 0.87 43 2005 1.39 1,487 0.75 2.43 0.88 54 2004 1.84 2,439 0.75 2.29 0.90 51 HIGH YIELD BOND FUND Institutional Class (commenced operations on January 14, 2000) 2008 (9.83)% $13,926 1.00% 7.72% 1.09% 20% 2007 7.27 17,137 1.00 7.73 1.10 26 2006 6.90 20,887 1.00 7.58 1.10 23 2005 4.85 22,588 1.00 7.71 1.11 46 2004 12.47 22,860 1.00 7.87 1.14 35 Class N (commenced operations on January 14, 2000) 2008 (10.10)% $17,521 1.30% 7.43% 1.39% 20% 2007 6.95 20,121 1.30 7.44 1.40 26 2006 6.58 20,045 1.30 7.28 1.40 23 2005 4.54 21,028 1.30 7.41 1.41 46 2004 12.14 20,655 1.30 7.56 1.44 35
+ PER SHARE CALCULATIONS ARE BASED ON THE AVERAGE SHARES OUTSTANDING THROUGHOUT THE PERIOD. +++ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. FEE WAIVERS ARE IN EFFECT; IF THEY HAD NOT BEEN IN EFFECT, PERFORMANCE WOULD HAVE BEEN LOWER. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. (1) ANNUALIZED FOR PERIODS LESS THAN ONE YEAR. (2) RATIO INCLUDES WAIVERS AND PREVIOUSLY WAIVED INVESTMENT ADVISORY FEES RECOVERED.THE IMPACT OF THE RECOVERED FEES MAY CAUSE A HIGHER NET EXPENSE RATIO. AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 75 financial highlights FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD FOR THE YEAR ENDED SEPTEMBER 30,
RATIO OF EXPENSES RATIO TO AVERAGE NET NET NET OF NET NET ASSETS ASSET DIVIDENDS ASSET ASSETS RATIO INVESTMENT (EXCLUDING VALUE NET FROM NET VALUE END OF EXPENSES INCOME WAIVERS & BEGINNING INVESTMENT INVESTMENT END TOTAL OF PERIOD TO AVERAGE TO AVERAGE RECOVERED OF PERIOD INCOME INCOME OF PERIOD RETURN+++ (000) NET ASSETS(1)(2) NET ASSETS(1) FEES)(1) --------- ---------- ---------- --------- --------- ---------- ---------------- ------------- ----------- PRIME MONEY MARKET FUND Institutional Class (commenced operations on March 23, 1998) 2008 $1.00 $0.030 $(0.030) $1.00 3.01% $ 532,931 0.58% 2.90% 0.58% 2007 1.00 0.047 (0.047) 1.00 4.85 438,639 0.59 4.74 0.60 2006 1.00 0.041 (0.041) 1.00 4.17 388,171 0.59 4.12 0.60 2005 1.00 0.021 (0.021) 1.00 2.10 332,393 0.60 2.05 0.61 2004 1.00 0.006 (0.006) 1.00 0.58 367,209 0.63 0.59 0.63 Class N (commenced operations on October 18, 1999) 2008 $1.00 $0.027 $(0.027) $1.00 2.78% $1,123,900 0.80% 2.65% 1.08% 2007 1.00 0.045 (0.045) 1.00 4.62 870,537 0.81 4.52 1.10 2006 1.00 0.039 (0.039) 1.00 3.94 640,366 0.81 3.95 1.10 2005 1.00 0.019 (0.019) 1.00 1.87 312,452 0.82 1.94 1.11 2004 1.00 0.004 (0.004) 1.00 0.36 201,058 0.85 0.35 1.13 Class S (commenced operations on October 26, 1999) 2008 $1.00 $0.025 $(0.025) $1.00 2.57% $ 633,815 1.00% 2.54% 1.08% 2007 1.00 0.043 (0.043) 1.00 4.41 620,195 1.01 4.32 1.10 2006 1.00 0.037 (0.037) 1.00 3.73 324,353 1.01 3.74 1.10 2005 1.00 0.017 (0.017) 1.00 1.67 203,502 1.02 1.70 1.11 2004 1.00 0.002 (0.002) 1.00 0.21 115,761 1.00 0.21 1.13 GOVERNMENT MONEY MARKET FUND Institutional Class (commenced operations on April 3, 2000) 2008 $1.00 $0.027 $(0.027) $1.00 2.72% $ 100,674 0.59% 2.62% 0.59% 2007 1.00 0.047 (0.047) 1.00 4.77 47,858 0.60 4.67 0.61 2006 1.00 0.040 (0.040) 1.00 4.08 52,782 0.60 4.11 0.61 2005 1.00 0.020 (0.020) 1.00 2.05 32,039 0.61 1.97 0.62 2004 1.00 0.006 (0.006) 1.00 0.57 43,608 0.63 0.56 0.64 Class N (commenced operations on June 21, 1999) 2008 $1.00 $0.025 $(0.025) $1.00 2.49% $3,006,935 0.81% 2.40% 1.09% 2007 1.00 0.044 (0.044) 1.00 4.54 2,291,138 0.82 4.45 1.11 2006 1.00 0.038 (0.038) 1.00 3.86 1,940,602 0.82 3.78 1.11 2005 1.00 0.018 (0.018) 1.00 1.82 1,895,412 0.83 1.80 1.12 2004 1.00 0.004 (0.004) 1.00 0.35 1,857,676 0.85 0.35 1.14 Class S (commenced operations on October 6, 1999) 2008 $1.00 $0.023 $(0.023) $1.00 2.29% $ 408,747 1.02% 2.23% 1.09% 2007 1.00 0.042 (0.042) 1.00 4.33 321,061 1.02 4.24 1.11 2006 1.00 0.036 (0.036) 1.00 3.65 232,083 1.02 3.60 1.11 2005 1.00 0.016 (0.016) 1.00 1.62 227,905 1.03 1.61 1.12 2004 1.00 0.002 (0.002) 1.00 0.20 263,086 1.00 0.21 1.14 CALIFORNIA TAX EXEMPT MONEY MARKET FUND Institutional Class (commenced operations on April 3, 2000) 2008 $1.00 $0.018 $(0.018) $1.00 1.80% $ 157,427 0.55% 1.69% 0.61% 2007 1.00 0.030 (0.030) 1.00 3.01 89,237 0.55 2.97 0.62 2006 1.00 0.026 (0.026) 1.00 2.62 85,014 0.55 2.60 0.62 2005 1.00 0.015 (0.015)* 1.00 1.51 73,211 0.55 1.46 0.63 2004 1.00 0.005 (0.005) 1.00 0.52 79,413 0.55 0.51 0.65 Class N (commenced operations on June 21, 1999) 2008 $1.00 $0.016 $(0.016) $1.00 1.57% $ 880,794 0.78% 1.47% 1.11% 2007 1.00 0.027 (0.027) 1.00 2.78 695,318 0.78 2.73 1.12 2006 1.00 0.024 (0.024) 1.00 2.39 631,478 0.78 2.36 1.12 2005 1.00 0.013 (0.013)* 1.00 1.28 569,671 0.78 1.25 1.13 2004 1.00 0.003 (0.003) 1.00 0.29 505,029 0.78 0.29 1.15 Class S (commenced operations on November 12, 1999) 2008 $1.00 $0.014 $(0.014) $1.00 1.37% $ 141,757 0.98% 1.40% 1.11% 2007 1.00 0.025 (0.025) 1.00 2.57 178,918 0.98 2.55 1.12 2006 1.00 0.022 (0.022) 1.00 2.18 107,131 0.98 2.17 1.12 2005 1.00 0.011 (0.011)* 1.00 1.08 88,182 0.98 1.09 1.13 2004 1.00 0.002 (0.002) 1.00 0.15 33,520 0.91 0.15 1.15
* INCLUDES A REALIZED CAPITAL GAIN DISTRIBUTION OF LESS THAN $0.001. +++ RETURNS ARE FOR THE PERIOD INDICATED AND HAVE NOT BEEN ANNUALIZED. FEE WAIVERS ARE IN EFFECT; IF THEY HAD NOT BEEN IN EFFECT, PERFORMANCE WOULD HAVE BEEN LOWER. RETURNS SHOWN DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. (1) ANNUALIZED FOR PERIODS LESS THAN ONE YEAR. (2) RATIO INCLUDES WAIVERS AND PREVIOUSLY WAIVED INVESTMENT ADVISORY FEES RECOVERED. THE IMPACT OF THE RECOVERED FEES MAY CAUSE A HIGHER NET EXPENSE RATIO. SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. CNI CHARTER FUNDS | PAGE 76 notes to financial statements SEPTEMBER 30, 2008 1. ORGANIZATION: CNI Charter Funds, a Delaware statutory trust (the "Trust"), is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with 17 portfolios. The financial statements included herein are those of the Large Cap Value Equity Fund, Large Cap Growth Equity Fund, RCB Small Cap Value Fund, Opportunistic Value Fund (collectively, the "Equity Funds"); Corporate Bond Fund, Government Bond Fund, California Tax Exempt Bond Fund, High Yield Bond Fund (collectively, the "Fixed Income Funds"); Prime Money Market Fund, Government Money Market Fund, California Tax Exempt Money Market Fund (collectively, the "Money Market Funds"); and Multi-Asset Fund (each a "Fund," collectively, the "Funds"). The Equity and Fixed Income Funds and the Multi-Asset Fund are registered to offer Institutional and Class N Shares; in addition, the Opportunistic Value Fund is registered to offer Class E Shares and the RCB Small Cap Value Fund is registered to offer Class R Shares. The Money Market Funds are registered to offer Institutional, Class N and Class S Shares. The assets of each Fund are segregated, and a shareholder's interest is limited to the Fund in which shares are held. The Funds' prospectuses provide descriptions of each Fund's investment objectives, policies and strategies. Class N and Institutional Class shares of the Multi-Asset Fund commenced operations on October 1, 2007. Class E, Class N and Institutional Class shares of the Opportunistic Value Fund commenced operations on June 26, 2008. Effective January 31, 2008, Class A shares of the Funds were redesignated as Class N shares. There were no changes to the rights, fees or expenses of the Class A shares or services provided to Class A shareholders in connection with the change in designation to Class N. On April 5, 2005, the Board of Trustees of CNI Charter Funds (the "Trust") approved the reorganization of the AHA Limited Maturity Fixed Income Fund, AHA Full Maturity Fixed Income Fund, AHA Balanced Fund, AHA Diversified Equity Fund, and AHA Socially Responsible Equity Fund series of AHA Investment Funds, Inc. (the "Predecessor AHA Funds") into newly established corresponding series of the Trust (the "AHA Funds"). The reorganization was approved by shareholders of the Predecessor AHA Funds and was effective on October 3, 2005. Class N and Institutional Class shares of the AHA Funds are offered through separate prospectuses. To request a prospectus for the AHA Funds, shareholders can call 1-800-445-1341 or write to CNI Charter Funds, c/o SEI Investments Distribution Co., One Freedom Valley Drive, Oaks, Pennsylvania 19456. 2. SIGNIFICANT ACCOUNTING POLICIES: The following is a summary of significant accounting policies followed by the Funds. USE OF ESTIMATES - The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. SECURITY VALUATION - Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ) are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded, or, if there is no such reported sale, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price is used. If available, debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, or other methodologies designed to identify the market value for such securities. Debt obligations with remaining maturities of sixty days or less may be valued at their amortized cost, which approximates market value. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Prices for most securities held in the Funds are provided daily by recognized independent pricing agents. If a security price cannot be obtained from an independent, third-party pricing agent, the Funds seek to obtain a bid price from at least one independent broker. Securities for which market prices are not "readily available" are valued in accordance with Fair Value Procedures established by the Funds' Board of Trustees. The Funds' Fair Value Procedures are implemented through a Fair Value Committee (the "Committee") designated by the Funds' Board of Trustees. Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security's trading has been halted or suspended; the security has been de-listed from a national exchange; the security's primary trading market is temporarily closed at a time when under normal conditions it would be open; for international securities, market events occur after the close of the foreign markets that make closing prices not representative of fair value; or the security's primary pricing source is not able or CNI CHARTER FUNDS | PAGE 77 notes to financial statements SEPTEMBER 30, 2008 willing to provide a price. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee. SECURITY TRANSACTIONS AND RELATED INCOME - Security transactions are accounted for on the trade date of the security purchase or sale. Costs used in determining net realized capital gains and losses on the sale of securities are those of the specific securities sold. Interest income is recognized on the accrual basis and dividend income is recognized on the ex-dividend date. Purchase discounts and premiums on securities held by the Funds are accreted and amortized to maturity using the scientific method, except for the Money Market funds which use a straight line basis. REPURCHASE AGREEMENTS - Securities pledged as collateral for repurchase agreements are held by each Fund's custodian bank until maturity of the repurchase agreements. Provisions of the agreements and procedures adopted by the investment adviser require that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default by the counterparty. The Funds also invest in tri-party repurchase agreements. Securities held as collateral for tri-party repurchase agreements are maintained by the broker's custodian bank in a segregated account until maturity of the repurchase agreement. Provisions of the agreements require that the market value of the collateral, including accrued interest thereon, is sufficient in the event of default. If the counterparty defaults and the value of the collateral declines or if the counterparty enters into an insolvency proceeding, realization of the collateral by the Fund may be delayed or limited. TBA TRANSACTIONS - The Funds may engage in "to be announced" ("TBA") security transactions. Such transactions involve a commitment by the Funds to purchase or sell securities for a predetermined price or yield, with payment and delivery taking place beyond the customary settlement period. The Funds record TBA securities on the trade date and maintain security positions such that sufficient liquid assets will be available to make payments for the securities purchased. EXPENSE ALLOCATION - Common expenses incurred by the Funds are allocated among the Funds (i) based upon relative average daily net assets, (ii) as incurred on a specific identification basis, or (iii) equally among the Funds, depending on the nature of the expenditure. CLASSES - Class-specific expenses are borne by that class. Income, non class-specific expenses, and realized and unrealized gains/losses are allocated to the respective class on the basis of relative net asset value each day. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS - Dividends from net investment income are declared daily and paid to shareholders monthly for the Fixed Income and Money Market Funds. Dividends from net investment income are declared and paid quarterly for the Large Cap Value Equity, Large Cap Growth Equity, Opportunistic Value and Multi-Asset Funds. For the RCB Small Cap Value Fund, dividends from net investment income are declared and paid annually. Distributions from net realized capital gains are distributed to shareholders at least annually. DEFERRED OFFERING COSTS - All offering costs incurred with the start up of a Fund are being amortized on a straight line basis over a period of twelve months from commencement of operations. As of September 30, 2008, the remaining amount still to be amortized for the Opportunistic Value Fund was $17,740. The Multi-Asset Fund was fully amortized as of the fiscal year end. 3. ADMINISTRATION, TRANSFER AGENT, DISTRIBUTION AND SHAREHOLDER SERVICES AGREEMENTS: Pursuant to an administration agreement dated April 1, 1999, as amended April 1, 2008, (the "Agreement"), SEI Investments Global Funds Services (the "Administrator"), a wholly owned subsidiary of SEI Investments Company, acts as the Trust's administrator. Under the terms of the Agreement, the Administrator is entitled to receive an annual fee of 0.065% of aggregate average daily net assets of the Trust not exceeding $2.5 billion, 0.045% of aggregate average daily net assets of the Trust exceeding $2.5 billion but not exceeding $5 billion, 0.025% of aggregate average daily net assets of the Trust exceeding $5 billion but not exceeding $7.5 billion, and 0.02% of aggregate average daily net assets of the Trust exceeding $7.5 billion. Each Fund is subject to a minimum annual fee of $90,000, which may be reduced at the sole discretion of the Administrator. The Trust has adopted a Rule 12b-1 Distribution Plan ("the Plan") with respect to Class N, Class S and Class R Shares that allows each Fund to pay distribution and servicing fees. SEI Investments Distribution Co. (the "Distributor") receives a distribution fee, computed daily and paid monthly, at the annual rate of 0.50% of the average daily net assets of the Class N Shares and Class S Shares of the Money Market Funds and 0.25% of the Class N Shares of the Equity Funds, Fixed Income Funds and the Multi-Asset Fund and the Class R Shares of the RCB Small Cap Value Fund, with the exception of 0.30% charged to the Class N Shares of the High Yield Bond Fund, which may be used by the Distributor to provide compensation for sales support and distribution-related activities. The Trust and the Distributor are parties to a distribution agreement dated April 1, 1999. CNI CHARTER FUNDS | PAGE 78 SEI Institutional Transfer Agency, a division of SEI Investments Fund Management Corporation (the "Transfer Agent"), serves as transfer agent for the Trust and provides services at an annual rate of $15,000 per share class. The Transfer Agent has agreed to waive these fees. The Class R shares of the RCB Small Cap Value Fund began paying the sub-transfer agent, Citigroup Fund Services, LLC, fees commencing February 1, 2008. U.S. Bank, N.A. (the "Custodian") serves as custodian for the Trust. The Custodian plays no role in determining the investment policies of the Trust or which securities are to be purchased or sold by the Trust. The Trust has entered into Shareholder Servicing Agreements that permit payment of compensation to City National Bank ("CNB") and its affiliates, which provide certain shareholder support for their customers who own Institutional Class, Class N, Class S or Class R Shares. In consideration for such services, a shareholder servicing fee is charged at the annual rate of up to 0.25% of each Fund's average daily net assets. CNB has agreed to voluntarily waive portions of its shareholder servicing fees with respect to certain Funds. For the year ended September 30, 2008, CNB received Shareholder Servicing fees from the Trust in the amount of $13,281,818. Certain officers of the Trust are also officers of City National Asset Management, Inc. ("CNAM, Inc." or the "Adviser") or the Administrator. Such officers are paid no fees by the Trust for serving as officers of the Trust. 4. INVESTMENT ADVISORY FEES AND OTHER AGREEMENTS: CNAM, Inc., a wholly owned subsidiary of CNB, serves as the investment manager for the Funds. Under the terms of the current agreement, the Adviser receives an annual fee equal to 0.62% of the average daily net assets of the Large Cap Value Equity Fund, 0.65% of the average daily net assets of the Large Cap Growth Equity Fund, 0.85% of the average net assets of the RCB Small Cap Value Fund, 0.50% of the average daily net assets of the Opportunistic Value Fund, 0.50% of the average daily net assets of the Multi-Asset Fund, 0.40% of the average daily net assets of the Corporate Bond Fund, 0.43% of the average daily net assets of the Government Bond Fund, 0.27% of the average daily net assets of the California Tax Exempt Bond Fund, 0.75% of the average daily net assets of the High Yield Bond Fund, 0.25% of the average daily net assets of the Prime Money Market Fund, 0.26% of the average daily net assets of the Government Money Market Fund, and 0.27% of the average daily net assets of the California Tax Exempt Money Market Fund. REED, CONNER & BIRDWELL, LLC acts as the investment sub-adviser with respect to the RCB Small Cap Value Fund. HALBIS CAPITAL MANAGEMENT (USA), INC. acts as the investment sub-adviser with respect to the High Yield Bond Fund. SKBA Capital Management, LLC acts as the investment sub-adviser with respect to the Opportunistic Value Fund. Sub-adviser fees are paid by the Adviser. The Adviser has voluntarily agreed to limit its fees or reimburse expenses to the extent necessary to keep operating expenses at or below certain percentages of the Funds' respective average daily net assets. The voluntary expense limitations (expressed as percentages of average daily net assets) are as follows:
Large Cap Large Cap RCB Value Growth Small Cap Opportunistic Equity Equity Value Value Fund Fund Fund Fund ---------- --------- ---------- ------------- Institutional Class 1.00% 1.05% 1.24% 1.00% Class N 1.25% 1.30% 1.49% 1.25% Class E -- -- -- 0.75% Class R -- -- 1.49% --
California Multi- Corporate Government Tax Exempt Asset Bond Bond Bond Fund Fund Fund Fund ------ --------- ---------- ---------- Institutional Class 1.75% 0.75% 0.70% 0.50% Class N 2.00% 1.00% 0.95% 0.75%
California High Yield Prime Government Tax Exempt Bond Money Market Money Market Money Market Fund Fund Fund Fund ---------- ------------ ------------ -------------- Institutional Class 1.00% 0.63% 0.63% 0.55% Class N 1.30% 0.85% 0.85% 0.78% Class S -- 1.05% 1.05% 0.98%
Any fee reductions or expense reimbursements may be repaid to the Adviser within three years after occurrence, subject to certain restrictions and only if such repayments do not cause the Funds' expense ratios, at the time of repayment, to exceed the amounts shown in the preceding table. As of September 30, 2008, fees which were previously waived by the Adviser which may be subject to possible future reimbursement to the Adviser were as follows:
Potential Amount of Recovery Fund (000) Expiration - ---- ---------- ---------- Opportunistic Value $ 1 2011 Government Bond 23 2009 31 2010 39 2011 California Tax Exempt Bond 28 2009 34 2010 34 2011 High Yield Bond 38 2009 35 2010 29 2011 California Tax Exempt Money Market 516 2009 494 2010 583 2011
CNI CHARTER FUNDS | PAGE 79 notes to financial statements SEPTEMBER 30, 2008 5. INVESTMENT TRANSACTIONS: The cost of security purchases and proceeds from the sale and maturities of securities, other than temporary investments in short-term securities for the year ended September 30, 2008, were as follows for the Equity Funds, Multi-Asset Fund and Fixed Income Funds:
Purchases Sales & Maturities -------------------- ------------------- U.S. Gov't Other U.S. Gov't Other Fund (000) (000) (000) (000) ---- ---------- ------- ---------- ------- Large Cap Value Equity $ -- $44,026 $ -- $39,702 Large Cap Growth Equity -- 13,483 -- 22,194 RCB Small Cap Value -- 31,661 -- 45,179 Opportunistic Value -- 50,049 -- 2,064 Multi-Asset 4,361 42,970 2,141 20,790 Corporate Bond 3,786 5,330 1,859 5,637 Government Bond 34,806 -- 20,779 1,305 California Tax Exempt Bond -- 19,589 -- 17,928 High Yield Bond -- 7,492 -- 6,602
6. FEDERAL TAX INFORMATION: It is each Fund's intention to continue to qualify as a regulated investment company for Federal income tax purposes and distribute all of its taxable income and net capital gains. Accordingly, no provisions for Federal income taxes are required. Management has analyzed the Funds' tax position taken on federal income tax returns for all open tax years and has concluded that as of September 30, 2008, no provision for income tax would be required in the Funds' financial statements. The Funds' federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue. The Funds may be subject to taxes imposed by countries in which they invest, with respect to their investments in issuers existing or operating in such countries. Such taxes are generally based on income earned. The Funds accrue such taxes when the related income is earned. The timing and characterization of certain income and capital gains distributions are determined annually in accordance with Federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent. To the extent these differences are permanent in nature, they are charged or credited to undistributed net investment income (loss), accumulated net realized gain (loss), or paid-in-capital, as appropriate, in the period that the differences arise. Accordingly, the following permanent difference, primarily attributable to REIT adjustments, corporate action adjustments, the realized gains (losses) on paydowns and the timing of distributions, have been reclassified to/from the following accounts:
Increase Increase (Decrease) (Decrease) Undistributed Accumulated Net Investment Net Realized Income (Loss) Gain (Loss) Fund (000) (000) - ---- -------------- ------------ Large Cap Value Equity $(123) $123 Large Cap Growth Equity 1 (1) RCB Small Cap Value 72 (72) Corporate Bond (3) 3 Government Bond 11 (11)
These reclassifications had no effect on the net assets or net asset value per share. The tax character of dividends and distributions declared during the years ended September 30, 2008 and September 30, 2007 are shown below:
Tax Long-term Exempt Ordinar Capital Income Income Gain Total Fund (000) (000) (000) (000) - ---- ----------- -------- --------- ------------- Large Cap Value Equity 2008 $ -- $ 1,827 $5,489 $ 7,316 2007 -- 2,039 5,502 7,541 Large Cap Growth Equity 2008 -- 152 -- 152 2007 -- 246 -- 246 RCB Small Cap Value 2008 -- 3,067 6,538 9,605 2007 -- 2 1,108 1,110 Opportunistic Value 2008 -- -- -- -- Multi-Asset 2008 -- 473 -- 473 Corporate Bond 2008 -- 2,888 -- 2,888 2007 -- 2,595 -- 2,595 Government Bond 2008 -- 2,639 -- 2,639 2007 -- 2,072 -- 2,072 California Tax Exempt Bond 2008 1,063 -- -- 1,063 2007 950 1 -- 951 High Yield Bond 2008 -- 2,806 -- 2,806 2007 -- 2,880 -- 2,880 Prime Money Market 2008 -- 61,899 -- 61,899 2007 -- 73,650 -- 73,650 Government Money Market 2008 -- 73,655 -- 73,655 2007 -- 106,396 -- 106,396 California Tax Exempt Money Market 2008 17,064 11 -- 17,075 2007 22,975 -- -- 22,975
CNI CHARTER FUNDS | PAGE 80 As of September 30, 2008, the components of Distributable Earnings/(Accumulated Losses) on a tax basis were as follows:
Undistributed Undistributed Capital Post- Unrealized Other Total Tax-Exempt Ordinary Loss October Appreciation Temporary Distributable Earnings Income Income Carryforwards Losses (Depreciation) Differences (Accumulated Losses) Fund (000) (000) (000) (000) (000) (000) (000) - ---- ------------- ------------- ------------- -------- -------------- ----------- ---------------------- Large Cap Value Equity $ -- $ 330 $ -- $(1,918) $(1,192) $ (457) $ (3,237) Large Cap Growth Equity -- 46 (2,153) -- 786 (36) (1,357) RCB Small Cap Value -- 439 -- (635) (6,866) -- (7,062) Opportunistic Value -- 174 -- (725) (5,103) -- (5,654) Multi-Asset -- 182 -- (362) (2,832) (181) (3,193) Corporate Bond -- 243 (451) (90) (3,185) (243) (3,726) Government Bond -- 215 (535) -- 430 (216) (106) California Tax Exempt Bond 93 -- (42) (52) (482) (93) (576) High Yield Bond -- 283 (789) (563) (6,497) (228) (7,794) Prime Money Market -- 3,639 -- -- -- (3,553) 86 Government Money Market -- 3,846 -- -- -- (3,831) 15 California Tax Exempt Money Market 2,581 -- -- -- -- (2,578) 3
For tax purposes, the losses in the Funds can be carried forward for a maximum of eight years to offset any future net realized capital gains. At September 30, 2008, the breakdown of capital loss carryforwards is as follows:
Expiring September 30, ------------------------------------------------- 2010 2011 2012 2013 2014 2015 2016 Fund (000) (000) (000) (000) (000) (000) (000) Total - ---- ----- ------- ----- ----- ----- ----- ----- ----- Large Cap Growth Equity 82 1,844 227 -- -- -- -- 2,153 Corporate Bond -- -- -- -- 64 271 116 451 Government Bond -- -- -- -- 59 374 102 535 California Tax Exempt Bond -- -- -- -- -- 35 7 42 High Yield Bond -- 521 -- -- 268 -- -- 789
During the year ended September 30, 2008,the following Funds had utilized capital loss carryforwards to offset capital gains amounting to:
Amount Fund (000) --------- Large Cap Growth Equity $224 High Yield Bond 37 Prime Money Market 210
Post-October losses represent losses realized on investments and foreign currency transactions from November 1, 2007 through September 30, 2008 that, in accordance with Federal income tax regulations, the Funds have elected to defer and treat as having arisen in the following fiscal year. The aggregate gross unrealized appreciation on securities, the aggregate gross unrealized depreciation on securities and the net unrealized appreciation/(depreciation) for tax purposes at September 30, 2008 for each of the Equity and Fixed Income Funds and Multi-Asset Fund were as follows:
Aggregate Aggregate Net Gross Gross Unrealized Federal Unrealized Unrealized Appreciation Tax Cost Appreciation Depreciation (Depreciation) Fund (000) (000) (000) (000) - ---- -------- ------------- ------------ -------------- Large Cap Value Equity $101,568 $9,855 $(11,047) $(1,192) Large Cap Growth Equity 41,889 5,234 (4,448) 786 RCB Small Cap Value 32,434 3,869 (10,735) (6,866) Opportunistic Value 50,990 1,575 (6,678) (5,103) Multi Asset 31,119 13 (2,845) (2,832) Corporate Bond 73,071 298 (3,483) (3,185) Government Bond 68,388 451 (21) 430 California Tax Exempt Bond 35,321 158 (640) (482) High Yield Bond 37,212 82 (6,579) (6,497)
At September 30, 2008, the Money Market Funds' cost of secu- rities for Federal income tax purposes approximates the cost located in the Schedule of Investments. 7. CONCENTRATION OF CREDIT RISK In the normal course of business, the Funds enter into contracts that provide general indemnifications.The Funds' maximum exposure under these arrangements is dependent on future claims that may be made against the Funds and, therefore, cannot be established; however, based on experience, the risk of loss from such claim is considered remote. The Multi-Asset Fund may invest in exchange-traded notes ("ETNs") as a non-principal investment strategy. ETNs are unsecured debt obligations of investment banks which are traded on exchanges and the returns of which are linked to the performance of market indexes. In addition to trading ETNs on exchanges, investors may redeem ETNs directly with the issuer on a weekly basis, typically in a minimum amount of 50,000 units, or hold the ETNs until maturity. ETNs are riskier than ordinary unsecured debt securities and have no principal protection.The Fund will generally invest in ETNs which are linked to commodities indexes.The Fund's investment in an ETN may be influenced by many unpredictable factors, including highly volatile commodities prices, changes in supply and demand relationships, weather, agriculture, trade, changes in interest rates, and monetary and other governmental policies, action and inaction. Investing in ETNs is not equivalent to investing directly in index components or the relevant index itself. Because ETNs are debt securities, they possess credit risk; if the issuer has financial difficulties or goes bankrupt, the investor may not receive the return it was promised. CNI CHARTER FUNDS | PAGE 81 notes to financial statements SEPTEMBER 30, 2008 CALIFORNIA TAX EXEMPT FUNDS - SPECIFIC RISKS The ability of issuers to pay interest on, and repay principal of, California municipal securities may be affected by economic and political developments in the State of California. Certain securities are backed by letters of credit from various financial institutions and financial guaranty assurance agencies. These letters of credit enhance the credit quality of the individual securities; however, if any of the financial institutions or financial guaranty assurance agencies' credit quality should deteriorate, it could cause the individual security's credit quality to change. Additionally, if any of the Funds concentrate their letters of credit in any one financial institution, the risk of credit quality deterioration increases. 8. FUND MERGER On April 15, 2007, the assets of the Technology Growth Fund were reorganized into the Large Cap Growth Fund. In this merger, 635,779 shares of the Technology Growth Fund were exchanged for 351,181 shares of the Large Cap Growth Fund in a tax-free exchange. The value of the Technology Growth Fund on April 15, 2007 was $2,920,545. Upon the business combination of such Funds on April 15, 2007, the value of the Technology Growth Fund, which included accumulated realized losses of $1,428,382, and unrealized appreciation of $335,437, combined with the Large Cap Growth Fund was $56,094,352. 9. CAPITAL SHARES ISSUED AND REDEEMED: Capital share activity for the years ended September 30, 2008 and September 30, 2007 were as follows:
Large Cap Value Large Cap Growth RCB Small Cap Opportunistic Equity Fund (000) Equity Fund (000) Value Fund (000) Value Fund (000) ----------------- ----------------- ---------------- ---------------- 2008 2007 2008 2007 2008 2007 2008 -------- ------ ------- ------- ------ ------- ---------------- CAPITAL SHARES ISSUED AND REDEEMED: INSTITUTIONAL CLASS: Shares Issued 2,441 1,943 638 1,265 43 74 -- Shares Issued from merger(1) -- -- -- 164 -- -- -- Shares Issued in Lieu of Dividends and Distributions 469 433 6 8 55 6 -- Shares Redeemed (2,015) (1,531) (1,601) (893) (286) (262) -- ------ ------ ------ ----- ---- ---- ----- Net Institutional Class Transactions 895 845 (957) 544 (188) (182) -- ====== ====== ====== ====== ==== ==== ===== CLASS N: Shares Issued 66 379 107 461 4 20 1(2) Shares Issued from merger(1) -- -- -- 187 -- -- -- Shares Issued in Lieu of Dividends and Distributions 66 69 1 3 55 5 -- Shares Redeemed (246) (179) (274) (283) (116) (78) -- ------ ------ ------ ----- ---- ---- ----- Net Class N Transactions (114) 269 (166) 368 (57) (53) 1 ====== ====== ====== ====== ==== ==== ===== CLASS E: Shares Issued -- -- -- -- -- -- 4,863(2) Shares Redeemed -- -- -- -- -- -- -- ------ ------ ------ ----- ---- ---- ----- Net Class E Transactions -- -- -- -- -- -- 4,863 ====== ====== ====== ====== ==== ==== ===== CLASS R: Shares Issued -- -- -- -- 264 171 -- Shares Issued in Lieu of Dividends and Distributions -- -- -- -- 280 23 -- Shares Redeemed -- -- -- -- (704) (487) -- ------ ------ ------ ----- ---- ---- ----- Net Class R Transactions -- -- -- -- (160) (293) -- ====== ====== ====== ====== ==== ==== =====
CNI CHARTER FUNDS | PAGE 82 9. CAPITAL SHARES ISSUED AND REDEEMED (CONTINUED):
California Multi-Asset Corporate Bond Government Bond Tax Exempt Bond Fund (000) Fund (000) Fund (000) Fund (000) ----------- -------------- --------------- --------------- 2008 2008 2007 2008 2007 2008 2007 ----------- ------ ----- ------ ------ ------ ------ CAPITAL SHARES ISSUED AND REDEEMED: INSTITUTIONAL CLASS: Shares Issued 1,269 2,342 1,450 2,308 2,138 1,027 1,526 Shares Issued in Lieu of Dividends and Distributions 5 59 49 67 55 36 33 Shares Redeemed (167) (1,372) (824) (1,109) (572) (958) (803) ----- ----- ----- ----- ----- ----- ----- Net Institutional Class Transactions 1,107 1,029 675 1,266 1,621 105 756 ===== ====== ===== ===== ===== ===== ===== CLASS N: Shares Issued 1,916 4 21 74 97 76 6 Shares Issued in Lieu of Dividends and Distributions 11 2 2 4 3 -- 1 Shares Redeemed (204) (46) (52) (67) (19) (62) (27) ----- ----- ----- ----- ----- ----- ----- Net Class N Transactions 1,723 (40) (29) 11 81 14 (20) ===== ====== ===== ===== ===== ===== =====
California High-Yield Prime Government Tax Exempt Bond Money Market Money Market Money Market Fund (000) Fund (000) Fund (000) Fund (000) ----------- ----------------------- ----------------------- ----------------------- 2008 2007 2008 2007 2008 2007 2008 2007 ---- ---- ---------- ---------- ---------- ---------- ---------- ---------- CAPITAL SHARES ISSUED AND REDEEMED: INSTITUTIONAL CLASS: Shares Issued 142 177 1,704,267 1,324,934 553,021 532,859 1,830,572 2,517,017 Shares Issued in Lieu of Dividends and Distributions 104 94 2,772 3,872 3 4 -- -- Shares Redeemed (288) (679) (1,612,805) (1,278,386) (500,209) (537,787) (1,762,382) (2,512,794) ---- ---- ---------- ---------- ---------- ---------- ---------- ---------- Net Institutional Class Transactions (42) (408) 94,234 50,420 52,815 (4,924) 68,190 4,223 ==== ==== ========== ========== ========== ========== ========== ========== CLASS N: Shares Issued 193 157 3,333,223 2,695,734 6,290,498 5,523,344 2,477,610 2,143,730 Shares Issued in Lieu of Dividends and Distributions 121 100 13,996 12,208 43,391 62,437 9,947 13,108 Shares Redeemed (205) (236) (3,093,998) (2,477,866) (5,618,090) (5,235,257) (2,302,084) (2,092,998) ---- ---- ---------- ---------- ---------- ---------- ---------- ---------- Net Class N Transactions 109 21 253,221 230,076 715,799 350,524 185,473 63,840 ==== ==== ========== ========== ========== ========== ========== ========== CLASS S: Shares Issued -- -- 1,657,732 1,873,534 801,055 775,804 409,458 390,230 Shares Redeemed -- -- (1,644,197) (1,577,751) (713,370) (686,827) (446,618) (318,443) ---- ---- ---------- ---------- ---------- ---------- ---------- ---------- Net Class S Transactions -- -- 13,535 295,783 87,685 88,977 (37,160) 71,787 ==== ==== ========== ========== ========== ========== ========== ==========
(1) SEE NOTE 8 IN THE NOTES TO FINANCIAL STATEMENTS. (2) INCLUDES SUBSCRIPTIONS AS A RESULT OF IN-KIND TRANSFERS OF SECURITIES (SEE NOTE 10). AMOUNTS DESIGNATED AS "--" ARE EITHER 0 OR HAVE BEEN ROUNDED TO 0. CNI CHARTER FUNDS | PAGE 83 notes to financial statements SEPTEMBER 30, 2008 10. IN-KIND TRANSACTIONS During the year ended September 30, 2008, the Opportunistic Value Fund issued shares of beneficial interest in exchange for securities. The securities were transferred at their current value on June 26, 2008 as follows:
Shares Value Issued ($ Thousands) - ------- ------------- 579,800 $5,979
11. RECENT ACCOUNTING PRONOUNCEMENTS In September 2006, 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 generally accepted accounting principles 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 September 30, 2008, the Funds do not believe the adoption of SFAS No. 157 will impact the amounts reported in the financial statements; however, additional disclosures may be required about the inputs used to develop the measurements and the effect of certain of the measurements reported in the financial statements for a fiscal period. 12. SUBSEQUENT EVENT The CNI Charter Funds Board of Trustees approved the participation by the Prime Money Market Fund, Government Money Market Fund and California Money Market Fund (each, a "Fund," and collectively, the "Funds") in the U.S. Department of the Treasury's Temporary Guarantee Program for Money Market Funds (the "Program"). The Program insures shares held by money market fund investors as of the close of business on September 19, 2008 against loss in the event that a money market fund liquidates its holdings and shareholders receive less than $1.00 per share. The guarantee is triggered if the money market fund's net asset value per share falls below $0.995. Participation by a Fund in the Program does not reflect a decision by the Fund to liquidate, and the Trust, in consultation with the Funds' investment adviser, City National Asset Management, Inc., views the liquidation of each Fund as unlikely. The Program covers shareholders of each Fund for amounts they held in the Fund as of the close of business on September 19, 2008. New accounts opened since September 19, 2008 and any increase in the number of shares held by a shareholder after the close of business on September 19, 2008 will not be guaranteed. If shares held by a shareholder as of the close of business on September 19, 2008 are sold before the guarantee is called upon, then the guarantee will only cover the lesser of the number of shares held by that shareholder as of September 19, 2008, or the number of shares held by that shareholder on the date the guarantee is called upon. If a shareholder closes its account after September 19, 2008, new investments by that shareholder in the Fund will not be guaranteed. Guarantee payments under the Program will not exceed the amount available to all participating money market funds within the U.S. Department of the Treasury's Exchange Stabilization Fund ("ESF") on the date of payment. Currently, ESF assets are approximately $50 billion. The Program is designed to address temporary dislocations in the credit markets. The Program will operate through December 18, 2008. After the initial term, the Secretary of the Treasury has the option to extend the Program up to the close of business on September 18, 2009. Participation in the initial three months of the Program requires a payment to the U.S. Department of the Treasury in the amount of 0.01% of the net asset value of each Fund as of September 19, 2008. This expense will be borne by each Fund and will not be subject to any expense limitation currently in effect. If the Program is extended, each Fund will consider whether to participate, and there is no assurance that each Fund will continue to participate in the Program. Participation in any extensions of the Program will require an additional payment by each Fund. Additional information about the Program is available on the U.S. Department of the Treasury's website at www.ustreas.gov. CNI CHARTER FUNDS | PAGE 84 report of independent registered public accounting firm TO THE SHAREHOLDERS AND BOARD OF TRUSTEES OF CNI CHARTER FUNDS: We have audited the accompanying statements of assets and liabilities of the CNI Charter Funds comprised of the Large Cap Value Equity Fund, Large Cap Growth Equity Fund, RCB Small Cap Value Fund, Opportunistic Value Fund, Corporate Bond Fund, Government Bond Fund, California Tax Exempt Bond Fund, High Yield Bond Fund, Multi-Asset Fund, Prime Money Market Fund, Government Money Market Fund, and California Tax Exempt Money Market Fund (collectively, "the Funds"), including the schedules of investments, as of September 30, 2008 and the related statements of operations for the year or period then ended, and the changes in net assets for each of the years or periods in the two-year period then ended, and financial highlights for each of the years or periods in the five-year period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and the financial highlights based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of securities owned as of September 30, 2008, by correspondence with the custodian and broker or by other appropriate audit procedures when replies from brokers were not received. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the CNI Charter Funds as of September 30, 2008, the results of their operations for the year or period then ended, the changes in their net assets for each of the years or periods in the two-year period then ended, and the financial highlights for each of the years or periods in the five-year period then ended, in conformity with U.S. generally accepted accounting principles. /s/ KPMG LLP NOVEMBER 24, 2008 CNI CHARTER FUNDS | PAGE 85 trustees and officers (UNAUDITED) SEPTEMBER 30, 2008 Information pertaining to the Trustees and Officers of the Trust is set forth below as of September 30, 2008. Trustees who are not deemed to be "interested persons" of the Trust as defined in the Investment Company Act of 1940 are referred to as "Independent Trustees."Trustees who are deemed to be "interested persons" of the Trust are referred to as "Interested Trustees."The Trust's Statement of Additional Information ("SAI") includes additional information about the Trustees and Officers.The SAI may be obtained without charge by calling 1-888-889-0799.
TERM OF OFFICE NUMBER OF AND PORTFOLIOS IN OTHER NAME POSITION(S) LENGTH OF FUND COMPLEX DIRECTORSHIPS ADDRESS, HELD WITH TIME PRINCIPAL OCCUPATION(S) OVERSEEN BY HELD BY AND AGE(1) TRUST SERVED(2) DURING PAST FIVE YEARS BOARD MEMBER(3) TRUSTEE(4) - --------------------- ----------- ---------- ------------------------------------------- --------------- ------------- INTERESTED TRUSTEE Vernon C. Kozlen* Trustee Since President and Chief Executive Officer, CNI 17 None Age: 65 May 2007 Charter Funds (2000-2007). Executive Vice President and Director of Asset Management Development, CNB (1996-2007). Director, Reed, Conner & Birdwell LLC (2000-present), and Convergent Capital Management, LLC (2003-present). Chairman of the Board, CNAM, Inc. (2001-2005). Chairman of the Board, City National Securities, Inc. (1999-2005). Director, CNAM, Inc. (2001-2006), and City National Securities, Inc. (1999-2006). INDEPENDENT TRUSTEES Irwin G. Barnet, Esq. Trustee Since 1999 Attorney and partner, Reed Smith LLP, a law 17 None Age: 70 firm (2003-present).Attorney and principal, Crosby, Heafey, Roach & May P.C., a law firm (2000-2002 ). Attorney and principal, Sanders, Barnet, Goldman, Simons & Mosk, a law firm (1980-2000). Victor Meschures Trustee Since 1999 Certified Public Accountant, Meschures, 17 None Age: 70 Campeas,Thompson, Snyder and Pariser, LLP, an accounting firm (1964-present). William R. Sweet Trustee Since 1999 Retired. Executive Vice President, Union 17 None Age: 71 Bank of California (1985-1996). James Wolford Trustee Since 1999 Chief Financial Officer, Bixby Land 17 None Age: 54 Company, a real estate company (2004-present). Regional Financial Officer, AIMCO, a real estate investment trust (2004). Chief Financial Officer, DBM Group, a direct mail marketing company (2001-2004). Senior Vice President and Chief Operating Officer, Forecast Commercial Real Estate Service, Inc. (2000-2001). Senior Vice President and Chief Financial Officer, Bixby Ranch Company (1985-2000).
CNI CHARTER FUNDS | PAGE 86
TERM OF OFFICE AND NAME POSITION LENGTH OF ADDRESS, HELD WITH TIME PRINCIPAL OCCUPATION(S) AND AGE TRUST SERVED(2) DURING PAST FIVE YEARS - ------------------------ ----------------- --------- -------------------------------------------------------- OFFICERS Timothy D. Barto Vice President Since Attorney, Vice President and Assistant Secretary of SEI SEI Investments and Assistant 2000 Investments (1999-Present).Vice President and Assistant One Freedom Valley Drive Secretary Secretary of Administrator (1999-Present). Officer of Oaks, PA 19456 various investment companies administered by Age: 40 Administrator (1999-2004).Assistant Secretary of the Distributor (2003-2004).Vice President of the Distributor (1999-2004). Eric Kleinschmidt Controller and Since Director of Fund Accounting, SEI Investments SEI Investments Chief Operating 2005 (2004-Present). Manager of Fund Accounting, SEI One Freedom Valley Drive Officer Investments (1999-2004). Oaks, PA 19456 Age: 40 Valerie Y. Lewis Vice President Since Chief Compliance Officer, CNAM, Inc. (August, City National Bank and Chief 2005 2005-present). Fund Boards Specialist - Assistant 400 N. Roxbury Drive Compliance Secretary, Capital Research and Management and Company Beverly Hills, CA 90210 Officer Capital International, Inc. (1999-2005). Age: 52 James Ndiaye Vice President Since Attorney, SEI Investments Company (2004-present).Vice SEI Investments and Assistant 2005 President, Deutsche Asset Management One Freedom Valley Drive Secretary (2003-2004).Associate, Morgan Lewis & Bockius LLP Oaks, PA 19456 (2000-2003).Assistant Vice President, ING Variable Age: 40 Annuities Group (1999-2000). Michael T. Pang Vice President Since Attorney, SEI Investments Company (2005-present). SEI Investments and Assistant 2005 Counsel, Caledonian Bank & Trust's Mutual Funds Group One Freedom Valley Drive Secretary (2004-2005). Counsel, Permal Asset Management Oaks, PA 19456 (2001-2004).Associate, Schulte, Roth & Zabel's Age: 36 Investment Management Group (2000-2001).
- ---------- (1) Each trustee may be contacted by writing to the Trustee c/o CNI Charter Funds, One Freedom Valley Drive, Oaks, PA 19456. (2) Each trustee shall hold office during the lifetime of this Trust until he or she dies, resigns, is declared bankrupt or incompetent by a court of appropriate jurisdiction, or is removed, or, if sooner, until the next meeting of shareholders is called for the purpose of electing trustees and until the election and qualification of his or her successor in accordance with the Trust's Declaration of Trust. The president, treasurer and secretary shall hold office until their respective successors are chosen or qualified, or until their removal or resignation, or in each case until he or she sooner dies, resigns, is removed, or becomes disqualified in accordance with the Trust's by-laws. (3) The "Fund Complex" consists of all series of the Trust. As of September 30, 2008, the Fund Complex consisted of 17 Funds. (4) Directorships of companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., "public companies") or other investment companies registered under the 1940 Act. * Mr. Kozlen is an "interested person" of the Trust, as defined in the 1940 Act, by virtue of his position with CNB, the parent company of CNAM, Inc., until March 2007. CNI CHARTER FUNDS | PAGE 87 trustees and officers (UNAUDITED) (CONTINUED) SEPTEMBER 30, 2008
TERM OF OFFICE AND NAME POSITION LENGTH OF ADDRESS, HELD WITH TIME PRINCIPAL OCCUPATION(S) AND AGE TRUST SERVED DURING PAST FIVE YEARS - ------------------------ ----------------- --------- -------------------------------------------------------- OFFICERS (CONCLUDED) Rodney J. Olea Vice President Since Senior Vice President, CNAM, Inc. (2001-present). Senior City National Bank 2000 Vice President and Director of Fixed Income, CNB 400 N. Roxbury Drive (1994-present). Beverly Hills, CA 90210 Age: 43 Joseph Gallo Vice President Since Attorney for SEI Investments since 2007. Associate SEI Investments and Secretary 2008 Counsel at ICMA-RC from 2004 to 2007. Assistant One Freedom Valley Drive Secretary of The Vantage Trust Company in 2007. Oaks, PA 19456 Assistant Secretary of The Vantagepoint Funds from 2006 Age: 35 to 2007. Investigator, U.S. Department of Labor from 2002 to 2004. Timothy G. Solberg Vice President Since Managing Director and Chief Investment Officer, CCM CCM Advisors, LLC and Assistant 2005 Advisors (2001-present); Director of Marketing and 190 S. LaSalle Street Secretary Client Services, Hewitt Investment Group, a Division of Suite 2800 Hewitt Associates LLC (1989-2001). Chicago, IL 60603 Age: 55 Susan Rudzinski Vice President Since Compliance Director, Convergent Capital Management, LLC CCM Advisors, LLC May (2006-present); Self-employed Investment Advisory 190 S. LaSalle Street 2007 Compliance and Operations Consultant (2005-2006); Suite 2800 Manager,Affiliate Contracts, The Burridge Group LLC Chicago, IL 60603 (2003-2004). Age: 45 Richard A. Weiss President Since President, CNAM, Inc. (2001-present). Executive Vice City National Bank and Chief 2008 President and Chief Investment Officer, CNB 400 N. Roxbury Drive Executive Officer (1999-present). Director, City National Securities Beverly Hills, CA 90210 (April 2003-present). Executive Vice President and Chief Age: 48 Investment Officer. Sanwa Bank California (1994-1999).
CNI CHARTER FUNDS | PAGE 88 notice to shareholders (UNAUDITED) SEPTEMBER 30, 2008 For shareholders that do not have a September 30, 2008 taxable year end, this notice is for informational purposes only. For shareholders with a September 30, 2008 taxable year end, please consult your tax advisor as to the pertinence of this notice. For California income tax purposes, for the fiscal year ended September 30, 2008, each of the California Tax Exempt Bond Fund and California Tax Exempt Money Market Fund is designating 82.82% and 93.28%, respectively, of its distributions paid from net investment income as exempt-interest dividends under Section 17145 of the California Revenue and Taxation Code. For Federal income tax purposes, for the fiscal year ended September 30, 2008 each Fund is designating the following items with regard to distributions paid during the year:
(E) DIVIDENDS (A) (B) QUALIFYING LONG TERM ORDINARY (C) (D) FOR CORPORATE CAPITAL GAIN INCOME TAX EXEMPT TOTAL DIVIDENDS REC. DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DEDUCTION (1) ------------- ------------- ---------- ------------- -------------- Large Cap Value Equity Fund 75.34% 24.66% 0.00% 100.00% 100.00% Large Cap Growth Equity Fund 0.00% 100.00% 0.00% 100.00% 100.00% RCB Small Cap Value Fund 68.07% 31.93% 0.00% 100.00% 21.13% Opportunistic Value Fund 0.00% 0.00% 0.00% 0.00% 0.00% Multi-Asset Fund 0.00% 100.00% 0.00% 100.00% 0.82% Corporate Bond Fund 0.00% 100.00% 0.00% 100.00% 0.00% Government Bond Fund 0.00% 100.00% 0.00% 100.00% 0.00% California Tax Exempt Bond Fund 0.00% 0.00% 100.00% 100.00% 0.00% High Yield Bond Fund 0.00% 100.00% 0.00% 100.00% 0.00% Prime Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% Government Money Market Fund 0.00% 100.00% 0.00% 100.00% 0.00% California Tax Exempt Money Market Fund 0.00% 0.07% 99.93% 100.00% 0.00% (F) QUALIFYING DIVIDEND (G) (H) (I) INCOME U.S. INTEREST SHORT -TERM (15% RATE GOVERNMENT RELATED CAPITAL GAIN FOR QDI) (2) INTEREST (3) DIVIDENDS (4) DIVIDENDS (5) ------------ ------------ ------------- ------------- Large Cap Value Equity Fund 100.00% 0.00% 0.00% 0.00% Large Cap Growth Equity Fund 100.00% 0.00% 0.00% 0.00% RCB Small Cap Value Fund 22.03% 0.00% 7.81% 100.00% Opportunistic Value Fund 0.00% 0.00% 0.00% 0.00% Multi-Asset Fund 19.73% 29.64% 22.85% 0.00% Corporate Bond Fund 0.00% 3.39% 96.70% 0.00% Government Bond Fund 0.00% 27.34% 96.84% 0.00% California Tax Exempt Bond Fund 0.00% 0.00% 0.00% 0.00% High Yield Bond Fund 0.00% 0.00% 99.40% 0.00% Prime Money Market Fund 0.00% 3.54% 99.86% 0.00% Government Money Market Fund 0.00% 40.27% 99.99% 0.00% California Tax Exempt Money Market Fund 0.00% 0.00% 0.06% 0.00%
(1) "DIVIDENDS RECEIVED DEDUCTION" REPRESENT DIVIDENDS WHICH QUALIFY FOR THE CORPORATE DIVIDENDS RECEIVED DEDUCTION. (2) "QUALIFYING DIVIDEND INCOME" REPRESENT QUALIFYING DIVIDENDS AS CREATED BY THE JOBS AND GROWTH TAX RELIEF RECONCILIATION ACT OF 2003. IT IS THE INTENTION OF THE FUND TO DESIGNATE THE MAX AMOUNT PERMITTED BY LAW. (3) "U.S. GOVERNMENT INTEREST" REPRESENT THE AMOUNT OF INTEREST THAT WAS DERIVED FROM DIRECT U.S. GOVERNMENT OBLIGATIONS AND DISTRIBUTED DURING THE FISCAL YEAR. THIS AMOUNT IS REFLECTED AS A PERCENTAGE OF ORDINARY INCOME. GENERALLY, INTEREST FROM DIRECT U.S. GOVERNMENT OBLIGATIONS IS EXEMPT FROM STATE INCOME TAX. HOWEVER, FOR SHAREHOLDERS WHO ARE RESI- DENTS OF CALIFORNIA, CONNECTICUT OR NEW YORK, THE STATUTORY THRESHOLD REQUIREMENTS WERE NOT SATISFIED TO PERMIT EXEMPTION OF THESE AMOUNTS FROM STATE INCOME. (4) "INTEREST RELATED DIVIDENDS" REPRESENT QUALIFYING INTEREST THAT IS EXEMPT FROM U.S. WITHHOLDING TAX WHEN PAID TO FOREIGN INVESTORS AS CREATED BY THE AMERICAN JOBS CREATION ACT OF 2004. THIS PROVISION OF THE INTERNAL REVENUE CODE WILL BE EXPIRING FOR YEARS BEGINNING AFTER JANUARY 1, 2010. (5) "SHORT-TERM CAPITAL GAIN DIVIDENDS" REPRESENT QUALIFYING SHORT-TERM CAPITAL GAIN THAT IS EXEMPT FROM U.S. WITHHOLDING TAX WHEN PAID TO FOREIGN INVESTORS AS CREATED BY THE AMERICAN JOBS CREATION ACT OF 2004. THIS PROVISION OF THE INTERNAL REVENUE CODE WILL BE EXPIRING FOR YEARS BEGINNING AFTER JANUARY 1, 2010. ITEMS (A), (B), (C) AND (D) ARE BASED ON THE PERCENTAGE OF EACH FUND'S TOTAL DISTRIBUTION. ITEMS (E) AND (F) ARE BASED ON THE PERCENTAGE OF "ORDINARY INCOME DISTRIBUTIONS." ITEM (G) IS BASED ON THE PERCENTAGE OF GROSS INCOME OF EACH FUND. ITEM (H) IS BASED ON THE PERCENTAGE OF NET INVESTMENT INCOME DISTRIBUTIONS. ITEM (I) IS BASED ON THE PERCENTAGE OF SHORT-TERM CAPITAL GAIN DISTRIBUTIONS. CNI CHARTER FUNDS | PAGE 89 disclosure of fund expenses (UNAUDITED) All mutual funds have operating expenses. As a shareholder of a Fund, your investment is affected by these ongoing costs, which include (among others) costs for portfolio management, administrative services, class-specific distribution fees and shareholder reports like this one. It is important for you to understand the impact of these costs on your investment returns. Operating expenses such as these are deducted from the Fund's gross income and directly reduce your final investment return. These expenses are expressed as a percentage of the Fund's average net assets; this percentage is known as the Fund's expense ratio. The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period. The table below illustrates your Fund's costs in two ways: ACTUAL FUND RETURN. This section helps you to estimate the actual expenses that your Fund incurred over the period. The "Expenses Paid During Period" column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the "Ending Account Value" number is derived from deducting that expense cost from the Fund's gross investment return. You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your actual account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the number shown for your Fund under "Expenses Paid During Period." HYPOTHETICAL 5% RETURN. This section helps you compare your Fund's costs with those of other mutual funds. It assumes that the Fund had an annual 5% return before expenses during the year, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to make this 5% calculation. You can assess your Fund's comparative cost by comparing the hypothetical result for your Fund in the "Expenses Paid During Period" column with those that appear in the same charts in the shareholder reports for other funds. NOTE: Because the return is set at 5% for comparison purposes - NOT your Fund's actual return - the account values shown do not apply to your specific investment.
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT ANNUALIZED PAID VALUE VALUE EXPENSE DURING 4/1/08 9/30/08 RATIOS PERIOD* --------- --------- ---------- -------- LARGE CAP VALUE FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 911.80 0.95% $ 4.54 Class N 1,000.00 910.50 1.20% 5.73 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,020.25 0.95% $ 4.80 Class N 1,000.00 1,019.00 1.20% 6.06 LARGE CAP GROWTH FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 911.90 0.98% $ 4.68 Class N 1,000.00 911.00 1.23% 5.88 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,020.10 0.98% $ 4.95 Class N 1,000.00 1,018.85 1.23% 6.21
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT ANNUALIZED PAID VALUE VALUE EXPENSE DURING 4/1/08 9/30/08 RATIOS PERIOD* --------- --------- ---------- -------- RCB SMALL CAP VALUE FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 864.70 1.20% $5.59 Class N 1,000.00 863.60 1.46% 6.80 Class R 1,000.00 865.50 1.09% 5.08 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,019.00 1.20% $6.06 Class N 1,000.00 1,017.70 1.46% 7.36 Class R 1,000.00 1,019.55 1.09% 5.50 OPPORTUNISTIC VALUE FUND(1) ACTUAL FUND RETURN Institutional Class $1,000.00 $ 931.00 0.23% $0.58+ Class N 1,000.00 931.00 1.20% 3.04+ Class E 1,000.00 930.00 0.69% 1.75+ HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,018.75 0.23% $1.16 Class N 1,000.00 1,019.00 1.20% 6.06 Class E 1,000.00 1,021.55 0.69% 3.49
(1) Commenced operations June 26, 2008. * Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). + Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 96/366 (to reflect the period from the Fund's commencement through September 30, 2008). CNI CHARTER FUNDS | PAGE 90
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT ANNUALIZED PAID VALUE VALUE EXPENSE DURING 4/1/08 9/30/08 RATIOS PERIOD* --------- --------- ---------- -------- MULTI-ASSET FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 923.50 1.25% $6.01 Class N 1,000.00 921.50 1.49% 7.16 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,018.75 1.25% $6.31 Class N 1,000.00 1,017.55 1.49% 7.52 CORPORATE BOND FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 964.60 0.73% $3.59 Class N 1,000.00 963.50 0.98% $4.81 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,021.35 0.73% $3.69 Class N 1,000.00 1,020.10 0.98% 4.95 GOVERNMENT BOND FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $1,004.90 0.70% $3.51 Class N 1,000.00 1,003.60 0.95% 4.76 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,021.50 0.70% $3.54 Class N 1,000.00 1,020.25 0.95% 4.80 CALIFORNIA TAX-EXEMPT BOND FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 996.90 0.50% $2.50 Class N 1,000.00 995.70 0.75% 3.74 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,022.50 0.50% $2.53 Class N 1,000.00 1,021.25 0.75% 3.79 HIGH YIELD BOND FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $ 940.10 1.00% $4.85 Class N 1,000.00 938.70 1.30% 6.30 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,020.00 1.00% $5.05 Class N 1,000.00 1,018.50 1.30% 6.56
BEGINNING ENDING EXPENSES ACCOUNT ACCOUNT ANNUALIZED PAID VALUE VALUE EXPENSE DURING 4/1/08 9/30/08 RATIOS PERIOD* --------- --------- ---------- -------- PRIME MONEY MARKET FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $1,010.70 0.58% $2.92 Class N 1,000.00 1,009.50 0.80% 4.02 Class S 1,000.00 1,008.50 1.00% 5.02 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,022.10 0.58% $2.93 Class N 1,000.00 1,021.00 0.80% 4.04 Class S 1,000.00 1,020.00 1.00% 5.05 GOVERNMENT MONEY MARKET FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $1,009.10 0.59% $2.96 Class N 1,000.00 1,008.00 0.81% 4.07 Class S 1,000.00 1,007.00 1.01% 5.07 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,022.05 0.59% $2.98 Class N 1,000.00 1,020.95 0.81% 4.09 Class S 1,000.00 1,019.95 1.01% 5.10 CALIFORNIA TAX EXEMPT MONEY MARKET FUND ACTUAL FUND RETURN Institutional Class $1,000.00 $1,006.80 0.55% $2.76 Class N 1,000.00 1,005.70 0.78% 3.91 Class S 1,000.00 1,004.60 0.98% 4.91 HYPOTHETICAL 5% RETURN Institutional Class $1,000.00 $1,022.25 0.55% $2.78 Class N 1,000.00 1,021.10 0.78% 3.94 Class S 1,000.00 1,020.10 0.98% 4.95
* Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by 183/366 (to reflect the one-half year period). CNI CHARTER FUNDS | PAGE 91 Board Approval of Advisory and Sub-Advisory Agreements (UNAUDITED) The Board of Trustees of CNI Charter Funds (the "Trust") is comprised of five Trustees, four of whom are independent of the Trust's investment advisers and sub-advisers (the "Independent Trustees"). During the six months ended September 30, 2008, the Board and the Independent Trustees approved renewal of the Trust's advisory agreement (the "Management Agreement") with City National Asset Management, Inc. ("CNAM"); renewal of CNAM's sub-advisory agreement (the "RCB Agreement") with Reed, Conner & Birdwell, LLC ("RCB") with respect to the RCB Small Cap Value Fund (the "RCB Fund"); renewal of CNAM's sub-advisory agreement (the "Halbis Agreement") with Halbis Capital Management (USA), Inc. ("Halbis") with respect to the High Yield Bond Fund; amendment of the Management Agreement to add the new Opportunistic Value Fund series of the Trust; and approval of a new sub-advisory agreement (the "SKBA Agreement") between CNAM and SKBA Capital Management, LLC ("SKBA") with respect to the Opportunistic Value Fund. The RCB Agreement, the Halbis Agreement and the SKBA Agreements are collectively referred to below as the "Sub-Advisory Agreements" and the Management Agreement and Sub-Advisory Agreements are referred to below as the "Agreements." GENERAL INFORMATION The following information summarizes the Board's considerations associated with its review of the Agreements. In connection with their deliberations, the Board considered such information and factors as they believed, in light of the legal advice furnished to them and their own business judgment, to be relevant. The Agreements were considered separately for each relevant investment portfolio of the Trust (each a "Fund"), although the Board took into account the common interests of all the relevant Funds in its review. As described below, the Board considered the nature, quality and extent of the various investment advisory and administrative services performed by CNAM, RCB and Halbis and to be performed by SKBA. In considering these matters, the Independent Trustees discussed the approval of the Agreements with management and in private sessions with counsel at which no representatives of CNAM, RCB, Halbis or SKBA were present. The Board reviewed extensive materials regarding investment results of CNAM, RCB, Halbis, and SKBA and advisory fee and expense comparisons, financial information with respect to each entity, descriptions of various functions such as compliance monitoring and portfolio trading practices, and information about the personnel providing investment management and administrative services to the Funds. They also took into account information they received at past Board meetings with respect to these matters. In deciding to approve the Agreements, the Board and the Independent Trustees did not identify a single factor as controlling and this summary does not describe all of the matters considered. However, the Board and the Independent Trustees concluded that each of the various factors referred to below favored such approval. CNAM NATURE, EXTENT AND QUALITY OF SERVICES In reviewing the services provided by CNAM, the Board considered a variety of matters, including the background, education and experience of its key portfolio management and operational personnel; its overall financial strength and stability; its resources and efforts to retain, attract and motivate capable personnel to serve the Funds; and the overall general quality and depth of its organization. The Board also took into account the experience, capability and integrity of its senior management; its investment philosophy and processes, including sub-adviser oversight processes; its brokerage, trading and soft dollar practices; its disaster recovery and contingency planning; and its commitment and systems in place with regard to compliance with applicable laws and regulations. INVESTMENT PERFORMANCE* The Board assessed the performance of each Fund compared with its respective benchmark and the average of all funds in its respective peer group category (each, a "universe") selected by Lipper, Inc. and iMoneyNet, Inc. (for the money market funds only) for the one-, two-, three- and five-year and since inception periods ended June 30, 2008 (one-, three- and six-months and since inception periods with respect to the Multi-Asset Fund, which commenced operations on October 1, 2007). The Board also reviewed the performance of each Fund compared with the average performance of all funds in its respective "bank channel" universe, which includes only those funds in the Fund's Lipper universe that are distributed through CNI CHARTER FUNDS | PAGE 92 Board Approval of Advisory and Sub-Advisory Agreements (UNAUDITED) (CONTINUED) institutional and retail bank channels. The Board made the following observations in reviewing the Funds' performance: - - The annualized total returns of the PRIME MONEY MARKET FUND AND CALIFORNIA TAX EXEMPT MONEY MARKET FUND were slightly below but near the average returns of the relevant Lipper institutional money market fund universes, iMoneyNet institutional fund universes, and bank channel universes for all periods. - - The annualized total returns of the GOVERNMENT MONEY MARKET FUND were below the average returns of the relevant Lipper institutional money market fund universe and near or above the average returns of the relevant iMoneyNet institutional fund universe and bank channel universe for all periods except for the period since inception (for which period the Fund's returns were below all measures). - - The annualized total returns of the LARGE CAP GROWTH EQUITY FUND were above the average returns of the Lipper large cap growth fund universe and bank channel universe and the S&P 500/Citigroup Growth Index returns for the two- and three-year and since inception periods, above the Lipper large cap growth fund universe and the S&P 500/Citigroup Growth Index returns and below the bank channel universe returns for the one-year period, and below all those measures for the five-year period. - - The annualized total returns of the LARGE CAP VALUE EQUITY FUND were above the average returns of the S&P 500/Citigroup Value Index returns and below the Lipper large cap value funds universe and the bank channel universe returns for the one- and two-year periods, above those measures (except the Index) for the three- and five-year periods, and below those measures for the period since inception. - - The annualized total returns of the RCB SMALL CAP VALUE FUND were below the Lipper small cap core funds universe average returns, Russell 2000 Index returns and bank channel universe average returns for the one-, two-, three- and five-year periods, but were above all those measures for the period since inception. - - The annualized total returns of the MULTI-ASSET FUND were above the Lipper flexible portfolio funds universe and bank channel universe returns for the one-, three- and six-month periods and the period since inception and below a blended index comprised of 60% in the S&P 500 Index and 40% in the Barclays Intermediate Government/Credit Index (the "Blended Index"), CPI plus 500 basis points benchmark and the Barclays US Treasury Inflation Protected Securities Index for all periods (except the Barclays Index for the 3-month period and the Blended Index for the since inception period). - - The annualized total returns of the CORPORATE BOND FUND were above the average returns of the Lipper short/intermediate investment-grade universe, the bank channel universe, and the Barclays Intermediate US Corporate Index returns for the one-, two- and three- year periods and above all measures except for the Index for the five-year and since inception periods. - - The annualized total returns of the GOVERNMENT BOND FUND were above the average returns of the Lipper short/intermediate US government universe and the bank channel universe and below the Barclays US Government Bond Index returns for all periods. - - The annualized total returns of the CALIFORNIA TAX EXEMPT BOND FUND were above the average returns of the Lipper California short/intermediate debt universe and the bank channel universe and below the Barclays California Intermediate-Short Municipal Index returns for all periods. - - The annualized total returns of the HIGH YIELD BOND FUND were above the average returns of the Lipper high current yield bond fund universe and the bank channel universe and below the Citigroup Bond High-Yield Market Index returns for the one-, two-, three- and five-year periods and above all measures for the period since inception. The Board concluded that CNAM continued to provide high quality management and oversight services to the Funds. They noted that the investment results of the Funds were generally good during the past year and, in most cases, during previous periods; that in the instances where some of the Funds had below average short-term performance results their longer term results were good; that the results for the Money Market Funds compared to their peer groups were acceptable given the special services and investment focuses of those Funds; and that consideration of returns of market indexes needed to take into account that indexes do not reflect the expenses of operating mutual funds. CNI CHARTER FUNDS | PAGE 93 Board Approval of Advisory and Sub-Advisory Agreements (UNAUDITED) (CONTINUED) With respect to the Opportunistic Value Fund, the Board noted that CNAM intended to delegate all active portfolio management with respect to the Fund to SKBA. The Board considered the performance returns of SKBA's Value Opportunity composite, which SKBA managed using substantially the same investment strategies as it would use with respect to the Opportunistic Value Fund, subject to CNAM's oversight. The Board noted that the annual returns of the Value Opportunity composite for the one- and three-year periods ending December 31, 2007 were lower than the returns for the S&P 500 Index, the Russell 1000 Value Index, the Lipper large cap value funds universe average, the bank channel universe average, and the average of a peer group of 40 funds included in the Lipper universe that were expected to be most similar to the Fund based on factors including minimum investments and asset size (the "Peer Group"). The Trustees noted, however, that the Value Opportunity composite returns were higher than the returns of the S&P 500 Index, Lipper universe and bank channel universe for the five-year period, and above all measures for the seven-year, ten-year and since-inception periods ending December 31, 2007 (except for the Russell 1000 Index for the since-inception period). The Board concluded that CNAM would likely be able to provide high quality management and oversight services to the Opportunistic Value Fund. ADVISORY FEES AND FUND EXPENSES The Board reviewed information regarding the advisory fees charged by CNAM and the total expenses of each of the Funds compared to those of the funds included in the relevant Lipper and bank channel universes, and concluded that the advisory fees and expenses of the Funds continued to be reasonable. The Board observed that the actual investment advisory fees (net of fee waivers) paid by the California Tax-Exempt Money Market Fund, California Tax-Exempt Bond Fund and Multi-Asset Fund were below the relevant Lipper averages, and the fees paid by the other Funds were within the middle 60% of all funds in the relevant Lipper universe (except for the Government Money Market Fund and the High Yield Bond Fund, which were in the highest 20% of the funds in the relevant Lipper universes). With respect to the Government Money Market Fund, the Board noted the substantial demands on CNAM's portfolio management staff described below. With respect to the High Yield Bond Fund, the Board observed that the average credit quality of the Fund's holdings is higher than the average credit quality of other high yield bond funds, and that highly specialized expertise and continuous monitoring is required to maintain such high average credit quality. As the Funds represent CNAM's sole investment advisory clients, the Board was not able to compare the fees charged to the Funds by CNAM with fees charged to other institutional clients of CNAM. With respect to the total expenses of the Funds, the Board considered that total expenses (before fee waivers) as of June 30, 2008 were below the averages for relevant Lipper fund universes (except for the Prime Money Market Fund, California Tax-Exempt Money Market Fund, Government Money Market Fund and Multi-Asset Fund, each of which were within the middle 60% of funds in its Lipper universe). The Board noted that the Money Market Funds offered unique features such as automatic sweep functions, late cut-off times for investment, and no minimum transaction size requirements, and as a result had high levels of activity and considerable asset volatility, which created substantial demands on CNAM's portfolio management staff. With respect to the Multi-Asset Fund, the Board observed that the Fund had commenced operations on October 1, 2007 and that the assets of the Fund were relatively low. With respect to the Opportunistic Value Fund, the Trustees noted that CNAM's proposed annual investment advisory fee was below the average advisory fee of the funds in each of the Peer Group, the Lipper universe and the bank channel universe. In considering total expenses, the Trustees noted that the estimated expense ratios for all classes of the Fund were lower than the average total expense ratios of the funds in the Lipper universe and the bank channel universe. The Board considered information prepared by CNAM relating to its costs and profits with respect to the Funds, noting that because the Trust is CNAM's sole client, all of CNAM's costs are allocable to the Trust. The Board also considered the benefits received by CNAM and its affiliates as a result of CNAM's relationship with the Funds, including investment advisory fees paid to CNAM, fees paid to City National Bank and City National Securities, Inc. for providing certain shareholder servicing and sub-distribution services to the Trust, and the intangible benefits of any favorable publicity arising in connection with the Funds' performance. They also noted that although there were no advisory fee breakpoints, CNI CHARTER FUNDS | PAGE 94 Board Approval of Advisory and Sub-Advisory Agreements (UNAUDITED) (CONTINUED) based on CNAM's operations significant economies of scale were not likely to be realized until the asset levels of most of the Funds were significantly higher than their current levels. CONCLUSIONS Based on their review, including their consideration of each of the factors referred to above, the Board and the Independent Trustees concluded that the compensation payable to CNAM pursuant to the Management Agreement is fair and reasonable in light of the nature and quality of the services being provided by CNAM to the respective Funds and their shareholders, and that renewal of the Management Agreement was in the best interest of the Funds and their shareholders. With respect to the Opportunistic Value Fund, the Board and the Independent Trustees concluded that the compensation proposed to be paid to CNAM by the Fund pursuant to the Management Agreement is fair and reasonable in light of the nature and quality of the services to be provided by CNAM to the Fund and its shareholders, and that approval of the amended Management Agreement was in the best interest of the Fund and its shareholders. RCB NATURE, EXTENT AND QUALITY OF SERVICES In reviewing the services provided by RCB to the RCB Fund, the Board considered a variety of matters, including the background, education and experience of its key portfolio management and operational personnel; its overall financial strength and stability; its resources and related efforts to retain, attract and motivate capable personnel to serve the RCB Fund; and the overall general quality and depth of its organization. The Board also reviewed RCB's investment philosophy and processes as well as its brokerage and trading practices. INVESTMENT PERFORMANCE The Board's observations regarding the RCB Fund's performance are described above. The Board noted that although the RCB Fund had underperformed relative to the Lipper small cap core funds universe average returns and Russell 2000 Index returns for the short-term periods, the RCB Fund's long-term performance was good, and the Board determined to continue to monitor the performance of the RCB Fund. ADVISORY FEES AND FUND EXPENSES The Board reviewed information regarding the advisory fees charged by RCB and observed that the fees charged by RCB were low compared to the fees it charged to other institutional clients. They noted that CNAM pays RCB's sub-advisory fees out of CNAM's advisory fee. Although RCB's fee schedule has no breakpoints, they also noted that the asset levels of the RCB Fund were not so substantial that they would lead to significant economies of scale. The Board considered information prepared by RCB relating to its costs and profits with respect to the RCB Fund, as well as the methodologies used to determine and allocate such costs to its management of the Fund. The Board also considered the benefits received by RCB and its affiliates as a result of RCB's relationship with the Fund, including the sub-advisory fees paid to RCB, fees paid to CNAM as the Fund's adviser, fees paid to City National Bank and City National Securities, Inc. for providing certain shareholder servicing and sub-distribution services to the Trust, and the intangible benefits of any favorable publicity arising in connection with the RCB Fund's performance. CONCLUSIONS Based on their review, including their consideration of each of the factors referred to above, the Board and the Independent Trustees concluded that the compensation payable to RCB pursuant to the RCB Agreement is fair and reasonable in light of the nature and quality of the services being provided by RCB to the RCB Fund and its shareholders, and that renewal of the RCB Agreement was in the best interest of the Fund and its shareholders. HALBIS NATURE, EXTENT AND QUALITY OF SERVICES In reviewing the services provided by Halbis to the High Yield Bond Fund, the Board considered a variety of matters, including the background, education and experience of its key portfolio management and operational personnel; its overall financial strength and stability; its resources and related efforts to retain, attract and motivate capable personnel to serve the High Yield Bond Fund; and the overall general quality and CNI CHARTER FUNDS | PAGE 95 Board Approval of Advisory and Sub-Advisory Agreements (UNAUDITED) (CONCLUDED) depth of its organization. The Board also reviewed Halbis' investment philosophy and processes as well as its brokerage and trading practices. INVESTMENT PERFORMANCE The Board's observations regarding the High Yield Bond Fund's performance are described above. As indicated above, the Board and the Independent Trustees concluded that Halbis continued to provide high quality services to the High Yield Bond Fund. ADVISORY FEES AND FUND EXPENSES The Board reviewed information regarding the advisory fees charged by Halbis and observed that the fees charged by Halbis were low compared to its standard fee schedule. They also noted that CNAM pays Halbis' sub-advisory fees out of CNAM's advisory fee. The Board considered information prepared by Halbis relating to its revenues with respect to the High Yield Bond Fund as well as the benefits received by Halbis as a result of Halbis' relationship with the Funds, including fees paid to Halbis as the Fund's sub-adviser and the intangible benefits of any favorable publicity arising in connection with the High Yield Bond Fund's performance. CONCLUSIONS Based on their review, including their consideration of each of the factors referred to above, the Board and the Independent Trustees concluded that the compensation payable to Halbis pursuant to the Halbis Agreement is fair and reasonable in light of the nature and quality of the services being provided by Halbis to the High Yield Bond Fund and its shareholders, and that renewal of the Halbis Agreement was in the best interest of the Fund and its shareholders. SKBA NATURE, EXTENT AND QUALITY OF SERVICES In reviewing the services to be provided by SKBA to the Opportunistic Value Fund, the Board considered a variety of matters, including the background, education and experience of its key portfolio management and operational personnel; its overall financial strength and stability; its resources and related efforts to retain, attract and motivate capable personnel to serve the Opportunistic Value Fund; and the overall general quality and depth of its organization. The Board also reviewed SKBA's investment philosophy and processes as well as its brokerage and trading practices. INVESTMENT PERFORMANCE The Board's observations regarding SKBA's Value Opportunity composite performance are described above. As indicated above, the Board and the Independent Trustees concluded that SKBA would likely provide high quality services to the Opportunistic Value Fund. ADVISORY FEES AND FUND EXPENSES With respect to SKBA's proposed advisory fees, the Trustees made the same observations they had made in reviewing CNAM's advisory fee with respect to the Fund. They also noted that SKBA's proposed advisory fee with respect to the Opportunistic Value Fund was higher than SKBA's fees with respect to the other series of the Trust for which it serves as sub-adviser. The Trustees considered, however, that SKBA had agreed to implement expense caps for all classes of the Fund, and that any reimbursement of Fund expenses in excess of the caps would be SKBA's responsibility. They also noted that CNAM pays SKBA's sub-advisory fees out of CNAM's advisory fee. The Board considered information prepared by SKBA relating to its costs and profits with respect to the Opportunistic Value Fund, as well as the methodologies used to determine and allocate such costs to its management of the Fund. The Board also considered the benefits to be received by SKBA as a result of SKBA's relationship with the Opportunistic Value Fund, including fees paid to SKBA as the Fund's sub-adviser and the intangible benefits of any favorable publicity arising in connection with the Fund's performance. CONCLUSIONS Based on their review, including their consideration of each of the factors referred to above, the Board and the Independent Trustees concluded that the compensation proposed to be paid to SKBA pursuant to the SKBA Agreement is fair and reasonable in light of the nature and quality of the services to be provided by SKBA to the Opportunistic Value Fund and its shareholders, and that approval of the SKBA Agreement would be in the best interest of the Fund and its shareholders. * PRIOR TO OCTOBER 31, 2008, THE "BARCLAYS" INDEXES WERE NAMED THE "LEHMAN" INDEXES. CNI CHARTER FUNDS | PAGE 96 (GRPHIC) THANK YOU for your investment with CNI Charter Funds. We value the trust you have placed in us to help you achieve your financial goals. (GRAPHIC) For more information on CNI Charter Funds, including charges and expenses, please call 1-888-889-0799 for a free prospectus. Read it carefully before you invest or send money. (CNI CHARTER FUNDS(SM) LOGO) (LOGO) CNI-AR-001-0700 ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer and principal accounting officer. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The registrant's board of trustees has determined that the registrant has at least one audit committee financial expert serving on the audit committee. (a)(2) The audit committee financial experts are William R. Sweet and James R. Wolford. Messrs. Sweet and Wolford are independent as defined in Form N-CSR Item 3(a)(2). ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fees billed by KPMG LLP related to the Trust KPMG LLP billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows:
- ------------------ ----------------------------------------------------- ----------------------------------------------------- 2008 2007 - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- All fees and All fees and All other fees All fees and All fees and All other fees services to the services to and services to services to the services to and services to Trust that were service service Trust that were service service pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that were did not require were did not require pre-approved pre-approval pre-approved pre-approval - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (a) Audit $315,000 N/A N/A $278,000 N/A N/A Fees(1) - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (b) Audit- N/A N/A N/A N/A N/A N/A Related Fees - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (c) Tax Fees $66,400 N/A N/A $66,075 N/A N/A - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ----------------- (d) All N/A N/A N/A N/A N/A N/A Other Fees - ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Notes: (1) Audit fees include amounts related to the audit of the registrant's annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. (e)(1) The audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X are as follows. PRE-APPROVAL OF AUDIT AND PERMITTED NON-AUDIT SERVICES PROVIDED TO THE TRUST The Audit Committee pre-approves all audit services and permissible non-audit services (e.g., tax services) to be provided to the Trust by the Trust's independent accountant (the "Accountant"), including the fees therefor. The Audit Committee may delegate to one or more of its members the authority to grant pre-approvals. In connection with such delegation, the Audit Committee is required to establish pre-approval policies and procedures, including the requirement that the decisions of any member to whom authority is delegated be presented to the full Committee at each of its scheduled meetings. Pre-approval for a permitted non-audit service is not required if: (1) the aggregate amount of all such non-audit services is not more than 5% of the total revenues paid by the Trust to the Accountant in the fiscal year in which the non-audit services are provided; (2) such services were not recognized by the Trust at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Committee or by one or more members of the Committee to whom authority to grant such approvals has been delegated by the Committee. Additionally, the Audit Committee is required to pre-approve the Accountant's engagements for non-audit services with the Trust's investment advisers and any of their affiliates that provide ongoing services to the Trust in accordance with the foregoing paragraph, if the engagement relates directly to the operations and financial reporting of the Trust, unless the aggregate amount of all services provided constitutes no more than 5% of the total amount of revenues paid to the Accountant by the Trust, the investment adviser and any affiliate of the investment adviser that provides ongoing services to the Trust during the fiscal year in which the services are provided that would have to be pre-approved by the Committee pursuant to this paragraph (without regard to this exception). (e)(2) Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows: ---------------------------- ----------------- ---------------- 2008 2007 ---------------------------- ----------------- ---------------- Audit-Related Fees N/A N/A ---------------------------- ----------------- ---------------- Tax Fees N/A N/A ---------------------------- ----------------- ---------------- All Other Fees N/A N/A ---------------------------- ----------------- ---------------- (f) Not Applicable (g) The aggregate non-audit fees and services billed by KPMG LLP for the last two fiscal years were $66,400 and $66,075 for 2008 and 2007, respectively. (h) Not Applicable ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable to open-end management investment companies. ITEM 6. SCHEDULE OF INVESTMENTS Included as part of the report to shareholders filed under Item 1 of this report. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable to open-end management investment companies. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not applicable to open-end management investment companies. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable to open-end management investment companies. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. CNI Charter Funds (the "Fund") has adopted the following procedures by which shareholders may recommend nominees to the Fund's Board of Trustees. The Fund has a Nominating Committee comprised solely of persons who are not considered "interested persons" of the Fund within the meaning of the Investment Company Act of 1940. The Committee periodically reviews such issues as the Board's composition, responsibilities, committees, compensation and other relevant issues, and recommends any appropriate changes to the full Board of Trustees. While the Committee normally is able to identify from its own resources an ample number of qualified candidates, it will consider shareholder suggestions of persons to be considered as nominees to fill future vacancies on the Board, so long as the shareholder or shareholder group submitting a proposed nominee: (a) beneficially owns more than 5% of the Fund's voting shares and has held such shares continuously for two years, and (b) is not an adverse holder. No eligible shareholder or shareholder group may submit more than one independent Board member nominee each year. Such suggestions must be sent in writing to the Fund 's Secretary, and must be accompanied by the shareholder's contact information, the nominee's contact information and number of Fund shares owned by the nominee, all information regarding the nominee that would be required to be disclosed in solicitations of proxies for elections of directors required under the Securities Exchange Act of 1934, and a notarized letter from the nominee stating his or her intention to serve as a nominee and be named in the Fund's proxy statement, if so designated by the Committee and the Board of Trustees. ITEM 11. CONTROLS AND PROCEDURES. (a) The certifying officers, whose certifications are included herewith, have evaluated the registrant's disclosure controls and procedures within 90 days of the filing date of this report. In their opinion, based on their evaluation, the registrant's disclosure controls and procedures are adequately designed, and are operating effectively to ensure, that information required to be disclosed by the registrant in the reports it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no significant changes in the registrant's internal control over financial reporting that occurred during the registrant's last fiscal half-year that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEMS 12. EXHIBITS. (a)(1) Code of Ethics attached hereto. (a)(2) Separate certifications for the principal executive officer and the principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed herewith. (b) Officer certifications as required by Rule 30a-2(b) under the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing as an Exhibit. - -------------------------------------------------------------------------------- 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. (Registrant) CNI Charter Funds By (Signature and Title)* /S/ Richard A. Weiss ------------------------- Richard A. Weiss, President & CEO Date November 24, 2008 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 (Signature and Title)* /s/ Richard A. Weiss ------------------------- Richard A. Weiss, President & CEO Date November 24, 2008 By (Signature and Title)* /s/ Eric Kleinschmidt ------------------------- Eric Kleinschmidt, Controller and COO Date November 24, 2008 * Print the name and title of each signing officer under his or her signature. EX-99.CODE ETH 2 cnicoe9_08.txt CNI AR 9_08 CODE OF ETHICS CNI CHARTER FUNDS SUPPLEMENTAL CODE OF ETHICS FOR PRINCIPAL OFFICERS AND SENIOR FINANCIAL OFFICERS The Board of Trustees (the "Board") of CNI Charter Funds (the "Trust") has adopted this Supplemental Code of Ethics (the "Code") for the Trust's Principal Officers and Senior Financial Officers (the "Officers") to guide and remind the Officers of their responsibilities to the Trust, other Officers, shareholders of the Trust, and governmental authorities. Officers are expected to act in accordance with the guidance and standards set forth in this Code. For the purposes of this Code, the Trust's Principal Officers and Senior Financial Officers shall include: the Principal Executive Officer; the Principal Financial Officer; the Principal Accounting Officer; the Controller; and any persons performing similar functions on behalf of the Trust, regardless of whether such persons are employed by the Trust or a third party. This Code is intended to serve as the code of ethics described in Section 406 of The Sarbanes-Oxley Act of 2002 and Form N-CSR. To the extent that an Officer is subject to the Trust's code of ethics adopted pursuant to Rule 17j-1 of the Investment Company Act of 1940, as amended (the "Rule 17j-1 Code"), this Code is intended to supplement and be interpreted in the context of the Rule 17j-1 Code. This Code also should be interpreted in the context of all applicable laws, regulations, the Trust's Agreement and Declaration of Trust and Bylaws, as amended, and all other governance and disclosure policies and documents adopted by the Board. All Officers must become familiar and fully comply with this Code. Because this Code cannot and does not cover every applicable law or provide answers to all questions that might arise, all Officers are expected to use common sense about what is right and wrong, including a sense of when it is proper to seek guidance from others on the appropriate course of conduct. The purpose of this Code is to set standards for the Officers that are reasonably designed to deter wrongdoing and are necessary to promote: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely, and understandable disclosure in reports and documents that the Trust files with, or submits to, the Securities and Exchange Commission (the "SEC") and in any other public communications by the Trust; o compliance with applicable governmental laws, rules and regulations; o the prompt internal reporting of violations of the Code to the appropriate persons as set forth in the Code; and o accountability for adherence to the Code. 1. HONEST AND ETHICAL CONDUCT A. HONESTY, DILIGENCE AND PROFESSIONAL RESPONSIBILITY Officers are expected to observe both the form and the spirit of the ethical principles contained in this Code. Officers must perform their duties and responsibilities for the Trust: o with honesty, diligence, and a commitment to professional and ethical responsibility; o carefully, thoroughly and in a timely manner; and o in conformity with applicable professional and technical standards. Officers who are certified public accountants are expected carry out their duties and responsibilities in a manner consistent with the principles governing the accounting profession, including any guidelines or principles issued by the Public Company Accounting Oversight Board or the American Institute of Certified Public Accountants from time to time. B. OBJECTIVITY / AVOIDANCE OF UNDISCLOSED CONFLICTS OF INTEREST Officers are expected to maintain objectivity and avoid undisclosed conflicts of interest. In the performance of their duties and responsibilities for the Trust, Officers must not subordinate their judgment to personal gain and advantage, or be unduly influenced by their own interests or by the interests of others. Officers must avoid participation in any activity or relationship that constitutes a conflict of interest unless that conflict has been completely disclosed to affected parties. Further, Officers should avoid participation in any activity or relationship that could create the appearance of a conflict of interest. A conflict of interest would generally arise if an Officer directly or indirectly participated in any investment, interest, association, activity or relationship that may impair or appear to impair the Officer's objectivity. Any Officer who may be involved in a situation or activity that might be a conflict of interest or give the appearance of a conflict of interest should consider reporting such situation or activity using the reporting procedures set forth in Section 4 of this Code. The Audit Committee will not be responsible for monitoring or enforcing this conflict of interest policy, but rather each Officer is responsible for self-compliance with this conflict of interest policy. 2 C. PREPARATION OF FINANCIAL STATEMENTS Officers must not knowingly make any misrepresentations regarding the Trust's financial statements or any facts in the preparation of the Trust's financial statements, and must comply with all applicable laws, standards, principles, guidelines, rules and regulations in the preparation of the Trust's financial statements. This section is intended to prohibit: o making, or permitting or directing another to make, materially false or misleading entries in the Trust's financial statements or records; o failing to correct the Trust's financial statements or records that are materially false or misleading when he or she has the authority to record an entry; and o signing, or permitting or directing another to sign, a document containing materially false or misleading financial information. Officers must be scrupulous in their application of generally accepted accounting principles. No Officer may (i) express an opinion or state affirmatively that the financial statements or other financial data of the Trust are presented in conformity with generally accepted accounting principles, or (ii) state that he or she is not aware of any material modifications that should be made to such statements or data in order for them to be in conformity with generally accepted accounting principles, if such statements or data contain any departure from generally accepted accounting principles then in effect in the United States. Officers must follow the laws, standards, principles, guidelines, rules and regulations established by all applicable governmental bodies, commissions or other regulatory agencies in the preparation of financial statements, records and related information. If an Officer prepares financial statements, records or related information for purposes of reporting to such bodies, commissions or regulatory agencies, the Officer must follow the requirements of such organizations in addition to generally accepted accounting principles. If an Officer and his or her supervisor have a disagreement or dispute relating to the preparation of financial statements or the recording of transactions, the Officer should take the following steps to ensure that the situation does not constitute an impermissible subordination of judgment: o The Officer should consider whether (i) the entry or the failure to record a transaction in the records, or (ii) the financial statement presentation or the nature or omission of disclosure in the financial statements, as proposed by the supervisor, represents the use of an acceptable alternative and does not materially misrepresent the facts or result in an 3 omission of a material fact. If, after appropriate research or consultation, the Officer concludes that the matter has authoritative support and/or does not result in a material misrepresentation, the Officer need do nothing further. o If the Officer concludes that the financial statements or records could be materially misstated as a result of the supervisor's determination, the Officer should follow the reporting procedures set forth in Section 4 of this Code. D. OBLIGATIONS TO THE INDEPENDENT AUDITOR OF THE TRUST In dealing with the Trust's independent auditor, Officers must be candid and not knowingly misrepresent facts or knowingly fail to disclose material facts, and must respond to specific inquiries and requests by the Trust's independent auditor. Officers must not take any action, or direct any person to take any action, to fraudulently influence, coerce, manipulate or mislead the Trust's independent auditor in the performance of an audit of the Trust's financial statements for the purpose of rendering such financial statements materially misleading. 2. FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE It is the Trust's policy to provide full, fair, accurate, timely, and understandable disclosure in reports and documents that the Trust files with, or submits to, the SEC and in any other public communications by the Trust. The Trust has designed and implemented Disclosure Controls and Procedures to carry out this policy. Officers are expected to use their best efforts to promote, facilitate, and prepare full, fair, accurate, timely, and understandable disclosure in all reports and documents that the Trust files with, or submits to, the SEC and in any other public communications by the Trust. Officers must review the Trust's Disclosure Controls and Procedures to ensure they are aware of and carry out their duties and responsibilities in accordance with the Disclosure Controls and Procedures and the public reporting obligations of the Trust. Officers are responsible for monitoring the integrity and effectiveness of the Trust's Disclosure Controls and Procedures. 4 3. COMPLIANCE WITH APPLICABLE LAWS, RULES AND REGULATIONS Officers are expected to know, respect and comply with all laws, rules and regulations applicable to the conduct of the Trust's business. If an Officer is in doubt about the legality or propriety of an action, business practice or policy, the Officer should seek advice from the Officer's supervisor or the Trust's legal counsel. In the performance of their work, Officers must not knowingly be a party to any illegal activity or engage in acts that are discreditable to the Trust. Officers are expected to promote the Trust's compliance with applicable laws, rules and regulations. To promote such compliance, Officers may establish and maintain mechanisms to educate employees carrying out the finance and compliance functions of the Trust about any applicable laws, rules or regulations that affect the operation of the finance and compliance functions and the Trust generally. 4. REPORTING OF ILLEGAL OR UNETHICAL BEHAVIOR Officers should promptly report any conduct or actions by an Officer that do not comply with the law or with this Code. Officers and the Trust shall adhere to the following reporting procedures: o Any Officer who questions whether a situation, activity or practice is acceptable must immediately report such practice to the Principal Executive Officer of the Trust (or to an Officer who is the functional equivalent of this position) or to the Trust's legal counsel. The person receiving the report shall consider the matter and respond to the Officer within a reasonable amount of time. o If the Officer is not satisfied with the response of the Principal Executive Officer or counsel, the Officer must report the matter to the Chairman of the Audit Committee. If the Chairman is unavailable, the Officer may report the matter to any other member of the Audit Committee. The person receiving the report shall consider the matter, refer it to the full Audit Committee if he or she deems appropriate, and respond to the Officer within a reasonable amount of time. o If, after receiving a response, the Officer concludes that appropriate action was not taken, he or she should consider any responsibility that may exist to communicate to third parties, such as regulatory authorities or the Trust's independent auditor. In this matter, the Officer may wish to consult with his or her own legal counsel. 5 o The Audit Committee and the Trust will not be responsible for monitoring or enforcing this reporting of violations policy, but rather each Officer is responsible for self-compliance with this reporting of violations policy. o To the extent possible and as allowed by law, reports will be treated as confidential. o If the Audit Committee determines that an Officer violated this Code, failed to report a known or suspected violation of this Code, or provided intentionally false or malicious information in connection with an alleged violation of this Code, the Trust may take disciplinary action against any such Officer to the extent the Audit Committee deems appropriate. No Officer will be disciplined for reporting a concern in good faith. o The Trust and the Audit Committee may report violations of the law to the appropriate authorities. 5. ACCOUNTABILITY AND APPLICABILITY All Officers will be held accountable for adherence to this Code. On an annual basis, within 30 days of the beginning of each calendar year, each Officer shall certify in writing his or her receipt, familiarity and commitment to compliance with this Code, by signing the Acknowledgment Form (APPENDIX A to this Code). This Code is applicable to all Officers, regardless of whether such persons are employed by the Trust or a third party. If an Officer is aware of a person ("Potential Officer") who may be considered an Officer as defined by this Code, the Officer should inform legal counsel to the Trust of such Potential Officer so that a determination can be made regarding whether such Potential Officer has completed or should complete an Acknowledgment Form. However, the absence of such a determination will not be deemed to relieve any person of his or her duties under this Code. 6. DISCLOSURE OF THIS CODE This Code shall be disclosed by at least one of the following methods in the manner prescribed by the SEC, unless otherwise required by law: o by filing a copy of the Code with the SEC; o by posting the text of the Code on the Trust's website; or o by providing, without charge, a copy of the Code to any person upon request. 6 7. WAIVERS Any waiver of this Code, including an implicit waiver, that has been granted to an Officer, may be made only by the Board or a committee of the Board to which such responsibility has been delegated, and must be disclosed by the Trust in the manner prescribed by law and as set forth above in Section 6 (Disclosure of this Code). 8. AMENDMENTS This Code may be amended by the affirmative vote of a majority of the Board. Any amendment of this Code, must be disclosed by the Trust in the manner prescribed by law and as set forth above in Section 6 (Disclosure of this Code), unless such amendment is deemed to be technical, administrative, or otherwise non-substantive. Any amendments to this Code will be provided to the Officers. Approved by the Board of Trustees on August 14, 2003. APPENDIX A CNI CHARTER FUNDS CERTIFICATION AND ACKNOWLEDGMENT OF RECEIPT OF SUPPLEMENTAL CODE OF ETHICS FOR PRINCIPAL OFFICERS AND SENIOR FINANCIAL OFFICERS I acknowledge and certify that I have received a copy of the CNI Charter Funds' Supplemental Code of Ethics for Principal Officers and Senior Financial Officers (the "Code"). I understand and agree that it is my responsibility to read and familiarize myself with the policies and procedures contained in the Code and to abide by those policies and procedures. I acknowledge my commitment to comply with the Code. _________________________________________ ________________________________ Officer Name (Please Print) Officer Signature ________________________________ Date EX-99.CERT 3 cni302certrw.txt CNI AR 9_08 RW 302 CERT CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Richard A. Weiss certify that: 1. I have reviewed this report on Form N-CSR of CNI Charter Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 24, 2008 /s/ Richard A. Weiss - -------------------- Richard A. Weiss President & CEO EX-99.CERT 4 cni302certek.txt CNI AR 9_08 EK 302 CERT CERTIFICATION Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 I, Eric Kleinschmidt, certify that: 1. I have reviewed this report on Form N-CSR of CNI Charter Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: November 24, 2008 /s/ Eric Kleinschmidt - --------------------- Eric Kleinschmidt Controller & COO EX-99.906CERT 5 cni906certrw.txt CNI AR 9_08 RW 906 CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the Chief Executive Officer of CNI Charter Funds (the "Fund") (the "Fund"), with respect to the Fund's Form N-CSR for the period ended September 30, 2008 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. Dated: November 24, 2008 /s/ Richard A. Weiss -------------------- Richard A. Weiss President & CEO EX-99.906CERT 6 cni906certek.txt CNI AR 9_08 EK 906 CERT CERTIFICATION Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 The undersigned, the Chief Operating Officer of CNI Charter Funds (the "Fund") (the "Fund"), with respect to the Fund's Form N-CSR for the period ended September 30, 2008 as filed with the Securities and Exchange Commission, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge: 1. such Form N-CSR fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in such Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. 3. Dated: November 24, 2008 /s/ Eric Kleinschmidt --------------------- Eric Kleinschmidt Controller & COO -----END PRIVACY-ENHANCED MESSAGE-----