UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-07923
CNI CHARTER FUNDS
(Exact name of registrant as specified in charter)
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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, 2006
DATE OF REPORTING PERIOD: SEPTEMBER 30, 2006
ITEM 1. REPORTS TO STOCKHOLDERS.
CNI CHARTER FUNDS(SM) [LOGO OMITTED](R)
[GRAPHIC OMITTED]
CNI Charter Funds 2006 Annual Report
September 30, 2006
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
6 Equity Funds Overview
10 Fixed Income Funds Investment Adviser's Report
12 Fixed Income Funds Overview
16 Money Market Funds Investment Adviser's Report
17 Schedules of Investments
58 Statements of Assets & Liabilities
61 Statements of Operations
64 Statements of Changes in Net Assets
68 Financial Highlights
71 Notes to Financial Statements
78 Report of Independent Registered Public Accounting Firm
79 Board Members and Officers
82 Notice to Shareholders
83 Disclosure of Fund Expenses
85 Approval of Investment Advisory Agreements
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The Funds file their complete schedule 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
Fund's 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, 2006
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This annual report covers the CNI Charter Funds for the fiscal year ended
September 30, 2006. 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. Relatively healthy economic
growth and strong corporate earnings, combined with steady and rising inflation
during most of this period produced strong returns to financial assets as well
as many alternative asset classes, including real estate, commodities, and other
real assets. Equity markets continued to surprise on the upside despite growing
evidence of a maturing economic recovery and, more recently, an imminent
slowdown in economic growth. Fixed income securities generally produced sub-par,
single-digit returns as the Federal Reserve ended its monetary tightening
program after 17 consecutive rate increases, leaving the Treasury yield curve
inverted. By adhering strictly to our fundamental investment strategies we were
able to produce highly competitive results in all asset categories within the
CNI Charter Funds family.
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, 2006.
TWELVE-MONTH MARKET WATCH:
OCTOBER 2005 - SEPTEMBER 2006
Domestic economic growth remained above historical norms for the most part
during the past twelve months, although clear, market-related signs of an
imminent slowdown were beginning to emerge towards the end of this period.
Stronger than expected corporate earnings growth combined with rising short-term
interest rates were the primary factors driving the stock and bond markets over
the last twelve months. International equities, in particular, showed very
attractive returns in U.S. Dollar terms, given the relative weakness in the
Dollar during this time.
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Twelve-Month October, 2005 -
Index Watch: September, 2006
EQUITIES
S&P 500 Stock Index: ............................................. +10.8%
Russell 2000 Value Index: ........................................ +14.0%
MSCI EAFE Index: ................................................. +19.2%
BONDS
Lehman Brothers Gov't/Credit
Bond Index: ................................................... + 3.3%
Lehman Brothers Aggregate
Bond Index: ................................................... + 3.7%
Lehman Brothers CA
Intermediate Muni Index: ...................................... + 3.7%
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CNI CHARTER FUNDS | PAGE 2
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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.
All four of our equity-oriented funds produced gains over the past twelve
months, in keeping with the broader market trends. The LARGE CAP VALUE EQUITY
FUND led the pack with a 14.5% return. The TECHNOLOGY GROWTH FUND rose 6.8%,
followed closely by the LARGE CAP GROWTH EQUITY FUND, which gained 4.6%. The RCB
SMALL CAP VALUE EQUITY FUND eked out a 0.4% return for the same period.
All four CNI Charter Bond Funds also produced solid gains for the period. Once
again, the HIGH YIELD BOND FUND led the way with a 6.9% total return. The
CALIFORNIA TAX-EXEMPT BOND FUND rose 3.2%, while the CORPORATE BOND FUND
returned 3.2% and the GOVERNMENT BOND FUND gained 2.9%.
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 the 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, AND PRODUCTS OF COMPANIES
IN WHICH TECHNOLOGY FUNDS INVEST MAY BE SUBJECT TO SEVERE COMPETITION AND RAPID
OBSOLESCENCE. AN INVESTMENT IN THE FUNDS IS NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
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*NOT FDIC INSURED *NO BANK GUARANTEE *MAY LOSE VALUE
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AHA Investment Funds, a series of the CNI Charter Funds
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Endorsed by the American Hospital Association, the five AHA Investment Funds
encourage healthy behavior by having guidelines that prohibit investment in any
tobacco-related securities.
The five AHA Funds in the CNI Charter Fund family are:
o AHA Limited Maturity Fixed Income Fund
o AHA Full Maturity Fixed Income Fund
o AHA Balanced Fund
o AHA Diversified Equity Fund
o AHA Socially Responsible Equity Fund
These Funds together with the other eleven CNI Charter Funds provide an
unwavering commitment to client satisfaction and quality investments that help
successful individuals, families and businesses achieve their financial goals.
For more information about the CNI Charter Funds (including the AHA Investment
Funds) visit www.cnicharterfunds.com.
CNI CHARTER FUNDS | PAGE 3
investment adviser's report
SEPTEMBER 30, 2006
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EQUITY FUNDS
For the fiscal year ending September 30, 2006, the U.S. equity market, as
measured by the S&P 500, returned 10.8%. The majority of the asset appreciation
came in the first eight months of the fiscal year, as returns pushed higher into
early May 2006. Corporate earnings remained the catalyst as growth rates,
although lower than the previous year, continued to come in above expectations.
Inflation fears, though, took a toll on the market in the middle of May 2006, as
commodity prices continued to rise. The market sold off about 5% from its May
highs, reaching its lows in mid June. Federal Reserve Bank ("Fed") Chairman
Bernanke's talk in mid July started the recent market upturn on comments
regarding the possible end to rising short-term interest rates. After raising
the short-term rate to 5.25% in June, the Fed has kept rates stable in the two
most recent Fed meetings. In addition to the Fed possibly ending its tightening
policy, declines in commodity prices also provided a positive effect to stock
prices. By the end of September, stock prices had surpassed their 12 month
highs, with the Dow Jones Industrial Average surpassing its all time high.
EQUITY FUND PERFORMANCE
(ALL RETURNS LISTED FOR CNI CHARTER FUNDS REFER TO INSTITUTIONAL CLASS SHARES
o The LARGE CAP VALUE EQUITY FUND returned 14.5% during the twelve
months ending September 30, 2006. The S&P 500/Citigroup Value Index
returned 15.4% and the Lipper Large-Cap Value Funds Classification
returned 12.0% over the same time period. The telecommunications
sector produced the top returns with companies like BellSouth
producing a 69.0% return. The announced merger with AT&T (still
pending) is expected to bring about improved efficiencies, cost
reductions, and higher earnings. In the financial sector, Goldman
Sachs gained 40.3% as earnings beat analysts' expectations on higher
investment-banking fees. Ryder System, a leader in transportation and
supply chain management, returned a positive 53.3%, as growth in its
leasing unit continued to push earnings above expectations. Stocks
that hurt performance included Intel, down 29.3%, as semiconductor
prices declined and the company lost market share to rivals. Qualcomm
was also down 22.0% on fears that increased usage of a rival phone
technology will hurt their future earnings.
o The LARGE CAP GROWTH EQUITY FUND returned 4.6% during the twelve
months ending September 30, 2006. The S&P 500/Citigroup Growth Index
returned 6.4% and the Lipper Large-Cap Growth Funds Classification
returned 3.5%, over the same time period. Stocks that helped
performance included the T. Rowe Price Group, which was up 25.2%. The
asset management company benefit from strong asset flows into their
fund complex. Pepsi Bottling Group, the second largest soft-drink
distributor, gained 25.9% on increased sales of its "non-soda"
products. In the technology sector, Oracle was up 43.1% as software
license revenue surged due to recent acquisitions. Detractors from
fund performance included Dell, down 33.2%. Dell missed analysts'
earnings expectations due to competitive pricing and lost market share
within the personal-computer market. Boston Scientific, maker of
medical supplies, lost 36.7% due to the market's concern over a recent
acquisition and issues regarding product quality.
o The RCB SMALL CAP VALUE FUND returned 0.4% for the 12 months ending
September 30, 2006 as compared with the Russell 2000 Value Index at
14.0%, the Russell 2000 Index at 9.9%, the Russell 2500 Value Index at
11.1%, and the Lipper Small Cap Value Funds Classification at 8.1%.
The following text regarding performance has been provided by Reed,
Connor & Birdwell, LLC, sub-adviser to the Fund.
CNI CHARTER FUNDS | PAGE 4
investment adviser's report
SEPTEMBER 30, 2006
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"Over the trailing 12-month period we have grossly erred on the
conservative side as far as asset allocation and stock selection while
the investing world continued to embrace "risky" assets in the face of
what we consider to be the uninspiring valuation of the overall market
and mounting external risks. We believe this set of circumstances
peaked in the first quarter of 2006 just in time to produce the
maximum amount of performance embarrassment. However during the most
recent quarter-end, we witnessed a nice rebound in year-to-date
performance on an absolute basis and some "modest" make-up in relative
performance. After a truly dismal four quarter run of relative
performance, we believe we are back on track. Part of it is us; the
mathematics of two takeovers of the largest positions in a
concentrated portfolio (Advo and Intrawest) combined with a
determination to stop making a few hellacious mistakes seemed to have
produced the desired results. The other part consists of the small cap
market forces which act as a headwind for the Fund. These would
include liquidity, the inflows and subsequent outflows generated by
exchange traded funds and the sector composition of the indexes. Our
30-odd stock portfolio has historically been able to side-step an
index based headwind and we look forward to clawing back performance
one stock at a time."
o The TECHNOLOGY GROWTH FUND returned 6.8% during the twelve months
ending September 30, 2006. The Russell 3000 Technology Index returned
6.1% and the Lipper Science & Technology Funds Objective returned
5.1%, over the same time period. Stocks that produced positive returns
included Akamai Technologies, up 156.6%. The company exhibited strong
earnings growth on increased demand for their software that
accelerates the delivery of internet content. Cognizant Technology
Solutions gained 58.9% on surging demand for computer consulting
services. Apple Computer was up 43.6% on improved sales of their
Macintosh personal computers and iPod music players. Stocks that lost
ground included Tekelec, down 51.7%. The developer of
telecommunication products and services had to restate earnings and
take a write-down on a previous acquisition. NAVTEQ, a leading
provider of navigation systems, lost 47.7% on declining sales in the
automotive industry and delays in new product launches.
STRATEGIC OUTLOOK FOR EQUITY FUNDS
As we look forward, the strength of the economy and its effect on inflation and
interest rates is the question of the day. Market strategists are divided. Some
see lower rates on slower economic growth. Others see higher rates based on
higher inflation and stronger than expected economic growth. At City National
Asset Management, Inc., we see growing evidence of a maturing economic recovery
and a slowdown in economic growth. Still, most economists are not calling for a
recession anytime in the near future. In this environment, 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.
CNI CHARTER FUNDS | PAGE 5
fund overview
SEPTEMBER 30, 2006
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LARGE CAP VALUE EQUITY FUND
The Fund seeks to provide capital appreciation and moderate income consistent
with current returns available in the market place by investing in large U.S.
corporations and U.S. dollar denominated American Depository Receipts of large
foreign corporations which are undervalued and whose market valuations compare
favorably relative to similar companies.
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Comparison of Change in the Value of a $10,000 Investment in the CNI Large Cap
Value Equity Fund, Institutional Class or Class A Shares, versus the S&P 500/
Citigroup Value Index, and the Lipper Large Cap Value Funds Classification(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
LARGE CAP VALUE EQUITY FUND
CNI Large Cap Value Fund, CNI Large Cap Value Fund, S&P 500/Citigroup Lipper Large Cap
Institutional Class Shares Class A Shares Value Index Value Funds Index
1/14/00 10,000 10,000 10,000 10,000
9/30/00 10,099 10,093 9,871 10,449
9/30/01 8,446 8,410 8,508 9,641
9/30/02 6,852 6,814 6,989 7,783
9/30/03 8,498 8,433 8,579 9,544
9/30/04 10,147 10,036 10,271 11,137
9/30/05 11,607 11,455 11,950 12,644
9/30/06 13,290 13,086 13,796 14,160
(*) Standard and Poor's has changed the name and the construction methodology
of their style indices. The S&P 500/Barra Value Index became the S&P
500/Citigroup Value Index in mid-December 2005. The Large Cap Value Fund
will use the new index as a comparative investment benchmark going
forward.
(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
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Ticker 1-Year 3-Year 5-Year Inception
Shares Symbol Return Return Return to Date
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Institutional Class (1)^ CNLIX 14.50% 16.07% 9.49% 4.33%
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Class A (2) CVEAX 14.24% 15.78% 9.25% 4.09%+
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(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 where City National Bank serves as trustee or in a fiduciary
capacity.
+ Class A 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 A Shares. If it had,
performance would have been lower than that shown.
Top Ten Holdings
% OF PORTFOLIO
Bank of America 3.6
Citigroup 3.2
Exxon Mobil 2.7
Wells Fargo 2.5
Verizon Communications 2.4
Hewlett-Packard 2.4
Wachovia 1.9
Morgan Stanley 1.9
BellSouth 1.9
American International Group 1.8
CNI CHARTER FUNDS | PAGE 6
fund overview
SEPTEMBER 30, 2006
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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 Depository 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.
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Comparison of Change in the Value of a $10,000 Investment in the CNI Large Cap
Growth Equity Fund, Institutional Class or Class A Shares, versus the S&P
500/Citigroup Growth Index, and the Lipper Large Cap Growth Funds
Classification(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
LARGE CAP GROWTH EQUITY FUND
CNI Large Cap Growth Equity Fund, CNI Large Cap Growth Equity Fund, S&P 500/Citigroup Lipper Large Cap
Institutional Class Shares Class A Shares Growth Index* Growth Funds Classification
1/14/00 $10,000 $10,000 $10,000 $10,000
9/30/00 9,370 9,349 9,763 10,314
9/30/01 6,360 6,329 5,950 6,080
9/30/02 5,250 5,210 4,538 4,814
9/30/03 6,380 6,320 5,717 5,825
9/30/04 6,775 6,691 6,203 6,259
9/30/05 7,490 7,379 6,709 7,040
9/30/06 7,834 7,715 7,138 7,288
(*) Standard and Poor's has changed the name and the construction methodology
of their style indices. The S&P 500/Barra Growth Index became the S&P
500/Citigroup Growth Index in mid-December 2005. The Large Cap Growth Fund
will use the new index as a comparative investment benchmark going
forward.
(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
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Ticker 1-Year 3-Year 5-Year Inception
Shares Symbol Return Return Return to Date
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Institutional Class (1)^ CNGIX 4.59% 7.08% 4.25% (3.57)%
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Class A (2) CLEAX 4.55% 6.87% 4.03% (3.79)%+
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(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 where City National Bank serves as trustee or in a fiduciary
capacity.
+ Class A 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 A Shares. If it had,
performance would have been lower than that shown.
Top Ten Holdings
% OF PORTFOLIO
Exxon Mobil 4.7
Procter & Gamble 3.5
Microsoft 3.0
General Electric 2.4
Wal-Mart Stores 2.4
Johnson & Johnson 2.4
Amgen 2.2
PepsiCo 2.1
Gilead Sciences 1.9
UnitedHealth Group 1.7
CNI CHARTER FUNDS | PAGE 7
fund overview
SEPTEMBER 30, 2006
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RCB SMALL CAP VALUE FUND
The Fund seeks to provide capital appreciation by investing primarily in smaller
U.S. corporations which are considered undervalued.
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Comparison of Change in the Value of a $10,000 Investment in the CNI RCB Small
Cap Value Fund, Institutional Class, Class A 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(1), and the Lipper Small Cap
Core Funds Classification(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
RCB SMALL CAP VALUE FUND
CNI RCB
Small Cap CNI RCB CNI RCB
Value Fund, Small Cap Small Cap Lipper Small Lipper Small
Institutional Value Fund, Value Fund, Russell 2000 Russell 2000 Russell 2500 Cap Value Funds Cap Core Funds
Class Shares Class A Shares Class R Shares Index Value Index Value Index Classification Classification
<s>
9/30/98 $10,000 $10,000 $ 9,650 $10,000 $10,000 $10,000 $10,000 $10,000
9/30/99 15,120 15,120 14,591 11,907 10,583 10,840 11,193 12,044
9/30/00 16,859 16,859 16,269 14,692 12,209 12,547 13,113 15,646
9/30/01 18,395 18,395 17,751 11,576 12,893 12,863 13,741 14,011
9/30/02 16,353 16,331 15,740 10,499 12,705 12,784 13,694 13,228
9/30/03 23,802 23,714 22,856 14,332 16,728 16,779 17,812 17,376
9/30/04 29,745 29,557 28,485 17,022 21,020 20,899 22,133 20,968
9/30/05 32,681 32,380 31,208 20,077 24,751 25,355 26,216 24,969
9/30/06 32,811 32,435 31,252 22,069 28,219 28,177 28,350 26,854
(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
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Ticker 1-Year 3-Year 5-Year Inception
Shares Symbol Return Return Return to Date
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Institutional Class (1)^ RCBIX 0.40% 11.29% 12.27%+ 16.01%+
- -------------------------------------------------------------------------------
Class A (1) RCBAX 0.17% 11.00% 12.01%+ 15.85%+
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Class R (2) RCBSX 0.14% 11.00% 11.98% 15.82%
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Class R with load RCBSX (3.38)% 9.69% 11.19% 15.31%
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(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 where City National Bank serves as trustee or in a fiduciary
capacity.
+ The performance of the Institutional Class and Class A 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 Rule 12b-1 Fees and expenses
applicable to Institutional and Class A Shares. Fees for the Institutional
Class Shares are lower than the fees for the Class R Shares;
correspondingly, performance would have been higher than that shown.
Top Ten Holdings*
% OF PORTFOLIO
Lodgenet Entertainment 7.3
Alleghany 5.1
Smart & Final 4.8
White Mountains Insurance Group 4.4
USI Holdings 4.4
Ralcorp Holdings 4.3
Annaly Mortgage Management 4.3
Montpelier Re Holdings 4.3
Conseco 4.2
Jacuzzi Brands 4.1
*Excludes Repurchase Agreement
CNI CHARTER FUNDS | PAGE 8
fund overview
SEPTEMBER 30, 2006
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TECHNOLOGY GROWTH FUND
The Fund seeks to provide long-term capital appreciation by investing in U.S.
corporations and U.S. dollar denominated American Depository Receipts of foreign
corporations with the potential for growth and that are engaged in the
production, distribution and development of products or services based on
technology and should benefit significantly from advances or improvements in
technology.
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Comparison of Change in the Value of a $10,000 Investment in the CNI Technology
Growth Fund, Institutional Class or Class A Shares, versus the Russell 3000
Technology Index, and the Lipper Science & Technology Funds Objective(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
TECHNOLOGY GROWTH FUND
CNI Technology CNI Technology Lipper Science
Growth Fund Growth Fund Russell 3000 & Technology
Institutional Class Shares Class A Shares Technology Index Funds Objective
10/03/00 $10,000 $10,000 $10,000 $10,000
9/30/01 3,544 3,463 3,608 3,494
9/30/02 2,262 2,201 2,449 2,308
9/30/03 3,504 3,405 3,953 3,819
9/30/04 3,464 3,346 3,951 3,871
9/30/05 4,044 3,894 4,560 4,565
9/30/06 4,318 4,139 4,839 4,796
(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
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Ticker 1-Year 3-Year 5-Year Inception
Shares Symbol Return Return Return to Date
- -------------------------------------------------------------------------------
Institutional Class (1)^ CTEIX 6.77% 7.22% 4.03% (13.08)%
- -------------------------------------------------------------------------------
Class A (2) CTGAX 6.30% 6.73% 3.63% (13.80)%
- -------------------------------------------------------------------------------
(1) Commenced operations on October 3, 2000.
(2) Commenced operations on October 23, 2000.
^ The Fund's Institutional Class Shares are currently offered only to
accounts where City National Bank serves as trustee or in a fiduciary
capacity.
Top Ten Holdings
% OF PORTFOLIO
Microsoft 8.0
Hewlett-Packard 5.2
IBM 4.3
Cisco Systems 4.0
Intel 3.8
Texas Instruments 3.6
Qualcomm 3.5
Oracle 3.1
Apple Computer 2.9
Symantec 2.6
CNI CHARTER FUNDS | PAGE 9
investment adviser's report
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
FIXED INCOME FUNDS
The bond market is more focused on an economic slowdown at the end of the fiscal
year ending September 30, 2006. The Federal Reserve Bank ("Fed") has been on
hold for the last three Federal Open Market Committee (FOMC) meetings due to the
weaker economic news and slightly tamer inflationary reports. During this fiscal
period, the Fed raised rates six times and is now on hold at a 5.25% Fed Funds
rate.
During the fiscal year, City National Asset Management, Inc. altered its
maturity posture to its investment grade bond funds from a slightly defensive
position to a neutral stance versus our comparative benchmarks. This strategy
shift comes after rates have been increasing for several quarters. The yield
curve remains quite flat or inverted as investors debate how long the Fed will
remain on hold. Looking ahead, we are focused more on "horizon return" than
yield to maturity. If the Fed reverses course and starts lowering interest rates
to counter a weak economy in the future, the biggest risk to the bond investors,
in our opinion, would be re-investment risk. So even if there is little yield to
be garnered by extending out maturities at this juncture, we are keeping an eye
on our maturity posture and might move it from a neutral maturity stance to an
aggressive maturity stance versus our comparative benchmarks in order to lock in
these higher rates for an extended period of time.
BOND FUND PERFORMANCE
(ALL RETURNS LISTED FOR CNI CHARTER FUNDS REFER TO INSTITUTIONAL CLASS SHARES)
o The CORPORATE BOND FUND produced a total return of 3.2% for the last
12 months. For the same period, the Lehman Intermediate U.S. Corporate
Index 3.6%. The corporate bond universe is heavily weighted in lower
quality (Baa) rated securities that did reasonably well during this
recent period and yield spreads for corporate bonds versus Treasuries
remained tight. This Fund continued to retain a higher quality profile
than the Index and thus did not capture all of the performance
garnered by the lower quality bonds. The Fund's performance compares
favorably with its peer group where the Lipper Short/Intermediate
Investment Grade Objective was up 3.1%.
o The GOVERNMENT BOND FUND produced a total return of 2.9% for the last
12 months. For the same period, the Lehman Intermediate U.S.
Government Bond Index returned 3.5%. Our defensive maturity posture
for the Fund worked for most of the period but underperformed after
rates peaked in June 2006. Since that time, we have extended our
average maturity in the Fund to capture the higher yields and position
the Fund for appreciation potential if rates decline. The Fund
performance relative to the peer group is tracking closely as measured
by the Lipper Short Intermediate U.S. Government Objective return of
3.0%.
o The CALIFORNIA TAX EXEMPT BOND FUND produced a total return of 3.2%
for the last 12 months. For the same period, the Lehman CA
Intermediate-Short Municipal Bond Index returned 3.2%. The Fund's
strategy tracked close to the benchmark but trailed slightly as we
extended our average maturity to lock in the higher yields during the
mid-summer. The Fund's performance compares favorably with its peer
group where the Lipper California Short/Intermediate Municipal Debt
Objective returned 3.0%.
o The HIGH YIELD BOND FUND produced a total return of 6.9% for the last
12 months. For the same period, the Citigroup High Yield Market Index
returned 7.4%. Absolute performance remained strong for this sector
even though the economy showed signs of a slowdown. The Fund trailed
the Index slightly due its underweight in the lowest quality of bonds
within the Index. The Fund's relative performance vis-a-vis its peer
group remained positively competitive where the Lipper High Current
Yield Bond Funds Objective returned 6.7%.
CNI CHARTER FUNDS | PAGE 10
investment adviser's report
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
STRATEGIC OUTLOOK FOR BOND FUNDS
With economic news all focused on an economic slowdown, many observers expect
the Fed to pause indefinitely in its rate hike campaign or even reverse course
in the quarters leading into 2007 if a problem develops in the economy. If so,
the biggest risk for the typical bond investor or Fund in the coming quarters is
"reinvestment risk" -- the possibility that funds reinvested as bonds mature may
be at lower rates. With that said, we are positioned for stable rates in the
near-term as evidenced by our neutral maturity stance versus the benchmarks. We
are poised to extend maturities on major market sell-offs or if we see
significant economic weakness coupled with a decline in inflationary measures.
We continue to monitor these and other factors in order to add value to our
actively managed bond funds in all interest rate environments.
Sincerely,
/s/ Rodney J. Olea
Rodney J. Olea
DIRECTOR OF FIXED INCOME
CITY NATIONAL ASSET MANAGEMENT, INC.
CNI CHARTER FUNDS | PAGE 11
fund overview
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
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 A Shares, versus the Lehman Intermediate
Corporate Index, and Lipper Short/Intermediate Investment Grade Debt
Objective(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
CORPORATE BOND FUND
CNI Corporate CNI Corporate Lehman Lipper Short/
Bond Fund Bond Fund Intermediate Intermediate Investment
Institutional Class Shares Class A Shares Corporate Index Grade Debt Objective
1/14/00 $10,000 $10,000 $10,000 $10,000
9/30/00 10,577 10,592 10,644 10,569
9/30/01 11,861 11,871 11,992 11,750
9/30/02 12,580 12,547 12,852 12,392
9/30/03 13,428 13,359 14,129 12,997
9/30/04 13,717 13,624 14,686 13,266
9/30/05 13,890 13,748 14,946 13,427
9/30/06 14,333 14,151 15,479 13,838
(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 3.19% 2.20% 3.86% 5.51%
- -------------------------------------------------------------------------------
Class A (2) CCBAX 2.93% 1.94% 3.58% 5.31%+
- -------------------------------------------------------------------------------
(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 where City National Bank serves as trustee or in a fiduciary
capacity.
+ Class A 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 A Shares. If it had,
performance would have been lower than that shown.
Top Ten Holdings*
% OF PORTFOLIO
General Electric Capital,
Ser A, MTN
6.000%, 6/15/12 2.7
Giro Balanced Funding
5.270%, 10/05/06 2.6
FNMA CMO,
Ser 2002-56, Cl MC
5.500%, 09/25/07 2.3
FHLMC, Ser R004, Cl Al
5.125%, 12/15/13 2.2
Union Planters Bank
5.125%, 06/15/07 2.1
Lehman Brothers Holdings
8.250%, 06/15/07 2.0
Walt Disney
5.700%, 07/15/11 2.0
National Rural Utilities,
Ser C, MTN
7.250%, 03/01/12 1.9
AXA Financial
7.750%, 08/01/10 1.9
U.S. Treasury Inflation Index Note
2.000%, 01/15/14 1.9
* Excludes Cash Equivalents
CNI CHARTER FUNDS | PAGE 12
fund overview
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
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 A Shares, versus the Lehman Intermediate
U.S. Government Bond Index, and the Lipper Short/Intermediate U.S. Government
Objective(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
GOVERNMENT BOND FUND
CNI Government CNI Government Lehman Intermediate Lipper Short/
Bond Fund Bond Fund U.S. Government Intermediate
Institutional Class Shares Class A Shares Bond Index U.S. Government Objective
1/14/00 $10,000 $10,000 $10,000 $10,000
9/30/00 10,564 10,535 10,659 10,539
9/30/01 11,796 11,720 12,031 11,721
9/30/02 12,685 12,596 13,045 12,506
9/30/03 13,024 12,937 13,502 12,828
9/30/04 13,130 13,009 13,760 12,994
9/30/05 13,316 13,159 13,940 13,114
9/30/06 13,701 13,505 14,432 13,501
(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 2.89% 1.70% 3.04% 4.80%
- -------------------------------------------------------------------------------
Class A (2) CGBAX 2.63% 1.44% 2.88% 4.58%+
- -------------------------------------------------------------------------------
(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 where City National Bank serves as trustee or in a fiduciary
capacity.
+ Class A 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 A Shares. If it had,
performance would have been lower than that shown.
Top Ten Holdings
% OF PORTFOLIO
FNMA
7.125%, 06/15/10 11.6
FNMA
5.500%, 03/15/11 7.1
FNMA
5.000%, 01/23/09 6.7
FNMA
5.010%, 11/10/10 6.7
FHLB
6.200%, 03/22/21 5.4
FNMA
5.000%, 07/25/08 5.4
FHLMC REMIC,
Ser R009, Cl AK
5.750%, 12/15/18 5.3
FHLB
4.375%, 09/17/10 5.3
FHLMC, Ser R004, Cl Al
5.125%, 12/15/13 5.2
FHLMC, Ser R003, Cl AG
5.125%, 10/15/15 5.0
CNI CHARTER FUNDS | PAGE 13
fund overview
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
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 A Shares, versus the Lehman
CA Intermediate-Short Municipal Index, and the Lipper CA Short/Intermediate
Municipal Debt Objective(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
CALIFORNIA TAX EXEMPT BOND FUND
CNI California CNI California Lehman CA Lipper CA Short/
Tax-Exempt Bond Fund, Tax-Exempt Bond Fund, Intermediate-Short Intermediate
Institutional Class Shares Class A Shares Municipal Index Municipal Debt Objective
1/14/00 $10,000 $10,000 $10,000 $10,000
9/30/00 10,545 10,532 10,545 10,460
9/30/01 11,305 11,278 11,403 11,165
9/30/02 12,162 12,112 12,272 11,850
9/30/03 12,482 12,399 12,633 12,104
9/30/04 12,731 12,627 12,999 12,287
9/30/05 12,941 12,803 13,250 12,632
9/30/06 13,353 13,163 13,677 13,011
(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 3.18% 2.28% 3.39% 4.40%
- -------------------------------------------------------------------------------
Class A (2) CCTEX 2.81% 2.01% 3.14% 4.18%+
- -------------------------------------------------------------------------------
(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 where City National Bank serves as trustee or in a fiduciary
capacity.
+ Class A 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 A Shares. If it had,
performance would have been lower than that shown.
Top Ten Holdings
% OF PORTFOLIO
San Diego, Unified School District,
Election 1998 Project,
Ser B-1, GO, MBIA
5.000%, 07/01/17 4.1
Escondido, Union School District,
Refunding & Financing Project,
COP, MBIA
4.750%, 07/01/19 2.9
California State, Public Works
Board Lease, Department of
Corrections-State Prisons Project,
Ser A, RB, AMBAC
5.250%, 12/01/13 2.4
New York State, Ser E, RB
6.000%, 04/01/14 2.1
San Bernardino, Community
College District, Election 2002
Project, Ser B, GO, MBIA
5.250%, 08/01/14 2.1
Sanger, Unified School District,
Election 2006 Project,
Ser A, GO, FSA
5.000%, 08/01/18 2.1
Arizona State, Transportation
Board, GAN, Ser A, RB
5.000%, 07/01/13 2.0
San Diego County, Edgemoor &
Regional Systems Projects,
COP, AMBAC
5.000%, 02/01/18 2.0
Los Angeles, Water & Power
Authority, Power Systems Project,
Ser A, RB
5.000%, 07/01/08 1.9
Oakland, Redevelopment Agency,
Central District Redevelopment
Project, TA, AMBAC
5.500%, 02/01/14 1.9
CNI CHARTER FUNDS | PAGE 14
fund overview
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
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 A Shares, versus the Citigroup High
Yield Market Index and the Lipper High Current Yield Bond Funds Objective(1)
[LINE GRAPHIC OMITTED]
PLOT POINTS ARE AS FOLLOWS:
HIGH YIELD BOND FUND
CNI High Yield CNI High Yield Citigroup Lipper High Current
Bond Fund, Bond Fund, High Yield Yield Bond
Institutional Class Shares Class A Shares Market Index Funds Objective
1/14/00 $10,000 $10,000 $10,000 $10,000
9/30/00 10,420 10,394 9,974 9,882
9/30/01 10,165 10,109 9,373 9,058
9/30/02 10,653 10,563 9,059 8,900
9/30/03 12,757 12,611 12,073 11,142
9/30/04 14,348 14,142 13,586 12,401
9/30/05 15,044 14,784 14,468 13,155
9/30/06 16,082 15,757 15,536 14,035
(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 6.90% 8.03% 9.61% 7.33%
- ------------------------------------------------------------------------------
Class A (1) CHBAX 6.58% 7.70% 9.28% 7.01%
- ------------------------------------------------------------------------------
(1) Commenced operations on January 14, 2000.
^ The Fund's Institutional Class Shares are currently offered only to
accounts where City National Bank serves as trustee or in a fiduciary
capacity.
Top Ten Holdings*
% OF PORTFOLIO
GMAC
6.750%, 12/01/14 1.6
General Motors
7.125%, 07/15/13 1.6
Qwest
7.625%, 06/15/15 1.4
Charter Communications Holdings
10.250%, 09/15/10 1.0
Smithfield Foods, Ser B
8.000%, 10/15/09 0.9
Ford Motor Credit
7.375%, 02/01/11 0.8
AES
9.000%, 05/15/15 0.8
Whiting Petroleum
7.000%, 02/01/14 0.7
Pogo Producing
6.875%, 10/01/17 0.7
El Paso
7.000%, 05/15/11 0.7
* Excludes cash equivalents
CNI CHARTER FUNDS | PAGE 15
investment adviser's report
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
MONEY MARKET FUNDS
The money market environment continued to change for most of this fiscal year
ending September 30, 2006. The Federal Reserve Bank ("Fed") raised rates six
times this period and has since been in a holding pattern for three consecutive
meetings. Fed Funds target rate has been at 5.25% for over a quarter now and it
seems poised to stay there for the remainder of 2006. Fed policy makers have
been on a holding pattern as they weigh the mixed data on the economy. Inflation
or core inflation remains at high levels, but the Fed is counting on the drop in
oil prices and a slowdown in housing to help on this front. This of course
remains to be seen. Until then, market participants are "data dependent" as we
try to predict how long the Fed remains on hold and if the next move is up
(because of high inflation) or down (because of a dramatic slowdown in economic
growth coupled with declining inflation.) The CNI Charter Money Market Funds are
enjoying higher yields after the Fed has moved short-term rates upward 17 times
these past few years. We will maintain a conservative maturity posture until
such a time we fear the Fed will reverse course and start cutting rates.
The PRIME MONEY MARKET FUND continued to emphasize quality and liquidity in
these uncertain times. With interest rates peaking above the 5.25% level in
recent months -- higher than it's been in years, the average days to maturity
have remained relatively short. This maturity allocation positions the Fund to
perform competitively as 2007 approaches. The Fund has focused primarily on
high-grade short-term commercial paper and corporate securities as well as
government agency notes on the longer-end of the money market maturity spectrum.
The GOVERNMENT MONEY MARKET FUND continued to be well-positioned from both a
sector as well as maturity perspective. The maturity profile has incorporated a
modified barbell strategy for most of the past fiscal year. This strategy has
been beneficial over the past year as short rates have risen. This should also
position the Fund to add value as short maturities continue to rise in 2006. The
Fund's yield continued to be enhanced by the concentration of Government Agency
securities over Treasury instruments.
Our objective for the CALIFORNIA TAX EXEMPT MONEY MARKET FUND has always been
safety and liquidity. Over the past fiscal year, prior historic budgetary
challenges in California have given way to an improving credit profile for the
state. Our stringent credit research effort remains the cornerstone to managing
the Fund in the never-ending political/economic backdrop of Sacramento. The
average days to maturity remains relatively short and our credit quality profile
remains very high.
STRATEGIC OUTLOOK
Our outlook continues to be favorable for money market investments. Short-term
rates will likely peak around these levels and move lower as we enter 2007.
While a slowing economy is often synonymous with declining interest rates, many
are uncertain of the Fed's next move due to the current high level of core
inflation. Either way, we are near the peak of short-term rates and will extend
out if the Fed changes its posture to one of easing. With the inverted yield
curve in securities maturing under one year we maintain a shorter maturity
stance for the CNI Charter Money Market Funds until the Fed changes its monetary
policy. City National Asset Management, Inc. is monitoring the market very
closely and will be proactive so as to take advantage of market opportunities.
Sincerely,
/s/ Rodney J. Olea
Rodney J. Olea
DIRECTOR OF FIXED INCOME
CITY NATIONAL ASSET MANAGEMENT, INC.
CNI CHARTER FUNDS | PAGE 16
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP VALUE EQUITY FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
32.6% Financials
14.2% Industrials
8.9% Consumer Discretionary
8.7% Information Technology
7.9% Energy
6.6% Telecommunications
5.9% Utilities
4.8% Consumer Staples
4.6% Materials
4.2% Healthcare
1.6% Short-Term Investments
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCK [98.4%]
AEROSPACE & DEFENSE [5.1%]
Goodrich 16,400 $ 665
Honeywell International 21,200 867
Lockheed Martin 9,800 843
Northrop Grumman 17,000 1,157
Raytheon 15,200 730
United Technologies 17,500 1,109
-----------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE 5,371
=============================================================================
AIR FREIGHT & LOGISTICS [0.7%]
FedEx 6,800 739
=============================================================================
AUTO COMPONENTS [0.5%]
Johnson Controls 6,800 488
=============================================================================
BEVERAGES [2.1%]
Coca-Cola 27,100 1,211
Coca-Cola Enterprises 32,100 669
Molson Coors Brewing, Cl B 4,500 310
-----------------------------------------------------------------------------
TOTAL BEVERAGES 2,190
=============================================================================
CAPITAL MARKETS [6.5%]
Bank of New York 11,600 409
Goldman Sachs Group 11,200 1,895
Lehman Brothers Holdings 15,000 1,108
Merrill Lynch 15,400 1,205
Morgan Stanley 27,000 1,968
State Street 5,200 324
-----------------------------------------------------------------------------
TOTAL CAPITAL MARKETS 6,909
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CHEMICAL [2.6%]
Dow Chemical 36,000 $ 1,404
PPG Industries 14,000 939
Rohm & Haas 8,600 407
-----------------------------------------------------------------------------
TOTAL CHEMICAL 2,750
=============================================================================
COMMERCIAL BANKS [7.7%]
Keycorp 10,400 389
National City 16,100 589
PNC Financial Services Group 6,800 493
SunTrust Banks 6,300 487
US Bancorp 48,000 1,594
Wachovia 35,700 1,992
Wells Fargo 73,460 2,658
-----------------------------------------------------------------------------
TOTAL COMMERCIAL BANKS 8,202
=============================================================================
COMMERCIAL SERVICES & SUPPLIES [0.4%]
Waste Management 11,600 425
=============================================================================
COMMUNICATIONS EQUIPMENT [2.6%]
Motorola 64,300 1,607
Nokia, ADR 27,000 532
Qualcomm 9,800 356
Tellabs* 23,800 261
-----------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 2,756
=============================================================================
COMPUTERS & PERIPHERALS [3.5%]
Apple Computer* 7,300 562
Hewlett-Packard 68,700 2,521
IBM 7,900 647
-----------------------------------------------------------------------------
TOTAL COMPUTERS & PERIPHERALS 3,730
=============================================================================
CONSUMER FINANCE [0.6%]
Capital One Financial 8,300 653
=============================================================================
DIVERSIFIED FINANCIAL SERVICES [7.4%]
Bank of America 70,396 3,771
CIT Group 14,500 705
Citigroup 67,786 3,367
-----------------------------------------------------------------------------
TOTAL DIVERSIFIED FINANCIAL SERVICES 7,843
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 17
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP VALUE EQUITY FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
DIVERSIFIED TELECOMMUNICATION SERVICES [5.7%]
AT&T 47,300 $ 1,540
BellSouth 45,900 1,962
Verizon Communications 68,009 2,525
-----------------------------------------------------------------------------
TOTAL DIVERSIFIED TELECOMMUNICATION
SERVICES 6,027
=============================================================================
ELECTRIC UTILITIES [3.1%]
Edison International 13,900 579
Entergy 3,500 274
FirstEnergy 15,700 877
FPL Group 17,300 778
PPL 22,700 747
-----------------------------------------------------------------------------
TOTAL ELECTRIC UTILITIES 3,255
=============================================================================
FOOD & STAPLES RETAILING [1.6%]
Costco Wholesale 16,200 805
Kroger 19,300 447
Safeway 16,000 485
-----------------------------------------------------------------------------
TOTAL FOOD & STAPLES RETAILING 1,737
=============================================================================
FOOD PRODUCTS [0.6%]
Archer-Daniels-Midland 8,400 318
Tyson Foods 22,000 350
-----------------------------------------------------------------------------
TOTAL FOOD PRODUCTS 668
=============================================================================
HEALTH CARE PROVIDERS & SERVICES [2.3%]
Aetna 22,100 874
Cigna 4,500 524
Health Management
Associates, Cl A 27,000 564
McKesson 9,200 485
-----------------------------------------------------------------------------
TOTAL HEALTH CARE PROVIDERS & SERVICES 2,447
=============================================================================
HOUSEHOLD DURABLES [0.7%]
Newell Rubbermaid 11,800 334
Whirlpool 5,200 438
-----------------------------------------------------------------------------
TOTAL HOUSEHOLD DURABLES 772
=============================================================================
INDEPEDENT POWER PRODUCER/
ENERGY TRADER [0.8%]
Constellation Energy Group 13,400 793
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
INDUSTRIAL CONGLOMERATES [3.4%]
General Electric 52,500 $ 1,853
Tyco International 61,600 1,724
-----------------------------------------------------------------------------
TOTAL INDUSTRIAL CONGLOMERATES 3,577
=============================================================================
INSURANCE [8.2%]
ACE 17,800 974
Aflac 18,800 860
American International Group 29,100 1,928
Chubb 16,600 863
Hartford Financial Services
Group 12,300 1,067
Metlife 17,100 969
Prudential Financial 9,700 740
St Paul Travelers 27,000 1,266
-----------------------------------------------------------------------------
TOTAL INSURANCE 8,667
=============================================================================
IT SERVICES [1.1%]
Electronic Data Systems 39,900 978
First Data 5,500 231
-----------------------------------------------------------------------------
TOTAL IT SERVICES 1,209
=============================================================================
LEISURE EQUIPMENT & PRODUCTS [0.4%]
Mattel 18,500 364
=============================================================================
LIFE SCIENCES TOOLS & SERVICES [0.4%]
PerkinElmer 23,700 449
=============================================================================
MACHINERY [2.2%]
Caterpillar 14,300 941
Danaher 7,000 481
Deere 7,400 621
Illinois Tool Works 7,000 314
-----------------------------------------------------------------------------
TOTAL MACHINERY 2,357
=============================================================================
MEDIA [4.9%]
CBS, Cl B 25,750 725
Comcast, Cl A* 34,800 1,282
News Corp., Cl A 25,000 491
Time Warner 65,300 1,191
Walt Disney 47,900 1,481
-----------------------------------------------------------------------------
TOTAL MEDIA 5,170
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 18
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP VALUE EQUITY FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
METALS & MINING [1.2%]
Alcoa 31,300 $ 878
Phelps Dodge 5,200 440
-----------------------------------------------------------------------------
TOTAL METALS & MINING 1,318
=============================================================================
MULTI-UTILITIES & UNREGULATED POWER [2.0%]
Dominion Resources 11,700 895
PG&E 19,600 816
Sempra Energy 8,600 432
-----------------------------------------------------------------------------
TOTAL MULTI-UTILITIES & UNREGULATED POWER 2,143
=============================================================================
MULTILINE RETAIL [1.5%]
Federated Department Stores 23,400 1,011
JC Penney 8,000 547
-----------------------------------------------------------------------------
TOTAL MULTILINE RETAIL 1,558
=============================================================================
OFFICE ELECTRONICS [0.6%]
Xerox* 43,500 677
=============================================================================
OIL & GAS [7.9%]
Chevron 23,040 1,494
ConocoPhillips 28,380 1,690
Exxon Mobil 42,100 2,825
Hess 7,800 323
Marathon Oil 14,800 1,138
Occidental Petroleum 18,400 885
-----------------------------------------------------------------------------
TOTAL OIL & GAS 8,355
=============================================================================
PAPER & FOREST PRODUCTS [0.8%]
International Paper 24,500 848
=============================================================================
PERSONAL PRODUCTS [0.5%]
Alberto-Culver 10,500 531
=============================================================================
PHARMACEUTICALS [1.4%]
Abbott Laboratories 16,000 777
Bristol-Myers Squibb 29,400 733
-----------------------------------------------------------------------------
TOTAL PHARMACEUTICALS 1,510
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
ROAD & RAIL [2.4%]
Avis Budget Group* 2,330 $ 43
CSX 31,400 1,031
Norfolk Southern 17,800 784
Ryder System 9,300 481
Union Pacific 2,800 246
-----------------------------------------------------------------------------
TOTAL ROAD & RAIL 2,585
=============================================================================
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT [0.8%]
Freescale Semiconductor* 13,000 494
Texas Instruments 11,000 366
-----------------------------------------------------------------------------
TOTAL SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT 860
=============================================================================
SPECIALTY RETAIL [1.1%]
Gap 41,000 777
Officemax 8,500 346
-----------------------------------------------------------------------------
TOTAL SPECIALTY RETAIL 1,123
=============================================================================
THRIFTS & MORTGAGE FINANCE [2.1%]
Fannie Mae 19,900 1,113
Washington Mutual 26,200 1,139
-----------------------------------------------------------------------------
TOTAL THRIFTS & MORTGAGE FINANCE 2,252
=============================================================================
WIRELESS TELECOMMUNICATION SERVICES [1.0%]
Alltel 10,600 588
Sprint-Nextel 24,300 417
-----------------------------------------------------------------------------
TOTAL WIRELESS TELECOMMUNICATION SERVICES 1,005
=============================================================================
TOTAL COMMON STOCK
(Cost $87,095) 104,313
=========================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 19
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP VALUE EQUITY FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENTS [1.6%]
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%** 1,714,571 $ 1,715
SEI Daily Income Trust,
Prime Obligation Fund,
Cl A, 5.33%** 10,815 11
-----------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS
(Cost $1,726) 1,726
=========================================================================
TOTAL INVESTMENTS [100.0%]
(Cost $88,821) 106,039
=========================================================================
OTHER ASSETS AND LIABILITIES [0.0%] 11
=========================================================================
NET ASSETS -- 100.0% $ 106,050
=============================================================================
* NON-INCOME PRODUCING SECURITY
** RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 20
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP GROWTH EQUITY FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
21.6% Information Technology
21.2% Healthcare
14.3% Consumer Staples
11.1% Consumer Discretionary
10.9% Financials
10.4% Energy
7.2% Industrials
1.5% Short-Term Investments
0.9% Materials
0.7% Utilities
0.2% Telecommunications
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCK [98.1%]
AEROSPACE & DEFENSE [0.4%]
L-3 Communications Holdings 2,500 $ 196
=============================================================================
AIR FREIGHT & LOGISTICS [0.9%]
United Parcel Service, Cl B 5,700 410
=============================================================================
BEVERAGES [3.4%]
Coca-Cola 9,800 438
Pepsi Bottling Group 5,700 202
PepsiCo 14,500 946
-----------------------------------------------------------------------------
TOTAL BEVERAGES 1,586
=============================================================================
BIOTECHNOLOGY [5.1%]
Amgen* 14,300 1,023
Genzyme-General Division* 6,500 439
Gilead Sciences* 12,700 872
-----------------------------------------------------------------------------
TOTAL BIOTECHNOLOGY 2,334
=============================================================================
CAPITAL MARKETS [4.1%]
Franklin Resources 2,100 222
Goldman Sachs Group 2,600 440
Lehman Brothers Holdings 4,800 355
Merrill Lynch 2,600 203
State Street 5,400 337
T Rowe Price Group 7,000 335
-----------------------------------------------------------------------------
TOTAL CAPITAL MARKETS 1,892
=============================================================================
COMMERCIAL BANKS [0.5%]
Synovus Financial 8,300 244
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES & SUPPLIES [1.4%]
Equifax 7,000 $ 257
Robert Half International 5,200 176
RR Donnelley & Sons 6,300 208
-----------------------------------------------------------------------------
TOTAL COMMERCIAL SERVICES & SUPPLIES 641
=============================================================================
COMMUNICATIONS EQUIPMENT [3.3%]
Cisco Systems* 29,250 673
Corning* 9,500 232
Qualcomm 17,000 618
-----------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT 1,523
=============================================================================
COMPUTERS & PERIPHERALS [3.8%]
Apple Computer* 8,100 624
Dell* 17,165 392
IBM 9,000 737
-----------------------------------------------------------------------------
TOTAL COMPUTERS & PERIPHERALS 1,753
=============================================================================
CONSUMER FINANCE [1.6%]
Capital One Financial 5,200 409
SLM 6,400 333
-----------------------------------------------------------------------------
TOTAL CONSUMER FINANCE 742
=============================================================================
DIVERSIFIED FINANCIAL SERVICES [0.3%]
Chicago Mercantile Exchange
Holdings 250 120
=============================================================================
ENERGY EQUIPMENT & SERVICES [3.5%]
BJ Services 14,100 425
Nabors Industries* 12,200 363
Schlumberger 7,800 484
Transocean* 4,900 358
-----------------------------------------------------------------------------
TOTAL ENERGY EQUIPMENT & SERVICES 1,630
=============================================================================
FOOD & STAPLES RETAILING [3.5%]
Sysco 16,100 538
Wal-Mart Stores 21,975 1,084
-----------------------------------------------------------------------------
TOTAL FOOD & STAPLES RETAILING 1,622
=============================================================================
FOOD PRODUCTS [1.2%]
General Mills 4,300 243
Kellogg 6,200 307
-----------------------------------------------------------------------------
TOTAL FOOD PRODUCTS 550
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 21
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP GROWTH EQUITY FUND (CONTINUED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
HEALTH CARE EQUIPMENT & SUPPLIES [3.8%]
Bard (C.R.) 3,200 $ 240
Biomet 10,900 351
Boston Scientific* 8,400 124
Stryker 12,800 635
Zimmer Holdings* 6,200 419
-----------------------------------------------------------------------------
TOTAL HEALTH CARE EQUIPMENT & SUPPLIES 1,769
=============================================================================
HEALTH CARE PROVIDERS & SERVICES [4.5%]
Caremark Rx 12,900 731
Coventry Health Care* 4,200 217
Quest Diagnostics 5,400 330
UnitedHealth Group 15,800 777
-----------------------------------------------------------------------------
TOTAL HEALTH CARE PROVIDERS & SERVICES 2,055
=============================================================================
HEALTH CARE TECHNOLOGY [0.4%]
IMS Health 7,500 200
=============================================================================
HOTELS, RESTAURANTS & LEISURE [2.3%]
Carnival 6,600 310
Starbucks* 9,500 324
Wyndham Worldwide* 1,660 46
Yum! Brands 7,400 385
-----------------------------------------------------------------------------
TOTAL HOTELS, RESTAURANTS & LEISURE 1,065
=============================================================================
HOUSEHOLD DURABLES [0.4%]
Harman International Industries 2,200 184
=============================================================================
HOUSEHOLD PRODUCTS [5.5%]
Colgate-Palmolive 10,100 628
Procter & Gamble 26,302 1,630
Clorox 4,400 277
-----------------------------------------------------------------------------
TOTAL HOUSEHOLD PRODUCTS 2,535
=============================================================================
INDEPENDENT POWER PRODUCER/
ENERGY TRADER [0.7%]
TXU 5,200 325
=============================================================================
INDUSTRIAL CONGLOMERATES [3.3%]
3M 6,000 446
General Electric 31,075 1,097
-----------------------------------------------------------------------------
TOTAL INDUSTRIAL CONGLOMERATES 1,543
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
INSURANCE [2.7%]
Aflac 6,600 $ 302
American International Group 11,500 762
Progressive 8,000 196
-----------------------------------------------------------------------------
TOTAL INSURANCE 1,260
=============================================================================
INTERNET SOFTWARE & SERVICES [2.9%]
eBay* 26,800 760
Yahoo!* 22,500 569
-----------------------------------------------------------------------------
TOTAL INTERNET SOFTWARE & SERVICES 1,329
=============================================================================
IT SERVICES [1.0%]
First Data 7,100 298
Paychex 4,800 177
-----------------------------------------------------------------------------
TOTAL IT SERVICES 475
=============================================================================
LIFE SCIENCES TOOLS & SERVICES [0.6%]
Thermo Electron* 7,100 279
=============================================================================
MACHINERY [1.1%]
Danaher 7,600 522
=============================================================================
MEDIA [1.9%]
Comcast* 8,100 299
McGraw-Hill 5,400 313
Time Warner 13,100 239
-----------------------------------------------------------------------------
TOTAL MEDIA 851
=============================================================================
METALS & MINING [0.9%]
Goldcorp 9,000 212
Nucor 4,200 208
-----------------------------------------------------------------------------
TOTAL METALS & MINING 420
=============================================================================
MULTILINE RETAIL [1.8%]
Sears Holdings* 2,700 427
Target 7,500 414
-----------------------------------------------------------------------------
TOTAL MULTILINE RETAIL 841
=============================================================================
OIL & GAS [6.8%]
Chevron 3,800 247
Exxon Mobil 32,000 2,147
Sunoco 4,200 261
XTO Energy 11,300 476
-----------------------------------------------------------------------------
TOTAL OIL & GAS 3,131
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 22
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
LARGE CAP GROWTH EQUITY FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
PERSONAL PRODUCTS [0.6%]
Avon Products 8,600 $ 264
=============================================================================
PHARMACEUTICALS [6.8%]
Abbott Laboratories 4,795 233
Allergan 3,700 417
Forest Laboratories* 7,700 390
Johnson & Johnson 16,664 1,082
Schering-Plough 14,000 309
Wyeth 13,850 704
-----------------------------------------------------------------------------
TOTAL PHARMACEUTICALS 3,135
=============================================================================
REAL ESTATE INVESTMENT TRUST [0.9%]
Simon Property Group 4,700 426
=============================================================================
REAL ESTATE MANAGEMENT & DEVELOPMENT [0.1%]
Realogy* 2,075 47
=============================================================================
ROAD & RAIL [0.0%]
Avis Budget Group* 830 15
=============================================================================
SEMICONDUCTORS & SEMICONDUCTOR
EQUIPMENT [3.4%]
Broadcom, Cl A* 11,850 360
Intel 12,350 254
Linear Technology 11,700 364
Texas Instruments 17,800 592
-----------------------------------------------------------------------------
TOTAL SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 1,570
=============================================================================
SOFTWARE [7.1%]
Autodesk* 9,800 341
Citrix Systems* 7,100 257
Electronic Arts* 3,600 200
Microsoft 49,830 1,362
Oracle* 22,500 399
Symantec* 34,400 732
-----------------------------------------------------------------------------
TOTAL SOFTWARE 3,291
=============================================================================
SPECIALTY RETAIL [3.4%]
Best Buy 3,500 187
Home Depot 18,300 664
Lowe's 17,600 494
TJX 8,600 241
-----------------------------------------------------------------------------
TOTAL SPECIALTY RETAIL 1,586
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
TEXTILES, APPAREL & LUXURY GOODS [1.3%]
Coach* 17,300 $ 595
=============================================================================
THRIFTS & MORTGAGE FINANCE [0.7%]
Countrywide Financial 8,600 301
=============================================================================
WIRELESS TELECOMMUNICATION SERVICES [0.2%]
Sprint-Nextel 4,309 74
=============================================================================
TOTAL COMMON STOCK
(Cost $41,212) 45,331
=========================================================================
CASH EQUIVALENTS [1.5%]
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%** 656,508 657
SEI Daily Income Trust,
Prime Obligation Fund,
Cl A, 5.33%** 25,272 25
-----------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS
(Cost $682) 682
=========================================================================
TOTAL INVESTMENTS [99.6%]
(Cost $41,894) 46,013
=========================================================================
OTHER ASSETS AND LIABILITIES [ 0.4%] 192
=========================================================================
NET ASSETS -- 100.0% $ 46,205
=============================================================================
* NON-INCOME PRODUCING SECURITY
** RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
CL -- CLASS
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 23
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
RCB SMALL CAP VALUE FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
34.2% Financials
23.3% Consumer Discretionary
13.4% Industrials
12.2% Consumer Staples
4.9% Energy
4.4% Short-Term Investment
3.6% Utilities
2.4% Materials
1.6% Information Technology
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCK+ [92.7%]
BROADCASTING & CABLE [6.5%]
Cox Radio* 161,250 $ 2,475
Cumulus Media* 218,600 2,090
-----------------------------------------------------------------------------
TOTAL BROADCASTING & CABLE 4,565
=============================================================================
COMMERCIAL SERVICES [7.1%]
Adesa 58,000 1,340
Coinstar* 65,600 1,888
Watson Wyatt 42,000 1,719
-----------------------------------------------------------------------------
TOTAL COMMERCIAL SERVICES 4,947
=============================================================================
DIVERSIFIED MANUFACTURING [4.1%]
Jacuzzi Brands* 283,300 2,830
=============================================================================
DIVERSIFIED METALS & MINING [2.4%]
Compass Minerals International 59,000 1,670
=============================================================================
UTILITIES [3.6%]
Sierra Pacific Resources* 174,000 2,495
=============================================================================
ENERGY EQUIPMENT & SERVICES [2.1%]
Hanover Compressor* 79,200 1,443
=============================================================================
ENTERTAINMENT [7.3%]
Lodgenet Entertainment* 270,000 5,098
=============================================================================
FOOD, BEVERAGE & TOBACCO [4.3%]
Ralcorp Holdings* 62,400 3,010
=============================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS [3.1%]
Central Garden & Pet* 45,100 $ 2,176
=============================================================================
INSURANCE [27.5%]
Alleghany* 12,218 3,531
Conseco* 140,000 2,939
Hilb Rogal & Hobbs 38,900 1,659
Montpelier Re Holdings 152,450 2,956
Odyssey Re Holdings 58,000 1,959
USI Holdings* 226,200 3,065
White Mountains Insurance
Group 6,200 3,081
-----------------------------------------------------------------------------
TOTAL INSURANCE 19,190
=============================================================================
MACHINERY [2.0%]
IDEX 31,800 1,369
=============================================================================
OIL & GAS [2.8%]
Rosetta Resources* 114,200 1,961
=============================================================================
PREPACKAGING SOFTWARE [1.6%]
PLATO Learning* 175,300 1,117
=============================================================================
REAL ESTATE INVESTMENT TRUST [4.2%]
Annaly Mortgage Management 225,100 2,958
=============================================================================
RETAIL [10.6%]
IHOP 33,170 1,538
Smart & Final* 194,600 3,322
Triarc, Cl B 169,800 2,567
-----------------------------------------------------------------------------
TOTAL RETAIL 7,427
=============================================================================
SPECIALTY RETAIL [3.5%]
Jo-Ann Stores* 144,100 2,409
=============================================================================
TOTAL COMMON STOCK
(Cost $51,933) 64,665
=========================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 24
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
RCB SMALL CAP VALUE FUND (CONCLUDED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE BONDS [2.6%]
FINANCIAL SERVICES [2.3%]
Fairfax Financial Holding
7.750%, 04/26/12 $ 600 $ 558
Labranche (A)
Callable 05/15/07 @ 104.75
9.500%, 05/15/09 1,000 1,043
-----------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 1,601
=============================================================================
LABORATORY EQUIPMENT [0.3%]
Sea Containers, Ser B
10.750%, 10/15/06 250 200
=============================================================================
TOTAL CORPORATE BONDS
(Cost $1,828) 1,801
=========================================================================
REPURCHASE AGREEMENT (B) [4.4%]
Morgan Stanley,
5.000%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $3,054,731
(collateralized by a U.S. Treasury
Note, par value $2,919,831,
6.500%, 2/15/10; with total
market value $3,114,578) 3,053 3,053
-----------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $3,053) 3,053
=========================================================================
TOTAL INVESTMENTS [99.7%]
(Cost $56,814) 69,519
=========================================================================
OTHER ASSETS AND LIABILITIES [0.3%] 222
=========================================================================
NET ASSETS -- 100.0% $ 69,741
=============================================================================
DESCRIPTION
* NON-INCOME PRODUCING SECURITY
+ MORE NARROW INDUSTRIES ARE UTILIZED FOR COMPLIANCE PURPOSES, WHEREAS BROAD
SECTORS ARE UTILIZED FOR REPORTING.
(A) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONS. ON SEPTEMBER 30, 2006,
THE VALUE OF THESE SECURITIES AMOUNTED TO $1,043 (000), REPRESENTING 1.5%
OF THE NET ASSETS OF THE FUND.
(B) TRI-PARTY REPURCHASE AGREEMENT
CL -- CLASS
SER -- SERIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 25
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
TECHNOLOGY GROWTH FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
94.6% Information Technology
2.2% Short-Term Investments
1.5% Industrials
1.3% Healthcare
0.4% Consumer Discretionary
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
COMMON STOCK [97.8%]
AUDIO & VIDEO EQUIPMENT
MANUFACTURING [0.4%]
Sony, ADR 300 $ 12
=============================================================================
COMMUNICATIONS EQUIPMENT
MANUFACTURING [12.8%]
Cisco Systems* 4,705 108
Harris 700 31
Motorola 2,725 68
Nokia, ADR 2,150 42
Qualcomm 2,600 95
-----------------------------------------------------------------------------
TOTAL COMMUNICATIONS EQUIPMENT
MANUFACTURING 344
=============================================================================
COMPUTER & PERIPHERAL EQUIPMENT
MANUFACTURING [19.3%]
Apple Computer* 995 77
Dell* 1,525 35
EMC-Mass* 4,505 54
Hewlett-Packard 3,823 140
IBM 1,400 115
NAVTEQ* 400 10
Sandisk* 400 21
Symbol Technologies 2,250 33
Western Digital* 1,750 32
-----------------------------------------------------------------------------
TOTAL COMPUTER & PERIPHERAL EQUIPMENT MANUFACTURING 517
=============================================================================
COMPUTER SYSTEMS DESIGN &
RELATED SERVICES [8.6%]
Autodesk* 800 28
Cerner* 400 18
Cognizant Technology Solutions,
Cl A* 800 59
Electronic Data Systems 1,725 42
Intergraph* 275 12
Jack Henry & Associates 1,100 24
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Micros Systems* 300 $ 15
Parametric Technology* 950 16
Quest Software* 1,100 16
-----------------------------------------------------------------------------
TOTAL COMPUTER SYSTEMS
DESIGN & RELATED SERVICES 230
=============================================================================
DATA PROCESSING SERVICES [2.2%]
Affiliated Computer Services,
Cl A* 425 22
First Data 850 36
-----------------------------------------------------------------------------
TOTAL DATA PROCESSING SERVICES 58
=============================================================================
ELECTRONIC SHOPPING & MAIL-ORDER HOUSES [0.8%]
eBay* 725 21
=============================================================================
FIBER OPTIC CABLE MANUFACTURING [1.8%]
Corning* 2,000 49
=============================================================================
NAVIGATIONAL/MEASURING/MEDICAL/CONTROL
INSTRUMENTS MANUFACTURING [2.5%]
Flir Systems* 400 11
L-3 Communications Holdings 500 39
PerkinElmer 875 17
-----------------------------------------------------------------------------
TOTAL NAVIGATIONAL/MEASURING/MEDICAL/
CONTROL INSTRUMENTS MANUFACTURING 67
=============================================================================
ON-LINE INFORMATION SERVICES [5.4%]
Google* 95 38
Juniper Networks* 1,092 19
WebEx Communications* 1,125 44
Websense* 700 15
Yahoo!* 1,200 30
-----------------------------------------------------------------------------
TOTAL ON-LINE INFORMATION SERVICES 146
=============================================================================
SEMICONDUCTOR & OTHER ELECTRONIC COMPONENT
MANUFACTURING [18.9%]
Amphenol, Cl A 500 31
Analog Devices 825 24
Applied Materials 800 14
Arrow Electronics* 500 14
Broadcom, Cl A* 1,200 37
Intel 4,950 102
Jabil Circuit 850 24
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 26
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
TECHNOLOGY GROWTH FUND (CONCLUDED)
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
Linear Technology 775 $ 24
Marvel Tech Group* 1,200 23
Maxim Integrated Products 900 25
Micron Technology* 750 13
National Semiconductor 475 11
Taiwan Semiconductor
Manufacturing, ADR 3,394 33
Texas Instruments 2,900 97
TTM Technologies* 850 10
Xilinx 700 15
Zoran* 600 10
-----------------------------------------------------------------------------
TOTAL SEMICONDUCTOR & OTHER ELECTRONIC
COMPONENT MANUFACTURING 507
=============================================================================
SOFTWARE PUBLISHERS [23.6%]
Adobe Systems* 1,000 37
Akamai Technologies* 1,000 50
BEA Systems* 1,400 21
Citrix Systems* 1,175 43
Electronic Arts* 400 22
F5 Networks* 350 19
Intuit* 400 13
McAfee* 975 24
Microsoft 7,850 215
Oracle* 4,765 84
Red Hat* 500 11
SAP, ADR 250 12
Symantec* 3,300 70
VeriSign* 550 11
-----------------------------------------------------------------------------
TOTAL SOFTWARE PUBLISHERS 632
=============================================================================
TELECOMMUNICATIONS [1.5%]
Amdocs* 1,000 40
=============================================================================
TOTAL COMMON STOCK
(Cost $2,431) 2,623
=========================================================================
DESCRIPTION SHARES VALUE (000)
- --------------------------------------------------------------------------------
CASH EQUIVALENTS [2.2%]
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%** 51,456 $ 51
SEI Daily Income Trust,
Prime Obligation Fund,
Cl A, 5.33%** 8,009 8
=============================================================================
TOTAL CASH EQUIVALENTS
(Cost $59) 59
=========================================================================
TOTAL INVESTMENTS [100.0%]
(Cost $2,490) 2,682
=========================================================================
OTHER ASSETS AND LIABILITIES [0.0%] --
=========================================================================
NET ASSETS -- 100.0% $ 2,682
=============================================================================
* NON-INCOME PRODUCING SECURITY
** RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 27
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
38.9% Financial
25.6% Industrial
7.4% Telephone
7.3% Bank
5.4% U.S. Government Mortgage-Backed Obligations
3.2% Short-Term Investments
3.0% Utilities
2.6% Commercial Paper
1.9% U.S. Treasury Obligations
1.8% Municipal Bonds
1.1% Gas Transmission
0.8% Foreign Governments
0.7% Mortgage-Backed
0.3% Transportation
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE BONDS [85.0%]
AIR TRANSPORTATION [0.3%]
Federal Express, Ser A2
7.890%, 09/23/08 $ 165 $ 168
=============================================================================
AUTOMOTIVE [2.7%]
DaimlerChrysler
5.875%, 03/15/11 570 571
Toyota Motor Credit
4.250%, 03/15/10 1,000 971
-----------------------------------------------------------------------------
TOTAL AUTOMOTIVE 1,542
=============================================================================
BANKS [8.4%]
Bankers Trust
7.250%, 10/15/11 500 546
Crestar Finance
6.500%, 01/15/08 1,035 1,054
Deutsche Bank
7.500%, 04/25/09 500 526
Union Planters Bank
5.125%, 06/15/07 1,215 1,214
US Bancorp
6.875%, 09/15/07 350 354
Wachovia
7.125%, 10/15/06 100 100
Wells Fargo
4.625%, 08/09/10 1,000 984
-----------------------------------------------------------------------------
TOTAL BANKS 4,778
=============================================================================
BEAUTY PRODUCTS [1.5%]
Avon Products
7.150%, 11/15/09 800 844
=============================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CHEMICALS [0.4%]
Praxair
6.625%, 10/15/07 $ 200 $ 202
=============================================================================
COMMUNICATION & MEDIA [4.5%]
AOL Time Warner
6.750%, 04/15/11 395 413
Comcast Cable Communications
Holdings
8.375%, 03/15/13 440 502
News America Holdings
9.250%, 02/01/13 450 532
Walt Disney
5.700%, 07/15/11 1,100 1,121
-----------------------------------------------------------------------------
TOTAL COMMUNICATION & MEDIA 2,568
=============================================================================
COMPUTER SYSTEM DESIGN & SERVICES [3.3%]
Cisco Systems
5.500%, 02/22/16 1,000 1,008
IBM
4.375%, 06/01/09 900 885
-----------------------------------------------------------------------------
TOTAL COMPUTERS SYSTEM DESIGN
& SERVICES 1,893
=============================================================================
DRUGS [1.8%]
Abbott Laboratories
5.375%, 05/15/09 1,000 1,009
=============================================================================
ELECTRICAL SERVICES [3.1%]
American Electric Power
5.250%, 06/01/15 490 477
Iowa Electric Light & Power
6.000%, 10/01/08 200 202
WPS Resources
7.000%, 11/01/09 1,000 1,047
-----------------------------------------------------------------------------
TOTAL ELECTRICAL SERVICES 1,726
=============================================================================
FINANCIAL SERVICES [16.7%]
American General Finance,
Ser I, MTN
4.625%, 05/15/09 1,000 983
CIT Group, MTN
4.750%, 12/15/10 1,000 978
Citigroup
5.850%, 08/02/16 1,000 1,034
Countrywide Home Loans
5.625%, 07/15/09 155 156
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 28
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CORPORATE BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Countrywide Home Loans,
Ser L, MTN
4.000%, 03/22/11 $ 875 $ 826
General Electric Capital,
Ser A, MTN
6.875%, 11/15/10 250 266
6.000%, 06/15/12 1,500 1,559
HSBC Finance
5.250%, 04/15/15 1,000 985
John Deere Capital
4.625%, 04/15/09 750 740
MBNA
4.625%, 09/15/08 410 405
National Rural Utilities,
Ser C, MTN
7.250%, 03/01/12 1,000 1,093
Washington Mutual
4.625%, 04/01/14 460 429
-----------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 9,454
=============================================================================
FOOD, BEVERAGE & TOBACCO [4.2%]
Bottling Group
5.500%, 04/01/16 1,000 1,007
Diageo Capital
3.375%, 03/20/08 1,000 974
General Mills
2.625%, 10/24/06 410 409
-----------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 2,390
=============================================================================
FOREIGN GOVERNMENTS [0.8%]
United Mexican States
5.875%, 01/15/14 450 460
=============================================================================
INSURANCE [5.5%]
Aflac
6.500%, 04/15/09 1,000 1,031
AXA Financial
7.750%, 08/01/10 1,000 1,084
Berkshire Hathaway Finance
4.125%, 01/15/10 1,000 972
-----------------------------------------------------------------------------
TOTAL INSURANCE 3,087
=============================================================================
INVESTMENT BANKER/BROKER DEALER [12.3%]
Credit Suisse
5.500%, 08/15/13 1,000 1,009
Goldman Sachs Group
5.150%, 01/15/14 1,000 978
Jefferies Group
5.500%, 03/15/16 665 649
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
JPMorgan Chase
7.125%, 06/15/09 $ 675 $ 709
6.750%, 02/01/11 500 530
Lehman Brothers Holdings
8.250%, 06/15/07 1,100 1,122
Merrill Lynch
4.000%, 11/15/07 1,000 986
Morgan Stanley
3.875%, 01/15/09 1,000 973
-----------------------------------------------------------------------------
TOTAL INVESTMENT BANKER/BROKER DEALER 6,956
=============================================================================
PETROLEUM & FUEL PRODUCTS [2.0%]
Chevron
8.625%, 06/30/10 200 225
ConocoPhillips
6.375%, 03/30/09 305 314
Duke Capital
5.500%, 03/01/14 625 614
-----------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS 1,153
=============================================================================
REAL ESTATE INVESTMENT TRUSTS [1.9%]
Kimco Realty, MTN
6.960%, 07/16/07 1,000 1,011
Kimco Realty, Ser B, MTN
7.860%, 11/01/07 67 68
-----------------------------------------------------------------------------
TOTAL REAL ESTATE INVESTMENT TRUSTS 1,079
=============================================================================
RETAIL [7.0%]
Kohl's
6.300%, 03/01/11 1,000 1,037
Kroger
5.500%, 02/01/13 450 444
McDonald's, Ser E, MTN
4.240%, 12/13/06 995 992
Target
5.875%, 07/15/16 500 518
Wal-Mart Stores
4.375%, 07/12/07 1,000 994
-----------------------------------------------------------------------------
TOTAL RETAIL 3,985
=============================================================================
TELEPHONES & TELECOMMUNICATIONS [7.5%]
BellSouth
4.200%, 09/15/09 1,000 970
Deutsche Telekom International Finance
5.250%, 07/22/13 475 461
New Cingular Wireless Services
8.125%, 05/01/12 400 450
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 29
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CORPORATE BOND FUND (CONCLUDED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Southwestern Bell
6.625%, 07/15/07 $ 750 $ 757
Sprint Capital
8.375%, 03/15/12 550 616
Verizon Communications
5.550%, 02/15/16 1,000 987
-----------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS 4,241
=============================================================================
WASTE DISPOSAL [1.1%]
Waste Management
6.875%, 05/15/09 575 597
=============================================================================
TOTAL CORPORATE BONDS
(Cost $48,413) 48,132
=============================================================================
U.S. TREASURY OBLIGATION [1.9%]
U.S. Treasury Inflation Index Note
2.000%, 01/15/14 1,101 1,080
-----------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $1,141) 1,080
=============================================================================
MUNICIPAL BONDS [1.8%]
CALIFORNIA [1.8%]
California Statewide, Community
Development Authority,
Ser A-2, RB, XLCA
4.000%, 11/15/06 75 75
City of Industry, Sales Tax Project,
RB, MBIA
5.000%, 01/01/12 955 946
-----------------------------------------------------------------------------
TOTAL CALIFORNIA 1,021
=============================================================================
TOTAL MUNICIPAL BONDS
(Cost $1,057) 1,021
=============================================================================
MORTGAGE-BACKED SECURITY [0.7%]
Residential Asset Mortgage
Products, Ser 2003-RS5, Cl AI4
3.700%, 09/25/31 393 387
-----------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITY
(Cost $388) 387
=========================================================================
DESCRIPTION FACE AMOUNT (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS [5.5%]
FHLMC, Ser 2982, Cl NB
5.500%, 02/15/29 $ 340 $ 341
FHLMC, Ser R004, Cl Al
5.125%, 12/15/13 1,238 1,228
FNMA CMO, Ser 2002-56,
Cl MC
5.500%, 09/25/17 1,316 1,319
FNMA REMIC, Ser 2006,
Cl AB
6.000%, 06/25/16 217 218
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS
(Cost $3,102) 3,106
=============================================================================
COMMERCIAL PAPER (A) [2.7%]
ASSET BACKED SECURITIES [2.7%]
Giro Balanced Funding
5.270%, 10/05/06 1,489 1,488
=============================================================================
TOTAL COMMERCIAL PAPER
(Cost $1,488) 1,488
=============================================================================
CASH EQUIVALENT [3.2%]
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%* 1,838,200 1,838
-----------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $1,838) 1,838
=========================================================================
TOTAL INVESTMENTS [100.8%]
(Cost $57,427) 57,052
=========================================================================
OTHER ASSETS AND LIABILITIES [-0.8%] (430)
=========================================================================
NET ASSETS -- 100.0% $ 56,622
=============================================================================
* RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
(A) THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE.
CL -- CLASS
CMO -- COLLATERALIZED MORTGAGE OBLIGATION
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
MTN -- MEDIUM TERM NOTE
REMIC -- REAL ESTATE MORTGAGE INVESTMENT CONDUIT
RB -- REVENUE BOND
SER -- SERIES
XLCA -- XL CAPITAL ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 30
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
50.8% U.S. Government Agency Obligations
36.0% U.S. Government Mortgage-Backed Obligations
13.1% U.S. Treasury Obligations
0.1% Short-Term Investments
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS [50.4%]
FHLB
6.200%, 03/22/21 $ 2,000 $ 1,995
5.020%, 11/07/08 1,000 999
4.375%, 09/17/10 2,000 1,960
FHLMC
5.125%, 10/15/08 30 30
FNMA
7.125%, 06/15/10 4,000 4,298
5.500%, 03/15/11 2,570 2,630
5.010%, 11/10/10 2,500 2,476
5.000%, 07/25/08 2,000 1,995
5.000%, 01/23/09 2,500 2,493
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $18,989) 18,876
=========================================================================
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS [35.7%]
FHLMC REMIC, Ser R005,
Cl AB
5.500%, 12/15/18 1,398 1,396
FHLMC REMIC, Ser R009,
Cl AK
5.750%, 12/15/18 1,966 1,972
FHLMC, Ser R003, Cl AG
5.125%, 10/15/15 1,888 1,872
FHLMC, Ser R004, Cl Al
5.125%, 12/15/13 1,944 1,928
FHLMC, Ser R007, Cl AC
5.875%, 05/15/16 1,853 1,859
FNMA, Pool 766620
4.574%, 03/01/34 1,110 1,088
GNMA, Pool 81318
4.500%, 04/20/35 1,170 1,155
GNMA, Pool 81447
5.000%, 08/20/35 131 129
GNMA, Pool 81510
4.250%, 10/20/35 1,415 1,378
GNMA, Pool 864622
4.500%, 06/20/35 600 592
-----------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS
(Cost $13,414) 13,369
=========================================================================
DESCRIPTION FACE AMOUNT (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS [13.0%]
U.S. Treasury Notes
5.500%, 02/15/08 $ 1,125 $ 1,135
4.250%, 11/15/13 1,050 1,027
4.250%, 08/15/15 1,150 1,119
3.875%, 01/15/09 1,445 1,487
3.750%, 05/15/08 75 74
-----------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $4,916) 4,842
=============================================================================
CASH EQUIVALENT [0.1%]
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%* 49,932 50
-----------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $50) 50
=========================================================================
TOTAL INVESTMENTS [99.2%]
(Cost $37,369) 37,137
=========================================================================
OTHER ASSETS AND LIABILITIES [ 0.8%] 316
=========================================================================
NET ASSETS -- 100.0% $ 37,453
=============================================================================
* RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
CL -- CLASS
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 31
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
26.6% Education
13.7% General Revenue
11.4% Public Facilities
10.5% General Obligation
9.2% Water
8.6% Industrial Development
6.8% Power
4.8% Transportation
4.6% Utilities
1.6% Healthcare
1.2% Short-Term Investments
1.0% Airport
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BOND [97.9%]
ALABAMA [1.0%]
Jefferson County, Sewer Authority,
Ser B-8, RB, FSA
Callable 02/01/10 @ 100
5.250%, 02/01/14 $ 250 $ 262
=============================================================================
ARIZONA [2.0%]
Arizona State, Transportation Board,
GAN, Ser A, RB
5.000%, 07/01/13 500 540
=============================================================================
CALIFORNIA [78.9%]
Anaheim, Public Financing Authority,
Distribution System Project,
Second Lien, RB, MBIA
5.000%, 10/01/08 250 257
Berkeley, Ser C, GO, MBIA
Callable 11/10/06 @ 102
5.000%, 09/01/10 95 96
Beverly Hills, Unified School
District Authority, Ser B, GO
Pre-Refunded @ 101 (A)
4.700%, 06/01/08 50 51
Big Bear Lake, Water Authority,
RB, MBIA
6.000%, 04/01/11 200 216
Burbank, Public Financing Authority,
Golden State Redevelopment
Project, Ser A, RB, AMBAC
Callable 12/01/13 @ 100
5.250%, 12/01/18 175 190
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
California State, Department of
Water Resource & Power,
Ser B-5, RB
Callable 10/10/06 @ 100 (C)
3.650%, 05/01/22 $ 400 $ 400
California State, Department of Water
Resources, Ser A, RB, AMBAC
Callable 05/01/12 @ 101
5.500%, 05/01/14 300 331
California State, Department of
Water Resources, Ser W, RB, FSA
5.500%, 12/01/13 400 448
California State, Educational Facilities
Authority, Pooled College &
University Projects, Ser A, RB
4.300%, 04/01/09 100 101
California State, Educational Facilities
Authority, University of
San Francisco, RB, MBIA
6.000%, 10/01/08 300 315
California State, GO
4.750%, 06/01/07 100 101
California State, GO
Callable 02/01/12 @ 100
5.000%, 02/01/18 175 184
California State, GO
Callable 08/01/13 @ 100
5.250%, 02/01/21 250 269
California State, GO
Callable 10/01/10 @ 100
5.250%, 10/01/18 50 52
California State, GO
Pre-Refunded @ 100 (A)
5.250%, 09/01/10 200 213
California State, GO
Pre-Refunded @ 100 (A)
5.250%, 10/01/10 20 21
California State, Infrastructure &
Economic Authority, Bay Area
Toll Bridges Project,
Ser A, RB, FSA
Pre-Refunded @ 100 (A)
5.250%, 07/01/13 125 138
California State, Infrastructure &
Economic Authority, Energy
Efficiency Master Trust, Ser A, RB
5.000%, 03/01/11 315 334
California State, Infrastructure &
Economic Authority, RB, MBIA
Pre-Refunded @ 101 (A)
5.500%, 06/01/10 350 378
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 32
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
California State, Public Works
Board Lease, California State
University, Ser C, RB
5.000%, 10/01/07 $ 100 $ 101
California State, Public Works
Board Lease, Department of
Corrections Project,
Ser B, RB, MBIA
Callable 09/01/08 @ 101
5.000%, 09/01/21 100 103
California State, Public Works
Board Lease, Department of
Corrections, Ser A, RB
Callable 09/01/08 @ 101
5.250%, 09/01/15 250 259
California State, Public Works
Board Lease, Department of
Corrections-State Prisons
Project, Ser A, RB, AMBAC
5.250%, 12/01/13 600 657
California State, Public Works
Board Lease, Department of
Corrections-Ten Administration,
Ser A, RB, AMBAC
Callable 03/01/12 @ 100
5.250%, 03/01/18 155 166
California State, Public Works
Board Lease, Trustees California
State University, Ser A, RB
Callable 10/01/08 @ 101
5.250%, 10/01/11 100 104
California State, Public Works
Board Lease, Various University
Projects, RB, MBIA
Callable 06/01/11 @ 100
5.500%, 06/01/14 250 277
California State, Ser A-3, GO (C)
3.650%, 05/01/33 200 200
California State, University of
California, Ser K, RB, MBIA
Callable 09/01/08 @ 101
5.000%, 09/01/17 150 155
California Statewide, Communities
Development Authority,
Ser B-2, RB, XLCA
4.000%, 11/15/06 400 400
Central, Unified School District
Authority, Ser A, GO, FGIC
5.500%, 07/01/22 400 444
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Coachella Valley, Water District
Authority, Flood Control
Project, COP, AMBAC
Callable 10/01/07 @ 102
5.000%, 10/01/11 $ 250 $ 258
Corona, Public Financing Authority,
City Hall Project, Ser B, RB
Callable 09/01/12 @ 100
5.250%, 09/01/16 350 381
Culver City, Redevelopment Finance
Authority, TA, AMBAC
Sink Date 11/01/09 @ 100
5.500%, 11/01/14 75 82
Desert Sands, Unified School
District, COP, MBIA
Callable 03/01/13 @ 100
5.250%, 03/01/15 405 442
Escondido, Union School District,
Refunding & Financing Project,
COP, MBIA
4.750%, 07/01/19 735 792
Evergreen School District,
Ser C, GO, FGIC
Pre-Refunded @ 101 (A)
5.250%, 09/01/08 200 209
Fruitvale, School District, GO, FSA
Callable 08/01/09 @ 102
5.000%, 08/01/19 200 211
Golden State, Tobacco
Settlement, Ser A, RB
Callable 06/01/09 @ 100
5.000%, 06/01/19 250 256
Golden State, Tobacco
Settlement, Ser B, RB
Pre-Refunded @ 100 (A)
5.750%, 06/01/08 250 259
Irvine, Improvement Board,
Act 1915 Project,
District #93-14, SAB (B)
3.650%, 09/02/25 100 100
Los Angeles County, Public Works
Finance Authority, Master
Refunding Project,
Ser A, RB, MBIA
5.000%, 12/01/12 275 297
Los Angeles County, Public Works
Finance Authority, Regional Park
& Open Project, Ser A, RB
Pre-Refunded @ 101 (A)
5.500%, 10/01/07 325 335
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 33
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Los Angeles County, Public
Works Finance Authority,
Ser B, RB, MBIA
Callable 11/01/06 @ 102
5.250%, 09/01/14 $ 200 $ 204
Los Angeles, Harbor Development
Project, Ser C, RB
Callable 11/01/06 @ 101
5.125%, 11/01/11 180 182
Los Angeles, Municipal
Improvement Authority,
Central Library Project,
Ser A, RB, MBIA
5.250%, 06/01/13 230 253
Los Angeles, Property Tax
Project, Ser A, GO, MBIA
4.000%, 09/01/09 250 254
Los Angeles, Wastewater
Systems Authority, RB, FSA
4.500%, 06/01/09 250 257
Los Angeles, Water & Power
Authority, Power Systems
Project, Ser A, RB
5.000%, 07/01/08 500 513
Los Angeles, Water & Power
Authority, Power Systems
Project, Ser AA1, RB, MBIA
Callable 07/01/11 @ 100
5.250%, 07/01/13 200 215
M-S-R Public Power,
Ser G, RB, MBIA
Callable 07/01/07 @ 101
5.250%, 07/01/11 100 102
Modesto, Irrigation District,
Capital Improvements Project,
Ser A, COP, AMBAC
Callable 10/01/16 @ 100
5.000%, 10/01/19 330 359
Northern California, Transmission
Resource Authority, Ore
Transmission Project,
Ser A, RB, MBIA
7.000%, 05/01/13 250 292
Oakland, Joint Powers Financing
Authority, Oakland Convention
Center Project, RB, AMBAC
5.500%, 10/01/11 300 327
Oakland, Redevelopment Agency,
Central Distric Redevelopment
Project, TA, AMBAC
6.000%, 02/01/07 300 302
5.500%, 02/01/14 475 512
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Oakland, State Building Authority,
Elihu M Harris Project,
Ser A, RB, AMBAC
Pre-Refunded @ 101 (A)
5.500%, 04/01/08 $ 100 $ 104
Pasadena, Electric Improvements
Authority, RB, FSA
4.500%, 06/01/07 160 161
Pinole, Redevelopment Agency
Project, TA, FSA
Callable 08/01/09 @ 101
5.250%, 08/01/14 100 105
Riverside, RB
Callable 10/01/08 @ 101
5.375%, 10/01/12 90 94
Riverside, RB
Pre-Refunded @ 101 (A)
5.375%, 10/01/08 10 10
Sacramento County, Sanitation
District Funding Authority,
RB, ETM
Callable 11/10/06 @ 102
5.000%, 12/01/07 100 102
Sacramento, City Unified School
District, Ser A, GO, FSA
4.250%, 07/01/09 75 77
San Bernardino, Community
College District, Election 2002
Project, Ser B, GO, MBIA
Pre-Refunded @ 100 (A)
5.250%, 08/01/14 750 834
San Diego County, Edgemoor &
Regional Systems Projects,
COP, AMBAC
Callable 02/01/15 @ 100
5.000%, 02/01/18 500 538
San Diego County, North County
Regional Center for Expansion,
COP, AMBAC
Pre-Refunded @ 102 (A)
5.250%, 11/15/06 100 102
San Diego, Unified School
District, Election 1998 Project,
Ser B-1, GO, MBIA
5.000%, 07/01/17 1,000 1,107
San Diego, Unified School
District, Election 1998 Project,
Ser E, GO, FSA
Callable 07/01/13 @ 100
5.000%, 07/01/28 400 431
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 34
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
San Diego, University School
District, Capital Appreciation-
Election 1998 Project,
Ser D, GO, FGIC
Callable 07/01/12 @ 101
5.250%, 07/01/24 $ 135 $ 148
San Diego, University School
District, Election 1998
Project, Ser E, GO, FSA
Callable 07/01/13 @ 101
5.250%, 07/01/16 100 110
San Francisco (City & County),
Airports Commission Authority,
Second Ser-27B, RB, FGIC
5.250%, 05/01/12 250 268
San Francisco (City & County),
Public Utility Authority,
Ser A, RB, MBIA
Callable 11/01/06 @ 101.5
5.000%, 11/01/17 160 163
San Jose, University School
District, Ser A, GO, FSA
Callable 08/01/11 @ 101
5.375%, 08/01/19 150 162
San Ysidro, School District, Election
1997 Project, Ser C, GO, MBIA
6.000%, 08/01/11 205 228
Sanger, Unified School District,
Election 2006 Project,
Ser A, GO, FSA
Callable 08/01/16 @ 102
5.000%, 08/01/18 500 555
Sanger, Unified School District,
GO, MBIA
5.350%, 08/01/15 250 272
Santa Monica, Public Safety
Facilities Project, RB
Callable 07/01/09 @ 101
5.250%, 07/01/14 100 105
Semitropic, Improvement Water
Storage Authority, RB,
FSA, ACA Insured
Pre-Refunded @ 103 (A)
4.000%, 06/01/11 250 262
Solano County, COP, MBIA
Callable 11/01/12 @ 100
5.250%, 11/01/14 100 109
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Southern California, Metropolitan
Water District Authority,
Ser A, RB
5.750%, 07/01/21 $ 280 $ 331
Southern California, Publiic
Power Authority, Southern
Transmission Project,
Sub-Ser A, RB, FSA
Callable 07/01/12 @ 100
5.250%, 07/01/16 200 217
Sweetwater, Union High School
District, Ser A, RB, FSA
5.000%, 09/01/13 355 385
Wiseburn, School District,
Ser A, GO, FGIC
4.200%, 08/01/07 125 126
-----------------------------------------------------------------------------
TOTAL CALIFORNIA 21,461
=============================================================================
FLORIDA [1.4%]
Florida State, Correctional
Private Commission
Authority, COP, MBIA
Callable 08/01/11 @ 101
5.375%, 08/01/14 350 379
=============================================================================
GEORGIA [0.8%]
Georgia State, Metropolitan
Atlanta Rapid Transportation
Authority, Second Indenture
Project, Ser A, RB, MBIA
6.250%, 07/01/07 200 204
=============================================================================
ILLINOIS [2.2%]
Illinois State, Civic Center
Authority, RB, FSA
Callable 12/15/10 @ 100
5.500%, 12/15/14 200 214
Illinois State, Development
Finance Authority, Revolving
Fund-Master Trust, RB
Callable 09/01/12 @ 100
5.500%, 09/01/13 250 274
Illinois State, Ser A, GO
Callable 10/01/13 @ 100
5.000%, 10/01/16 100 108
-----------------------------------------------------------------------------
TOTAL ILLINOIS 596
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 35
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MICHIGAN [0.9%]
Michigan State, Building
Authority, Facilities Project,
Ser II, RB
Pre-Refunded @ 101 (A)
5.000%, 10/15/07 $ 250 $ 256
=============================================================================
NEW JERSEY [1.4%]
New Jersey State, Turnpike
Authority, RB, MBIA, ETM
6.500%, 01/01/16 315 369
=============================================================================
NEW YORK [2.1%]
New York State, Ser E, RB
6.000%, 04/01/14 500 574
=============================================================================
OREGON [1.4%]
Lane County, School District, GO
Pre-Refunded @ 100 (A)
5.625%, 06/15/10 345 370
=============================================================================
TEXAS [2.0%]
San Angelo, Waterworks &
Sewer System Authority,
Refunding & Improvements
Projects, RB, FSA
Callable 04/01/11 @ 100
5.250%, 04/01/19 100 106
Travis County, Health Facilities
Development Authority,
Ascension Health Credit
Project, Ser A, RB, MBIA
Pre-Refunded @ 101 (A)
6.250%, 11/15/09 400 435
-----------------------------------------------------------------------------
TOTAL TEXAS 541
=============================================================================
UTAH [0.5%]
Central, Water Conservancy
District, Ser D, GO
Pre-Refunded @ 100 (A)
4.600%, 04/01/09 140 144
=============================================================================
WASHINGTON [1.3%]
Washington State,
Ser 02-A, GO, FSA
Callable 07/01/11 @ 100
5.000%, 07/01/19 345 362
=============================================================================
DESCRIPTION FACE AMOUNT (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
PUERTO RICO [2.0%]
Puerto Rico, Electric Power
Authority, Power Project,
Ser CC, RB, MBIA
Callable 07/01/07 @ 101.5
5.250%, 07/01/09 $ 100 $ 103
Puerto Rico, Municipal Finance
Agency, Ser A, RB, FSA
Callable 07/01/07 @ 101.5
5.250%, 07/01/10 130 133
Puerto Rico, Public Buildings
Authority, Government
Facilities Project, Ser J,
RB, AMBAC
Callable 07/01/12 @ 100
5.000%, 07/01/36 300 320
-----------------------------------------------------------------------------
TOTAL PUERTO RICO 556
=============================================================================
TOTAL MUNICIPAL BOND
(Cost $26,537) 26,614
=======================================================================
CASH EQUIVALENT [1.1%]
Federated California Municipal
Money Market Fund,
Cl I, 3.42%* 309,680 310
-----------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $310) 310
=========================================================================
TOTAL INVESTMENTS [99.0%]
(Cost $26,847) 26,924
=========================================================================
OTHER ASSETS AND LIABILITIES [1.0%] 284
=========================================================================
NET ASSETS -- 100.0% $ 27,208
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 36
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND (CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------------
(A) PRE-REFUNDED SECURITY - THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
(B) SECURITIES ARE HELD IN CONJUNCTION WITH A LETTER OF CREDIT FROM A MAJOR
BANK OR FINANCIAL INSTITUTION.
(C) FLOATING RATE SECURITY - THE RATE REFLECTED ON THE SCHEDULE OF INVESTMENTS
IS THE RATE IN EFFECT ON SEPTEMBER 30, 2006.
* RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
COP -- CERTIFICATE OF PARTICIPATION
ETM -- ESCROWED TO MATURITY
FGIC -- FINANCIAL GUARANTY INSURANCE COMPANY
FSA -- FINANCIAL SECURITY ASSISTANCE
GAN -- GRANT ANTICIPATION NOTE
GO -- GENERAL OBLIGATION
MBIA -- MUNICIPAL BOND INSURANCE ASSOCIATION
RB -- REVENUE BOND
SAB -- SPECIAL ASSESSMENT BOND
SER -- SERIES
TA -- TAX ALLOCATION
XLCA -- XL CAPITAL ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 37
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
72.2% Industrial
7.5% Financial
6.2% Telephone
5.8% Utilities
4.9% Gas Transmission
1.8% Short-Term Investments
1.5% Transportation
0.1% Common Stock
0.0% Healthcare
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CORPORATE BONDS [97.0%]
ADVERTISING [0.3%]
Advanstar Communications
10.750%, 08/15/10 $ 100 $ 108
=============================================================================
AEROSPACE & DEFENSE [1.3%]
DRS Techologies
6.625%, 02/01/16 100 98
Esterline Technologies
7.750%, 06/15/13 100 101
L-3 Communications
5.875%, 01/15/15 200 190
Sequa, Ser B
8.875%, 04/01/08 150 156
-----------------------------------------------------------------------------
TOTAL AEROSPACE & DEFENSE 545
=============================================================================
AGRICULTURE [0.4%]
American Rock Salt
9.500%, 03/15/14 150 155
=============================================================================
AIRLINES [0.5%]
American Airlines, Ser 2001-2
7.800%, 04/01/08 200 200
=============================================================================
ALUMINUM [0.3%]
Novelis (A)
8.250%, 02/15/15 150 142
=============================================================================
APPAREL/TEXTILES [0.4%]
Levi Strauss
9.750%, 01/15/15 100 103
Phillips-Van Heusen
7.250%, 02/15/11 75 76
-----------------------------------------------------------------------------
TOTAL APPAREL/TEXTILES 179
=============================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
AUTO RENT & LEASE [1.4%]
Avis Budget Car Rental (A)
7.750%, 05/15/16 $ 100 $ 97
Hertz (A)
10.500%, 01/01/16 150 165
Rent-Way
11.875%, 06/15/10 100 116
United Rentals
6.500%, 02/15/12 90 87
Williams Scotsman
8.500%, 10/01/15 100 102
-----------------------------------------------------------------------------
TOTAL AUTO RENT & LEASE 567
=============================================================================
AUTOMOTIVE [1.6%]
General Motors
7.125%, 07/15/13 725 637
=============================================================================
AUTOPARTS [1.2%]
Accuride
8.500%, 02/01/15 150 140
Dura Operating, Ser D
9.000%, 05/01/09 75 3
Metaldyne
10.000%, 11/01/13 100 101
Tenneco Automotive
8.625%, 11/15/14 150 148
TRW Automotive
11.000%, 02/15/13 98 107
-----------------------------------------------------------------------------
TOTAL AUTOPARTS 499
=============================================================================
BROADCASTING & CABLE [6.8%]
Albritton Communications
7.750%, 12/15/12 150 151
Atlantic Broadband Finance (A)
9.375%, 01/15/14 100 98
Cablevision Systems, Ser B
8.000%, 04/15/12 225 228
CCO Holdings
8.750%, 11/15/13 250 252
Charter Communications Holdings
10.250%, 09/15/10 400 408
Coleman Cable
9.875%, 10/01/12 100 100
CSC Holdings
7.625%, 07/15/18 100 102
Echostar DBS
6.625%, 10/01/14 200 190
Fisher Communication
8.625%, 09/15/14 150 156
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 38
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
General Cable
9.500%, 11/15/10 $ 100 $ 107
Gray Television
9.250%, 12/15/11 100 104
Insight Commununications (B)
12.250%, 02/15/11 100 106
Kabel Deutschland (A)
10.625%, 07/01/14 200 214
Mediacom Capital
7.875%, 02/15/11 150 148
Nexstar Finance Holdings (B)
10.050%, 04/01/13 200 167
Olympus Communications, Ser B (D)
10.625%, 11/15/06 100 140
Videotron Ltee
6.875%, 01/15/14 100 99
-----------------------------------------------------------------------------
TOTAL BROADCASTING & CABLE 2,770
=============================================================================
BUILDING & CONSTRUCTION [4.1%]
Ainsworth Lumber
7.250%, 10/01/12 100 74
6.750%, 03/15/14 100 70
Beazer Homes USA
8.375%, 04/15/12 100 100
Brand Services
12.000%, 10/15/12 150 168
DR Horton
5.625%, 01/15/16 125 116
Goodman Global Holdings
7.875%, 12/15/12 75 71
Interline Brands
8.125%, 06/15/14 50 51
International Utility Structures (D)
10.750%, 02/01/08 100 1
KB Home
8.625%, 12/15/08 50 51
6.250%, 06/15/15 200 184
Nortek
8.500%, 09/01/14 200 189
Panolam Industries (A)
10.750%, 10/01/13 250 252
Ply Gem Industries
9.000%, 02/15/12 150 120
RMCC Acquisition (A)
9.500%, 11/01/12 150 155
Tech Olympic USA
7.500%, 01/15/15 100 77
-----------------------------------------------------------------------------
TOTAL BUILDING & CONSTRUCTION 1,679
=============================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
BUSINESS SERVICES [0.7%]
Corrections
7.500%, 05/01/11 $ 100 $ 102
FTI Consulting
7.625%, 06/15/13 50 51
Geo Group
8.250%, 07/15/13 150 150
-----------------------------------------------------------------------------
TOTAL BUSINESS SERVICES 303
=============================================================================
CHEMICALS [4.7%]
Basell Af SCA (A)
8.375%, 08/15/15 250 248
BCP Crystal US Holdings
9.625%, 06/15/14 45 49
Crystal Holdings, Ser B (B)
9.037%, 10/01/14 73 59
Equistar Chemicals
10.625%, 05/01/11 150 161
Georgia Gulf (A)
9.500%, 10/15/14 150 149
Lyondell Chemical
8.250%, 09/15/16 60 61
8.000%, 09/15/14 60 61
Mosaic Global Holdings
10.875%, 08/01/13 100 111
Mosaic Global Holdings, Ser B
11.250%, 06/01/11 100 106
Nalco
7.750%, 11/15/11 150 153
Nova Chemicals
6.500%, 01/15/12 250 235
Polymer Holdings (B)
11.043%, 07/15/14 250 203
PolyOne
10.625%, 05/15/10 100 107
Rhodia
10.250%, 06/01/10 65 73
Rockwood Specialties Group
10.625%, 05/15/11 73 78
Terra Capital
11.500%, 06/01/10 65 71
-----------------------------------------------------------------------------
TOTAL CHEMICALS 1,925
=============================================================================
CIRCUIT BOARDS [0.1%]
Viasystems
10.500%, 01/15/11 50 49
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 39
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COAL MINING [0.4%]
Alpha Natural Resources
10.000%, 06/01/12 $ 150 $ 161
=============================================================================
COMMERCIAL SERVICES [0.9%]
Iron Mountain
8.750%, 07/15/18 150 156
8.625%, 04/01/13 100 102
The Brickman Group, Ser B
11.750%, 12/15/09 100 107
-----------------------------------------------------------------------------
TOTAL COMMERCIAL SERVICES 365
=============================================================================
COMPUTER SYSTEM DESIGN & SERVICES [0.9%]
Activant Solution (A)
9.500%, 05/01/16 100 93
Xerox
7.625%, 06/15/13 250 262
-----------------------------------------------------------------------------
TOTAL COMPUTERS SYSTEM DESIGN & SERVICES 355
=============================================================================
CONSUMER PRODUCTS & SERVICES [4.4%]
Ames True Temper (C)
9.507%, 01/15/12 100 101
Exopac Holding (A)
11.250%, 02/01/14 100 102
Gregg Appliances
9.000%, 02/01/13 150 137
Johnsondiversey Holdings (B)
12.305%, 05/15/13 200 173
Johnsondiversey, Ser B
9.625%, 05/15/12 150 151
Libbey Glass (A) (C)
12.436%, 06/01/11 100 104
Prestige Brands
9.250%, 04/15/12 90 90
Sealy Mattress
8.250%, 06/15/14 200 204
Southern States Cooperative (A)
10.500%, 11/01/10 200 209
Spectrum Brands
7.375%, 02/01/15 300 240
Steinway Musical (A)
7.000%, 03/01/14 100 98
Visant Holding (A)
8.750%, 12/01/13 100 101
WMG Holdings (B)
9.563%, 12/15/14 130 97
-----------------------------------------------------------------------------
TOTAL CONSUMER PRODUCTS & SERVICES 1,807
=============================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CONTAINERS & PACKAGING [2.0%]
Crown Americas
7.750%, 11/15/15 $ 150 $ 152
Graham Packaging
9.875%, 10/15/14 100 98
Intertape Polymer US
8.500%, 08/01/14 50 47
Owens-Brockway Glass Container
6.750%, 12/01/14 100 95
Owens-Illinois
8.100%, 05/15/07 100 101
Plastipak Holdings (A)
8.500%, 12/15/15 100 101
Solo Cup
8.500%, 02/15/14 150 130
Stone Container
7.375%, 07/15/14 100 91
-----------------------------------------------------------------------------
TOTAL CONTAINERS & PACKAGING 815
=============================================================================
DIVERSIFIED OPERATIONS [0.9%]
Jacuzzi Brands
9.625%, 07/01/10 150 159
Trinity Industries
6.500%, 03/15/14 200 195
-----------------------------------------------------------------------------
TOTAL DIVERSIFIED OPERATIONS 354
=============================================================================
EDUCATIONAL SERVICES [0.3%]
Education Management (A)
10.250%, 06/01/16 60 61
8.750%, 06/01/14 60 61
-----------------------------------------------------------------------------
TOTAL EDUCATIONAL SERVICES 122
=============================================================================
ELECTRICAL PRODUCTS [0.5%]
ESI Tractebel Acquisitions, Ser B
7.990%, 12/30/11 60 62
Kinetek, Ser D
10.750%, 11/15/06 150 149
-----------------------------------------------------------------------------
TOTAL ELECTRICAL PRODUCTS 211
=============================================================================
ELECTRIC UTILITIES [5.1%]
AES (A)
9.000%, 05/15/15 300 323
7.750%, 03/01/14 100 104
Allegheny Energy Supply
7.800%, 03/15/11 200 213
Aquila
7.625%, 11/15/09 100 104
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 40
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Calpine Generating (D)
11.080%, 04/01/10 $ 200 $ 210
CMS Energy
7.500%, 01/15/09 100 103
6.875%, 12/15/15 150 152
Edison Mission Energy
7.730%, 06/15/09 200 206
Mirant North America
7.375%, 12/31/13 150 150
Reliant Resources
9.500%, 07/15/13 200 208
Sierra Pacific Resources
8.625%, 03/15/14 200 216
TECO Energy
7.200%, 05/01/11 100 104
-----------------------------------------------------------------------------
TOTAL ELECTRIC UTILITIES 2,093
=============================================================================
ENTERTAINMENT & GAMING [7.8%]
AMC Entertainment
11.000%, 02/01/16 100 109
9.875%, 02/01/12 100 103
9.500%, 02/01/11 72 72
Aztar
9.000%, 08/15/11 100 104
Choctaw Resort Development
Entity (A)
7.250%, 11/15/19 200 199
Chukchansi Economic
Development Authority (A)
8.000%, 11/15/13 150 154
Cinemark USA
9.000%, 02/01/13 100 104
Circus & Eldorado Joint Venture/
Silver Legacy Capital
10.125%, 03/01/12 150 158
Herbst Gaming
8.125%, 06/01/12 150 153
Inn of the Mountain Gods
12.000%, 11/15/10 150 157
Isle of Capri Casinos
7.000%, 03/01/14 200 190
Jacobs Entertainment (A)
9.750%, 06/15/14 75 74
MGM Mirage
8.500%, 09/15/10 200 213
6.750%, 09/01/12 100 99
6.000%, 10/01/09 100 99
Mohegan Tribal Gaming Authority
7.125%, 08/15/14 150 149
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MTR Gaming Group, Ser B
9.750%, 04/01/10 $ 200 $ 210
OED/Diamond Jo
8.750%, 04/15/12 100 100
Penn National Gaming
6.875%, 12/01/11 100 100
Speedway Motorsports
6.750%, 06/01/13 100 99
Station Casinos
6.875%, 03/01/16 100 94
Tunica-Biloxi Gaming Authority (A)
9.000%, 11/15/15 125 130
Waterford Gaming (A)
8.625%, 09/15/12 109 115
Wynn Las Vegas Capital
6.625%, 12/01/14 200 194
-----------------------------------------------------------------------------
TOTAL ENTERTAINMENT & GAMING 3,179
=============================================================================
FINANCIAL SERVICES [2.9%]
Ford Motor Credit
7.375%, 10/28/09 200 194
7.375%, 02/01/11 350 336
GMAC
6.750%, 12/01/14 675 659
-----------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 1,189
=============================================================================
FOOD, BEVERAGE & TOBACCO [4.2%]
Chiquita Brands International
7.500%, 11/01/14 100 87
Del Monte
8.625%, 12/15/12 50 52
Dominos
8.250%, 07/01/11 75 79
Friendly Ice Cream
8.375%, 06/15/12 200 181
General Nutrition Center
8.500%, 12/01/10 150 146
Land O' Lakes
8.750%, 11/15/11 6 6
Le-Natures (A)
10.000%, 06/15/13 150 155
Leiner Health Products
11.000%, 06/01/12 100 97
National Beef Packaging
10.500%, 08/01/11 100 104
National Wine & Spirits
10.125%, 01/15/09 100 101
Pinnacle Foods
8.250%, 12/01/13 150 150
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 41
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Smithfield Foods, Ser B
8.000%, 10/15/09 $ 350 $ 366
Swift
12.500%, 01/01/10 200 203
-----------------------------------------------------------------------------
TOTAL FOOD, BEVERAGE & TOBACCO 1,727
=============================================================================
FORESTRY [0.1%]
Tembec Industries
7.750%, 03/15/12 100 51
=============================================================================
GAS/NATURAL GAS [3.9%]
Colorado Interstate Gas
6.800%, 11/15/15 150 151
El Paso
7.000%, 05/15/11 275 277
El Paso Natural Gas
7.625%, 08/01/10 150 155
MarkWest Energy Partners (A)
8.500%, 07/15/16 150 151
Semco Energy
7.125%, 05/15/08 250 249
Targa Resources (A)
8.500%, 11/01/13 200 200
Williams
8.125%, 03/15/12 200 213
7.625%, 07/15/19 50 52
6.375%, 10/01/10 (A) 150 149
-----------------------------------------------------------------------------
TOTAL GAS/NATURAL GAS 1,597
=============================================================================
MACHINERY [1.5%]
Case New Holland
9.250%, 08/01/11 100 106
7.125%, 03/01/14 100 100
Cummins
9.500%, 12/01/10 150 158
Terex
7.375%, 01/15/14 100 100
Trimas
9.875%, 06/15/12 150 139
-----------------------------------------------------------------------------
TOTAL MACHINERY 603
=============================================================================
MEDICAL [3.2%]
Angiotech Pharmaceuticals (A)
7.750%, 04/01/14 100 95
Bio-Rad Laboratories
7.500%, 08/15/13 100 102
Biovail
7.875%, 04/01/10 100 100
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
CDRV Investors (B)
9.558%, 01/01/15 $ 200 $ 148
Extendicare Health
6.875%, 05/01/14 100 107
Genesis HealthCare
8.000%, 10/15/13 100 104
MQ Associates (B)
13.869%, 08/15/12 150 53
Mylan Laboratories
5.750%, 08/15/10 150 148
Omnicare
6.750%, 12/15/13 250 243
Tenet Healthcare
9.250%, 02/01/15 200 193
-----------------------------------------------------------------------------
TOTAL MEDICAL 1,293
=============================================================================
MEDICAL PRODUCTS & SERVICES [0.2%]
Vanguard Health Holding
9.000%, 10/01/14 100 97
=============================================================================
MISCELLANEOUS BUSINESS SERVICES [2.5%]
Affinion Group
11.500%, 10/15/15 150 154
Allied Security Escrow
11.375%, 07/15/11 150 150
Carriage Services
7.875%, 01/15/15 200 194
CCM Merger (A)
8.000%, 08/01/13 225 216
Compagnie Generale de
Geophysique
7.500%, 05/15/15 50 50
Integrated Alarm Services
Group (A)
12.000%, 11/15/11 100 99
Mobile Services Group
9.750%, 08/01/14 150 154
-----------------------------------------------------------------------------
TOTAL MISCELLANEOUS BUSINESS SERVICES 1,017
=============================================================================
MISCELLANEOUS MANUFACTURING [0.9%]
Dresser-Rand Group
7.375%, 11/01/14 133 130
KI Holdings (B)
9.972%, 11/15/14 250 184
Maax Holdings (B)
26.373%, 12/15/12 200 74
-----------------------------------------------------------------------------
TOTAL MISCELLANEOUS MANUFACTURING 388
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 42
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
PAPER & RELATED PRODUCTS [3.4%]
Abitibi-Consolidated
7.750%, 06/15/11 $ 100 $ 92
Appleton Papers, Ser B
9.750%, 06/15/14 100 99
Domtar
7.125%, 08/15/15 150 139
Georgia-Pacific
7.700%, 06/15/15 100 100
JSG Funding
9.625%, 10/01/12 100 105
Neenah Paper
7.375%, 11/15/14 150 141
Newark Group
9.750%, 03/15/14 200 194
Norampac
6.750%, 06/01/13 100 95
Norske Skog Canada
7.375%, 03/01/14 250 230
Smurfit Kappa Funding
7.750%, 04/01/15 150 142
Verso Paper Holdings (A)
9.125%, 08/01/14 65 65
-----------------------------------------------------------------------------
TOTAL PAPER & RELATED PRODUCTS 1,402
=============================================================================
PETROLEUM & FUEL PRODUCTS [7.2%]
Atlas Pipeline Partners
8.125%, 12/15/15 200 204
Chesapeake Energy
6.250%, 01/15/18 100 93
Clayton William Energy
7.750%, 08/01/13 150 135
Comstock Resources
6.875%, 03/01/12 150 143
Dynegy Holdings
6.875%, 04/01/11 100 97
El Paso Production Holding
7.750%, 06/01/13 200 204
Forest Oil
8.000%, 06/15/08 150 154
8.000%, 12/15/11 100 104
Frontier Oil
6.625%, 10/01/11 150 150
Giant Industries
8.000%, 05/15/14 200 216
Pacific Energy
7.125%, 06/15/14 100 102
6.250%, 09/15/15 250 246
Parker Drilling
9.625%, 10/01/13 150 164
Plains Exploration & Production
8.750%, 07/01/12 150 159
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Pogo Producing
6.875%, 10/01/17 $ 300 $ 286
Pride International
7.375%, 07/15/14 100 103
Swift Energy
7.625%, 07/15/11 100 100
Whiting Petroleum
7.000%, 02/01/14 300 292
-----------------------------------------------------------------------------
TOTAL PETROLEUM & FUEL PRODUCTS 2,952
=============================================================================
PRINTING & PUBLISHING [3.3%]
Dex Media (B)
8.738%, 11/15/13 200 168
Dex Media East
9.875%, 11/15/09 100 105
Dex Media West, Ser B
8.500%, 08/15/10 100 103
Emmis Operating
6.875%, 05/15/12 150 150
Haights Cross Operating
11.750%, 08/15/11 200 205
JII Holdings
13.000%, 04/01/07 70 60
Primedia
8.000%, 05/15/13 100 91
RH Donnelley
6.875%, 01/15/13 200 182
RH Donnelley, Ser A-2
6.875%, 01/15/13 50 46
Sheridan Group
10.250%, 08/15/11 150 152
Warner Music Group
7.375%, 04/15/14 100 98
-----------------------------------------------------------------------------
TOTAL PRINTING & PUBLISHING 1,360
=============================================================================
REAL ESTATE INVESTMENT TRUST [0.4%]
Host Marriott, Ser O
6.375%, 03/15/15 150 145
=============================================================================
RETAIL [2.7%]
Asbury Automotive Group
9.000%, 06/15/12 150 154
Denny's Holdings
10.000%, 10/01/12 150 155
Group 1 Automotive
8.250%, 08/15/13 100 102
Jean County Group
8.500%, 08/01/14 150 144
Landry's Restaurants, Ser B
7.500%, 12/15/14 100 96
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 43
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Leslie's Poolmart
7.750%, 02/01/13 $ 100 $ 99
NPC International (A)
9.500%, 05/01/14 100 99
Rite Aid
8.125%, 05/01/10 100 100
True Temper Sports
8.375%, 09/15/11 150 134
-----------------------------------------------------------------------------
TOTAL RETAIL 1,083
=============================================================================
RUBBER & PLASTIC [0.4%]
Goodyear Tire & Rubber
9.000%, 07/01/15 150 152
=============================================================================
SEMI-CONDUCTORS [1.2%]
Amkor Technology
9.250%, 06/01/16 100 94
Flextronics International
6.250%, 11/15/14 100 97
Freescale Semiconductors
7.125%, 07/15/14 200 214
Sensata Technologies (A)
8.000%, 05/01/14 100 97
-----------------------------------------------------------------------------
TOTAL SEMI-CONDUCTORS 502
=============================================================================
STEEL & STEEL WORKS [1.4%]
AK Steel
7.875%, 02/15/09 115 114
7.750%, 06/15/12 200 195
Gerdau Ameristeel
10.375%, 07/15/11 100 108
International Steel Group
6.500%, 04/15/14 150 148
-----------------------------------------------------------------------------
TOTAL STEEL & STEEL WORKS 565
=============================================================================
TELEPHONES & TELECOMMUNICATIONS [8.5%]
American Cellular, Ser B
10.000%, 08/01/11 150 157
American Tower
7.125%, 10/15/12 150 154
Centennial Communications
10.125%, 06/15/13 100 106
8.125%, 02/01/14 50 49
Cincinnati Bell
8.375%, 01/15/14 185 187
Dobson Cellular Systems
9.875%, 11/01/12 230 247
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Dobson Communications (C)
9.757%, 10/15/12 $ 250 $ 255
Insight Midwest
9.750%, 10/01/09 200 204
IPCS
11.500%, 05/01/12 150 168
Nextel Partners
8.125%, 07/01/11 150 158
Nordic Telephone (A)
8.875%, 05/01/16 50 53
NTL Cable
9.125%, 08/15/16 150 155
PanAmSat
9.000%, 08/15/14 96 99
Qwest
7.625%, 06/15/15 564 585
5.625%, 11/15/08 100 99
Rogers Wireless
9.625%, 05/01/11 100 113
7.250%, 12/15/12 50 52
Rural Cellular
9.750%, 01/15/10 200 201
Telenet Group Holding (A) (B)
9.651%, 06/15/14 22 19
Time Warner Telecom Holdings
9.250%, 02/15/14 100 105
Triton PCS
8.500%, 06/01/13 150 139
UbiquiTel Operating
9.875%, 03/01/11 150 163
-----------------------------------------------------------------------------
TOTAL TELEPHONES & TELECOMMUNICATIONS 3,468
=============================================================================
TRANSPORTATION SERVICES [1.7%]
American Commercial Lines
9.500%, 02/15/15 97 105
Kansas City Southern
9.500%, 10/01/08 100 104
NCL
10.625%, 07/15/14 100 97
Ship Finance
8.500%, 12/15/13 200 193
Stena
7.000%, 12/01/16 200 189
-----------------------------------------------------------------------------
TOTAL TRANSPORTATION SERVICES 688
=============================================================================
WASTE DISPOSAL [0.2%]
Allied Waste North America, Ser B
7.125%, 05/15/16 100 99
=============================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 44
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND (CONCLUDED)
DESCRIPTION FACE AMOUNT (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
WHOLESALE [0.2%]
Collins & Aikman Floor Cover, Ser B
9.750%, 02/15/10 $ 100 $ 100
=============================================================================
TOTAL CORPORATE BONDS
(Cost $39,734) 39,698
=========================================================================
COMMON STOCK [0.2%]
COMMERCIAL SERVICES [0.0%]
Magellan Health Services* 69 3
=============================================================================
RETAIL [0.2%]
Crunch Equity Holding* 56 57
=============================================================================
TOTAL COMMON STOCK
(Cost $61) 60
=========================================================================
CASH EQUIVALENTS [1.8%]
Evergreen Select Money Market,
Institutional Class, 5.20%** 373,441 373
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%** 373,441 373
-----------------------------------------------------------------------------
TOTAL CASH EQUIVALENTS
(Cost $746) 746
=========================================================================
WARRANTS [0.0%]
Dayton Superior,
Expires 06/15/09* (A) 100 --
Diva Systems,
Expires 03/01/08* (A) 600 --
Pliant, Expires 06/01/10* (A) 100 --
-----------------------------------------------------------------------------
TOTAL WARRANTS
(Cost $0) --
=========================================================================
TOTAL INVESTMENTS [99.0%]
(Cost $40,541) 40,504
=========================================================================
OTHER ASSETS AND LIABILITIES [1.0%] 428
=========================================================================
NET ASSETS -- 100.0% $ 40,932
=============================================================================
DESCRIPTION
- --------------------------------------------------------------------------------
* NON-INCOME PRODUCING SECURITY
** RATE SHOWN IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
(A) SECURITY SOLD WITHIN THE TERMS OF A PRIVATE PLACEMENT MEMORANDUM, EXEMPT
FROM REGISTRATION UNDER SECTION 144A OF THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER
"ACCREDITED INVESTORS." THE TOTAL VALUE OF THESE SECURITIES AS OF
SEPTEMBER 30, 2006 WAS $4,568 (000) AND REPRESENTS 11.2% OF NET ASSETS.
(B) STEP BOND -- THE RATE REFLECTED ON THE SCHEDULE OF INVESTMENTS IS THE RATE
IN EFFECT ON SEPTEMBER 30, 2006. THE COUPON ON A STEP BOND CHANGES ON A
SPECIFIC DATE.
(C) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE SCHEDULE OF
INVESTMENTS IS THE RATE IN EFFECT ON SEPTEMBER 30, 2006.
(D) IN DEFAULT ON INTEREST PAYMENTS
CL -- CLASS
SER -- SERIES
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 45
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
44.7% Commercial Paper
39.4% Repurchase Agreements
5.5% Certificate of Deposit
5.5% U.S. Government Agency Obligations
3.7% Corporate Bond
1.2% Mortgage-Backed
0.0% Cash Equivalent
* Percentages are based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
COMMERCIAL PAPER (A) [45.0%]
ASSET BACKED SECURITIES [15.5%]
Amsterdam Funding
5.260%, 10/05/06 $ 25,000 $ 24,986
Barton Capital
5.260%, 11/03/06 25,000 24,880
Duke Funding High Grade
5.285%, 10/23/06 25,000 24,919
Kitty Hawk Funding
5.255%, 10/20/06 25,000 24,931
Laguna (C)
5.300%, 12/18/06 25,000 24,713
Premier Asset
5.260%, 10/20/06 10,000 9,972
Ranger Funding
5.260%, 10/05/06 25,000 24,985
Windmill Funding
5.260%, 10/05/06 25,000 24,985
Yorktown Capital (C)
5.260%, 10/30/06 25,000 24,894
--------------------------------------------------------------------------
TOTAL ASSET BACKED SECURITIES 209,265
==========================================================================
BANKS [7.4%]
BNP Paribas Finance
5.245%, 10/11/06 25,000 24,964
Dexia Delaware
5.225%, 10/06/06 25,000 24,982
Lloyds TSB Bank
5.250%, 10/02/06 25,000 24,996
Societe Generale
5.250%, 10/04/06 25,000 24,989
--------------------------------------------------------------------------
TOTAL BANKS 99,931
==========================================================================
FINANCE AUTO LOANS [5.5%]
American Honda Finance
5.220%, 10/11/06 25,000 24,964
5.450%, 01/26/07 (C) 25,000 25,000
Toyota Motor Credit
5.240%, 10/31/06 25,000 24,891
--------------------------------------------------------------------------
TOTAL FINANCE AUTO LOANS 74,855
==========================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
FINANCIAL SERVICES [3.7%]
Citigroup Funding
5.240%, 10/06/06 $ 25,000 $ 24,982
General Electric Capital
5.240%, 10/17/06 25,000 24,942
--------------------------------------------------------------------------
TOTAL FINANCIAL SERVICES 49,924
==========================================================================
INSURANCE [3.7%]
Prudential Funding
5.230%, 10/02/06 25,000 24,996
5.220%, 10/12/06 25,000 24,960
--------------------------------------------------------------------------
TOTAL INSURANCE 49,956
==========================================================================
PERSONAL CREDIT INSTITUTIONS [1.8%]
ING Funding
5.230%, 10/26/06 25,000 24,909
==========================================================================
RETAIL [1.9%]
Wal-Mart Stores
5.200%, 10/04/06 25,000 24,989
==========================================================================
SECURITY BROKERS & DEALERS [5.5%]
Bearn Stearns
5.250%, 10/23/06 25,000 24,920
Merrill Lynch
5.230%, 10/04/06 25,000 24,989
Morgan Stanley
5.260%, 10/05/06 25,000 24,985
--------------------------------------------------------------------------
TOTAL SECURITY BROKERS & DEALERS 74,894
==========================================================================
TOTAL COMMERCIAL PAPER
(Cost $608,723) 608,723
=====================================================================
CERTIFICATES OF DEPOSIT [5.5%]
Barclays Bank
5.450%, 10/25/06 25,000 25,000
Deutsche Bank New York
5.310%, 12/07/06 25,000 25,000
First Tennessee Bank
5.440%, 10/23/06 25,000 25,000
--------------------------------------------------------------------------
TOTAL CERTIFICATES OF DEPOSIT
(Cost $75,000) 75,000
=====================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 46
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000)/SHARES VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS [5.5%]
FHLB
4.550%, 12/29/06 $ 5,000 $ 5,000
4.600%, 01/08/07 5,000 5,000
4.580%, 02/07/07 5,000 5,000
5.490%, 02/22/07 5,000 5,000
5.200%, 02/22/07 5,000 5,000
5.080%, 02/22/07 10,000 9,979
4.870%, 03/12/07 5,000 5,000
4.250%, 04/16/07 5,000 4,977
5.500%, 07/27/07 (B) 5,000 5,000
5.550%, 08/08/07 5,000 5,000
5.250%, 10/26/07 5,000 5,000
FNMA
4.750%, 01/02/07 5,000 4,991
4.000%, 02/28/07 10,000 9,947
--------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $74,894) 74,894
=====================================================================
CORPORATE BONDS [3.7%]
BANKS [1.8%]
Bank of America
5.310%, 11/07/06 25,000 25,000
==========================================================================
FINANCIAL SERVICES [1.9%]
SLM, Ser A, MTN
5.625%, 04/10/07 25,000 25,022
==========================================================================
TOTAL CORPORATE BONDS
(Cost $50,022) 50,022
=====================================================================
MORTGAGE-BACKED SECURITY [1.2%]
Capital Auto Receivable Asset
Trust, Ser 06, Cl SN-1,
5.440%, 09/20/07 16,194 16,194
--------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED SECURITY
(Cost $16,194) 16,194
=====================================================================
CASH EQUIVALENT [0.0%]
Fidelity Institutional Domestic
Money Market Portfolio,
Cl I, 5.22%* 202,758 203
--------------------------------------------------------------------------
TOTAL CASH EQUIVALENT
(Cost $203) 203
=====================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (D) [39.6%]
Banc of America
5.330%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $125,055,521
(collateralized by a U.S.
Goverment obligation;
par value $155,544,026,
5.000%, 03/01/35; with
total market value
$127,500,000) $ 125,000 $ 125,000
Barclay Bank
5.350%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price, $135,260,277
(collateralized by U.S.
Government obligations,
ranging in par value
$3,026,075-$150,000,000,
4.929%-6.444%, 02/01/23-
09/01/36; with total market
value $137,904,001) 135,200 135,200
Bear Stearns
5.370%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $125,055,937
(collateralized by various U.S.
Government obligations,
ranging in par value
$4,825,844-$12,325,000,
5.000%-7.000%, 12/01/18-
10/01/36; with total market
value $127,502,530) 125,000 125,000
Lehman Brothers
5.380%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $25,011,208
(collateralized by a U.S.
Government obligation,
par value $25,235,000,
6.000%, 09/01/36;
with total market
value $25,502,325) 25,000 25,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 47
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND (CONCLUDED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Nomura
5.400%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $125,056,250
(collateralized by various U.S.
Government obligations,
ranging in par value
$1,896,666-$150,000,000,
3.969%-6.971%, 03/01/18-
09/01/36; with total market
value $127,500,000) $ 125,000 $ 125,000
--------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $535,200) 535,200
=====================================================================
TOTAL INVESTMENTS [100.5%]
(Cost $1,360,236) 1,360,236
=====================================================================
OTHER ASSETS AND LIABILITIES [-0.5%] (7,346)
=====================================================================
NET ASSETS -- 100.0% $ 1,352,890
================================================================================
(A) THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE.
(B) STEP BOND -- THE RATE REFLECTED ON THE SCHEDULE OF INVESTMENTS IS THE RATE
IN EFFECT ON SEPTEMBER 30, 2006. THE COUPON ON A STEP BOND CHANGES ON A
SPECIFIC DATE.
(C) SECURITY EXEMPT FROM REGISTRATION UNDER RULE 144A OF THE SECURITIES ACT OF
1933. THESE SECURITIES MAY BE RESOLD IN TRANSACTIONS EXEMPT FROM
REGISTRATION NORMALLY TO QUALIFIED INSTITUTIONS. ON SEPTEMBER 30, 2006,
THE VALUE OF THESE SECURITIES AMOUNTED TO $74,607, REPRESENTING 5.5% OF
THE NET ASSETS OF THE FUND.
(D) TRI-PARTY REPURCHASE AGREEMENT
* RATE REPORTED IS THE 7-DAY EFFECTIVE YIELD AS OF SEPTEMBER 30, 2006.
CL -- CLASS
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
MTN -- MEDIUM TERM NOTE
SER -- SERIES
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 48
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
GOVERNMENT MONEY MARKET FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTING (UNAUDITED)*:
63.1% U.S. Government Agency Obligations
36.9% Repurchase Agreements
* Percentages are based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY OBLIGATIONS [64.9%]
FFCB (A)
5.100%, 10/02/06 $ 50,000 $ 49,993
5.100%, 10/03/06 155,000 154,956
5.070%, 10/04/06 50,000 49,979
5.120%, 10/06/06 32,660 32,637
FHLB
5.130%, 10/02/06 (A) 81,250 81,238
5.090%, 10/03/06 (A) 300,000 299,915
5.080%, 10/04/06 (A) 100,000 99,958
5.000%, 10/13/06 25,000 25,000
5.170%, 10/18/06 (A) 100,000 99,757
5.130%, 10/20/06 (A) 50,000 49,865
4.550%, 12/29/06 25,000 25,000
4.600%, 01/08/07 25,000 25,000
5.250%, 01/16/07 25,000 25,000
4.580%, 02/07/07 25,000 25,000
5.490%, 02/22/07 25,000 25,000
5.200%, 02/22/07 25,000 25,000
5.080%, 02/22/07 25,000 24,947
4.870%, 03/12/07 25,000 25,000
4.250%, 04/16/07 20,000 19,909
4.625%, 05/18/07 36,010 35,883
5.500%, 07/27/07 (B) 25,000 25,000
5.550%, 08/08/07 25,000 25,000
5.375%, 08/28/07 10,000 10,000
5.320%, 09/14/07 25,000 25,000
5.500%, 10/02/07 25,000 25,000
5.260%, 10/23/07 25,000 25,000
5.250%, 10/26/07 37,060 37,060
FNMA
4.750%, 01/02/07 42,997 42,920
2.500%, 01/30/07 5,300 5,251
4.000%, 02/28/07 25,000 24,866
--------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $1,444,134) 1,444,134
=====================================================================
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENTS (C) [37.9%]
Bank of America
5.330%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $150,066,625
(collaterized by U.S.
Government obligations,
ranging in par value
$32,250,307-$153,855,805,
5.000%, 03/01/35-07/01/35;
with total market value
$153,000,000) $ 150,000 $ 150,000
Barclay Bank
5.350%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $193,286,135
(collateralized by U.S.
Government obligations,
ranging in par value
$40,826,933-$61,183, 315,
5.000%-6.592%, 07/01/20-
06/01/36; with total market
value $197,064,001) 193,200 193,200
Bear Stearns Inc. & Co.
5.370%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $175,078,312
(collateralized by U.S. Treasury
obligations, ranging in par value
$1,465,000-$11,897,393,
4.500%-7.500%, 04/01/13-
09/01/36, with total market
value $178,502,511) 175,000 175,000
Deutsche Bank
5.330%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $100,044,417
(collateralized by U.S.
Government obligations,
ranging in par value
$20,764,040-$43,000,000,
5.000%-6.500%, 08/25/15-
08/25/32; with total market
value $102,000,001) 100,000 100,000
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 49
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
GOVERNMENT MONEY MARKET FUND (CONCLUDED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Lehman Brothers
5.380%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $25,011,208
(collateralized by U.S.
Government obligation,
par value $25,235,000,
6.000%, 09/01/36; with
total market value
$25,502,325) $ 25,000 $ 25,000
Nomura
5.400%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $150,067,500
(collaterized by U.S.
Government obligations,
ranging in par value
$455,000-$100,000,000,
4.002%-7.661%, 06/01/16-
05/01/36; with total market
value $153,000,001) 150,000 150,000
UBS Warburg
5.300%, dated 09/29/06,
repurchased on 10/02/06,
repurchase price $50,022,083
(collateralized by U.S.
Government obligations,
ranging in par value
$7,490,000-$33,010,867,
5.500%-6.500%, 11/01/34-
08/01/36; with total market
value $51,002,935) 50,000 50,000
--------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS
(Cost $843,200) 843,200
=====================================================================
TOTAL INVESTMENTS [102.8%]
(Cost $2,287,334) 2,287,334
=====================================================================
OTHER ASSETS AND LIABILITIES [-2.8%] (61,867)
=====================================================================
NET ASSETS -- 100.0% $ 2,225,467
==========================================================================
DESCRIPTION
- --------------------------------------------------------------------------------
(A) THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE.
(B) STEP BOND -- THE RATE REFLECTED ON THE SCHEDULE OF INVESTMENTS IS THE RATE
IN EFFECT ON SEPTEMBER 30, 2006. THE COUPON ON A STEP BOND CHANGES ON A
SPECIFIC DATE.
(C) TRI-PARTY REPURCHASE AGREEMENT
FFCB -- FEDERAL FARM CREDIT BANK
FHLB -- FEDERAL HOME LOAN BANK
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 50
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
SECTOR WEIGHTINGS (UNAUDITED)*:
13.9% General Revenue
12.9% General Obligation
11.3% Water
10.6% Housing
10.2% Power
8.9% Industrial Development
7.4% Utilities
7.1% Education
7.0% Transportation
4.7% Public Facilities
4.4% Healthcare
1.1% Commercial Paper
0.5% Equipment
* Percentages based on total investments.
- --------------------------------------------------------------------------------
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
MUNICIPAL BOND [97.5%]
CALIFORNIA [96.4%]
ABAG, Finance Authority for
Non-Profit Corporations,
Hamlin School Project,
Ser A, GO (A) (B) (C)
3.610%, 08/01/32 $ 1,500 $ 1,500
ABAG, Finance Authority for
Non-Profit Corporations,
Public Policy Institute,
Ser A, RB (A) (B) (C)
3.610%, 11/01/31 2,955 2,955
ABAG, Finance Authority for
Non-Profit Corporations,
School of the Sacred Heart,
Ser B, RB (A) (B) (C)
3.750%, 06/01/30 8,100 8,100
ABAG, Finance Authority for
Non-Profit Corporations,
Ser C, COP (A) (B) (C)
3.700%, 10/01/27 9,710 9,710
ABAG, Finance Authority for
Non-Profit Corporations,
Ser D, COP (A) (B) (C)
3.700%, 10/01/27 2,500 2,500
ABAG, Financial Authority for
Non-Profit Corporations,
Jewish Community Center
Project, RB (A) (B) (C)
3.790%, 11/15/31 13,270 13,270
Anaheim, Multi-Family Housing
Authority, Heritage Village
Apartments Project, Ser A,
RB (A) (B) (D)
3.610%, 07/15/33 4,685 4,685
Berkeley, Unified School
District, TRAN
4.500%, 11/01/06 6,000 6,008
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Berkeley, YMCA Project,
RB (A) (B) (C)
3.610%, 06/01/23 $ 1,850 $ 1,850
Califonia State, Community
College Financing Authority,
Ser A, TRAN, FSA
4.500%, 06/29/07 4,500 4,528
California State, Bay Area Toll
Authority, San Francisco
Bay Area Project, Ser A,
RB, AMBAC (A) (B)
3.580%, 04/01/39 12,800 12,800
California State, Daily
Kindergarten University,
Ser A-5, GO (A) (B) (C)
3.600%, 05/01/34 8,000 8,000
California State, Daily
Kindergarten University,
Ser B-1, GO (A) (B) (C)
3.650%, 05/01/34 3,400 3,400
California State, Department of
Water Resource & Power,
Ser A, RB, MBIA (A) (B)
5.250%, 05/01/07 2,590 2,614
California State, Department of
Water Resource & Power,
Ser B-1, RB (A) (B) (C)
3.800%, 05/01/22 6,000 6,000
California State, Department of
Water Resource & Power,
Ser B-2, RB (A) (B) (C)
3.660%, 05/01/22 5,870 5,870
California State, Department of
Water Resource & Power,
Ser C-15, RB (A) (B) (C)
3.650%, 05/01/22 5,000 5,000
California State, Department of
Water Resource & Power,
Sub-Ser F-2, RB (A) (B) (C)
3.700%, 05/01/20 2,000 2,000
California State, Department of
Water Resource & Power,
Sub-Ser G-3, RB, FSA (A) (B)
3.590%, 05/01/16 1,050 1,050
California State, Department of
Water Resource & Power,
Sub-Ser G-4, RB, FSA (A) (B)
3.600%, 05/01/16 10,000 10,000
California State, Department of
Water Resourse & Power,
Ser B-6, RB (A) (B) (C)
3.650%, 05/01/22 1,200 1,200
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 51
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
California State, Economic
Development Financing
Authority, KQED Project,
RB (A) (B) (C)
3.570%, 04/01/20 $ 1,300 $ 1,300
California State, Economic
Recovery Authority,
Ser C-1, RB (A) (B)
3.650%, 07/01/23 3,250 3,250
California State, Economic
Recovery Authority,
Ser C-10, RB (A) (B) (C)
3.600%, 07/01/23 7,810 7,810
California State, Economic
Recovery Authority,
Ser C-12, RB (A) (B)
3.580%, 07/01/23 1,100 1,100
California State, Economic
Recovery Authority,
Ser C-13, RB, XLCA (A) (B)
3.680%, 07/01/23 5,000 5,000
California State, Economic
Recovery Authority,
Ser C-3, RB (A) (B)
3.650%, 07/01/23 2,485 2,485
California State, Economic
Recovery Authority,
Ser C-7, RB (A) (B) (C)
3.600%, 07/01/23 5,350 5,350
California State, Economic
Recovery Authority,
Ser C-8, RB (A) (B) (C)
3.650%, 07/01/23 3,000 3,000
California State, Educational
Facilities Authority, Chapman
University Project,
RB (A) (B) (C)
3.570%, 12/01/30 1,000 1,000
California State, Educational
Facilities Authority, University
San Francisco, RB (A) (B) (C)
3.500%, 05/01/30 5,200 5,200
California State, Health Facilities
Finance Authority, Adventist
Health Systems Project,
Ser B, RB (A) (B) (C)
3.800%, 09/01/25 4,400 4,400
California State, Health Facilities
Finance Authority, Adventist
Hospital Project,
Ser B, RB, MBIA (A) (B)
3.790%, 09/01/28 1,200 1,200
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
California State, Infrastructure &
Economic Authority, Asian Art
Museum Foundation Project,
RB, MBIA (A) (B)
3.790%, 06/01/34 $ 14,000 $ 14,000
California State, Infrastructure &
Economic Authority, Colburn
School Project, Ser B,
RB (A) (B) (C)
3.600%, 08/01/37 3,655 3,655
California State, Infrastructure &
Economic Authority, J Paul
Getty Trust Project,
Ser D, RB (A)
3.250%, 04/01/33 10,000 10,000
California State, Ser A-3, GO
3.650%, 05/01/33 14,000 14,000
California State, Ser B,
Sub-Ser B-1, GO (A) (B) (C)
3.590%, 05/01/40 15,000 15,000
California State, Ser B,
Sub-Ser B-6, GO (A) (B) (C)
3.650%, 05/01/40 8,700 8,700
California State, Ser B-1,
GO (A) (B) (C)
3.580%, 05/01/33 7,000 7,000
California State, Weekly
Kindgarten University,
Ser B-5, GO (A) (B) (C)
3.590%, 05/01/34 11,525 11,525
California Statewide,
Communities Development
Authority, Childrens
Hospital Project, Ser A, RB,
AMBAC (A) (B)
3.580%, 08/15/32 1,300 1,300
California Statewide,
Communities Development
Authority, Childrens Hospital
Project, Ser B, RB,
AMBAC (A) (B)
3.580%, 08/15/32 1,800 1,800
California Statewide,
Communities Development
Authority, North Peninsula
Jewish Project, RB (A) (B) (C)
3.790%, 07/01/34 6,300 6,300
California Statewide,
Communities Development
Authority, Monterey County
Project, Ser A-3, TRAN
4.500%, 06/29/07 5,000 5,033
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 52
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Corona, Multi-Family Housing
Authority, Country Hills
Project, Ser A, RB (A) (B) (D)
3.600%, 02/01/25 $ 6,475 $ 6,475
East Bay, Municipal Utilities
District Authority,
Ser A, RB, FSA (A) (B)
3.570%, 06/01/25 5,220 5,220
East Bay, Municipal Utilities
District Authority,
Sub-Ser 1, RB,
XLCA (A) (B)
3.580%, 06/01/38 6,700 6,700
East Bay, Municipal Utilities
District Authority,
Sub-Ser B-1, RB,
XLCA (A) (B)
3.580%, 06/01/38 14,965 14,965
East Bay, Municipal Utilities
District Authority,
Sub-Ser B-3, RB,
XLCA (A) (B)
3.600%, 06/01/38 4,985 4,985
Eastern California, Municipal
Water District, COP,
Ser B, TA, FGIC (A) (B)
3.600%, 07/01/20 5,000 5,000
Fremont, Family Center Finance
Project, COP (A) (B) (C)
3.600%, 08/01/28 4,300 4,300
Fremont, Office Building
Improvement & Fire
Equipment Project,
COP (A) (B) (C)
3.600%, 08/01/30 3,345 3,345
Fresno, Multi-Family Housing
Authority, Stonepine
Apartment Project,
Ser A, RB (A) (B) (D)
3.600%, 02/15/31 2,095 2,095
Fresno, Palm Lakes Apartment
Project, RB (A) (B) (C)
3.700%, 05/01/15 3,615 3,615
Glendale, Police Building
Project, COP (A) (B)
3.680%, 06/01/30 19,600 19,600
Grant, Joint Union High School
District, School Facility
Bridge Funding Project,
COP, FSA (A) (B)
3.600%, 09/01/34 1,000 1,000
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Huntington Beach, Union High
School District, School
Facility Bridge Funding
Project, COP, FSA (A) (B)
3.600%, 09/01/28 $ 1,890 $ 1,890
Irvine Ranch, Water District
#140-240-105-250,
GO (A) (B) (C)
3.650%, 04/01/33 4,525 4,525
Irvine Ranch, Water District,
GO (A) (B) (C)
3.650%, 01/01/21 9,000 9,000
Irvine, Improvement Board, Act
1915 Project, District #03-19,
Ser B, SAB (A) (B)
3.650%, 09/02/29 2,000 2,000
Irvine, Improvement Board, Act
1915 Project, District #05-21,
Ser A, RB (A) (B) (C)
3.650%, 09/02/31 12,000 12,000
Irvine, Improvement Board, Act
1915 Project, District #87-8,
SAB (A) (B) (C)
3.650%, 09/02/24 1,100 1,100
Irvine, Improvement Board, Act
1915 Project, District #93-14,
SAB (A) (B) (C)
3.650%, 09/02/25 16,670 16,670
Kern County, TRAN
4.500%, 06/29/07 5,000 5,036
Kings County, Multi-Family
Housing Authority, Edgewater
Isle Apartments Project,
Ser A, RB (A) (B) (D)
3.600%, 02/15/31 13,410 13,410
Lemon Grove, Multifamily
Housing, Hillside Terrace
Project, RB (A) (B) (D)
3.600%, 02/15/31 4,955 4,955
Lodi, Electric System Authority,
Ser A, COP, MBIA (A) (B)
3.580%, 07/01/32 9,360 9,360
Los Angeles County, Multi-
Family Housing Authority,
Malibu Canyon Apartments
Project, Ser B, RB (A) (B) (C)
3.620%, 06/01/10 8,000 8,000
Los Angeles County, Sanitation
Districts Financing Authority,
Capital Project, Ser A, RB, FSA
5.000%, 10/01/06 1,210 1,210
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 53
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Los Angeles County,
Ser A, TRAN
4.500%, 06/29/07 $ 13,000 $ 13,093
Los Angeles, Department of
Water & Power, Sub-Ser B-1,
RB (A) (B)
3.680%, 07/01/35 11,000 11,000
Los Angeles, Department of
Water & Power, Sub-Ser B-3,
RB (A) (B)
3.640%, 07/01/35 3,600 3,600
Los Angeles, Department of
Water, Sub-Ser -2, RB (A) (B)
3.650%, 07/01/35 2,000 2,000
Los Angeles, Metropolitan
Transit Commission, Ser A,
RB, FGIC (A) (B)
3.570%, 07/01/12 5,330 5,330
Los Angeles, Metropolitan
Transportation Authority,
Proposition C, Ser A, RB,
MBIA (A) (B)
3.600%, 07/01/20 11,015 11,015
Los Angeles, Samuel A Fryer
Vavney, Ser A, COP
(A) (B) (C)
3.570%, 08/01/21 7,000 7,000
Los Angeles, Unified School
District, Administration
Building Project, Ser A,
COP, AMBAC (A) (B)
3.600%, 10/01/24 8,365 8,365
Los Angeles, Wastewater
Systems, Sub-Ser B-1,
RB, XLCA (A) (B)
3.520%, 06/01/28 4,480 4,480
Los Angeles, Water & Power
Resource Authority,
Power System Project,
Sub-Ser A-7, RB (A) (B)
3.590%, 07/01/35 15,000 15,000
Los Angeles, Water & Power
Resource Authority,
Sub-Ser B-2, RB (A) (B)
3.650%, 07/01/34 2,000 2,000
Los Angeles, Water & Power
Resource Authority,
Sub-Ser B-6, RB (A) (B)
3.790%, 07/01/34 9,675 9,675
Los Angeles, Water & Power
Resource Authority,
Subser B-3, RB (A) (B)
3.700%, 07/01/34 10,700 10,700
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Moorpark, Unified School
District, Ser A, COP,
FSA (A) (B)
3.600%, 11/01/28 $ 1,000 $ 1,000
Newport Beach, Hoag
Memorial Hospital,
Ser A, RB (A) (B)
3.670%, 10/01/26 5,700 5,700
Newport Beach, Hoag
Memorial Hospital,
Ser B, RB (A) (B)
3.670%, 10/01/26 1,045 1,045
Newport Beach, Hoag
Memorial Hospital,
Ser C, RB (A) (B)
3.670%, 10/01/26 7,870 7,870
Oakland, Capital Equipment
Project, COP (A) (B) (C)
3.680%, 12/01/15 3,890 3,890
Oakland-Alameda County,
Coliseum Project, Ser C-1,
RB (A) (B) (C)
3.630%, 02/01/25 15,000 15,000
Orange County, Apartment
Development Authority,
Bear Brand Apartments
Project, RB (A) (B) (D)
3.580%, 11/01/07 1,900 1,900
Orange County, Apartment
Development Authority,
Hidden Hills Project,
Ser C, RB (A) (B)
3.620%, 11/01/09 3,200 3,200
Orange County, Apartment
Development Authority,
Larkspur Canyon Apartments,
Ser A, RB (A) (B) (D)
3.590%, 06/15/37 1,200 1,200
Orange County, Apartment
Development Authority,
Riverbend Apartments
Project, Ser B, RB (A) (B) (D)
3.590%, 12/01/29 5,000 5,000
Orange County, Apartment
Development Authority,
Seaside Meadow Project,
Ser C, RB (A) (B) (D)
3.580%, 08/01/08 8,000 8,000
Orange County, Sanitation
District Authority,
Ser A, COP (A) (B)
3.650%, 08/01/29 11,755 11,755
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 54
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Orange County, Sanitation
District Authority,
Ser B, COP (A) (B)
3.650%, 08/01/30 $ 1,300 $ 1,300
Orange County, Water
District Authority,
Ser A, COP (A) (B)
3.570%, 08/01/42 2,800 2,800
Pasadena, Public Financing
Authority, Rose Bowl
Refinancing & Improvement
Project, RB (A) (B) (C)
3.550%, 12/01/23 5,000 5,000
Riverside County, Ser C,
COP (A) (B) (C)
3.650%, 12/01/15 15,700 15,700
Riverside, Unified School
District, Ser C, School
Facility Bridge Funding
Project, COP, FSA (A) (B)
3.600%, 09/01/27 1,610 1,610
Sacramento County, Housing
Authority, Bent Tree
Apartments Project,
Ser A, RB (A) (B) (D)
3.600%, 02/15/31 2,500 2,500
Sacramento County, TRAN
4.500%, 07/17/07 7,000 7,048
San Bernardino County,
Housing Authority, Alta Loma
Heritage Project, Ser A,
RB (A) (B) (C)
3.620%, 02/01/23 1,354 1,354
San Diego County, School
District, Ser A, TRAN
4.500%, 07/27/07 6,000 6,038
San Diego, Museum of Art
Project, COP (A) (B) (C)
3.750%, 09/01/30 1,400 1,400
San Diego, Unified School
District, Ser A, TRAN
4.500%, 07/24/07 4,000 4,025
San Francisco (City & County),
Housing Authority, Bayside
Village Project D, Ser A,
RB (A) (B) (C)
3.620%, 12/01/16 6,000 6,000
San Francisco City & County,
Moscone Center Expansion
Project, Ser 2, RB,
AMBAC (A) (B)
3.580%, 04/01/30 1,150 1,150
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
San Francisco, Bay Area Toll
Authority, Ser A, RB,
AMBAC (A) (B)
3.580%, 04/01/36 $ 15,850 $ 15,850
San Francisco, Bay Area Toll
Authority, Ser C, RB,
AMBAC (A) (B)
3.570%, 04/01/25 5,650 5,650
San Francisco, Building Authority,
Civic Center Complex Project,
Ser A, RB, AMBAC
Pre-Refunded @ 102 (F)
5.250%, 12/01/16 1,000 1,023
San Jose, Redevelopment
Agency, Merged Area
Redevelopment Project,
Ser A, RB (A) (B) (C)
3.570%, 07/01/26 3,100 3,100
Santa Barbara County, Schools
Financing Authority, TRAN
4.500%, 06/29/07 2,000 2,012
Santa Clara County, Financing
Authority, VMC Facility
Replacement Project,
Ser B, RB (A) (B)
3.600%, 11/15/25 12,375 12,375
Santa Clara Valley,
Transportation Authority,
Ser A, RB, AMBAC (A) (B)
3.600%, 06/01/26 6,300 6,300
Santa Cruz County, TRAN
4.500%, 06/29/07 5,000 5,031
South Coast, Local Education
Agencies, Ser A, TRAN
4.500%, 06/29/07 2,000 2,015
Southern California,
Metro Water District
Authority, Waterworks
Authorization, Ser B-4 (A) (B)
3.570%, 07/01/35 5,000 5,000
Southern California,
Metropolitan Water District
Authority, Ser B, RB (A) (B)
3.580%, 07/01/27 2,100 2,100
Southern California,
Metropolitan Water District
Authority, Ser B-3, RB (A) (B)
3.650%, 07/01/35 8,600 8,600
Southern California,
Metropolitan Water District
Authority, Ser C-2, RB (A) (B)
3.600%, 07/01/36 4,650 4,650
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 55
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONTINUED)
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Southern California,
Metropolitan Water District
Authority, Water Works
Authorization, Ser B,
RB (A) (B)
3.580%, 07/01/28 $ 4,000 $ 4,000
Southern California,
Metropolitan Water District,
Ser A, RB (A) (B)
3.640%, 07/01/25 3,800 3,800
Southern California,
Metropolitan Water District,
Ser C-1, RB (A) (B)
3.570%, 07/01/30 5,000 5,000
Southern California,
Metropolitan Water District,
Ser C-3, RB (A) (B)
3.570%, 07/01/30 6,200 6,200
Southern California,
Public Power Authority,
Southern Transmission Project,
RB, AMBAC (A) (B) (C)
3.580%, 07/01/19 8,000 8,000
State of California, Economic
Recovery Authority,
Ser C-2, RB (A) (B) (D)
3.650%, 07/01/23 2,250 2,250
State of California,
Ser B-3, GO (A) (B) (C)
3.600%, 05/01/33 6,100 6,100
Sunnyvale, Government Center
Site Acquisition Project,
Ser A, COP, AMBAC (A) (B)
3.610%, 04/01/31 4,300 4,300
Three Valleys, Municipal Water
District Authority, Miramar
Water Treatment Project,
COP (A) (B) (C)
3.710%, 11/01/14 4,700 4,700
Turlock, Irrigation District,
Capital Improvement &
Refunding Project,
COP (A) (B) (C)
3.790%, 01/01/31 9,350 9,350
Upland, Community
Redevelopment Authority,
Sunset Ridge & Village
Apartments Project,
RB (A) (B) (C)
3.590%, 12/01/29 6,700 6,700
Ventura County, TRAN
4.500%, 07/02/07 2,500 2,515
DESCRIPTION FACE AMOUNT (000) VALUE (000)
- --------------------------------------------------------------------------------
Westminster, Civic Center
Refinancing Program,
Ser A, COP, AMBAC (A) (B)
3.610%, 06/01/22 $ 2,900 $ 2,900
Yolo County, Multi-Family
Housing Authority, Primero
Grove Project, Ser A,
RB (A) (B) (C)
3.570%, 11/01/27 10,485 10,485
--------------------------------------------------------------------------
TOTAL CALIFORNIA 793,653
==========================================================================
MASSACHUSETTS [0.6%]
Massachusetts State, Development &
Finance Agency, Harvard
University Project,
Ser B-1, RB (A) (B)
3.750%, 07/15/36 5,000 5,000
==========================================================================
WASHINGTON [0.5%]
Seattle, Municipal Light &
Power Authority,
RB (A) (B) (C)
3.700%, 06/01/21 4,300 4,300
==========================================================================
TOTAL MUNICIPAL BOND
(Cost $802,953) 802,953
=====================================================================
COMMERCIAL PAPER (E) [1.1%]
California State
3.470%, 10/03/06 9,000 9,000
==========================================================================
TOTAL INVESTMENTS [98.6%]
(Cost $811,953) 811,953
=====================================================================
OTHER ASSETS AND LIABILITIES [1.4%] 11,670
=====================================================================
NET ASSETS -- 100.0% $ 823,623
==========================================================================
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 56
schedule of investments
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND (CONCLUDED)
DESCRIPTION
- --------------------------------------------------------------------------------
(A) FLOATING RATE SECURITY -- THE RATE REFLECTED ON THE SCHEDULE OF
INVESTMENTS IS THE RATE IN EFFECT ON SEPTEMBER 30, 2006.
(B) PUT AND DEMAND FEATURE -- THE DATE REPORTED ON THE SCHEDULE OF INVESTMENTS
IS THE FINAL MATURITY, NOT THE NEXT RESET OR PUT DATE.
(C) SECURITIES ARE HELD IN CONJUNCTION WITH A LETTER OF CREDIT FROM A MAJOR
BANK OR FINANCIAL INSTITUTION.
(D) SECURITIES ARE COLLATERALIZED UNDER AN AGREEMENT FROM FHLMC/FNMA.
(E) THE RATE REPORTED IS THE EFFECTIVE YIELD AT TIME OF PURCHASE.
(F) PRE-REFUNDED SECURITY - THE MATURITY DATE SHOWN IS THE PRE-REFUNDED DATE.
ABAG -- ASSOCIATION OF BAY AREA GOVERNMENTS
AMBAC -- AMERICAN MUNICIPAL BOND ASSURANCE COMPANY
COP -- CERTIFICATE OF PARTICIPATION
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
SAB -- SPECIAL ASSESSMENT BOND
SER -- SERIES
TA -- TAX ALLOCATION
TRAN -- TAX & REVENUE ANTICIPATION NOTE
XLCA -- XL CAPITAL ASSURANCE
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 57
statements of assets and liabilities (000)
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
Large Cap Value Large Cap Growth RCB Small Cap Technology
Equity Fund Equity Fund Value Fund Growth Fund
------------------------------------------------------------------
ASSETS:
Cost of securities (including repurchase agreements) $ 88,821 $ 41,894 $ 56,814 $ 2,490
- ---------------------------------------------------------------------------------------------------------------------------------
Investments in securities at value $ 106,039 $ 46,013 $ 66,466 $ 2,682
Repurchase agreements at value -- -- 3,053 --
Receivable for investment securities sold 2,830 1,330 274 --
Income receivable 136 28 114 1
Receivable for capital shares sold 102 31 1 2
Prepaid Expenses 1 1 1 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Assets 109,108 47,403 69,909 2,685
- ---------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased 2,851 1,140 -- --
Payable for income distributions 110 16 -- --
Payable for capital shares redeemed 6 -- 55 --
Investment adviser fees payable 53 25 49 2
Shareholder servicing fees payable 24 12 56 1
Administrative fees payable 5 2 3 --
Accrued expenses 9 3 5 --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 3,058 1,198 168 3
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 106,050 $ 46,205 $ 69,741 $ 2,682
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Paid-in-Capital
(unlimited authorization -- $0.01 par value) $ 83,636 $ 45,086 $ 55,935 $ 3,995
Undistributed (distributions in excess of)
net investment income (2) (1) 3 --
Accumulated net realized gain (loss) on investments 5,198 (2,999) 1,098 (1,505)
Net unrealized appreciation on investments 17,218 4,119 12,705 192
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 106,050 $ 46,205 $ 69,741 $ 2,682
- ---------------------------------------------------------------------------------------------------------------------------------
Institutional Shares ($Dollars):
Net Assets $92,945,293 $35,842,162 $13,435,095 $1,244,724
Total shares outstanding at end of year 8,971,363 4,622,315 475,646 289,773
Net asset value, offering and redemption price per share
(net assets / shares outstanding) $ 10.36 $ 7.75 $ 28.25 $ 4.30
Class A Shares ($Dollars):
Net Assets $13,104,250 $10,363,242 $10,470,133 $1,437,152
Total shares outstanding at end of year 1,266,627 1,350,243 374,234 339,378
Net asset value, offering and redemption price per share
(net assets / shares outstanding) $ 10.35 $ 7.68 $ 27.98 $ 4.23
Class R Shares ($Dollars):
Net Assets $ -- $ -- $45,835,513 $ --
Total shares outstanding at end of year -- -- 1,640,798 --
Net asset value and redemption price per share
(net assets / shares outstanding) $ -- $ -- $ 27.93 $ --
Maximum offering price per share
(net asset value / 96.50%) $ -- $ -- $ 28.94 $ --
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 58
statements of assets and liabilities (000)
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
California
Corporate Government Tax Exempt High Yield
Bond Fund Bond Fund Bond Fund Bond Fund
------------------------------------------------------------------
ASSETS:
Cost of securities $ 57,427 $ 37,369 $ 26,847 $ 40,541
- ----------------------------------------------------------------------------------------------------------------------------------
Investments in securities at value $ 57,052 $ 37,137 $ 26,924 $ 40,504
Cash 12 -- 1 --
Receivable for investment securities sold -- -- -- 152
Income receivable 704 313 349 903
Receivable for capital shares sold 17 121 -- 3
Prepaid Expenses 1 1 -- 1
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets 57,786 37,572 27,274 41,563
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased 962 -- -- 475
Payable for income distributions 159 96 43 101
Payable for capital shares redeemed 5 -- 11 5
Investment adviser fees payable 19 10 3 22
Shareholder servicing fees payable 12 8 6 13
Administrative fees payable 3 2 1 2
Accrued expenses 4 3 2 3
Payable to custodian -- -- -- 10
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 1,164 119 66 631
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 56,622 $ 37,453 $ 27,208 $ 40,932
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Paid-in-Capital
(unlimited authorization -- $0.01 par value) $ 57,332 $ 38,099 $ 27,174 $ 42,224
Undistributed net investment income 1 1 -- --
Accumulated net realized loss on investments (336) (415) (43) (1,255)
Net unrealized appreciation (depreciation)
on investments (375) (232) 77 (37)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 56,622 $ 37,453 $ 27,208 $ 40,932
- ----------------------------------------------------------------------------------------------------------------------------------
Institutional Shares ($Dollars):
Net Assets $55,290,256 $35,670,498 $26,073,962 $20,887,459
Total shares outstanding at end of year 5,438,882 3,470,224 2,544,904 2,332,240
Net asset value, offering and redemption price per share
(net assets / shares outstanding) $ 10.17 $ 10.28 $ 10.25 $ 8.96
Class A Shares ($Dollars):
Net Assets $ 1,332,049 $ 1,782,407 $ 1,134,367 $20,044,571
Total shares outstanding at end of year 130,949 173,035 110,426 2,238,216
Net asset value, offering and redemption price per share
(net assets / shares outstanding) $ 10.17 $ 10.30 $ 10.27 $ 8.96
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 59
statements of assets and liabilities (000)
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
California
Prime Government Tax Exempt
Money Money Money
Market Fund Market Fund Market Fund
-----------------------------------------------------
ASSETS:
Cost of securities (including repurchase agreements) $ 1,360,236 $ 2,287,334 $ 811,953
- ------------------------------------------------------------------------------------------------------------------
Investments in securities at value $ 825,036 $ 1,444,134 $ 811,953
Repurchase agreements at value 535,200 843,200 --
Cash 4 58 11,101
Income receivable 2,647 5,196 3,841
Prepaid Expenses 16 35 12
- ------------------------------------------------------------------------------------------------------------------
Total Assets 1,362,903 2,292,623 826,907
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities purchased 5,000 62,060 2,016
Payable for income distributions 4,055 3,400 693
Investment adviser fees payable 280 493 131
Shareholder servicing fees payable 511 922 337
Administrative fees payable 62 105 39
Trustees' fees payable 1 2 1
Accrued expenses 104 174 67
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities 10,013 67,156 3,284
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,352,890 $ 2,225,467 $ 823,623
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS
Paid-in-Capital
(unlimited authorization -- $0.01 par value) $ 1,353,291 $ 2,225,465 $ 823,622
Undistributed net investment income 1 2 --
Accumulated net realized gain (loss) on investments (402) -- 1
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 1,352,890 $ 2,225,467 $ 823,623
- ------------------------------------------------------------------------------------------------------------------
Institutional Shares ($Dollars):
Net Assets $388,170,906 $ 52,781,932 $ 85,014,525
Total shares outstanding at end of year 388,306,196 52,783,258 85,015,819
Net asset value, offering and redemption price per share
(net assets / shares outstanding) $ 1.00 $ 1.00 $ 1.00
Class A Shares ($Dollars):
Net Assets $640,366,315 $1,940,602,170 $631,477,612
Total shares outstanding at end of year 640,635,133 1,940,597,943 631,479,986
Net asset value, offering and redemption price per share
(net assets / shares outstanding) $ 1.00 $ 1.00 $ 1.00
Class S Shares ($Dollars):
Net Assets $324,352,628 $ 232,082,832 $107,130,690
Total shares outstanding at end of year 324,442,719 232,083,278 107,127,093
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 60
statements of operations
FOR THE YEAR ENDED SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
Large Cap Value Large Cap Growth RCB Small Cap Technology
Equity Fund Equity Fund Value Fund Growth Fund
(000) (000) (000) (000)
-------------------------------------------------------------------
INVESTMENT INCOME:
Dividend $ 2,173 $ 568 $ 572 $ 17
Interest 16 -- 541 --
Less: Foreign tax withheld (2) -- (6) --
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 2,187 568 1,107 17
- -------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 585 293 669 22
Shareholder Servicing Fees--Institutional Class 205 88 35 3
Shareholder Servicing Fees--Class A(1) 61 49 60 8
Shareholder Servicing Fees--Class R(1) -- -- 264 --
Administrative Fees 52 25 43 1
Trustee Fees 3 2 3 --
Professional Fees 12 3 10 (2)
Transfer Agent Fees 10 5 9 --
Custodian Fees 5 2 9 --
Printing Fees 4 1 3 --
Registration Fees 3 1 1 --
Insurance and Other Fees 7 5 9 --
- -------------------------------------------------------------------------------------------------------------------------------
Total Expenses 947 474 1,115 32
- -------------------------------------------------------------------------------------------------------------------------------
Recovery of Investment Advisory Fees
Previously Waived(2) -- -- -- 2
Less Waiver of:
Transfer Agent Fees (10) (5) (9) --
- -------------------------------------------------------------------------------------------------------------------------------
Net Expenses 937 469 1,106 34
- -------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 1,250 99 1 (17)
- -------------------------------------------------------------------------------------------------------------------------------
Net Realized Gain From Securities Transactions 5,205 1,412 1,110 103
Net Change in Unrealized Appreciation (Depreciation)
on Investments 6,087 547 (908) 81
- -------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $12,542 $2,058 $ 203 $167
===============================================================================================================================
(1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES.
(2) SEE NOTE 4 FOR ADVISORY FEES RECOVERED.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 61
statements of operations
FOR THE YEAR ENDED SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
California
Corporate Government Tax Exempt High Yield
Bond Fund Bond Fund Bond Fund Bond Fund
(000) (000) (000) (000)
----------------------------------------------------------------
INVESTMENT INCOME:
Interest $2,584 $1,533 $841 $3,467
Dividend 50 26 13 18
- --------------------------------------------------------------------------------------------------------------------------------
Total Investment Income 2,634 1,559 854 3,485
- --------------------------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 216 141 69 305
Shareholder Servicing Fees--Institutional Class 131 80 61 53
Shareholder Servicing Fees--Class A(1) 7 4 6 107
Administrative Fees 30 18 14 23
Trustee Fees 2 1 1 2
Professional Fees 5 4 2 4
Transfer Agent Fees 6 4 3 4
Custodian Fees 3 2 1 2
Printing Fees 1 1 1 1
Registration Fees 1 1 1 1
Insurance and Other Fees 6 4 3 5
- --------------------------------------------------------------------------------------------------------------------------------
Total Expenses 408 260 162 507
- --------------------------------------------------------------------------------------------------------------------------------
Recovery of Investment Advisory Fees
Previously Waived(2) 5 -- -- --
Less Waiver of:
Investment Advisory Fees -- (23) (28) (38)
Transfer Agent Fees (6) (4) (3) (4)
- --------------------------------------------------------------------------------------------------------------------------------
Net Expenses 407 233 131 465
- --------------------------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 2,227 1,326 723 3,020
- --------------------------------------------------------------------------------------------------------------------------------
Net Realized Loss From Securities Transactions (276) (360) (35) (18)
Net Change in Unrealized Appreciation (Depreciation)
on Investments (191) 48 122 (392)
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $1,760 $1,014 $810 $2,610
==================================================================================================================================
(1) INCLUDES CLASS SPECIFIC DISTRIBUTION EXPENSES.
(2) SEE NOTE 4 FOR ADVISORY FEES RECOVERY.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 62
statements of operations
FOR THE YEAR ENDED SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
California
Prime Government Tax Exempt
Money Money Money
Market Fund Market Fund Market Fund
(000) (000) (000)
----------------------------------------------
INVESTMENT INCOME:
Interest $52,333 $104,689 $25,657
Dividend 24 -- --
- ---------------------------------------------------------------------------------------------------------------
Total Investment Income 52,357 104,689 25,657
- ---------------------------------------------------------------------------------------------------------------
EXPENSES:
Investment Advisory Fees 2,761 5,904 2,204
Shareholder Servicing Fees--Institutional Class 893 126 200
Shareholder Servicing Fees--Class A(1) 3,592 14,797 4,808
Shareholder Servicing Fees--Class S(1) 2,009 1,857 713
Administrative Fees 612 1,259 453
Trustee Fees 37 85 30
Professional Fees 127 242 95
Transfer Agent Fees 120 248 89
Custodian Fees 58 108 44
Printing Fees 43 68 30
Registration and Filing Fees 33 50 17
Insurance and Other Fees 102 269 91
- ---------------------------------------------------------------------------------------------------------------
Total Expenses 10,387 25,013 8,774
- ---------------------------------------------------------------------------------------------------------------
Less Waiver of:
Investment Advisory Fees -- -- (516)
Shareholder Servicing Fees -- Class A(1) (1,340) (5,524) (1,731)
Shareholder Servicing Fees -- Class S(1) (214) (198) (67)
Transfer Agent Fees (120) (248) (89)
- ---------------------------------------------------------------------------------------------------------------
Net Expenses 8,713 19,043 6,371
- ---------------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME 43,644 85,646 19,286
- ---------------------------------------------------------------------------------------------------------------
Net Realized Gain From Securities Transactions -- 1 --
- ---------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $43,644 $ 85,647 $19,286
===============================================================================================================
(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 63
statements of changes in net assets
FOR THE YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
Large Cap Value Large Cap Growth
Equity Fund (000) Equity Fund (000)
-------------------- ----------------------
2006 2005 2006 2005
- ----------------------------------------------------------------------------- ----------------------
OPERATIONS:
Net Investment Income (Loss) $ 1,250 $ 536 $ 99 $ 194
Net Realized Gain (Loss) from
Security Transactions 5,205 4,127 1,412 376
Net Change in Unrealized Appreciation
(Depreciation) on Investments 6,087 1,915 547 2,999
- ----------------------------------------------------------------------------- ----------------------
Net Increase in Net Assets
Resulting from Operations 12,542 6,578 2,058 3,569
- ----------------------------------------------------------------------------- ----------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net Investment Income:
INSTITUTIONAL CLASS (1,124) (453) (96) (172)
CLASS A (128) (82) (5) (26)
CLASS R -- -- -- --
Realized Capital Gains:
INSTITUTIONAL CLASS (3,330) (1,585) -- --
CLASS A (459) (323) -- --
CLASS R -- -- -- --
- ----------------------------------------------------------------------------- ----------------------
Total Dividends and Distributions (5,041) (2,443) (101) (198)
- ----------------------------------------------------------------------------- ----------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Shares Issued 55,314 8,083 7,916 10,719
Shares Issued in Lieu of Dividends and Distributions 2,902 673 30 56
Shares Redeemed (14,689) (7,549) (7,829) (4,944)
- ----------------------------------------------------------------------------- ----------------------
Increase (Decrease) in Net Assets from
Institutional Class Share Transactions 43,527 1,207 117 5,831
- ----------------------------------------------------------------------------- ----------------------
CLASS A:
Shares Issued 2,656 4,714 3,182 3,209
Shares Issued in Lieu of Dividends and Distributions 471 323 4 18
Shares Redeemed (1,743) (1,366) (1,497) (785)
- ----------------------------------------------------------------------------- ----------------------
Increase (Decrease) in Net Assets from
Class A Share Transactions 1,384 3,671 1,689 2,442
- ----------------------------------------------------------------------------- ----------------------
CLASS R:
Shares Issued -- -- -- --
Shares Issued in Lieu of Dividends and Distributions -- -- -- --
Shares Redeemed -- -- -- --
- ----------------------------------------------------------------------------- ----------------------
Increase (Decrease) in Net Assets from
Class R Share Transactions -- -- -- --
- ----------------------------------------------------------------------------- ----------------------
Net Increase (Decrease) in Net Assets from
Share Transactions 44,911 4,878 1,806 8,273
- ----------------------------------------------------------------------------- ----------------------
Total Increase (Decrease) in Net Assets 52,412 9,013 3,763 11,644
- ----------------------------------------------------------------------------- ----------------------
NET ASSETS:
Beginning of year 53,638 44,625 42,442 30,798
- ----------------------------------------------------------------------------- ----------------------
End of year $106,050 $ 53,638 $ 46,205 $ 42,442
============================================================================= ======================
Undistributed (Distributions in Excess of)
Net Investment Income $ (2) $ -- $ (1) $ (1)
- ----------------------------------------------------------------------------- ----------------------
(1) SEE NOTE 8 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 64
RCB Small Cap Technology Growth Corporate Bond
Value Fund (000) Fund (000) Fund (000)
-------------------- -------------------- --------------------
2006 2005 2006 2005 2006 2005
- ----------------------------------------------------------------------------- -------------------- --------------------
OPERATIONS:
Net Investment Income (Loss) $ 1 $ 44 $ (17) $ 4 $ 2,227 $ 1,920
Net Realized Gain (Loss) from
Security Transactions 1,110 2,115 103 40 (276) (65)
Net Change in Unrealized Appreciation
(Depreciation) on Investments (908) 3,809 81 320 (191) (1,281)
- ----------------------------------------------------------------------------- -------------------- --------------------
Net Increase in Net Assets
Resulting from Operations 203 5,968 167 364 1,760 574
- ----------------------------------------------------------------------------- -------------------- --------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net Investment Income:
INSTITUTIONAL CLASS (35) -- (4) -- (2,167) (1,865)
CLASS A (1) -- -- -- (54) (54)
CLASS R (10) -- -- -- -- --
Realized Capital Gains:
INSTITUTIONAL CLASS (186) (462) -- -- -- (293)
CLASS A (170) (480) -- -- -- (10)
CLASS R (785) (2,072) -- -- -- --
- ----------------------------------------------------------------------------- -------------------- --------------------
Total Dividends and Distributions (1,187) (3,014) (4) -- (2,221) (2,222)
- ----------------------------------------------------------------------------- -------------------- --------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Shares Issued 5,422 7,853 333 428 15,662 15,341
Shares Issued in Lieu of Dividends and Distributions 159 325 4 -- 406 396
Shares Redeemed (5,973) (3,616) (357) (379) (11,526) (10,031)
- ----------------------------------------------------------------------------- -------------------- --------------------
Increase (Decrease) in Net Assets from
Institutional Class Share Transactions (392) 4,562 (20) 49 4,542 5,706
- ----------------------------------------------------------------------------- -------------------- --------------------
CLASS A:
Shares Issued 1,155 7,216 144 37 146 604
Shares Issued in Lieu of Dividends and Distributions 129 391 -- -- 25 30
Shares Redeemed (3,396) (2,825) (215) (56) (353) (571)
- ----------------------------------------------------------------------------- -------------------- --------------------
Increase (Decrease) in Net Assets from
Class A Share Transactions (2,112) 4,782 (71) (19) (182) 63
- ----------------------------------------------------------------------------- -------------------- --------------------
CLASS R:
Shares Issued 12,077 28,095 -- -- -- --
Shares Issued in Lieu of Dividends and Distributions 742 1,991 -- -- -- --
Shares Redeemed (24,106) (10,847) -- -- -- --
- ----------------------------------------------------------------------------- -------------------- --------------------
Increase (Decrease) in Net Assets from
Class R Share Transactions (11,287) 19,239 -- -- -- --
- ----------------------------------------------------------------------------- -------------------- --------------------
Net Increase (Decrease) in Net Assets from
Share Transactions (13,791) 28,583 (91) 30 4,360 5,769
- ----------------------------------------------------------------------------- -------------------- --------------------
Total Increase (Decrease) in Net Assets (14,775) 31,537 72 394 3,899 4,121
- ----------------------------------------------------------------------------- -------------------- --------------------
NET ASSETS:
Beginning of year 84,516 52,979 2,610 2,216 52,723 48,602
- ----------------------------------------------------------------------------- -------------------- --------------------
End of year $ 69,741 $ 84,516 $ 2,682 $ 2,610 $ 56,622 $ 52,723
============================================================================= ==================== ====================
Undistributed (Distributions in Excess of)
Net Investment Income $ 3 $ 43 $ -- $ 4 $ 1 $ --
- ----------------------------------------------------------------------------- -------------------- --------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 65
statements of changes in net assets
FOR THE YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
Government California Tax Exempt
Bond Fund (000) Bond Fund (000)
------------------------ ------------------------
2006 2005 2006 2005
- --------------------------------------------------------------------------------- ------------------------
OPERATIONS:
Net Investment Income $ 1,326 $ 738 $ 723 $ 593
Net Realized Gain (Loss) from
Security Transactions (360) (55) (35) 135
Net Change in Unrealized Appreciation (Depreciation)
on Investments 48 (342) 122 (391)
- --------------------------------------------------------------------------------- ------------------------
Net Increase in Net Assets
Resulting from Operations 1,014 341 810 337
- --------------------------------------------------------------------------------- ------------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net Investment Income:
INSTITUTIONAL CLASS (1,292) (728) (692) (540)
CLASS A (32) (11) (31) (53)
CLASS S -- -- -- --
Realized Capital Gains:
INSTITUTIONAL CLASS -- (118) (90) (71)
CLASS A -- (2) (5) (11)
CLASS S -- -- -- --
- --------------------------------------------------------------------------------- ------------------------
Total Dividends and Distributions (1,324) (859) (818) (675)
- --------------------------------------------------------------------------------- ------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Shares Issued 13,593 12,985 8,793 8,952
Shares Issued in Lieu of Dividends and Distributions 338 209 255 139
Shares Redeemed (6,079) (5,454) (5,739) (3,813)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Institutional Class Share Transactions 7,852 7,740 3,309 5,278
- --------------------------------------------------------------------------------- ------------------------
CLASS A:
Shares Issued 1,378 275 31 302
Shares Issued in Lieu of Dividends and Distributions 9 5 6 25
Shares Redeemed (162) (153) (385) (1,240)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Class A Share Transactions 1,225 127 (348) (913)
- --------------------------------------------------------------------------------- ------------------------
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 9,077 7,867 2,961 4,365
- --------------------------------------------------------------------------------- ------------------------
Total Increase (Decrease) in Net Assets 8,767 7,349 2,953 4,027
- --------------------------------------------------------------------------------- ------------------------
NET ASSETS:
Beginning of year 28,686 21,337 24,255 20,228
- --------------------------------------------------------------------------------- ------------------------
End of year $ 37,453 $ 28,686 $ 27,208 $ 24,255
================================================================================= ========================
Undistributed (Distributions in excess of)
Net Investment Income $ 1 $ 3 $ -- $ --
- --------------------------------------------------------------------------------- ------------------------
(1) SEE NOTE 8 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 66
High Yield Prime Money
Bond Fund (000) Market Fund (000)
------------------------ ------------------------
2006 2005 2006 2005
- --------------------------------------------------------------------------------- ------------------------
OPERATIONS:
Net Investment Income $ 3,020 $ 3,416 $ 43,644 $ 14,619
Net Realized Gain (Loss) from
Security Transactions (18) (157) -- 1
Net Change in Unrealized Appreciation (Depreciation)
on Investments (392) (1,200) -- --
- --------------------------------------------------------------------------------- ------------------------
Net Increase in Net Assets
Resulting from Operations 2,610 2,059 43,644 14,620
- --------------------------------------------------------------------------------- ------------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net Investment Income:
INSTITUTIONAL CLASS (1,599) (1,815) (14,704) (7,317)
CLASS A (1,421) (1,589) (18,919) (4,601)
CLASS S -- -- (10,020) (2,701)
Realized Capital Gains:
INSTITUTIONAL CLASS -- -- -- --
CLASS A -- -- -- --
CLASS S -- -- -- --
- --------------------------------------------------------------------------------- ------------------------
Total Dividends and Distributions (3,020) (3,404) (43,643) (14,619)
- --------------------------------------------------------------------------------- ------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Shares Issued 4,120 6,056 1,690,942 1,215,600
Shares Issued in Lieu of Dividends and Distributions 895 945 2,507 1,411
Shares Redeemed (6,503) (6,600) (1,637,671) (1,251,828)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Institutional Class Share Transactions (1,488) 401 55,778 (34,817)
- --------------------------------------------------------------------------------- ------------------------
CLASS A:
Shares Issued 1,822 4,528 2,204,941 958,549
Shares Issued in Lieu of Dividends and Distributions 817 920 5,522 982
Shares Redeemed (3,425) (4,403) (1,882,549) (848,138)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Class A Share Transactions (786) 1,045 327,914 111,393
- --------------------------------------------------------------------------------- ------------------------
CLASS S:
Shares Issued -- -- 1,261,525 499,380
Shares Issued in Lieu of Dividends and Distributions -- -- -- --
Shares Redeemed -- -- (1,140,675) (411,638)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Class S Share Transactions -- -- 120,850 87,742
- --------------------------------------------------------------------------------- ------------------------
Net Increase (Decrease) in Net Assets from
Share Transactions (2,274) 1,446 504,542 164,318
- --------------------------------------------------------------------------------- ------------------------
Total Increase (Decrease) in Net Assets (2,684) 101 504,543 164,319
- --------------------------------------------------------------------------------- ------------------------
NET ASSETS:
Beginning of year 43,616 43,515 848,347 684,028
- --------------------------------------------------------------------------------- ------------------------
End of year $ 40,932 $ 43,616 $1,352,890 $ 848,347
================================================================================= ========================
Undistributed (Distributions in excess of)
Net Investment Income $ -- $ -- $ 1 $ --
- --------------------------------------------------------------------------------- ------------------------
Government Money California Tax Exempt
Market Fund (000) Money Market Fund (000)
------------------------ ------------------------
2006 2005 2006 2005
- --------------------------------------------------------------------------------- ------------------------
OPERATIONS:
Net Investment Income $ 85,646 $ 38,831 $ 19,286 $ 9,079
Net Realized Gain (Loss) from
Security Transactions 1 -- -- --
Net Change in Unrealized Appreciation (Depreciation)
on Investments -- -- -- --
- --------------------------------------------------------------------------------- ------------------------
Net Increase in Net Assets
Resulting from Operations 85,647 38,831 19,286 9,079
- --------------------------------------------------------------------------------- ------------------------
DIVIDENDS AND DISTRIBUTIONS FROM:
Net Investment Income:
INSTITUTIONAL CLASS (2,064) (880) (2,080) (1,365)
CLASS A (74,663) (33,943) (15,136) (7,285)
CLASS S (8,922) (4,006) (2,065) (433)
Realized Capital Gains:
INSTITUTIONAL CLASS -- -- -- (27)
CLASS A -- -- -- (144)
CLASS S -- -- -- (7)
- --------------------------------------------------------------------------------- ------------------------
Total Dividends and Distributions (85,649) (38,829) (19,281) (9,261)
- --------------------------------------------------------------------------------- ------------------------
CAPITAL SHARE TRANSACTIONS:(1)
INSTITUTIONAL CLASS:
Shares Issued 635,895 376,258 1,444,514 1,139,802
Shares Issued in Lieu of Dividends and Distributions 2 7 -- 8
Shares Redeemed (615,154) (387,834) (1,432,711) (1,145,985)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Institutional Class Share Transactions 20,743 (11,569) 11,803 (6,175)
- --------------------------------------------------------------------------------- ------------------------
CLASS A:
Shares Issued 5,761,555 4,965,371 2,014,013 1,822,478
Shares Issued in Lieu of Dividends and Distributions 51,511 23,227 12,188 6,066
Shares Redeemed (5,767,874) (4,950,864) (1,964,398) (1,763,753)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Class A Share Transactions 45,192 37,734 61,803 64,791
- --------------------------------------------------------------------------------- ------------------------
CLASS S:
Shares Issued 1,013,412 689,747 348,788 271,376
Shares Issued in Lieu of Dividends and Distributions -- -- -- --
Shares Redeemed (1,009,234) (724,928) (329,840) (216,708)
- --------------------------------------------------------------------------------- ------------------------
Increase (Decrease) in Net Assets from
Class S Share Transactions 4,178 (35,181) 18,948 54,668
- --------------------------------------------------------------------------------- ------------------------
Net Increase (Decrease) in Net Assets from
Share Transactions 70,113 (9,016) 92,554 113,284
- --------------------------------------------------------------------------------- ------------------------
Total Increase (Decrease) in Net Assets 70,111 (9,014) 92,559 113,102
- --------------------------------------------------------------------------------- ------------------------
NET ASSETS:
Beginning of year 2,155,356 2,164,370 731,064 617,962
- --------------------------------------------------------------------------------- ------------------------
End of year $2,225,467 $2,155,356 $ 823,623 $ 731,064
================================================================================= ========================
Undistributed (Distributions in excess of)
Net Investment Income $ 2 $ 5 $ -- $ (5)
- --------------------------------------------------------------------------------- ------------------------
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 67
financial highlights
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
FOR THE YEAR ENDED SEPTEMBER 30,
- --------------------------------------------------------------------------------
NET
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET NET UNREALIZED DIVIDENDS FROM ASSET ASSETS
VALUE INVESTMENT GAINS (LOSSES) FROM NET REALIZED VALUE END
BEGINNING INCOME ON INVESTMENT CAPITAL END TOTAL OF PERIOD
OF PERIOD (LOSS) SECURITIES INCOME GAINS OF PERIOD RETURN++ (000)
- --------------------------------------------------------------------------------------------------------------------------
LARGE CAP VALUE EQUITY FUND
Institutional Class (commenced operations on January 14, 2000)
2006 $ 9.54 $ 0.13^ $ 1.21^ $ (0.13) $ (0.39) $ 10.36 14.50% $ 92,946
2005 8.77 0.10^ 1.13^ (0.10) (0.36) 9.54 14.39 42,974
2004 7.41 0.08^ 1.36^ (0.08) -- 8.77 19.40 38,344
2003 6.04 0.07 1.37 (0.07) -- 7.41 24.03 33,016
2002 7.63 0.07 (1.47) (0.07) (0.12) 6.04 (18.88) 23,325
Class A (commenced operations on April 13, 2000)
2006 $ 9.53 $ 0.11^ $ 1.20^ $ (0.10) $ (0.39) $ 10.35 14.24% $ 13,104
2005 8.76 0.09^ 1.12^ (0.08) (0.36) 9.53 14.14 10,664
2004 7.41 0.05^ 1.36^ (0.06) -- 8.76 19.01 6,281
2003 6.04 0.06 1.37 (0.06) -- 7.41 23.75 1,792
2002 7.62 0.05 (1.46) (0.05) (0.12) 6.04 (18.97) 769
- --------------------------------------------------------------------------------------------------------------------------
LARGE CAP GROWTH EQUITY FUND
Institutional Class (commenced operations on January 14, 2000)
2006 $ 7.43 $ 0.02^ $ 0.32^ $ (0.02) $ -- $ 7.75 4.59% $ 35,842
2005 6.76 0.04^ 0.67^ (0.04) -- 7.43 10.55 34,164
2004 6.37 0.01^ 0.38^ --^^ -- 6.76 6.20 25,575
2003 5.25 0.01^ 1.12^ (0.01) -- 6.37 21.51 22,249
2002 6.36 0.00 (1.11) -- -- 5.25 (17.45) 14,195
Class A (commenced operations on March 28, 2000)
2006 $ 7.35 $ --^ $ 0.33^ $ --^^ $ -- $ 7.68 4.55% $ 10,363
2005 6.69 0.02^ 0.67^ (0.03) -- 7.35 10.28 8,278
2004 6.32 (0.01)^ 0.38^ --^^ -- 6.69 5.87 5,223
2003 5.21 (0.01)^ 1.12^ -- -- 6.32 21.31 1,965
2002 6.33 (0.02) (1.10) -- -- 5.21 (17.69) 798
- --------------------------------------------------------------------------------------------------------------------------
RCB SMALL CAP VALUE FUND
Institutional Class (commenced operations on October 3, 2001)
2006 $28.58 $ 0.06^ $ 0.05^ $ (0.07) $ (0.37) $ 28.25 0.40% $ 13,435
2005 27.30 0.07^ 2.58^ -- (1.37) 28.58 9.87 13,975
2004 21.92 0.06^ 5.40^ -- (0.08) 27.30 24.97 8,955
2003 15.06 (0.04)^ 6.90^ -- -- 21.92 45.55 6,236
2002 17.11 (0.07) (1.98) -- -- 15.06 (11.98) 1,768
Class A (commenced operations on October 3, 2001)
2006 $28.31 $ (0.01)^ $ 0.05^ $ --^^ $ (0.37) $ 27.98 0.17% $ 10,470
2005 27.13 0.00^ 2.55^ -- (1.37) 28.31 9.55 12,754
2004 21.84 (0.02)^ 5.39^ -- (0.08) 27.13 24.64 7,551
2003 15.04 (0.08)^ 6.88^ -- -- 21.84 45.21 2,384
2002 17.11 (0.05) (2.02) -- -- 15.04 (12.10) 410
Class R (commenced operations on September 30, 1998) (2)
2006 $28.27 $ (0.01)^ $ 0.04^ $ --^^ $ (0.37) $ 27.93 0.14% $ 45,836
2005 27.09 0.01^ 2.54^ -- (1.37) 28.27 9.56 57,787
2004 21.81 (0.02)^ 5.38^ -- (0.08) 27.09 24.63 36,473
2003 15.02 (0.07)^ 6.86^ -- -- 21.81 45.21 14,267
2002 16.94 (0.12) (1.80) -- -- 15.02 (11.33) 10,174
- --------------------------------------------------------------------------------------------------------------------------
TECHNOLOGY GROWTH FUND
Institutional Class (commenced operations on October 3, 2000)
2006 $ 4.04 $ (0.02)^ $ 0.29^ $ (0.01) $ -- $ 4.30 6.77% $ 1,245
2005 3.46 0.01^ 0.57^ -- -- 4.04 16.76 1,187
2004 3.50 (0.03)^ (0.01)^ -- -- 3.46 (1.14) 976
2003 2.26 (0.02) 1.26 -- -- 3.50 54.87 913
2002 3.54 (0.03) (1.25) -- -- 2.26 (36.16) 565
Class A (commenced operations on October 23, 2000)
2006 $ 3.98 $ (0.03)^ $ 0.28^ $ --^^ $ -- $ 4.23 6.30% $ 1,437
2005 3.42 0.00^ 0.56^ -- -- 3.98 16.37 1,423
2004 3.48 (0.04)^ (0.02)^ -- -- 3.42 (1.72) 1,240
2003 2.25 (0.03) 1.26 -- -- 3.48 54.67 950
2002 3.54 (0.04) (1.25) -- -- 2.25 (36.44) 432
RATIO
OF EXPENSES
RATIO TO AVERAGE
OF NET NET ASSETS
RATIO INVESTMENT (EXCLUDING
OF EXPENSES INCOME (LOSS) WAIVERS & PORTFOLIO
TO AVERAGE TO AVERAGE RECOVERED TURNOVER
NET ASSETS(1)# NET ASSETS(1) FEES)(1) RATE
- ------------------------------------------------------------------------
LARGE CAP VALUE EQUITY FUND
Institutional Class (commenced operations on January 14, 2000)
2006 0.96% 1.36% 0.97% 31%
2005 0.96 1.12 0.97 34
2004 0.97 0.92 0.97 36
2003 1.00 1.12 1.00 39
2002 1.00 0.90 1.05 42
Class A (commenced operations on April 13, 2000)
2006 1.21% 1.13% 1.22% 31%
2005 1.21 0.87 1.22 34
2004 1.22 0.64 1.22 36
2003 1.25 0.84 1.25 39
2002 1.25 0.65 1.30 42
- ------------------------------------------------------------------------
LARGE CAP GROWTH EQUITY FUND
Institutional Class (commenced operations on January 14, 2000)
2006 0.99% 0.27% 1.00% 34%
2005 0.98 0.57 1.00 27
2004 1.01 0.10 1.01 50
2003 1.05 0.16 1.03 43
2002 1.05 (0.04) 1.09 31
Class A (commenced operations on March 28, 2000)
2006 1.24% 0.03% 1.25% 34%
2005 1.23 0.33 1.25 27
2004 1.26 (0.14) 1.26 50
2003 1.30 (0.09) 1.29 43
2002 1.30 (0.29) 1.34 31
- ------------------------------------------------------------------------
RCB SMALL CAP VALUE FUND
Institutional Class (commenced operations on October 3, 2001)
2006 1.20% 0.20% 1.21% 66%
2005 1.18 0.26 1.20 41
2004 1.21 0.23 1.20 40
2003 1.24 (0.20) 1.24 65
2002 1.24 (0.46) 1.28 39
Class A (commenced operations on October 3, 2001)
2006 1.45% (0.04)% 1.46% 66%
2005 1.43 0.01 1.45 41
2004 1.49 (0.07) 1.48 40
2003 1.49 (0.45) 1.49 65
2002 1.49 (0.74) 1.53 39
Class R (commenced operations on September 30, 1998) (2)
2006 1.45% (0.04)% 1.46% 66%
2005 1.43 0.02 1.45 41
2004 1.49 (0.07) 1.48 40
2003 1.49 (0.41) 1.49 65
2002 1.49 (0.70) 1.53 39
- ------------------------------------------------------------------------
TECHNOLOGY GROWTH FUND
Institutional Class (commenced operations on October 3, 2000)
2006 1.16% (0.52)% 1.10% 24%
2005 1.20 0.34 1.21 37
2004 1.20 (0.82) 1.28 33
2003 1.20 (0.78) 1.36 29
2002 1.20 (0.88) 1.37 24
Class A (commenced operations on October 23, 2000)
2006 1.46% (0.81)% 1.40% 24%
2005 1.50 0.06 1.51 37
2004 1.50 (1.12) 1.58 33
2003 1.50 (1.08) 1.66 29
2002 1.50 (1.18) 1.67 24
++ 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.
^ PER SHARE CALCULATIONS ARE BASED ON AVERAGE SHARES OUTSTANDING THROUGHOUT
THE PERIOD.
^^ AMOUNT REPRESENTS LESS THAN $0.01 PER SHARE.
# RATIO INCLUDES WAIVERS AND PREVIOUSLY WAIVED INVESTMENT ADVISORY FEES
RECOVERED. THE IMPACT OF THE RECOVERED FEES MAY CAUSE A HIGHER NET EXPENSE
RATIO.
(1) ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
(2) ON OCTOBER 3, 2001, THE RCB SMALL CAP FUND EXCHANGED ALL OF ITS ASSETS AND
LIABILITIES FOR SHARES OF THE CNI CHARTER RCB SMALL CAP VALUE FUND. THE
CNI CHARTER RCB SMALL CAP VALUE FUND IS THE ACCOUNTING SURVIVOR IN THIS
TRANSACTION, AND AS A RESULT, ITS BASIS OF ACCOUNTING FOR ASSETS AND
LIABILITIES AND ITS OPERATING RESULTS FOR THE PERIODS PRIOR TO OCTOBER 3,
2001 HAVE BEEN CARRIED FORWARD IN THESE FINANCIAL HIGHLIGHTS.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 68
- --------------------------------------------------------------------------------
NET
NET REALIZED AND DISTRIBUTIONS NET NET
ASSET UNREALIZED DIVIDENDS FROM ASSET ASSETS
VALUE NET GAINS (LOSSES) FROM NET REALIZED VALUE END
BEGINNING INVESTMENT ON INVESTMENT CAPITAL END TOTAL OF PERIOD
OF PERIOD INCOME SECURITIES INCOME GAINS OF PERIOD RETURN++ (000)
- --------------------------------------------------------------------------------------------------------------------------
CORPORATE BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 $10.27 $ 0.42^ $ (0.10)^ $ (0.42) $ -- $ 10.17 3.19% $ 55,290
2005 10.60 0.40^ (0.27)^ (0.40) (0.06) 10.27 1.26 51,193
2004 10.89 0.41^ (0.18)^ (0.41) (0.11) 10.60 2.15 47,080
2003 10.65 0.46 0.24 (0.46) -- 10.89 6.74 42,256
2002 10.72 0.53 0.09 (0.53) (0.16) 10.65 6.06 40,807
Class A (commenced operations on April 13, 2000)
2006 $10.27 $ 0.39^ $ (0.10)^ $ (0.39) $ -- $ 10.17 2.93% $ 1,332
2005 10.61 0.37^ (0.28)^ (0.37) (0.06) 10.27 0.91 1,530
2004 10.89 0.37^ (0.16)^ (0.38) (0.11) 10.61 1.99 1,522
2003 10.65 0.44 0.23 (0.43) -- 10.89 6.47 830
2002 10.73 0.50 0.08 (0.50) (0.16) 10.65 5.69 544
- --------------------------------------------------------------------------------------------------------------------------
GOVERNMENT BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 $10.40 $ 0.41^ $ (0.12)^ $ (0.41) $ -- $ 10.28 2.89% $ 35,671
2005 10.62 0.31^ (0.16)^ (0.31) (0.06) 10.40 1.42 28,132
2004 10.93 0.25^ (0.17)^ (0.25) (0.14) 10.62 0.81 20,901
2003 11.02 0.36^ (0.07)^ (0.37) (0.01) 10.93 2.68* 15,596
2002 10.80 0.44 0.34 (0.44) (0.12) 11.02 7.53 14,502
Class A (commenced operations on April 13, 2000)
2006 $10.42 $ 0.39^ $ (0.12)^ $ (0.39) $ -- $ 10.30 2.63% $ 1,782
2005 10.64 0.29^ (0.17)^ (0.28) (0.06) 10.42 1.16 554
2004 10.95 0.23^ (0.17)^ (0.23) (0.14) 10.64 0.55 436
2003 11.01 0.33^ (0.04)^ (0.34) (0.01) 10.95 2.71* 18
2002 10.77 0.43 0.34 (0.41) (0.12) 11.01 7.47 525
- --------------------------------------------------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 $10.26 $ 0.29^ $ 0.03^ $ (0.29) $ (0.04) $ 10.25 3.18% $ 26,074
2005 10.41 0.28^ (0.11)^ (0.28) (0.04) 10.26 1.65 22,768
2004 10.60 0.27^ (0.06)^ (0.27) (0.13) 10.41 2.00 17,789
2003 10.83 0.31 (0.04) (0.31) (0.19) 10.60 2.63 14,546
2002 10.50 0.36 0.41 (0.35) (0.09) 10.83 7.58 16,147
Class A (commenced operations on April 13, 2000)
2006 $10.29 $ 0.26^ $ 0.02^ $ (0.26) $ (0.04) $ 10.27 2.81% $ 1,134
2005 10.44 0.25^ (0.11)^ (0.25) (0.04) 10.29 1.39 1,487
2004 10.62 0.24^ (0.05)^ (0.24) (0.13) 10.44 1.84 2,439
2003 10.85 0.27 (0.02) (0.29) (0.19) 10.62 2.37 732
2002 10.51 0.33 0.43 (0.33) (0.09) 10.85 7.40 13
- --------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 $ 9.04 $ 0.68^ $ (0.08)^ $ (0.68) $ -- $ 8.96 6.90% $ 20,887
2005 9.31 0.71^ (0.27)^ (0.71) -- 9.04 4.85 22,588
2004 8.95 0.72^ 0.36^ (0.72) -- 9.31 12.47 22,860
2003 8.16 0.76 0.79 (0.76) -- 8.95 19.75 13,387
2002 8.57 0.83 (0.40) (0.84) -- 8.16 4.80 10,020
Class A (commenced operations on January 14, 2000)
2006 $ 9.04 $ 0.65^ $ (0.08)^ $ (0.65) $ -- $ 8.96 6.58% $ 20,045
2005 9.31 0.69^ (0.27)^ (0.69) -- 9.04 4.54 21,028
2004 8.95 0.70^ 0.35^ (0.69) -- 9.31 12.14 20,655
2003 8.16 0.74 0.78 (0.73) -- 8.95 19.39 16,878
2002 8.57 0.81 (0.40) (0.82) -- 8.16 4.49 9,397
RATIO
OF EXPENSES
RATIO TO AVERAGE
OF NET NET ASSETS
RATIO INVESTMENT (EXCLUDING
OF EXPENSES INCOME WAIVERS & PORTFOLIO
TO AVERAGE TO AVERAGE RECOVERED TURNOVER
NET ASSETS(1)# NET ASSETS(1) FEES)(1) RATE
- ---------------------------------------------------------------------
CORPORATE BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 0.75% 4.14% 0.75% 25%
2005 0.75 3.80 0.76 25
2004 0.75 3.82 0.79 57
2003 0.75 4.30 0.78 66
2002 0.75 5.04 0.82 55
Class A (commenced operations on April 13, 2000)
2006 1.00% 3.88% 1.00% 25%
2005 1.00 3.55 1.01 25
2004 1.00 3.51 1.04 57
2003 1.00 4.00 1.03 66
2002 1.00 4.71 1.07 55
- ---------------------------------------------------------------------
GOVERNMENT BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 0.70% 4.04% 0.78% 62%
2005 0.70 2.98 0.79 58
2004 0.70 2.39 0.81 169
2003 0.70 3.26 0.81 54
2002 0.70 4.11+ 0.86 70
Class A (commenced operations on April 13, 2000)
2006 0.95% 3.81% 1.03% 62%
2005 0.95 2.70 1.04 58
2004 0.95 2.14 1.06 169
2003 0.95 3.00 1.06 54
2002 0.95 3.70 1.11 70
- ---------------------------------------------------------------------
CALIFORNIA TAX EXEMPT BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 0.50% 2.85% 0.62% 43%
2005 0.50 2.70 0.63 54
2004 0.50 2.55 0.65 51
2003 0.50 2.91 0.65 68
2002 0.50 3.33 0.70 90
Class A (commenced operations on April 13, 2000)
2006 0.75% 2.59% 0.87% 43%
2005 0.75 2.43 0.88 54
2004 0.75 2.29 0.90 51
2003 0.75 2.62 0.90 68
2002 0.75 3.05 0.95 90
- ---------------------------------------------------------------------
HIGH YIELD BOND FUND
Institutional Class (commenced operations on January 14, 2000)
2006 1.00% 7.58% 1.10% 23%
2005 1.00 7.71 1.11 46
2004 1.00 7.87 1.14 35
2003 1.00 8.84 1.13 36
2002 1.00 9.48 1.18 30
Class A (commenced operations on January 14, 2000)
2006 1.30% 7.28% 1.40% 23%
2005 1.30 7.41 1.41 46
2004 1.30 7.56 1.44 35
2003 1.30 8.44 1.43 36
2002 1.30 9.03 1.48 30
* TOTAL RETURN FOR CLASS A OF THE GOVERNMENT BOND FUND IS GREATER THAN THE
INSTITUTIONAL CLASS'S DUE TO A LARGE REDEMPTION DURING THE YEAR.
+ RATIOS REFLECT THE IMPACT OF SIGNIFICANT CHANGES IN AVERAGE NET ASSETS AND
THE EFFECTS OF ANNUALIZATION.
++ 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.
^ PER SHARE CALCULATIONS ARE BASED ON THE AVERAGE SHARES OUTSTANDING
THROUGHOUT THE PERIOD.
# RATIO INCLUDES WAIVERS AND PREVIOUSLY WAIVED INVESTMENT ADVISORY FEES
RECOVERED. THE IMPACT OF THE RECOVERED FEES MAY CAUSE A HIGHER NET EXPENSE
RATIO.
(1) ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 69
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)# NET ASSETS(1) FEES)(1)
- ------------------------------------------------------------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
Institutional Class (commenced operations on March 23, 1998)
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
2003 1.00 0.007 (0.007) 1.00 0.68 287,087 0.63 0.68 0.64
2002 1.00 0.014 (0.014) 1.00 1.37 290,778 0.63 1.37 0.67
Class A (commenced operations on October 18, 1999)
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
2003 1.00 0.005 (0.005) 1.00 0.46 205,191 0.85 0.47 1.14
2002 1.00 0.011 (0.011) 1.00 1.15 228,807 0.85 1.15 1.17
Class S (commenced operations on October 26, 1999)
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
2003 1.00 0.003 (0.003) 1.00 0.29 118,624 1.03 0.29 1.14
2002 1.00 0.009 (0.009) 1.00 0.95 129,180 1.05 0.95 1.17
- ------------------------------------------------------------------------------------------------------------------------------------
GOVERNMENT MONEY MARKET FUND
Institutional Class (commenced operations on April 3, 2000)
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
2003 1.00 0.007 (0.007) 1.00 0.70 56,841 0.63 0.68 0.64
2002 1.00 0.014 (0.014) 1.00 1.38 51,985 0.63 1.43 0.66
Class A (commenced operations on June 21, 1999)
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
2003 1.00 0.005 (0.005) 1.00 0.48 2,060,860 0.85 0.48 1.14
2002 1.00 0.012 (0.012) 1.00 1.16 2,149,151 0.85 1.18 1.16
Class S (commenced operations on October 6, 1999)
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
2003 1.00 0.003 (0.003) 1.00 0.30 191,539 1.03 0.31 1.14
2002 1.00 0.010 (0.010) 1.00 0.96 219,387 1.05 0.93 1.16
- ------------------------------------------------------------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND
Institutional Class (commenced operations on April 3, 2000)
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
2003 1.00 0.006 (0.006) 1.00 0.62 87,820 0.55 0.59 0.65
2002 1.00 0.010 (0.010) 1.00 0.98 58,923 0.55 0.96 0.69
Class A (commenced operations on June 21, 1999)
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
2003 1.00 0.004 (0.004) 1.00 0.41 539,182 0.76 0.41 1.15
2002 1.00 0.007 (0.007) 1.00 0.75 519,269 0.78 0.75 1.19
Class S (commenced operations on November 12, 1999)
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
2003 1.00 0.003 (0.003) 1.00 0.27 24,002 0.89 0.27 1.15
2002 1.00 0.005 (0.005) 1.00 0.55 29,626 0.98 0.53 1.19
* 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.
# RATIO INCLUDES WAIVERS AND PREVIOUSLY WAIVED INVESTMENT ADVISORY FEES
RECOVERED. THE IMPACT OF THE RECOVERED FEES MAY CAUSE A HIGHER NET EXPENSE
RATIO.
(1) ANNUALIZED FOR PERIODS LESS THAN ONE YEAR.
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
CNI CHARTER FUNDS | PAGE 70
notes to financial statements
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
1. ORGANIZATION:
The 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 sixteen 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, Technology Growth 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");
and Prime Money Market Fund, Government Money Market Fund and California Tax
Exempt Money Market Fund (collectively, the "Money Market Funds") (each a
"Fund", collectively, the "Funds"). The Equity and Fixed Income Funds are
registered to offer Institutional and Class A Shares; in addition, the RCB Small
Cap Value Fund is registered to offer Class R Shares. The Money Market Funds are
registered to offer Institutional, Class A 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 a description of each
Fund's investment objectives, policies and strategies.
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.
("AHA Funds") into newly established corresponding series of the Trust. The
reorganization was approved by shareholders of AHA Funds and was effective on
October 3, 2005. 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 amount 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 will be 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 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.
CNI CHARTER FUNDS | PAGE 71
notes to financial statements
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
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, and
Technology Growth 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.
3. ADMINISTRATION, TRANSFER AGENT, DISTRIBUTION AND SHAREHOLDER SERVICES
AGREEMENTS:
Pursuant to an administration agreement (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 dated April 1, 1999, as amended January 1, 2005, 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, and 0.025% of aggregate average daily net assets of the Trust exceeding
$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 A, S and R Shares that allows each Fund to pay distribution and
servicing fees. SEI Investments Distribution Co. (the "Distributor"), as
compensation for its services under the Plan, 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 A Shares and Class S Shares of the Money Market
Funds and 0.25% of the Class A Shares of the Equity and Fixed Income Funds and
the Class R Shares of the RCB Small Cap Value Fund, with the exception of 0.30%
charged to the Class A Shares of the Technology Growth and High Yield Bond
Funds, 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. The Distributor receives no fees for its distribution services
under this agreement.
SEI Investments Fund Management serves as Transfer Agent for the Trust whereby
they provide services at an annual rate of $15,000 per share class. The Transfer
Agent has voluntarily agreed to waive these fees. Forum Shareholder Services,
LLC (a division of Citigroup Fund Services, LLC) serves as the Sub-Transfer
Agent for the RCB Small Cap Value Fund.
U.S. Bank, N.A. 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 also adopted a Shareholder Servicing Agreement that permits
payment of compensation to service providers, that may include City National
Bank ("CNB"), that have agreed to provide certain shareholder support for their
customers who own Institutional Class, Class A, 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. The Trust
has agreed to voluntarily waive shareholder servicing fees to the extent
necessary to limit the total
CNI CHARTER FUNDS | PAGE 72
- --------------------------------------------------------------------------------
operating expenses of the Fund. For the year ended September 30, 2006, CNB
received Shareholder Servicing fees from the Trust in the amount of $8,522,844.
Certain officers of the Trust are also officers of City National Asset
Management, Inc. ("CNAM", the "Adviser") and 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, 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, 0.85% of the
average daily net assets of the Technology Growth 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 on behalf of the
RCB Small Cap Value Fund.
HSBC HALBIS PARTNERS (USA), INC. acts as the Investment Sub-Adviser on behalf of
the High Yield Bond 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 respective average daily net assets. The Adviser has voluntarily agreed
to maintain this limitation until further notice to the Trust. The voluntary
expense limitations (expressed as a percentage of average daily net assets) are
as follows:
Large Cap Large Cap RCB
Value Growth Small Cap Technology
Equity Equity Value Growth
Fund Fund Fund Fund
- --------------------------------------------------------------------------------
Institutional Class 1.00% 1.05% 1.24% 1.20%
Class A 1.25% 1.30% 1.49% 1.50%
Class R -- -- 1.49% --
- --------------------------------------------------------------------------------
California
Corporate Government Tax Exempt High Yield
Bond Bond Bond Bond
Fund Fund Fund Fund
- --------------------------------------------------------------------------------
Institutional Class 0.75% 0.70% 0.50% 1.00%
Class A 1.00% 0.95% 0.75% 1.30%
- --------------------------------------------------------------------------------
Prime California
Money Government Tax Exempt
Market Money Market Money Market
Fund Fund Fund
- --------------------------------------------------------------------------------
Institutional Class 0.63% 0.63% 0.55%
Class A 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.
During the year ended September 30, 2006, the Board of Trustees approved the
reimbursement of previously waived fees by the Adviser for the prior fiscal year
in the amount of $1,667 and $4,821 for the Technology Growth Fund and Corporate
Bond Fund, respectively.
As of September 30, 2006, 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
Fund Recovery (000) Expiration
- --------------------------------------------------------------------------------
Government Bond $ 16 2007
18 2008
23 2009
California Tax Exempt Bond 23 2007
25 2008
28 2009
High Yield Bond 42 2007
42 2008
38 2009
California Tax Exempt Money Market 496 2007
430 2008
516 2009
- --------------------------------------------------------------------------------
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, 2006, were as follows for the Equity 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 $ -- $ 68,851 $ -- $ 28,153
Large Cap Growth Equity -- 17,224 -- 15,178
RCB Small Cap Value -- 48,293 -- 56,721
Technology Growth -- 614 -- 718
Corporate Bond 2,909 13,521 821 11,982
Government Bond 26,449 537 18,266 --
California Tax Exempt Bond -- 15,086 -- 10,258
High Yield Bond -- 8,835 -- 11,272
CNI CHARTER FUNDS | PAGE 73
notes to financial statements
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
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.
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, net operating losses, 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 Decrease
Net Investment Net Realized Paid-In
Income (Loss) Gain (Loss) Capital
Fund (000) (000) (000)
- --------------------------------------------------------------------------------
Large Cap Growth Equity $ 2 $ (2) $ --
RCB Small Cap Value 5 (5) --
Technology Growth 17 -- (17)
Corporate Bond (5) 5 --
Government Bond (4) 4 --
- --------------------------------------------------------------------------------
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, 2006 and September 30, 2005 are shown below:
Tax
Exempt Ordinary Long-term
Income Income Capital Gain Total
Fund (000) (000) (000) (000)
- ------------------------------------------------------------------------------
Large Cap Value Equity
2006 $ -- $ 1,252 $ 3,789 $ 5,041
2005 -- 535 1,908 2,443
Large Cap Growth Equity
2006 -- 101 -- 101
2005 -- 198 -- 198
RCB Small Cap Value
2006 -- 66 1,121 1,187
2005 -- 521 2,493 3,014
Technology Growth
2006 -- 4 -- 4
2005 -- -- -- --
Corporate Bond
2006 -- 2,221 -- 2,221
2005 -- 1,919 303 2,222
Government Bond
2006 -- 1,324 -- 1,324
2005 -- 739 120 859
California Tax Exempt Bond
2006 724 26 68 818
2005 593 -- 82 675
High Yield Bond
2006 -- 3,020 -- 3,020
2005 -- 3,404 -- 3,404
Prime Money Market
2006 -- 43,643 -- 43,643
2005 -- 14,619 -- 14,619
Government Money Market
2006 -- 85,649 -- 85,649
2005 -- 38,829 -- 38,829
California Tax Exempt
Money Market
2006 19,281 -- -- 19,281
2005 9,088 -- 173 9,261
CNI CHARTER FUNDS | PAGE 74
- --------------------------------------------------------------------------------
As of September 30, 2006, the components of Distributable Earnings/(Accumulated
Losses) on a tax basis were as follows:
Undistributed Undistributed Undistributed Capital Unrealized
Tax-Exempt Ordinary Long-term Loss Post-October Appreciation
Income Income Capital Gain Carryforwards Losses (Depreciation)
Fund (000) (000) (000) (000) (000) (000)
- ----------------------------------------------------------------------------------------------------------------------------
Large Cap Value Equity $ -- $ 303 $ 5,197 $ -- $ -- $ 17,218
Large Cap Growth Equity -- 22 -- (2,998) -- 4,119
RCB Small Cap Value -- 2 1,108 -- -- 12,695
Technology Growth -- -- -- (1,504) -- 191
Corporate Bond -- 198 -- (64) (271) (374)
Government Bond -- 130 -- (59) (355) (232)
California Tax Exempt Bond 65 -- -- -- (42) 77
High Yield Bond -- 245 -- (1,233) (22) (37)
Prime Money Market -- 5,059 -- (403) -- --
Government Money Market -- 8,376 -- -- -- --
California Tax Exempt Money Market 1,831 -- -- -- -- --
Other Total
Temporary Distributable Earnings
Differences (Accumulated Losses)
Fund (000) (000)
- ----------------------------------------------------------------------
Large Cap Value Equity $ (304) $ 22,414
Large Cap Growth Equity (24) 1,119
RCB Small Cap Value -- 13,806
Technology Growth -- (1,313)
Corporate Bond (199) (710)
Government Bond (130) (646)
California Tax Exempt Bond (66) 34
High Yield Bond (245) (1,292)
Prime Money Market (5,057) (401)
Government Money Market (8,374) 2
California Tax Exempt Money Market (1,830) 1
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,
2006, the breakdown of capital loss carryforwards is as follows:
Expiring September 30,
- --------------------------------------------------------------------------------
2010 2011 2012 2013 2014
Fund (000) (000) (000) (000) (000)
- --------------------------------------------------------------------------------
Large Cap Growth Equity $1,482 $1,516 $ -- $ -- $ --
Technology Growth 290 658 328 228 --
Corporate Bond -- -- -- -- 64
Government Bond -- -- -- -- 59
High Yield Bond 33 932 -- -- 268
Prime Money Market 403 -- -- -- --
- --------------------------------------------------------------------------------
During the year ended September 30, 2006, the following funds had utilized
capital loss carryforwards to offset capital gains amounting to:
Amount
Fund (000)
- --------------------------------------------------------------------------------
Large Cap Growth Equity $ 1,412
Technology Growth 102
- --------------------------------------------------------------------------------
Post-October losses represent losses realized on investments and foreign
currency transactions from November 1, 2005 through September 30, 2006 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, 2006 for each of
the Equity and Fixed Income Funds 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 $ 88,821 $ 18,185 $ (967) $ 17,218
Large Cap Growth Equity 41,894 6,144 (2,025) 4,119
RCB Small Cap Value 56,824 13,463 (768) 12,695
Technology Growth 2,491 508 (317) 191
Corporate Bond 57,426 351 (725) (374)
Government Bond 37,369 58 (290) (232)
California Tax Exempt
Bond 26,847 171 (94) 77
High Yield Bond 40,541 965 (1,002) (37)
- --------------------------------------------------------------------------------
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.
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.
CNI CHARTER FUNDS | PAGE 75
notes to financial statements
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
8. CAPITAL SHARES ISSUED AND REDEEMED:
Capital share activity for the years ended September 30, 2006 and 2005 were as
follows:
Large Cap Value Large Cap Growth RCB Small Cap Technology
Equity Fund (000) Equity Fund (000) Value Fund (000) Growth Fund (000)
------------------ ------------------ ----------------- ------------------
2006 2005 2006 2005 2006 2005 2006 2005
- -------------------------------------------------------- ------------------ ----------------- ------------------
CAPITAL SHARES ISSUED AND REDEEMED:
INSTITUTIONAL CLASS:
Shares Issued 5,652 877 1,054 1,493 192 279 80 113
Shares Issued in Lieu of
Dividends and Distributions 304 74 4 7 6 12 1 --
Shares Redeemed (1,488) (821) (1,036) (684) (211) (130) (85) (101)
- -------------------------------------------------------- ------------------ ----------------- ------------------
Net Institutional
Class Transactions 4,468 130 22 816 (13) 161 (4) 12
======================================================== ================== ================= ==================
CLASS A:
Shares Issued 275 515 425 454 41 259 34 9
Shares Issued in Lieu of
Dividends and Distributions 50 36 1 3 5 14 -- --
Shares Redeemed (177) (149) (202) (111) (122) (101) (52) (15)
- -------------------------------------------------------- ------------------ ----------------- ------------------
Net Class A Transactions 148 402 224 346 (76) 172 (18) (6)
======================================================== ================== ================= ==================
CLASS R:
Shares Issued -- -- -- -- 433 1,014 -- --
Shares Issued in Lieu of
Dividends and Distributions -- -- -- -- 27 73 -- --
Shares Redeemed -- -- -- -- (863) (389) -- --
- -------------------------------------------------------- ------------------ ----------------- ------------------
Net Class R Transactions -- -- -- -- (403) 698 -- --
======================================================== ================== ================= ==================
California High Yield
Corporate Bond Government Bond Tax Exempt Bond Bond
Fund (000) Fund (000) Fund (000) Fund (000)
------------------ ------------------ ----------------- ------------------
2006 2005 2006 2005 2006 2005 2006 2005
- -------------------------------------------------------- ------------------ ----------------- ------------------
CAPITAL SHARES ISSUED AND REDEEMED:
INSTITUTIONAL CLASS:
Shares Issued 1,551 1,476 1,325 1,238 865 867 460 648
Shares Issued in Lieu of
Dividends and Distributions 40 38 33 20 25 13 100 102
Shares Redeemed (1,139) (967) (594) (521) (565) (370) (726) (708)
- -------------------------------------------------------- ------------------ ----------------- ------------------
Net Institutional
Class Transactions 452 547 764 737 325 510 (166) 42
======================================================== ================== ================= ==================
CLASS A:
Shares Issued 14 58 135 26 3 29 204 485
Shares Issued in Lieu of
Dividends and Distributions 3 3 1 1 1 2 92 99
Shares Redeemed (35) (55) (16) (15) (38) (120) (383) (478)
- -------------------------------------------------------- ------------------ ----------------- ------------------
Net Class A Transactions (18) 6 120 12 (34) (89) (87) 106
======================================================== ================== ================= ==================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
CNI CHARTER FUNDS | PAGE 76
- --------------------------------------------------------------------------------
California
Prime Government Tax Exempt
Money Market Money Market Money Market
Fund (000) Fund (000) Fund (000)
------------------------ ------------------------ -------------------------
2006 2005 2006 2005 2006 2005
- -------------------------------------------------------------- ------------------------ -------------------------
CAPITAL SHARES ISSUED AND REDEEMED:
INSTITUTIONAL CLASS:
Shares Issued 1,690,942 1,215,600 635,895 376,258 1,444,514 1,139,802
Shares Issued in Lieu of
Dividends and Distributions 2,507 1,411 2 7 -- 8
Shares Redeemed (1,637,671) (1,251,828) (615,154) (387,834) (1,432,711) (1,145,985)
- -------------------------------------------------------------- ------------------------ -------------------------
Net Institutional
Class Transactions 55,778 (34,817) 20,743 (11,569) 11,803 (6,175)
============================================================== ======================== =========================
CLASS A:
Shares Issued 2,204,941 958,549 5,761,555 4,965,371 2,014,013 1,822,478
Shares Issued in Lieu of
Dividends and Distributions 5,522 982 51,511 23,227 12,188 6,066
Shares Redeemed (1,882,549) (848,138) (5,767,874) (4,950,864) (1,964,398) (1,763,753)
- -------------------------------------------------------------- ------------------------ -------------------------
Net Class A Transactions 327,914 111,393 45,192 37,734 61,803 64,791
============================================================== ======================== =========================
CLASS S:
Shares Issued 1,261,525 499,380 1,013,412 689,747 348,788 271,376
Shares Issued in Lieu of
Dividends and Distributions -- -- -- -- -- --
Shares Redeemed (1,140,675) (411,638) (1,009,234) (724,928) (329,840) (216,708)
- -------------------------------------------------------------- ------------------------ -------------------------
Net Class S Transactions 120,850 87,742 4,178 (35,181) 18,948 54,668
============================================================== ======================== =========================
AMOUNTS DESIGNATED AS "--" ARE EITHER $0 OR HAVE BEEN ROUNDED TO $0.
9. NEW ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board (FASB) released FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" (FIN 48). FIN
48 provides guidance for how uncertain tax positions should be recognized,
measured, presented and disclosed in the financial statements. FIN 48 requires
the evaluation of tax positions taken or expected to be taken in the course of
preparing the fund's tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. At this time, management is
evaluating the implications of FIN 48 and its impact in the financial statements
has not yet been determined.
In September 2006, the Financial Accounting Standards Board (FASB) issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current 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, 2006, 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.
CNI CHARTER FUNDS | PAGE 77
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, the Large Cap
Growth Equity Fund, the RCB Small Cap Value Fund, the Technology Growth Fund,
the Corporate Bond Fund, the Government Bond Fund, the California Tax Exempt
Bond Fund, the High Yield Bond Fund, the Prime Money Market Fund, the Government
Money Market Fund, and the California Tax Exempt Money Market Fund
(collectively, "the Funds"), including the schedules of investments, as of
September 30, 2006, and the related statements of operations for the year then
ended and changes in net assets for each of the years in the two-year period
then ended, and financial highlights for each of the years or periods indicated
herein. 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
audit.
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 and financial highlights 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, 2006, by
correspondence with the custodian and brokers 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
Funds as of September 30, 2006, the results of their operations, the changes in
their net assets, and their financial highlights for the periods indicated, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ KPMG LLP
NOVEMBER 22, 2006
CNI CHARTER FUNDS | PAGE 78
board members and officers (UNAUDITED)
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
Information pertaining to the Trustees and Officers of the Trust is set forth
below as of October 3, 2006. Trustees who are not deemed to be "interested
persons" of the Trust as defined in the 1940 Act are referred to as "Independent
Board Members." Trustees who are deemed to be "interested persons" of the Trust
are referred to as "Interested Board Members."
- ------------------------------------------------------------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE PORTFOLIOS IN
AND CNI CHARTER OTHER
NAME POSITION(S) LENGTH OF FUNDS 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
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT
BOARD MEMBERS
Irwin G. Barnet Trustee Since 1999 Attorney and partner at Reed Smith LLP, 16 None
Age: 68 a law firm (January 2003-Present); attorney
and a principal of Crosby, Heafey, Roach &
May, a law firm (September 2000-December
2002); attorney and principal of Sanders,
Barnet, Goldman, Simons & Mosk, a law firm
prior to September, 2000.
- ------------------------------------------------------------------------------------------------------------------------------------
Victor Meschures Trustee Since 1999 Certified Public Accountant with Meschures, 16 None
Age: 68 Campeas, Thompson, Snyder and Pariser, LLP,
an accounting firm.
- ------------------------------------------------------------------------------------------------------------------------------------
William R. Sweet Trustee Since 1999 Retired. 16 None
Age: 69
- ------------------------------------------------------------------------------------------------------------------------------------
James R. Wolford Trustee Since 1999 Chief Financial Officer, Bixby Land Company, 16 None
Age: 52 a real estate company (September, 2004-Present);
Regional Financial Officer, AIMCO, a real estate
investment trust (January, 2004- September,
2004); Chief Financial Officer, DBM Group, a
direct mail marketing company (August, 2001-
January, 2004); Senior Vice President and Chief
Operating Officer, Forecast Commercial Real
Estate Service, Inc. (January, 2000- August,
2001); Senior Vice President and Chief Financial
Officer, Bixby Ranch Company (1985- January,
2000).
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Vernon C. Kozlen President Since 2000 Executive Vice President and Director of N/A N/A
City National Bank and Chief Asset Management Development, City
400 N. Roxbury Dr. Executive National Bank ("CNB") (1996-present);
Beverly Hills, Officer Director, Reed, Conner & Birdwell, L.L.C.
CA 90210 (2000-present) and Convergent Capital
Age: 63 -Management, LLC (2003-present). Formerly,
Chairman of the Board, City National Asset
Management, Inc. ("CNAM, Inc.") (2001- September
2005) and City National Securities, Inc. ("CNS")
(1999-September 2005); and Director, CNAM, Inc.
(2001-April 2006) and CNS (1999-April 2006).
- ------------------------------------------------------------------------------------------------------------------------------------
Rodney J. Olea Vice President Since 2000 Senior Vice President, City National Asset N/A N/A
City National Bank Management, Inc. (2001-Present);
Senior Vice President and Director of Fixed Income of
400 N. Roxbury Dr. City National Bank (1994-Present).
Beverly Hills, CA
90210
Age: 41
- ------------------------------------------------------------------------------------------------------------------------------------
CNI CHARTER FUNDS | PAGE 79
board members and officers (UNAUDITED) (CONTINUED)
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
Information pertaining to the Trustees and Officers of the Trust is set forth
below as of October 3, 2006. Trustees who are not deemed to be "interested
persons" of the Trust as defined in the 1940 Act are referred to as "Independent
Board Members." Trustees who are deemed to be "interested persons" of the Trust
are referred to as "Interested Board Members." The Trust's Statement of
Additional Information ("SAI") includes additional information about the Board
Members and Officers. The SAI may be obtained without charge by calling
1-800-708-8881.
- ------------------------------------------------------------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE PORTFOLIOS IN
AND CNI CHARTER OTHER
NAME POSITION(S) LENGTH OF FUNDS 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
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
Richard A. Weiss Vice President Since 2000 President, CNAM, Inc. (2001-Present); N/A N/A
City National Bank and Executive Vice President and Chief
400 N. Roxbury Dr., Assistant Investment Officer, CNB (1999-Present);
Beverly Hills, CA Secretary Director, City National Securities
90210 (April 2003-present). Formerly,
Age: 46 Executive Vice President and Chief
Investment Officer, Sanwa Bank
California (1994-1999).
- ------------------------------------------------------------------------------------------------------------------------------------
Valerie Y. Lewis Vice President Since 2005 Chief Compliance Officer, CNAM, Inc. N/A N/A
City National Bank and Chief (August, 2005- Present). Formerly, Fund
400 N. Roxbury Dr. Compliance Boards Specialist - Assistant Secretary,
Beverly Hills, Officer Capital Research and Management
CA 90210 Company and Capital International,
Age: 50 Inc. (1999-2005).
- ------------------------------------------------------------------------------------------------------------------------------------
Eric Kleinschmidt Controller and Since 2005 SEI Investments, Director of Fund N/A N/A
SEI Investments Chief Accounting, (2004-Present). Formerly,
One Freedom Operating Manager of Fund Accounting
Valley Drive Officer (1999-2004).
Oaks, PA 19456
Age: 38
- ------------------------------------------------------------------------------------------------------------------------------------
Timothy Solberg Vice President Since 2005 Managing Director and Chief Investment N/A N/A
109 S. Lasalle Street and Assistant Officer, CCMA (2001-Present).
Suite 2800 Secretary Formerly, Director of Marketing and
Chicago, IL 60603 Client Services, Hewitt Investment
Age: 53 Group, a Division of Hewitt Associates
LLC (1989-2001).
- --------------------
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 "CNI Charter Funds Complex" consists of all registered investment
companies for which City National Asset Management, Inc. serves as
investment adviser. As of September 30, 2006, the CNI Charter Funds
Complex consisted of 16 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.
CNI CHARTER FUNDS | PAGE 80
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
TERM OF NUMBER OF
OFFICE PORTFOLIOS IN
AND CNI CHARTER OTHER
NAME POSITION(S) LENGTH OF FUNDS 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
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
Timothy D. Barto Vice President Since 2000 Attorney, Vice President and Assistant N/A N/A
One Freedom and Assistant Secretary of SEI Investments (1999-
Valley Drive Secretary Present); Vice President and Assistant
Oaks, PA 19456 Secretary of Administrator (1999-
Age: 38 Present); Officer of various investment
companies administered by Administrator
(1999-Present). Formerly, Assistant Secretary
of the Distributor (2003-2004);
Vice President of the Distributor
(1999-2004).
- ------------------------------------------------------------------------------------------------------------------------------------
Phillip T. Masterson Vice President Since 2005 Attorney, employed by SEI Investments N/A N/A
SEI Investments and Assistant (August 2004-Present). Formerly, General
One Freedom Secretary Counsel, Citco Mutual Fund Services
Valley Drive (2003-2004); and Vice President and Associate
Oaks, PA 19456 Counsel, Oppenheimer Funds (1998-2003).
Age: 42
- ------------------------------------------------------------------------------------------------------------------------------------
James Ndiaye Vice President Since 2005 Attorney, Employed by SEI Investments N/A N/A
SEI Investments and Assistant Company (2004-Present). Formerly, Vice President,
One Freedom Secretary Deutsche Asset Management (2003-2004);
Valley Drive Associate, Morgan Lewis & Bockius LLP
Oaks, PA 19456 (2000-2003); and Assistant Vice President,
Age: 38 ING Variable Annuities Group (1999-2000).
- ------------------------------------------------------------------------------------------------------------------------------------
Sofia A. Rosala Vice President Since 2005 Vice President and Assistant Secretary N/A N/A
SEI Investments and Assistant of SEI Investments Fund Management
One Freedom Secretary (2005-present). Formerly, Compliance Officer
Valley Drive of SEI Investments (2001-2004); and Account
Oaks, PA 19456 and Product Consultant, SEI Private
Age: 32 Trust Company (1998-2001).
- ------------------------------------------------------------------------------------------------------------------------------------
Michael T. Pang Vice President Since 2005 Attorney, Employed by SEI Investments N/A N/A
SEI Investments and Assistant Company (January 2005). Formerly, Counsel,
One Freedom Secretary Caledonian Bank & Trust's Mutual Funds
Valley Drive Group (2004-2005); Counsel, Permal
Oaks, PA 19456 Asset Management (2001-2004); Associate,
Age: 34 Schulte, Roth & Zabel's Investment
Management Group (2000-2001); and Staff
Attorney, U.S. SEC's Division of
Enforcement, Northeast Regional Office
(1997-2000).
- ------------------------------------------------------------------------------------------------------------------------------------
CNI CHARTER FUNDS | PAGE 81
notice to shareholders (UNAUDITED)
SEPTEMBER 30, 2006
- --------------------------------------------------------------------------------
For shareholders that do not have a September 30, 2006 taxable year end, this
notice is for informational purposes only. For shareholders with a September 30,
2006 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,
2006, California Tax Exempt Bond Fund and California Tax Exempt Money Market
Fund designate 100% and 100%, respectively, of their 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, 2006
each Fund is designating the following items with regard to distributions paid
during the year:
(E) (F)
DIVIDENDS QUALIFYING
(A) (B) QUALIFYING DIVIDEND
RETURN LONG TERM ORDINARY (C) (D) FOR CORPORATE INCOME
OF CAPITAL GAIN INCOME TAX EXEMPT TOTAL DIVIDENDS REC. (15% RATE
CAPITAL DISTRIBUTIONS DISTRIBUTIONS INTEREST DISTRIBUTIONS DEDUCTION(1) FOR QDI)(2)
- -----------------------------------------------------------------------------------------------------------------------
Large Cap Value
Equity Fund 0% 78% 22% 0% 100% 100% 100%
Large Cap Growth
Equity Fund 0% 0% 100% 0% 100% 100% 100%
RCB Small Cap
Value Fund 0% 94% 6% 0% 100% 100% 100%
Technology Growth
Fund 1% 0% 99% 0% 100% 100% 100%
Corporate Bond
Fund 0% 0% 100% 0% 100% 0% 0%
Government Bond
Fund 0% 0% 100% 0% 100% 0% 0%
California Tax Exempt
Bond Fund 0% 9% 3% 88% 100% 0% 0%
High Yield Bond Fund 0% 0% 100% 0% 100% 0% 0%
Prime Money Market
Fund 0% 0% 100% 0% 100% 0% 0%
Government Money
Market Fund 0% 0% 100% 0% 100% 0% 0%
California Tax Exempt
Money Market Fund 0% 0% 0% 100% 100% 0% 0%
- -----------------------------------------------------------------------------------------------------------------------
(G) (H) (I)
U.S. QUALIFIED QUALIFIED
GOVERNMENT INTEREST SHORT-TERM
INTEREST (3) INCOME (4) CAPITAL GAIN (5)
- ------------------------------------------------------------------
Large Cap Value
Equity Fund 0.75% 0.86% 0.00%
Large Cap Growth
Equity Fund 0.00% 0.00% 0.00%
RCB Small Cap
Value Fund 0.00% 0.14% 0.00%
Technology Growth
Fund 0.00% 0.00% 0.00%
Corporate Bond
Fund 3.01% 92.45% 0.00%
Government Bond
Fund 36.41% 93.93% 0.00%
California Tax Exempt
Bond Fund 0.00% 92.43% 0.00%
High Yield Bond Fund 0.00% 91.71% 0.00%
Prime Money Market
Fund 7.26% 95.10% 0.00%
Government Money
Market Fund 22.21% 94.25% 100.00%
California Tax Exempt
Money Market Fund 0.00% 94.43% 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. GENERALLY, INTEREST FROM DIRECT U.S. GOVERNMENT OBLIGATIONS
IS EXEMPT FROM STATE INCOME TAX. HOWEVER, FOR SHAREHOLDERS WHO ARE
RESIDENTS OF CALIFORNIA, CONNECTICUT OR NEW YORK, THE STATUTORY THRESHOLD
REQUIREMENTS WERE NOT SATISFIED TO PERMIT EXEMPTION OF THESE AMOUNTS FROM
STATE INCOME.
(4) "QUALIFIED INTEREST INCOME" 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.
(5) "QUALIFIED SHORT-TERM CAPITAL GAIN" 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.
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 82
disclosure of fund expenses (UNAUDITED)
- --------------------------------------------------------------------------------
All mutual funds have operating expenses. As a shareholder of the Fund, your
investment is affected by these ongoing costs, which include (among others)
costs for portfolio management, administrative services, 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
4/1/06 9/30/06 RATIOS PERIOD*
- --------------------------------------------------------------------------------
LARGE CAP VALUE FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,054.20 0.97% $5.00
Class A 1,000.00 1,053.00 1.22% 6.28
HYPOTHETICAL 5% RETURN
Institutional Class 1,000.00 $1,020.21 0.97% $4.91
Class A 1,000.00 1,018.95 1.22% 6.17
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
4/1/06 9/30/06 RATIOS PERIOD*
- --------------------------------------------------------------------------------
LARGE CAP GROWTH FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,012.20 0.99% $4.99
Class A 1,000.00 1,012.40 1.24% 6.26
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,020.10 0.99% $5.01
Class A 1,000.00 1,018.85 1.24% 6.28
* Expenses are equal to the Fund's annualized expense ratio multiplied by
the average account value over the period, multiplied by 183/365 (to
reflect one-half year period).
CNI CHARTER FUNDS | PAGE 83
disclosure of fund expenses (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
4/1/06 9/30/06 RATIOS PERIOD*
- --------------------------------------------------------------------------------
RCB SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $ 976.80 1.21% $6.00
Class A 1,000.00 975.60 1.46% 7.23
Class R 1,000.00 975.60 1.46% 7.23
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,019.00 1.21% $6.12
Class A 1,000.00 1,017.75 1.46% 7.38
Class R 1,000.00 1,017.75 1.46% 7.38
- --------------------------------------------------------------------------------
TECHNOLOGY FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $ 981.70 1.13% $5.61
Class A 1,000.00 979.20 1.43% 7.10
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,019.40 1.13% $5.72
Class A 1,000.00 1,017.90 1.43% 7.23
- --------------------------------------------------------------------------------
CORPORATE BOND FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,032.60 0.75% $3.82
Class A 1,000.00 1,030.30 1.00% 5.09
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,021.31 0.75% $3.80
Class A 1,000.00 1,020.05 1.00% 5.06
- --------------------------------------------------------------------------------
GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,028.00 0.70% $3.56
Class A 1,000.00 1,025.70 0.94% 4.77
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,021.56 0.70% $3.55
Class A 1,000.00 1,020.36 0.94% 4.76
- --------------------------------------------------------------------------------
CALIFORNIA TAX-EXEMPT BOND FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,027.70 0.50% $2.54
Class A 1,000.00 1,025.30 0.75% 3.81
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,022.56 0.50% $2.54
Class A 1,000.00 1,021.31 0.75% 3.80
BEGINNING ENDING EXPENSES
ACCOUNT ACCOUNT ANNUALIZED PAID
VALUE VALUE EXPENSE DURING
4/1/06 9/30/06 RATIOS PERIOD*
- --------------------------------------------------------------------------------
HIGH YIELD BOND FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,031.60 1.00% $5.09
Class A 1,000.00 1,030.10 1.30% 6.62
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,020.05 1.00% $5.06
Class A 1,000.00 1,018.55 1.30% 6.58
- --------------------------------------------------------------------------------
PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,023.00 0.60% $3.04
Class A 1,000.00 1,021.80 0.82% 4.16
Class S 1,000.00 1,020.80 1.01% 5.12
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,022.06 0.60% $3.04
Class A 1,000.00 1,020.96 0.82% 4.15
Class S 1,000.00 1,020.00 1.01% 5.11
- --------------------------------------------------------------------------------
GOVERNMENT MONEY MARKET FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,022.50 0.60% $3.04
Class A 1,000.00 1,021.40 0.82% 4.16
Class S 1,000.00 1,020.40 1.02% 5.12
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,022.06 0.60% $3.04
Class A 1,000.00 1,020.96 0.82% 4.15
Class S 1,000.00 1,019.95 1.02% 5.16
- --------------------------------------------------------------------------------
CALIFORNIA TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
ACTUAL FUND RETURN
Institutional Class $1,000.00 $1,014.40 0.55% $2.78
Class A 1,000.00 1,013.20 0.78% 3.94
Class S 1,000.00 1,012.20 0.98% 4.94
HYPOTHETICAL 5% RETURN
Institutional Class $1,000.00 $1,022.31 0.55% $2.79
Class A 1,000.00 1,021.16 0.78% 3.95
Class S 1,000.00 1,020.16 0.98% 4.96
* Expenses are equal to the Fund's annualized expense ratio multiplied by
the average account value over the period, multiplied by 183/365 (to
reflect one-half year period).
CNI CHARTER FUNDS | PAGE 84
approval of investment advisory agreements (UNAUDITED)
- --------------------------------------------------------------------------------
The Board of Trustees of CNI Charter Funds (the "Trust") is comprised of four
Trustees, all of whom are independent of the Trust's investment advisers and
sub-advisers. During the six months ended September 30, 2006, the Board of
Trustees approved new sub-advisory agreements (the "Agreements") between CCM
Advisors, LLC ("CCMA") and each of AMBS Investment Counsel, LLC ("AMBS") and
SKBA Capital Management, LLC ("SKBA") with respect to portions of the AHA
Diversified Equity Fund (the "Fund").
The following information summarizes the Board's considerations associated with
its approval of each 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. Each Agreement was considered separately. As described below, the
Board considered the nature, quality and extent of the various investment
advisory services to be performed by AMBS and SKBA. In considering these
matters, the Board discussed the approval of the Agreements with management and
in private sessions with counsel at which no representatives of CCMA, AMBS or
SKBA were present.
The Board reviewed extensive materials regarding AMBS' and SKBA's investment
results, advisory fee comparisons, financial and profitability 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 Fund. In
deciding to approve each Agreement, the Board did not identify a single factor
as controlling and this summary does not describe all of the matters considered.
However, the Board concluded that each of the various factors referred to below
favored such approval.
NATURE, EXTENT AND QUALITY OF SERVICES
In connection with its review of the proposed AMBS and SKBA sub-advisory
agreements, the Board considered a variety of matters including the background,
education and experience of the proposed sub-advisers' key portfolio management
and operational personnel; their overall financial strength and stability; their
regulatory compliance systems and procedures; their resources and ability to
retain, attract and motivate capable personnel to serve the Fund; and the
overall general quality and depth of their organizations. The Board also
reviewed the proposed sub-advisers' investment philosophies and processes as
well as their brokerage, trading and soft dollar practices. The Board noted that
AMBS had not previously provided investment advisory services to mutual funds,
but concluded that providing sub-advisory services to the Fund would not involve
operational difficulties with which AMBS could not successfully cope. The Board
noted that it was familiar with SKBA's performance as a result of its services
as sub-adviser to the AHA Socially Responsible Fund series of the Trust.
INVESTMENT PERFORMANCE
The Board reviewed information regarding the historical performance of AMBS'
separate accounts, noting that the performance of AMBS' large cap value product
was in the top quartile of performance of investment advisers in the PSN Large
Cap Value Universe (published by Informa Investment Solutions, Inc., a
third-party supplier of investment manager separate account database
information) for the three- and five-year periods ended March 31, 2006, and that
it had significantly outperformed the Russell 1000 Value Index, which is the
benchmark for the portion of the Fund proposed to be allocated to AMBS, for
those periods.
The Board also reviewed information regarding the historical performance of
SKBA's separate accounts, noting that the performance of SKBA's large cap value
product was in the top quartile of performance of investment advisers in the PSN
Large Cap Value Universe for the three- and five-year periods ended March 31,
2006, and that it had significantly outperformed the Russell 1000 Value Index,
which is the benchmark for the portion of the Fund proposed to be allocated to
SKBA, for those periods.
The Board also reviewed information regarding the process by which CCMA selected
AMBS and SKBA from an initial field of over 300 large cap value investment
advisers, including performance and risk factor information for nine
semi-finalists in the search. In addition, the Board considered information
presented by CCMA indicating the hypothetical performance of a model portfolio
consisting of portions managed by AMBS, SKBA and Freeman Associates Investment
Management LLC ("Freeman"), the sub-adviser to the remaining portion of the
Fund. The model portfolio was based
CNI CHARTER FUNDS | PAGE 85
approval of investment advisory agreements (UNAUDITED) (CONCLUDED)
- --------------------------------------------------------------------------------
on Freeman's actual performance in advising a portion of the Fund and historical
performance composites of separate accounts managed by AMBS and SKBA using
substantially similar investment objectives, policies and strategies as those it
proposed to use in managing portions of the Fund. The Board noted that the
hypothetical performance of this combination of managers outperformed the Fund's
benchmark for the most quarters, during the three- and five-year time periods
reviewed. The Board further noted that this hypothetical performance was better
than the performance of five other model portfolios, each of which consisted of
portions managed by Freeman and one of the five finalists in the search
(including model portfolios with portions managed by Freeman and SKBA, and by
Freeman and AMBS).
ADVISORY FEES AND FUND EXPENSES
The Board also reviewed information regarding the advisory fees proposed to be
charged under the AMBS and SKBA sub-advisory agreements, noting that AMBS and
SKBA would be charging the same fees as those currently charged by the existing
sub-adviser to the portion of the Fund to be managed by AMBS and SKBA, and that
such fees are lower than AMBS' and SKBA's standard fee schedules for
institutional clients. The Board noted that CCMA pays the Fund's sub-advisory
fees out of CCMA's advisory fee, and that the Fund's asset levels were not so
substantial that they could lead to significant economies of scale.
The Board also considered information prepared by AMBS relating to its projected
costs and profits with respect to the Fund. They noted that SKBA was unable to
provide an estimation of the profitability of its proposed relationship with the
Fund. However, the Board determined that such profitability was likely to be
reasonable based on the low fee rate proposed to be charged by SKBA to CCMA with
respect to the Fund. The Board recognized that AMBS and SKBA would not receive
benefits other than investment advisory fees as a result of their relationships
with the Fund, except the intangible benefits of any favorable publicity arising
in connection with the Fund's performance. The Board noted, however, that City
National Bank and City National Securities, Inc., which are affiliates of AMBS
and SKBA, receive benefits in the form of fees paid for providing certain
shareholder servicing and sub-distribution services to the Trust.
CONCLUSIONS
Based on its review, including its consideration of each of the factors referred
to above, the Board concluded that each of the proposed AMBS and SKBA
sub-advisory agreements represents fair and reasonable compensation in light of
the nature and quality of the services to be provided by AMBS and SKBA,
respectively, to the Fund and its shareholders, and that approval of each
sub-advisory agreement is in the best interest of both the Fund and its
shareholders.
SHAREHOLDER APPROVAL
Because AMBS and SKBA are affiliated with CCMA, they are not covered under an
exemption order issued to the Trust by the Securities and Exchange Commission
which permits the Trust's advisers to hire and terminate sub-advisers without
shareholder approval. Upon the Board's approval of the appointments of AMBS and
SKBA, the officers of the Trust called a meeting of Fund shareholders on
September 25, 2006, at which time the shareholders of the Fund approved the
appointments of AMBS and SKBA.
CNI CHARTER FUNDS | PAGE 86
notes
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notes
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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.
- --------------------------------------------------------------------------------
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 OMITTED](R)
CNI-AR-001-0500
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:
- ------------------ ----------------------------------------------------- -----------------------------------------------------
2006 2005
- ------------------ ----------------------------------------------------- -----------------------------------------------------
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 $285,500 N/A N/A $221,500 N/A N/A
Fees(1)
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
(b) Audit- $0 N/A N/A $0 N/A N/A
Related
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
(c) Tax $60,000 N/A N/A $41,000 N/A N/A
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- ------------------
(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) Not Applicable
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
---------------------------- ----------------- ----------------
2006 2005
---------------------------- ----------------- ----------------
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 $60,000 and $41,000 for 2006 and 2005,
respectively.
(h) Not Applicable
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to open-end management investment companies.
ITEM 6. SCHEDULE OF INVESTMENTS
Not applicable.
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. Effective for closed-end management investment companies for
fiscal years ending on or after December 31, 2005
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) A separate certification 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.
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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/ Vern Kozlen
---------------------------------------
Vern Kozlen, President & CEO
Date November 27, 2006
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/ Vern Kozlen
---------------------------------------
Vern Kozlen, President & CEO
Date November 27, 2006
By (Signature and Title)* /s/ Eric Kleinschmidt
---------------------------------------
Eric Kleinschmidt, Controller and COO
Date November 27, 2006
* Print the name and title of each signing officer under his or her signature.