Managing Private & Institutional Assets Since 1959

Products
Large Cap
Small Cap
All Cap
Balanced
CNI Charter RCB
Small Cap Value Fund
SMID
International

CNI Charter RCB Small Cap Value Fund

 

As of October 1, 2001 RCB is the Investment Advisor to the CNI Charter RCB Small Cap Value Fund.

 

CNI CHARTER RCB SMALL CAP VALUE FUND - CLASS R
Data at Close August 20, 2008
Closing NAV $17.53
Change in NAV 0.01
Closing Offering Price $18.17
Closing Net Assets $21,486,356


CNI CAPITAL GAIN DISTRIBUTIONS 12/31/07
Record Date December 10, 2007
Ex-Date December 11, 2007
Reinvest Date December 11, 2007
Payable Date December 12, 2007
Short-term Cap Gains $1.5941
Long-term Cap Gains $3.3991

Total Cap Gains

Distributions to Shareholders

$4.9932

30 Day SEC Yield as of 6/30/07

0.00%

 

CNI CHARTER RCB SMALL CAP VALUE - CLASS R
FUND FACTS (As of 6/30/08)
Fund Classification Small Cap Value
Benchmark Russell 2000 Value
Manager Jeffrey Bronchick/Thomas Kerr
Inception Date September 30, 1998
Minimum Investment $25,000
Minimum for IRA $1,000
IRA Subsequent $100
Maximum Sales Charge 3.5%
CUSIP Number 125977710 (Class R)
Ticker Symbol RCBSX
Total Net Assets $22,944,175
# Issues in Portfolio 32
Dividend Frequency Annual
Returns at NAV 2nd Quarter 2008: -3.16%
  Year-to-Date: -18.49%
  Three Years: -6.71%
  Five Years: 3.39%
  Average Annual Since Inception (9/30/98): 10.30%
Returns (Load Adjusted) 2nd Quarter 2008: -6.57%
  Year-to-Date: -21.33%
  Three Years: -7.82%
  Five Years: 2.65%
  Average Annual Since Inception (9/30/98): 9.90%

The performance quoted represents past performance. Past performance does not guarantee future results. Investment returns and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance data current to the most recent month-end may be obtained by calling (888) 889-0799 or visit www.cnicharterfunds.com.

Shares of the Fund were sold without a sales charge through March 31, 1999; since that date, the maximum sales charge of 3.50% has been in effect and load-adjusted returns are shown.

Investment performance reflects voluntary fee waivers in effect. In the absence of such fee waivers, total returns would be reduced.  The fund's total annual operating expense is 1.61%.  CNB has contractually agreed to waive its shareholder servicing fee of 0.25% for the period ending January 30, 2009, resulting in a net annual fund operating expense of 1.36%.


Top 5 Sectors  
1 Consumer Discretionary: 28.0%
2 Financial Services: 26.4%
3 Information Technology: 9.5%
4 Energy: 8.9%
5 Materials: 8.3%
Top 10 Holdings  
1 White Mountains Insurance Grp: 6.4%
2 Alleghany: 5.3%
3 Conseco: 4.7%
4 Fisher Communications: 4.7%
5 Triarc Class B: 4.7%
6 Central Garden & Pet Class A: 4.5%
7 LodgeNet Interactive: 4.5%
8 Spartech: 4.3%
9 Edge Petroleum: 4.2%
10 Fair Isaac: 3.8%

Holdings are subject to change.

Commentary 6/30/08:

The global stock markets posted their worst first half performance in 26 years, with all the major broad market indices posting material declines including the S&P 500 down 11.91%, the Russell 2000 down 9.37% and the MSCI EAFE down 12.70%. As we noted in our last quarterly letter, the proverbial steak knife moderated somewhat into a butter knife in the second quarter and our performance remained difficult on an absolute basis, but stable to slightly better on a relative basis.

The most important point to be taken from the statement above is that it is past tense, which is a key point for the long-term investor to keep in mind. A prudent investing process must focus on what happens going forward. Despite some reasonably accurate fears about the litany of global economic issues, the price to value of much of what we own is as attractive as we have seen in years.

There was an interesting quote in the Financial Times last month from columnist Arne Alsin that seems apropos for this environment. "More than any other variable, investors think too much about price. It is fair to say that a significant percentage of investors obsess about this. Instead of setting you up for success, a focus on price sets you up for failure. It is the single, biggest reason why most ‘thinking investors' (oxymoron?) make dumb mistakes. Why is price such a problem? It's because price is meaningless when viewed in isolation. Without a frame of reference, price means nothing. The frame of reference required is a calculation of value."

The price trend in financial markets has remained essentially intact for the last year - commodity and energy stocks go up while economically sensitive or financial related stocks go down. Conversely, the absolute and relative value of each of the groups in general has moved in exactly the opposite fashion. The timing of when the price to value of stocks in each of these respective sectors begins to matter remains elusive, but our research suggests that when we look back three years from now, it will seem clear in retrospect that “leaning against the wind” once again is the intelligent direction for the long-term investor. With stocks in emerging markets down anywhere from 15% to 50% year to date (a likely precursor to an economic slowdown), the US in a de facto recession and Europe slowing as well, we find it difficult to see how these anchors will not weigh on the current momentum in commodities.

On that basis, we purchased during the quarter First American Corp and PHH Corp, two very different financial companies with exposure to housing volume, but not housing credit risk. We bought Liberty Media Capital, an odd and misunderstood amalgamation of assets trading at a significant discount to the sum of its parts. We added United Online, an operator of consumer websites funded by its “never-say-die” internet dial-up business, and Scotts Miracle-Gro, the branded, dominant player in the lawn and garden service industry. These are high quality companies whose stocks have been punished over the past year due to what our research suggests are short-term cyclical issues as well bouts of near hysteria from the general investor class. While timing again can be elusive, buying excellent businesses at 70 cents on the dollar has been a solid long-term strategy, and we would add that “cyclical” problems are by definition cyclical and thus buyable.

We reduced positions in a variety of stocks that were excellent performers and sold outright Hilb Rogal & Hobbs, which was acquired, and Carbo Ceramics, which was a superb winner for us in oilfield services. We also sold our only bank stock, Boston Private, before it came to represent an even bigger loss. Investing in small cap banking stocks is an absolute minefield given the current economic environment overlaid on what is generally an undiversified asset base.

In the small cap world, energy and commodity stocks have historically been highly challenging to invest in as the margin of safety is low due to a similar lack of diversity in the underlying assets. We recognize, however, that our less than aggressive approach to investing in these sectors has been a conceptual mistake in a period of tripling commodity prices. Our wince is noticeable when we see stocks like Compass Minerals, which mines salt and phosphate, double again after we sold it out of the portfolio on a valuation basis and a three-fold gain. Or take Alpha Natural Resources, a coal company whose stock tripled in the year after we doubled our money and sold the position. We did add a new company to the portfolio in the quarter in Global Industries, a provider of offshore oilfield construction services, after its stock took a hit following some one-time issues in its last earnings report.

While we are under no illusions that the global economy is anything but troubled, the price mechanism of generally free markets enables security pricing to at minimum “adjust” and as is often the case at market extremes, over-adjust. The adjustment has been severe in some cases and is just now rolling through the market in general.

The small cap team at RCB has been managing assets together since 1994 and we have to admit at being shocked by the volatility of some of our investments, a number of which we owned for years, sold at superb prices a year ago, and then simply got clobbered after we bought them back at what we considered to be excellent values. Obviously, timing mistakes were made. In some cases, business models and values changed and we took our lumps and moved on. But in most cases, the underlying business values have not materially changed and the stocks are morbidly inexpensive and are begging to be purchased. Our portfolio is the cheapest on a price to value basis that we have seen since 2002, and possibly since inception, and we have not lost the conviction to step to the plate in stocks where little has changed but the price.

It is important to remember that extreme scenarios, both positive and negative, sell newspapers and get people on television. Serious investing with the goal to build and grow wealth is quiet and somewhat dull when viewed from the outside. Although there is always the flavor du jour in the billionaire class, history has clearly demonstrated that a research driven, bottom-up focused approach to building a concentrated portfolio of companies selling at discounts to intrinsic value is a process that has worked well for our clients for over forty years.

Importantly, our firm and team are in excellent shape, which aside from cheap stock prices is the best indicator we have to expect solid long-term performance. We welcome the opportunity to discuss your portfolio with you at your convenience.

 

 

 

 

The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation.  It is a market-value weighted index (stock price times the number of shares outstanding), with each stock's weight in the index proportionate to its market value. Russell 2000 measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 8% of the total market capitalization of the Russell 3000 Index.   The MSCI EAFE® Index is an unmanaged index consisting of a market-value-weighted average of the performance of international securities listed on exchanges in Europe, Australasia and the Far East .  It is not possible to invest directly in an index.

Note: Past performance is not a guarantee or indicator of future results.  The information provided herein represents the opinion of the manager at a specific point in time and is not intended to be a forecast of future events, a guarantee of future results nor investment advice. Further, there is no assurance that certain securities will remain in or out of the portfolio. Please consult an investment professional for advice concerning your particular circumstances. There are risks involved with investing, including possible loss of principal. In addition to the normal risks associated with investing, investments in smaller companies exhibit higher volatility.

MUTUAL FUND SHARES ARE: NOT FDIC INSURED, NOT BANK GUARANTEED AND MAY LOSE VALUE.

To determine if the Fund is an appropriate investment for you, carefully consider the Funds' investment objectives, risk, and charge and expenses.  This and other information can be found in the Funds' prospectus which can be obtained by calling (888) 889- 0799, by visiting www.cnicharterfunds.com, or by clicking on the link below.  Please read the prospectus carefully before investing.

References to specific investments should not be construed as a recommendation for purchase by the Fund or the Advisor.

For additional information, please contact Shareholder Services at (888) 889-0799.  RCB is the sub-advisor to the Fund and City National Asset Management serves as the investment manager. City National Asset Management, Inc. and City National Securities are subsidiaries of City National Bank. RCB is an affiliate of City National Corp. Distributed by: SEI Investments Distribution Co. located in Oaks, PA. SEI is not affiliated with Reed Conner & Birdwell investment management, City National Corp, City National Bank or any of their respective affiliates.

You can download a PDF copy of the CNI Charter RCB Small Cap Value Fund Class R prospectus by clicking on the links below. To open a new account, print and complete the New Account Application. For more information, including IRA information, please contact us at (888) 889-0799.

CNI Charter RCB Small Cap Value Fund Class R Prospectus

CNI Charter RCB Small Cap Value Class R New Account Application

CNI Charter RCB Small Cap Value Fund Class R IRA Disclosure

CNI Charter RCB Small Cap Value Fund Class R IRA Application and Transfer of Assets Form

(Note: it is recommended that the application be printed on legal size paper for easier use, although it is not required.)

 


CNI Charter Fund Family
For more information on the CNI Charter Fund family, please visit their web site at www.cnicharterfunds.com.

  

Home | About Us | Approach to Investing | Investment Products | Resources | Advisor Access | Contact Us | Site Map
© 2003 Reed Conner & Birdwell, LLC. All rights reserved. | Privacy Policy