N-CSRS 1 d13959semi.txt CIGNA Funds Group Balanced Fund (sub-advised by Wellington Management) Large Cap Growth/Morgan Stanley Fund Large Cap Value/John A. Levin & Co. Fund S&P 500(R) Index Fund Small Cap Growth/TimesSquare Fund Small Cap Value/Perkins, Wolf, McDonnell Fund International Blend/Bank of Ireland Fund TimesSquare Core Plus Bond Fund Semiannual Report June 30, 2003 [LOGO] CIGNA Financial Services Fund Name Change Effective May 1, 2002, the name of the Small Cap Value/Berger(R) Fund was changed to Small Cap Value/Perkins, Wolf, McDonnell Fund. Dear Shareholders, Our commentary for the six months ended June 30, 2003 follows. The Economy The economy continued to expand at a below-average pace during the second quarter, constituting the seventh consecutive quarter of economic growth since the 2001 recession. However, the average inflation-adjusted growth in GDP (Gross Domestic Product) over this period has only been approximately 2.5% - well below the normal historical economic recovery. Economic growth remains imbalanced, with strength in housing, consumer spending, and government expenditures, and weakness in nonresidential fixed investment, exports, and manufacturing. The core consumer inflation rate remains in the vicinity of 1.5%, while corporate profits appear to be growing at an 8% to 10% year-over-year rate during the first six months of this year. Inflation, corporate profits, and real wages continue to benefit from the record increases in labor productivity. Financial Market Review The second quarter was an excellent one for long-term financial assets - particularly the equity markets, but for fixed income markets as well. In general, risky assets performed better than more conservative, defensive financial assets. Global equities registered their biggest quarterly gains since 1998, led by a sharp recovery in the technology sector. The NASDAQ Composite increased by 21.45% in the quarter, while the S&P 500 Index registered a gain of 15.40%, which was the eighth-largest quarterly increase since 1945. The Lehman Brothers Aggregate Bond Index gained 2.50% in the quarter, while the Lehman Brothers High Yield Corporate Bond Index registered a total return of 10.11%. The equity market exhibited excellent breadth with nearly 95% of the individual stocks within the S&P 500 Index showing a gain for the quarter. For the six months ended June 30, 2003, the total return on the S&P 500 Index was 11.77%, compared with a total return of 3.93% for the Lehman Brothers Aggregate Bond Index and a 7.32% total return on investment-grade corporate bonds (Lehman Brothers U.S. Credit Index). Within the global fixed income markets, emerging market debt (J.P. Morgan Emerging Market Bonds Plus Index) and high-yield corporate bonds (Lehman Brothers High Yield Bond Index) produced the best total returns by far on a year-to-date basis, with total returns from each market in excess of 18%. The six-month total return for the small capitalization Russell 2000 Index was 17.88%. There were five major developments during the quarter that contributed to the excellent performance results of equities and speculative-grade bonds. The most important was the successful military campaign in Iraq, which ended early in the quarter. The four other notable positives include: (1) better-than-expected first quarter corporate earnings reported during April and May. Operating results for the companies in the S&P 500 Index exceeded investor expectations, as earnings increased 12% on a 10% increase in sales; (2) passage of the 2003 Tax Bill, which incorporates a sharp reduction in taxes on corporate dividends and other pro-growth tax incentives; (3) further indications by the Federal Reserve that monetary - 1 policy would remain accommodative for an extended period; and (4) more widespread evidence that an acceleration in economic growth was imminent. Sincerely, /s/ Richard H. Forde Richard H. Forde Chairman of the Board and President CIGNA Funds Group Note: This commentary is not part of the Semiannual Report to Shareholders. - 2 CIGNA Funds Group Funds Table of Contents To assist you in using this report to shareholders, listed below is a Table of Contents and description of the various sections.
------------------------------------------------------------------------- Fund Schedule of Fund Summary Investments ------------------------------------------------------------------------- Balanced Fund (sub-advised by Wellington Management) 4 20 ------------------------------------------------------------------------- Large Cap Growth/Morgan Stanley Fund 6 24 ------------------------------------------------------------------------- Large Cap Value/John A. Levin & Co. Fund 8 26 ------------------------------------------------------------------------- S&P 500(R) Fund 10 28 ------------------------------------------------------------------------- Small Cap Growth/TimesSquare Fund 12 35 ------------------------------------------------------------------------- Small Cap Value/Perkins, Wolf, McDonnell Fund 14 37 ------------------------------------------------------------------------- International Blend/Bank of Ireland Fund 16 39 ------------------------------------------------------------------------- TimesSquare Core Plus Bond Fund 18 41 -------------------------------------------------------------------------
FUND SUMMARIES 4 A summary of each Fund's performance record and portfolio composition, and commentary from the Fund's investment manager. Note: These Fund Summaries are not part of the Semiannual Report to Shareholders. SCHEDULES OF INVESTMENTS 20 A listing of securities in each Fund's portfolio as of June 30, 2003. STATEMENTS OF ASSETS AND LIABILITIES 45 A "balance sheet" of a Fund as of the last day of the fiscal period. It includes the Fund's Class-level Net Asset Values (NAVs) per share, calculated by dividing the Fund's Class-level net assets (assets minus liabilities) by the number of Class-level shares outstanding. STATEMENTS OF OPERATIONS 46 These statements list each Fund's income, expenses, and gains and losses on securities and currency transactions, and appreciation or depreciation from portfolio holdings. STATEMENTS OF CHANGES IN NET ASSETS 47 These statements report the increase or decrease in each Fund's net assets during the reporting period. Changes in net assets may be due to a variety of factors, including investment operations, dividends, distributions and capital share transactions. FINANCIAL HIGHLIGHTS 49 For each Fund's share class outstanding, this section includes a table showing a per share breakdown of the factors that affect a Fund's NAV for the current and past reporting periods. In addition, total return, asset size, expense and income ratios and portfolio turnover rate are shown for each Fund class. NOTES TO FINANCIAL STATEMENTS 55 The notes to financial statements include a description of the significant accounting policies of the Funds, and more detailed information about the schedules and tables that appear in the report. - 3 Balanced Fund (sub-advised by Wellington Management) JUNE 30, 2003 ------------------------------------------------------------------------- FUND SUMMARY ------------------------------------------------------------------------- OBJECTIVE AND STRATEGY Seeks a high total return through capital appreciation and current income by investing principally in equity and fixed income securities. FUND INCEPTION DATE 01/20/2000 TOTAL NET ASSETS $14.5 million NUMBER OF SECURITIES IN THE PORTFOLIO 169 INVESTMENT MANAGER Wellington Management LLP ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- Ginnie Mae 12.5% ------------------------------------------------------------- Fannie Mae 4.0 ------------------------------------------------------------- Citigroup, Inc. 3.1 ------------------------------------------------------------- U.S. Treasury 3.0 ------------------------------------------------------------- Exxon Mobil Corp. 2.9 ------------------------------------------------------------- Washington Mutual, Inc. 2.2 ------------------------------------------------------------- Bank of America Corp. 2.2 ------------------------------------------------------------- SBC Communications, Inc. 2.0 ------------------------------------------------------------- Wells Fargo & Co. 2.0 ------------------------------------------------------------- National City Corp. 1.9 ------------------------------------------------------------- Ten Largest Sectors % of Net Assets ------------------------------------------------------------- Financial 21.3% ------------------------------------------------------------- U.S Government & Agencies 19.4 ------------------------------------------------------------- Communications & Media 11.5 ------------------------------------------------------------- Oil & Gas 8.6 ------------------------------------------------------------- Utilities 5.7 ------------------------------------------------------------- Retail 4.4 ------------------------------------------------------------- Insurance 4.3 ------------------------------------------------------------- Technology 2.6 ------------------------------------------------------------- Food and Beverages 2.1 ------------------------------------------------------------- Pharmaceuticals 1.9 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Bonds 35% ------------------------------------------------------------- Common stocks 62 ------------------------------------------------------------- Short-term investments 6 ------------------------------------------------------------- Liabilities in excess of other assets (3) -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY Stories of the conflict in Iraq and the spread of the SARS virus competed with economic concerns for investor attention during the first quarter of 2003. From the start of the conflict, market performance was closely linked to events in Iraq, as investor sentiment appeared to follow the progress of U.S. forces in the country. The Lehman Brothers Aggregate Bond Index gained 1.39% for the first quarter, while the S&P 500 Index lost 3.15%. During the first quarter, growth outperformed value. The Russell 1000 Value Index return of -4.86% underperformed the Russell 1000 Growth Index return of -1.07% by roughly 380 basis points. The rally that began in March continued throughout the second quarter. Several themes dominated. First, fiscal, monetary, and dollar policy all have become aggressively stimulative as the U.S. economy and capital markets try to achieve normalcy. The U.S. equity market finally became more hopeful and cast off its despair during the period, shrinking stocks' risk premiums in the process. Lastly, the dividend tax legislation appears to have nudged holders of money market funds and similar low-yielding fixed instruments toward better alternatives. Within fixed income, investors clearly favored riskier assets over Treasuries, as optimism for a second-half economic recovery grew. At the extreme end of the risk spectrum, high yield and emerging markets debt performed particularly well, as each sector posted double-digit gains during the quarter, while the high-quality Lehman Brothers Aggregate Bond Index gained 2.5% for the second quarter and 3.93% for the first six months of the year. In the first quarter, the equity component of the Fund benefited from strong stock selection in consumer discretionary, including top contributors Comcast and Nike. Other sectors where we had positive stock selection were health care, led by top contributors Beckman Coulter and Pharmacia; financials, where Washington Mutual helped performance during the quarter; and industrials, spurred by Caterpillar. The strong stock selection in the above sectors was somewhat offset by poorer picks in telecommunications and energy. On an absolute basis, SBC Communications, Stanley Works, and Hartford Financial Services were the largest detractors from performance during the period. In the equity component during the second quarter, holdings in materials, information technology and the consumer discretionary sector were the largest contributors to performance, while holdings in health care and utilities detracted the most from relative results. Stocks that contributed the most to relative results during the quarter were semiconductor manufacturer Teradyne, discount retailer Dollar General and insurance and financial services provider Hartford Financial Services. - 4 Owning Fannie Mae, which lagged the Index, hurt performance. Regarding the bond segment of the portfolio, during the first quarter the corporate sector of the bond market benefited from low interest rates, improving company balance sheets, and strong demand for corporate issuers. The Lehman Brothers U.S. Credit Index outperformed duration-equivalent Treasuries by 130 basis points in the first quarter. This strong performance was broad-based, with all major sectors outperforming. Lower quality issues outperformed their higher quality counterparts. The utility sector performed particularly well, as the market reacted favorably to the efforts of a number of major issuers to strengthen their balance sheets. Mortgage-backed securities outperformed duration-equivalent Treasuries during the first quarter, thanks to a decline in interest rate volatility and continued demand from investors seeking liquid, high quality bonds. During the second quarter within the Fund's fixed income segment, the U.S. credit sector had another strong quarter, mortgage-backed securities performed in line with Treasuries and the collateral-backed sector slightly outperformed comparable-duration Treasuries. We believe that the economy eventually will respond to the flood of stimuli, and that a better tone and higher prices in the equity markets in turn may help support capital spending. Although the economy's rate of expansion in the first half of the year was sluggish, we anticipate a shift to a higher growth rate during the second half of this year. Within the equity portion, the Fund has two themes to highlight. First, the Fund has lengthened its time horizon with some stocks in anticipation of a recovery or a new cycle of positive economic activity. Second, given recent dividend tax legislation, the Fund has added selected higher-yielding stocks, such as ChevronTexaco. Within the fixed income portion, the Fund is now neutral to slightly short duration relative to the benchmark. It continues to overweight the mortgage sector, structured to emphasize pre-payment protection, and is still overweight the corporate sector, seeking value in lower-quality companies that should benefit from an improving economy. Finally, the Government sector remains an underweight position. PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 8.57% Premier Class 8.46 Retail Class 8.37 S&P 500(R) Index 11.77 Balanced Composite (60% Russell 1000 Value/40% Lehman Brothers Aggregate Bond) 8.58 Lipper Balanced Funds Average 8.65 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. - 5 Large Cap Growth/Morgan Stanley Fund JUNE 30, 2003 -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- OBJECTIVE AND STRATEGY Seeks long-term capital appreciation by investing principally in equity securities of U.S. and, to a limited extent, foreign companies that exhibit strong or accelerating earnings growth. FUND INCEPTION DATE 01/20/2000 TOTAL NET ASSETS $11.5 million NUMBER OF SECURITIES IN THE PORTFOLIO 98 INVESTMENT MANAGER Morgan Stanley Investment Management Inc. ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- Microsoft Corp. 6.9% ------------------------------------------------------------- Pfizer, Inc. 5.6 ------------------------------------------------------------- General Electric Co. 3.8 ------------------------------------------------------------- Citigroup, Inc. 3.7 ------------------------------------------------------------- Wal-Mart Stores, Inc. 3.3 ------------------------------------------------------------- Intel Corp. 2.8 ------------------------------------------------------------- Cisco Systems, Inc. 2.5 ------------------------------------------------------------- Johnson & Johnson 2.4 ------------------------------------------------------------- Amgen, Inc. 2.3 ------------------------------------------------------------- Procter & Gamble Co. 2.0 ------------------------------------------------------------- Ten Largest Sectors % of Net Assets ------------------------------------------------------------- Pharmaceuticals 13.4% ------------------------------------------------------------- Retail 11.3 ------------------------------------------------------------- Software 10.3 ------------------------------------------------------------- Semiconductors 7.6 ------------------------------------------------------------- Financial 6.3 ------------------------------------------------------------- Health Care 6.2 ------------------------------------------------------------- Manufacturing 5.7 ------------------------------------------------------------- Media 5.4 ------------------------------------------------------------- Telecommunications 5.1 ------------------------------------------------------------- Food & Beverages 4.0 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Common stocks 97% ------------------------------------------------------------- Short-term investments 2 ------------------------------------------------------------- Other assets less liabilities 1 -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY The first quarter began under a continued cloud of global uncertainty. Once it became clear that diplomacy would not resolve the Iraq situation and war was imminent, the market rallied as many sidelined investors decided to participate. From that point on, day-to-day market volatility appeared to be highly correlated to the latest war report. Although the commencement of the war in Iraq eliminated one major uncertainty hampering the markets, there was little clarity on the economic impact. Manufacturing activity slowed during the first quarter with a reduction in auto output and a lack of new business spending. The Institute for Supply Management reported that production dropped to its lowest level since October 2001. Consumer sentiment improved during February and March, but remained historically low. Energy prices increased substantially during the first quarter and remained high longer than expected. Against this backdrop, the S&P 500 Index returned -3.15% for the first quarter. Growth and value stocks rose significantly for the second quarter across the capitalization spectrum. A quick and successful military campaign in Iraq removed one significant issue overhanging the market. In addition, the majority of companies produced first quarter earnings that exceeded estimates. Government passage of tax relief legislation and low interest rates made common stock investing more appealing. During the second quarter, Consumer Sentiment, as measured by the University of Michigan, advanced from a level of 77.6 to 87. The Institute of Supply Management manufacturing index improved over the quarter as well. New orders expanded and production increased. The encouraging news is that the economy is improving. The discouraging news is that we are not seeing the economy improve as much as had been expected. Companies still appear reluctant to spend, despite their higher earnings. Unemployment claims are still high as a result. Despite the mixed picture in the second quarter, both retail and institutional investors seemed focused on a second-half recovery and drove the market higher. Against this backdrop, the S&P 500 Index returned 15.40% and the Lipper Large Cap Growth Funds Index returned 13.51% for the second quarter. The Fund underperformed its benchmarks for the first half, primarily due to stock selection; however, sector allocations were a meaningful detractor as well. The Fund's health care position had the most significant negative impact, as weak performance of individual holdings and a substantial overweight detracted from relative results. Stock selection was weakest in the information technology sector, although this was partially offset by the positive impact of the portfolio's large technology overweight. Stock selection in the industrials sector was also a - 6 significant factor in the portfolio's underperformance. A number of our industrial holdings lagged the Index sector return. Stock selection among consumer discretionary stocks and consumer staples stocks detracted from relative return for the second quarter, as did the portfolio's zero weighting in utility stocks. Recoveries in the economy and markets tend not to be linear, and this recovery is no exception. Despite mixed news on the economic front, we continue to believe that the economic recovery will continue. We see positive developments in media, some areas of technology and early-stage manufacturing that confirm this belief. So far, the pre-announcement season for second quarter earnings has been favorable, with negative announcements running at a ratio of two to one versus historical long-term averages of three to one. As a result, we continue to seek, at the margin, to add to the portfolio names that are levered to recovery. PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 10.58% Premier Class 10.45 Retail Class 10.34 S&P 500(R) Index 11.77 Russell 1000 Growth Index 13.09 Lipper Large-Cap Growth Funds Average 12.25 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. - 7 Large Cap Value/John A. Levin & Co. Fund JUNE 30, 2003 -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- OBJECTIVE AND STRATEGY Seeks long-term capital appreciation by investing principally in common stocks of large U.S. companies with a market capitalization above $5 billion deemed, at the time of purchase, to be undervalued relative to their present and/or future prospects and after the stocks have declined from recent highs. FUND INCEPTION DATE 01/20/2000 TOTAL NET ASSETS $19.8 million NUMBER OF SECURITIES IN THE PORTFOLIO 71 INVESTMENT MANAGER John A. Levin & Co., Inc. ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- Pfizer, Inc. 3.5% ------------------------------------------------------------- Citigroup, Inc. 2.8 ------------------------------------------------------------- Bank of New York, Inc. 2.7 ------------------------------------------------------------- Bank of America Corp. 2.5 ------------------------------------------------------------- Exxon Mobil Corp. 2.4 ------------------------------------------------------------- General Electric Co. 2.2 ------------------------------------------------------------- Microsoft Corp. 2.2 ------------------------------------------------------------- du Pont (E.I.) de Nemours & Co. 2.1 ------------------------------------------------------------- BellSouth Corp. 2.1 ------------------------------------------------------------- Hancock (John) Financial Services, Inc. 2.0 ------------------------------------------------------------- Ten Largest Sectors % of Net Assets ------------------------------------------------------------- Banks 10.3% ------------------------------------------------------------- Manufacturing 8.9 ------------------------------------------------------------- Food & Beverages 7.0 ------------------------------------------------------------- Insurance 6.8 ------------------------------------------------------------- Oil & Gas 6.8 ------------------------------------------------------------- Pharmaceuticals 5.5 ------------------------------------------------------------- Media 5.2 ------------------------------------------------------------- Telecommunications 5.1 ------------------------------------------------------------- Financial 5.1 ------------------------------------------------------------- Aerospace & Defense 5.0 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Common stocks 95% ------------------------------------------------------------- Short-term investments 5 -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY Without doubt, the major change during the first quarter of 2003 was the commencement of the war in Iraq. Besides the war, the most important question on the minds of investors continues to be the timing and nature of a recovery in our domestic economy. In our many conversations with corporate managements, two themes emerge. First, there is limited potential for top line-growth. Second, companies continue to experience pressure on profit margins. The second quarter saw equities rebound and was the strongest three-month period since the fourth quarter of 1998. Many elements sparked renewed investor confidence, including lower interest rates, improved tax treatment of dividends for individuals, the Government's strong commitment to economic expansion and the decline of the dollar. The advance was broad based; 470 of the 500 S&P stocks advanced, as did all sectors. Still, a number of crosscurrents posed fundamental challenges to corporate profitability. This is separate from larger macro issues of the sustainability of low interest rates and the difficulties posed by the military occupation in Iraq. Many companies continue to face margin pressure and have difficulty raising prices to offset increases in raw materials costs. Labor costs have been controlled, however, as unemployment remains high across all segments of the workforce. Overcapacity remains an issue in many sectors, but strategic mergers and consolidation could help correct imbalances between capacity and demand. We believe that both the bull market of the 1980s and 1990s and the bear market of the past three years are over and the markets will remain within a broad trading range for some time. Contributing to the Fund's performance during the first quarter were Williams Companies and Burlington Resources, two of the top three best-performing securities. Williams settled its lawsuit with the State of California and made progress toward the sale or joint venture of its EMT business, and Burlington Resources benefited from the rise in oil prices. AON reported record earnings for the fourth quarter and showed positive results in the property and casualty area. Investors grew more confident that Pfizer's merger with Pharmacia will be completed and create valuable synergies for the drug company. General Electric benefited from the upturn in its short cycle businesses, which pushed up the stock's price. Conversely during the first quarter, UNUMProvident remained under pressure due to its lowered credit rating and restatement of earnings for the last three years. Tyco's accounting issues continued during the first quarter, causing the price to decline. The questions focused on its fire and safety subsidiary, one of its largest divisions. Accenture's stock price fell this quarter after layoffs signaled continued weakness in its consulting business. Bristol-Myers struggled after restating its earnings back to - 8 1997 and warning investors about patent expirations that may impact forecasted earnings growth. CIT announced that its business may not pick up as quickly as expected. The troubled airline industry may also have stressed the stock, as CIT provides a significant amount of financing to this industry. The Fund's performance was strong during the second quarter, both on an absolute and a relative basis. CIT Group announced a profit in April, which helped push up its stock price. Low interest rates helped the financial services sector generally, and The Bank of New York also saw trading activity increase. McDonald's was a top contributor as well, as new management implemented a strategy of simplifying the menu with healthier fare and increased spending on existing stores. Tyco was removed from credit watch in May, and management made efforts to increase investor confidence by continuing to clean up the firm's financial statements, which caused its shares to advance. Williams also had a very strong quarter. It reached a settlement in the California Federal Energy Regulatory Commission (FERC) litigation, which resolved much of its liquidity issues. The company is now refocused on fundamentals. Detracting from returns during the second quarter was Altria, which we sold at a loss to control risk when the company's financial stability appeared uncertain due to recent tobacco litigation. Northrop Grumman also had a disappointing quarter as concerns surfaced relating to its pension liabilities and its liability in the TRW lawsuit. HCA ' s price dropped after others in the industry experienced problems. Finally, Procter & Gamble stock dropped slightly due to concerns over their acquisition strategy. PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 11.47% Premier Class 11.35 Retail Class 11.26 S&P 500(R) Index 11.77 Russell 1000 Value Index 11.57 Lipper Large-Cap Value Funds Average 10.75 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. - 9 S&P 500(R) Index Fund JUNE 30, 2003 -------------------------------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- OBJECTIVE AND STRATEGY Seeks long-term growth of capital by investing principally in common stocks of companies in the Standard & Poor's 500(R) Composite Stock Price Index. FUND INCEPTION DATE 07/01/1997 - Institutional Class 01/21/2000 - Premier and Retail Classes TOTAL NET ASSETS $155.4 million NUMBER OF SECURITIES IN THE PORTFOLIO 538 INVESTMENT MANAGER TimesSquare Capital Management, Inc. ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- General Electric Co. 2.9% ------------------------------------------------------------- Microsoft Corp. 2.8 ------------------------------------------------------------- Pfizer, Inc. 2.8 ------------------------------------------------------------- Exxon Mobil Corp. 2.5 ------------------------------------------------------------- Wal-Mart Stores, Inc. 2.4 ------------------------------------------------------------- Citigroup, Inc. 2.3 ------------------------------------------------------------- Johnson & Johnson 1.6 ------------------------------------------------------------- American International Group, Inc. 1.5 ------------------------------------------------------------- International Business Machines Corp. 1.4 ------------------------------------------------------------- Intel Corp. 1.4 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Common stocks 93% ------------------------------------------------------------- Short-term investments* 7 -------------------------------------------------------------
*At June 30, 2003, the Fund was long 40 S&P(R) 500 futures contracts. INVESTMENT MANAGER COMMENTARY Economic touchstones which had provided hope of an improving recovery at year end grew decidedly weaker over the first three months of the year. Financial markets closely followed the course of Operation Iraqi Freedom. Uncertainties were compounded by the deterioration of the western alliance and the realization that the U.S./U.K. "coalition of the willing" would have to act in defiance of France, Germany, Russia and the U.N. The promotion of a shock and awe campaign by coalition forces promising early resolution to the conflict left investors relieved when war finally commenced in mid-March. However, by the quarter's end, Turkey's broken promise to provide a northern access route to Iraq and the inflammatory nature of real-time network war coverage had instead generated expectations for a messy and prolonged engagement. Financial markets received psychological boosts from a number of directions in the second quarter. U.S. and coalition forces achieved a decisive victory in Iraq and turned their attention to instituting a provisional civil authority to oversee the transition. President Bush declared an end to "major" hostilities, although a clean end to the conflict has been elusive. Congress passed the president's 2003 tax cut initiative. The SARS epidemic, which had been perceived as a world threat earlier in the year, received unprecedented international coordinated attention and was brought under control. In an unusual step, Federal Reserve (Fed) chairman Alan Greenspan acknowledged the threat of deflation, declared formal steps to guard against it, and suggested that the Fed would tolerate and even welcome moderate inflation. Equity markets retreated, intermediate rates fell and the dollar weakened through mid-March as the lack of U.N. resolve left questionable the U.S. course of action related to Iraq. These trends reversed dramatically during the first two weeks of engagement in anticipation of an early success, and then reversed again during the final week of March on concerns of a longer U.S. presence in Iraq. By quarter's end, total return for the S&P 500(R) Index was -3.15%. In the second quarter, equity market participants, buoyed by improving confidence indicators and better-than-expected reported earnings announcements, drove stock indexes to their best quarterly return in three and a half years. AMG Data Services (which provides information on mutual fund cash flows) reported that investors, anticipating a second-half acceleration in earnings, poured nearly $33 billion into stock mutual funds in the second quarter. The average diversified U.S. stock fund returned 16.82% during the period according to Lipper Analytics. Among large capitalization companies, value (+18.84%) outperformed growth (+12.17%), as measured by representative S&P/Barra indexes. The best-performing industries for the three months included employment services, computer & elec- -- 10 tronics, tobacco and utilities, which all returned more than 48%. Health care facilities, the principal loser, gave back 19%. Despite increases in the number of companies reporting improved corporate earnings and cash flow, results continue to be mixed and top-line growth weak. Unemployment has now increased to a nine-year high of 6.4%. The effectiveness of the 2003 tax cut in stimulating new capital investment by business owners may be slow to emerge. We continue to foresee slow, steady growth in an economy that is subject at once to both substantial sources of stimulus but also to a number of influences that do not allow the traditional business cycle to play out, not the least of which is the growth in overseas outsourcing. The recent advance in equity markets reflects anticipation of a broadening and acceleration in earnings growth over the remainder of the year and therefore is susceptible to any evidence to the contrary. The next leg up will require hard evidence that business capital investment is transpiring. PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 11.73% Premier Class 11.71 Retail Class 11.40 S&P 500(R) Index 11.77 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. -- 11 Small Cap Growth/TimesSquare Fund JUNE 30, 2003 FUND SUMMARY OBJECTIVE AND STRATEGY Seeks long-term capital appreciation by investing principally in common and preferred stocks of U.S. companies with market capitalizations between $50 million and $2 billion, with a focus on growing companies involved in new product development and technological breakthroughs. FUND INCEPTION DATE 01/21/2000 TOTAL NET ASSETS $177.6 million NUMBER OF SECURITIES IN THE PORTFOLIO 102 INVESTMENT MANAGER TimesSquare Capital Management, Inc. ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- DaVita, Inc. 2.5% ------------------------------------------------------------- Education Management Corp. 2.4 ------------------------------------------------------------- Rent-A-Center, Inc. 2.3 ------------------------------------------------------------- Markel Corp. 2.2 ------------------------------------------------------------- Lincare Holdings, Inc. 2.1 ------------------------------------------------------------- Getty Images, Inc. 2.1 ------------------------------------------------------------- Alliance Data Systems Corp. 2.0 ------------------------------------------------------------- Omnicare, Inc. 1.9 ------------------------------------------------------------- Respironics, Inc. 1.7 ------------------------------------------------------------- Corporate Executive Board Co. 1.7 ------------------------------------------------------------- Ten Largest Sectors % of Net Assets ------------------------------------------------------------- Commercial Services 15.5% ------------------------------------------------------------- Software 8.8 ------------------------------------------------------------- Health Care 7.6 ------------------------------------------------------------- Pharmaceuticals 7.1 ------------------------------------------------------------- Semiconductors 6.8 ------------------------------------------------------------- Financial 6.7 ------------------------------------------------------------- Computers 4.5 ------------------------------------------------------------- Oil & Gas 4.3 ------------------------------------------------------------- Electronics 3.5 ------------------------------------------------------------- Media 3.1 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Common stocks 92% ------------------------------------------------------------- Short-term investments 8 -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY During the first quarter, it was all about the war. At first, the anticipation held the markets and the economy hostage, sending the markets sliding and oil prices skyrocketing in January and February. The war's onset brought an expectation of a short and decisive victory; an explosive stock market rally ensued in March - quickly dissipating with those dashed hopes. For the first quarter, the total return of the Russell 2000 Growth Index was -3.88%. According to Lipper, the average small cap growth mutual fund was down 3.73% for the quarter. Small cap stocks lagged behind their large cap brethren during the first quarter. Performance of the Fund in the first quarter was helped by good stock selection, principally from the health care, consumer staples and energy sectors. Lack of improvement in capital spending hurt our investments in the technology and producer durables sectors. With the situation in Iraq under control, the second quarter focus returned to fundamentals and the economy. Corporate profits reported in April for the first quarter indicated the trend was for earnings to surpass modest expectations. Consumer sentiment experienced a strong post-war bounce, another positive omen for the lackluster economy. Hopes for an economic bounce led to a strong advance in April and May. The Federal Reserve bolstered those hopes in June by once more cutting its overnight lending rate by a quarter of a point, and the market trended higher in June. Second quarter returns finally gave stock market investors something to cheer about. Small caps staged a huge comeback, leading the large caps both for the second quarter and the year to date. The growth style led value for the quarter; the Russell 2000 Growth Index rose 24.15% versus 22.72% for the Russell 2000 Value Index, widening its lead year to date, 19.33% versus 16.49%. The Fund had solid absolute returns though it lagged its benchmark. The benchmark proved especially challenging to outperform, as the smallest illiquid stocks were up significantly more than the larger small cap stocks - and low quality stocks significantly outperformed the rest of the universe. For the second quarter, sector selection was responsible for most of the underperformance. Though an underweight impaired performance, technology contributed favorably to the overall portfolio. Despite possible short-term corrections, we are more optimistic looking forward. An unprecedented degree of monetary and fiscal stimulus is providing a favorable backdrop for the equity markets. Corporate sector fundamentals and finances are improving. With small cap earnings growth continuing to exceed large cap earnings growth, we believe the outlook remains favorable for small cap stocks. -- 12 PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 15.93% Premier Class 16.01 Retail Class 15.74 S&P 500(R) Index 11.77 Russell 2000 Growth Index 19.33 Russell 2000 Index 17.88 Lipper Small-Cap Growth Funds Average 17.45 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. -- 13 Small Cap Value/Perkins, Wolf, McDonnell Fund JUNE 30, 2003 FUND SUMMARY OBJECTIVE AND STRATEGY Seeks long-term capital appreciation by investing principally in common stocks of small U.S. companies with market capitalizations at the time of purchase of less than $1 billion and whose stock prices are believed to be undervalued. FUND INCEPTION DATE 01/20/2000 TOTAL NET ASSETS $65.7 million NUMBER OF SECURITIES IN THE PORTFOLIO 73 INVESTMENT MANAGER Perkins, Wolf, McDonnell & Company ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- First Niagara Financial Group, Inc. 3.4% ------------------------------------------------------------- Bradywine Realty Trust 2.2 ------------------------------------------------------------- La-Z-Boy, Inc. 2.2 ------------------------------------------------------------- Texas Industries, Inc. 2.2 ------------------------------------------------------------- Horace Mann Educators Corp. 2.0 ------------------------------------------------------------- Susquehanna Bancshares, Inc. 2.0 ------------------------------------------------------------- Kaydon Corp. 1.9 ------------------------------------------------------------- Home Properties of NY, Inc. 1.8 ------------------------------------------------------------- Community Bank System, Inc. 1.7 ------------------------------------------------------------- Brown (Tom), Inc. 1.7 ------------------------------------------------------------- Ten Largest Sectors % of Net Assets ------------------------------------------------------------- Banking 14.1% ------------------------------------------------------------- Real Estate Investment Trusts 9.2 ------------------------------------------------------------- Oil & Gas 8.7 ------------------------------------------------------------- Machinery 6.1 ------------------------------------------------------------- Manufacturing 3.3 ------------------------------------------------------------- Transportation 3.2 ------------------------------------------------------------- Health Care 3.1 ------------------------------------------------------------- Home Builders 2.8 ------------------------------------------------------------- Chemicals 2.3 ------------------------------------------------------------- Software 2.2 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Common stocks 83% ------------------------------------------------------------- Short-term investments 16 ------------------------------------------------------------- Other assets less liabilities 1 -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY The Fund ended the first quarter in negative territory, but outperformed its benchmark, the Russell 2000 Value Index. Those companies whose focus is on "safe" energy performed particularly well as their earnings expectations were deemed to be clearer. For this reason, oil rig servicing contractor Key Energy and steel tubing and piping maker Maverick Tube were the stalwarts of the sector, achieving gains of around 13% and 34%, respectively. We have maintained an overweight position in energy, taking gains when near-term price targets are met and adding to positions on temporary price dips. Detractors for the first quarter, bank holding company Greater Bay Bancorp and finance and transportation leasing firm GATX, experienced marked declines. With its exposure to the volatile San Francisco Bay area real estate market and questions arising about its internal controls, near-term estimates for Greater Bay were ratcheted down. We remain comfortable with the company, however, due to the positive resolutions of the control issues and the fact that the lower guidance is not related to credit quality. Likewise, the effects that a weak economy can have on industrials and commercial transportation resulted in lower estimates for GATX. We added to the position when we deemed the stock to be oversold relative to net asset values and cash flows following management's comments that a partial dividend cut may be necessary. During the second quarter, the U.S. economy seemed to gain momentum as new unemployment claims leveled off, manufacturing expanded and consumer spending inched upward. Nevertheless, the Federal Reserve Board - primarily citing deflation concerns - deemed it necessary to further loosen the money supply and lowered the federal funds rate to a 45-year low of 1.0%. Meanwhile, the major equities markets easily found positive territory for the period, as investors began to wade back into stocks. In this environment, the Fund advanced for the quarter, but trailed is benchmark, the Russell 2000 Value Index. Although the Fund offered positive absolute returns for the second quarter, a few select stocks in the health care and energy sectors were the primary contributors to our underperformance. On the other hand, our holdings in information technology and financial providers boded well for us, as these sectors moved in close tandem with the markets. Among our top individual holdings for the second quarter was bank holding company Greater Bay Bancorp. The regional financial concern continues to execute well on its consumer business model and regularly meets earnings expectations. Meanwhile, the largest detractors included specialty chemical supplier Great Lakes Chemical, whose first quarter performance was hurt by rising raw material and energy costs, despite the company's productivity gains and price increases. -- 14 We were also disappointed with health care network LifePoint Hospitals. While its earnings remain strong, the company suffers from the near-term decline in patient volume industry wide. Looking ahead, our stock selection will continue to hinge on first assessing each company's downside risk before considering upside potential. Even then, we ideally invest when we believe a company's upside prospect is at least double its downside risk potential. PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 12.61% Premier Class 12.56 Retail Class 12.33 S&P 500(R) Index 11.77 Russell 2000 Value Index 16.49 Lipper Small-Cap Value Funds Average 14.17 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. -- 15 International Blend/Bank of Ireland Fund JUNE 30, 2003 FUND SUMMARY OBJECTIVE AND STRATEGY Seeks long-term capital appreciation by investing principally in common stocks of well-established companies located outside the U.S. FUND INCEPTION DATE 01/24/2000 TOTAL NET ASSETS $9.5 million NUMBER OF SECURITIES IN THE PORTFOLIO 76 INVESTMENT MANAGER Bank of Ireland Asset Management (U.S.) Limited ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- Canon, Inc. 3.9% ------------------------------------------------------------- Total Fina Elf SA 3.6 ------------------------------------------------------------- Nestle SA 3.5 ------------------------------------------------------------- UBS AG 3.1 ------------------------------------------------------------- Barclays PLC 2.8 ------------------------------------------------------------- GlaxoSmithKline PLC 2.8 ------------------------------------------------------------- Vodafone Group PLC 2.8 ------------------------------------------------------------- Aventis SA 2.7 ------------------------------------------------------------- E. ON AG 2.5 ------------------------------------------------------------- ING Groep NV 2.4 ------------------------------------------------------------- Ten Largest Countries % of Net Assets ------------------------------------------------------------- United Kingdom 27.8% ------------------------------------------------------------- Japan 14.7 ------------------------------------------------------------- Switzerland 12.3 ------------------------------------------------------------- Netherlands 9.4 ------------------------------------------------------------- France 8.3 ------------------------------------------------------------- Germany 6.6 ------------------------------------------------------------- Italy 4.1 ------------------------------------------------------------- Spain 4.0 ------------------------------------------------------------- Australia 2.8 ------------------------------------------------------------- Hong Kong 2.0 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Common stocks 97% ------------------------------------------------------------- Short-term investments 2 ------------------------------------------------------------- Cash and other assets less liabilities 1 -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY International equity markets relinquished much of their prior quarter gains in the first three months of 2003. Most equity indexes reflected declines prompted by the uncertain duration and magnitude of the war in Iraq and its resultant impact on the global economy. About a week before the war began, equity markets languished given the high level of uncertainty. Markets then rallied strongly as the prospect of a short war appeared apparent, with oil prices slumping from earlier highs. Stocks in aggregate subsequently gave up some of that advance as the war progressed. Equity markets in the U.S. and Spain were among those limiting their losses for the quarter to the low single digits, with the tech-heavy NASDAQ Index one of the few indexes globally to record a positive return. Most European markets fell by a larger percentage, with the three key markets of the Netherlands, Germany and France each losing about 15%, led in part by the slump in large capitalization stocks. In U.S. dollar terms, the Morgan Stanley Capital International (MSCI) World Index dropped 5%, while the MSCI EAFE Index declined over 8%. European insurers detracted from the Fund's performance during the first quarter, as did Ahold, the Dutch supermarket chain. Oil companies also detracted. The better performers during the first quarter were the more defensive stocks, such as CRH, the third-largest European supplier of building materials. A sense of optimism pervaded equity markets over the course of the second quarter as investors shrugged off negative news and focused on the positive. The short duration of the war in Iraq provided support for views that the global economy would pick up in the second half of 2003. Markets had already begun a tentative rally from mid-March lows and reacted positively to the improved outlook. Within a short space of time, most markets had more than reversed early-year declines and pushed into positive territory for the year to date. The second quarter was marked by the continuing strength of technology stocks, as well as a strong recovery among financial services stocks. Energy and utility stocks also rallied strongly. Consumer-related stocks underperformed the market over the second quarter. As we enter the second half of 2003, it is heartening to see that confidence in equity markets appears to be gaining hold once again. What began as a reflex reaction to the end of the war in Iraq gathered sufficient momentum to carry markets to the best quarterly returns for up to five years (in some cases). We believe that equities continue to offer reasonable value relative to other assets at this time. -- 16 PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 6.82% Premier Class 6.83 Retail Class 6.72 MSCI EAFE (net) 9.47 Lipper International Funds Average 8.60 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. -- 17 TimesSquare Core Plus Bond Fund JUNE 30, 2003 FUND SUMMARY OBJECTIVE AND STRATEGY Seeks a high level of total return by investing principally in fixed income securities. FUND INCEPTION DATE 12/31/1999 - Institutional Class 01/21/2000 - Premier and Retail Classes TOTAL NET ASSETS $44.2 million NUMBER OF SECURITIES IN THE PORTFOLIO 193 INVESTMENT MANAGER TimesSquare Capital Management, Inc. ------------------------------------------------------------- FUND PROFILE JUNE 30, 2003 (Unaudited) ------------------------------------------------------------- Ten Largest Positions % of Net Assets ------------------------------------------------------------- Freddie Mac 16.9% ------------------------------------------------------------- Fannie Mae 13.1 ------------------------------------------------------------- U.S. Treasury 13.1 ------------------------------------------------------------- Ginnie Mae 3.0 ------------------------------------------------------------- Sovereign Bancorp. 1.5 ------------------------------------------------------------- Financing Corp. 1.3 ------------------------------------------------------------- France Telecom 1.3 ------------------------------------------------------------- Quebec (Province of Canada) 1.2 ------------------------------------------------------------- Ford Motor Credit Corp. 1.1 ------------------------------------------------------------- Time Warner, Inc. 1.1 ------------------------------------------------------------- Ten Largest Sectors % of Net Assets ------------------------------------------------------------- U.S. Government & Agencies 47.4% ------------------------------------------------------------- Financial 14.7 ------------------------------------------------------------- Communications & Media 8.3 ------------------------------------------------------------- Utilities 2.8 ------------------------------------------------------------- Consumer & Retail 2.6 ------------------------------------------------------------- Transportation 2.5 ------------------------------------------------------------- Foreign Government 2.2 ------------------------------------------------------------- Oil & Gas 2.2 ------------------------------------------------------------- Industrial 1.9 ------------------------------------------------------------- Diversified 1.7 ------------------------------------------------------------- Fund Composition % of Net Assets ------------------------------------------------------------- Bonds 87% ------------------------------------------------------------- Preferred stock 2 ------------------------------------------------------------- Short-term investments 11 -------------------------------------------------------------
INVESTMENT MANAGER COMMENTARY On a six-month year-to-date basis, the total return on the Lehman Brothers Aggregate Bond Index was 3.93%, compared with a total return of 7.32% on investment-grade corporate bonds (Lehman Brothers U.S. Credit Index). Emerging market debt (J.P. Morgan Emerging Market Bonds Plus Index) and high-yield corporate bonds (Lehman Brothers High Yield Bond Index) produced the best total returns by far on a year-to-date basis, with total returns from each market in excess of 18%. At the beginning of May, the Federal Reserve (Fed) Chairman Greenspan announced that any necessary action would be taken to combat deflationary pressures. Bond holders took this as a sign that the Fed would keep short-term rates low. The 10-year Treasury yield plunged to an inter-generational low of 3.13% on June 13, the lowest level since June 1958, before recovering to end the quarter at 3.53%. In the first quarter, the Fund benefited from its allocation to high yield and to the overweight allocation to the investment-grade credit sector. The Fund also was helped by the positive issue selection in investment-grade credits and mortgage-backed securities (MBS) for the period. In the second quarter, the overweight allocation and strong selection in investment-grade corporate bonds were the largest positive contributors to Fund performance. At June 30, 2003, the Fund was 14% overweight to corporate bonds on a duration-adjusted basis. Continued positive issue selection in Yankee and domestic telecommunications companies such as France Telecom, Deutsche Telekom, and Sprint Capital added value. Other sectors that performed well for us included Yankee Banks such as Royal Bank of Scotland and cable names, with Comcast as an example. In MBS, one of the more consistent and effective strategies that has been undertaken is to purchase securities with better call protection when rates are low. Our underweight in Agency bonds and selection within the sector, especially in Financing Corporation (FICO) bonds (issued to finance the savings and loan banking system bailout), continued to have a positive impact. We continue to favor investment-grade corporate bonds. Despite the extremely strong returns in this sector over the past nine months, we still see further upside, albeit not of the same magnitude. We remain vigilant in our monitoring of individual credits and potential volatility associated with continued accounting and corporate governance issues, potential profit disappointments, and exogenous/geopolitical events. In high yield, we may once again increase our allocation upon clearer signs of economic growth. In the MBS sector, we have moved to an underweight allocation due to our cautious outlook. -- 18 PERFORMANCE Returns for the six months ended June 30, 2003 were: Institutional Class 6.12% Premier Class 5.94 Retail Class 5.86 Lehman Brothers Aggregate Bond Index 3.93 Lipper Corporate Debt Funds - 'A' Rated Average 4.73 Note: This Fund Summary is not part of the Semiannual Report to Shareholders. -- 19 Balanced Fund (sub-advised by Wellington Management) INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
PRINCIPAL VALUE (000) (000) ----------------------------------------------------------------------------- BONDS-35.2% AEROSPACE/DEFENSE-0.1% Raytheon Co., 6.50%, 2005 $ 10 $ 11 ------ COMMUNICATIONS & MEDIA-2.3% Alltel Corp., 7.00%, 2012 20 24 AT&T Corp., 8.50%, 2031 20 23 AT&T Wireless Services, Inc., 8.75%, 2031 15 19 British Telecommunications PLC, 8.38% (coupon change based on rating), 2010 25 32 Cingular Wireless LLC, 7.13%, 2031 20 23 Clear Channel Communications, Inc., 7.65%, 2010 10 12 Cox Communications, Inc., 7.50%, 2004 40 42 France Telecom SA, 9.25% (coupon change based on rating), 2011 15 19 InterActiveCorp., 7.00%, 2013 5 6 Liberty Media Corp., 7.75%, 2009 15 17 Southwestern Bell Telephone Co., 6.63%, 2007 50 57 TCI Communications, Inc., 8.75%, 2015 10 13 Time Warner, Inc., 7.25%, 2017 25 29 Vodafone Group PLC, 7.75%, 2010 10 12 ------ 328 ------ COMPUTERS-0.1% Computer Sciences Corp., 7.38%, 2011 5 6 ------ ENTERTAINMENT-0.1% International Game Technology, 8.38%, 2009 5 6 ------ FINANCIAL-7.6% American Express Credit Corp., 7.20%, 2007 50 55 Associates Corp. of North America, 6.63%, 2005 65 71 Bank of America Corp., 5.88%, 2009 50 57 Bank One Corp., 6.50%, 2006 25 28 CIT Group Holdings, 7.63%, 2005 5 5 Deere (John) Capital Corp., 7.00%, 2012 10 12 Discover Card Master Trust, Inc., 5.60%, 2006 50 51 General Electric Capital Corp., 6.13%, 2011 20 23 General Motors Acceptance Corp., 7.75%, 2010 25 27 Goldman Sachs Group, Inc., 7.63%, 2005 50 56 Household Finance Corp., 5.88%, 2009 25 28 International Lease Financing Co., 5.75%, 2006 50 55 LB-UBS Commercial Mtg. Trust, 6.13%, 2030 100 115 Mercantile Bancorporation, Inc., 7.30%, 2007 10 12 Morgan (J.P.) Chase & Co., 7.00%, 2009 10 12 Morgan Stanley, Dean Witter, Discover & Co., 7.75%, 2005 50 56 6.39%, 2033 100 116 National Australia Bank Ltd., 8.60%, 2010 50 65
PRINCIPAL VALUE (000) (000) ----------------------------------------------------------------------------- FINANCIAL continued Nomura Asset Securities Corp., 6.59%, 2030 $ 100 $ 116 Pemex Project Funding Master Trust, 8.63%, 2022 40 46 Popular North America Inc., 4.25%, 2008 10 10 Wachovia Bank NA/Charlotte, 6.18%, 2036 10 11 Wells Fargo & Co., 6.63%, 2004 75 79 ------ 1,106 ------ FOOD & BEVERAGES-0.6% ConAgra Foods, Inc., 6.75%, 2011 30 35 Kraft Foods, Inc., 4.63%, 2006 5 5 PepsiCo, Inc., 5.75%, 2008 25 28 Tyson Foods, Inc., 8.25%, 2011 10 12 ------ 80 ------ FOREIGN GOVERNMENT-0.1% Israel Government International Bond, 4.63%, 2013 20 19 ------ FOREST PRODUCTS/PAPER-0.1% Temple-Inland, Inc., 7.88%, 2012 10 12 ------ INSURANCE-0.5% Berkley (WR) Corp., 5.88%, 2013 10 11 Jackson National Life Global Funding, 6.13%, 2012 144A 10 11 Liberty Mutual Insurance Co., 7.70%, 2097 144A 30 22 Nationwide Financial Services, Inc., 6.25%, 2011 20 22 Torchmark Corp., 6.25%, 2006 10 11 ------ 77 ------ MANUFACTURING-0.4% BMW Vehicle Owner Trust, 4.70%, 2005 12 12 Ford Motor Co., 6.50%, 2018 45 41 Honda Auto Receivables Owner Trust, 5.36%, 2004 10 10 ------ 63 ------ OIL & GAS-1.6% Atlantic Richfield Co., 5.90%, 2009 75 86 Burlington Resources Finance Co., 5.70%, 2007 20 22 Conoco, Inc., 6.95%, 2029 20 24 Devon Energy Corp., 7.95%, 2032 15 19 Kinder Morgan Energy Partners LP, 7.13%, 2012 20 24 Kinder Morgan, Inc., 6.50%, 2012 10 11 Schlumberger Technology Corp., 6.50%, 2012 144A 30 35 Valero Energy Corp., 7.5%, 2032 10 11 ------ 232 ------ PHARMACEUTICAL-0.1% Wyeth, 6.25%, 2006 5 6 ------
-- 20 The Notes to Financial Statements are an integral part of these statements. Balanced Fund (sub-advised by Wellington Management) INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
PRINCIPAL VALUE (000) (000) --------------------------------------------------------------------------- BONDS continued REAL ESTATE-0.0% Liberty Property LP, 8.50%, 2010 $ 5 $ 6 ------ REITS-0.0% Health Care Property Investors, Inc., 6.00%, 2015 5 5 ------ RETAIL-0.9% Lowes Companies, Inc., 6.50%, 2029 25 28 Target Corp., 7.50%, 2005 20 22 Wal-Mart Stores, Inc., 6.55%, 2004 75 79 ------ 129 ------ TRANSPORTATION-0.5% American Airlines, Inc., 3.86%, 2010 5 5 Delta Air Lines, Inc., 6.72%, 2024 47 51 Continental Airlines, Inc. 6.90 %, 2018 25 25 ------ 81 ------ U.S. GOVERNMENT AGENCY OBLIGATIONS-16.4% Freddie Mac, 6.50%, 2009 91 97 5.63%, 2011 30 34 Fannie Mae, 7.25%, 2010 150 186 5.38%, 2011 25 28 5.89%, 2011 98 112 5.91%, 2012 49 57 6.25%, 2012 49 56 Ginnie Mae, 7.00%, 2026 232 246 7.00%, 2027 157 166 6.00%, 2028 31 33 6.50%, 2028 238 251 7.00%, 2028 185 196 6.00%, 2029 230 242 7.50%, 2030 5 5 8.00%, 2031 21 23 6.00%, 2032 220 231 6.00%, 2033 100 105 TBA 5.50%, 2032 300 307 ------ 2,375 ------
PRINCIPAL VALUE (000) (000) --------------------------------------------------------------------------- U.S. TREASURY OBLIGATIONS-3.0% U.S. Treasury Bonds, 7.88%, 2021 $ 35 $ 50 7.25%, 2022 70 95 7.63%, 2025 30 43 8.13%, 2019 15 22 6.75%, 2026 20 26 Principal Strip, 6.88% 2025 100 33 U.S. Treasury Notes, 3.50%, 2011 145 164 ------ 433 ------ UTILITIES-0.8% Alabama Power Co., 5.88%, 2022 10 11 Dominion Resources, Inc., 8.13%, 2010 20 25 Duke Energy Corp., 6.25%, 2012 10 11 Oncor Electric Delivery Co., 6.38%, 2012 15 17 Progress Energy, Inc., 7.10%, 2011 25 29 PSEG Power LLC, 6.95%, 2012 15 17 Wisconsin Electric Power Co., 5.63%, 2033 10 10 ------ 120 ------ TOTAL BONDS (Cost $4,754) 5,095 ------ NUMBER OF SHARES ---------- COMMON STOCKS-62.0% BASIC MATERIALS-3.3% Alcoa, Inc. 4,200 107 Ashland, Inc. 3,500 107 du Pont (E.I.) de Nemours & Co. 3,500 146 Nucor Corp. 2,300 112 ------ 472 ------ COMMERCIAL SERVICES-0.2% Bearingpoint, Inc. (a) 2,400 23 ------ COMMUNICATIONS & MEDIA-9.2% AOL Time Warner, Inc. (a) 10,600 171 AT&T Corp. 3,440 66 BellSouth Corp. 6,100 162 Comcast Corp. (a) 5,700 164 Gannett Co., Inc. 1,200 92 Nokia Corp. 9,300 153 SBC Communications, Inc. 11,500 294 Verizon Communications, Inc. 5,664 223 ------ 1,325 ------ COMPUTERS-1.2% Hewlett-Packard Co. 8,000 170 ------
The Notes to Financial Statements are an integral part of these statements. -- 21 Balanced Fund (sub-advised by Wellington Management) INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------- COMMON STOCKS continued COSMETICS/PERSONAL CARE-0.6% Kimberly-Clark Corp. 1,800 $ 94 ------ DIVERSIFIED MANUFACTURING-1.6% Illinois Tool Works, Inc. 1,500 99 Tyco International Ltd. 7,100 135 ------ 234 ------ ENVIRONMENTAL SERVICES-1.1% Republic Services, Inc. (a) 6,800 154 ------ FINANCIAL-13.9% Bank of America Corp. 3,300 261 Citigroup, Inc. 10,340 443 Comerica, Inc. 1,800 84 Fannie Mae 2,000 135 Goldman Sachs Group, Inc. 1,700 142 Morgan Stanley 1,300 56 National City Corp. 8,300 272 PNC Financial Services Group, Inc. 1,800 88 Washington Mutual, Inc. 7,700 318 Wells Fargo & Co. 4,200 212 ------ 2,011 ------ FOOD & BEVERAGES-1.5% Kellogg Co. 3,400 117 PepsiCo, Inc. 2,100 93 ------ 210 ------ FOREST PRODUCTS/PAPER-1.4% Weyerhaeuser Co. 3,800 205 ------ HEALTH CARE-1.6% Bard (C.R.), Inc. 1,400 100 Beckman Coulter, Inc. 3,100 126 ------ 226 ------ INSURANCE-3.8% Chubb Corp. 1,400 84 Hartford (The) Financial Services Group, Inc. 2,900 146 Marsh & McLennan Co's., Inc. 2,000 102 St. Paul Companies, Inc. 2,800 102 StanCorp Financial Group, Inc. 2,000 105 Travelers Property Casualty Co., Class A 951 15 ------ 554 ------ MACHINERY-1.4% Caterpillar, Inc. 3,200 178 Rockwell Automation, Inc. 1,100 26 ------ 204 ------
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------- OIL & GAS-7.0% ChevronTexaco Corp. 2,800 $ 202 Exxon Mobil Corp. 11,600 417 GlobalSantaFe Corp. 5,100 119 National Fuel Gas Co. 3,700 96 Shell Transport & Trading Co. PLC 3,600 183 ------ 1,017 ------ PHARMACEUTICAL-1.8% Pfizer, Inc. 7,000 239 Schering-Plough Corp. 1,200 22 ------ 261 ------ REITS-0.3% Archstone Smith Trust 1,800 43 ------ RETAIL-3.5% Autonation, Inc. (a) 6,200 98 CVS Corp. 4,900 137 Dollar General Corp. 5,400 99 McDonald's Corp. 4,100 90 Nike, Inc. 1,600 86 ------ 510 ------ TECHNOLOGY-2.6% Applied Materials, Inc. (a) 6,100 97 Intel Corp. 6,700 139 Teradyne, Inc. (a) 8,500 147 ------ 383 ------ TRANSPORTATION-1.1% CSX Corp. 2,000 60 Southwest Airlines Co. 6,100 105 ------ 165 ------ UTILITIES-4.9% Dominion Resources, Inc. 1,850 119 Emerson Electric Co. 1,700 87 Exelon Corp. 3,000 180 PPL Corp. 1,900 82 Progress Energy, Inc. 2,800 123 SCANA Corp. 3,300 113 ------ 704 ------ TOTAL COMMON STOCKS (Cost $8,702) 8,965 ------
-- 22 The Notes to Financial Statements are an integral part of these statements. Balanced Fund (sub-advised by Wellington Management) INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) --------------------------------------------------------------------------------- SHORT-TERM OBLIGATION-5.9% MONEY MARKET FUND CIGNA Funds Group - Money Market Fund (Cost $853) 853,263 $ 853 -------- TOTAL INVESTMENTS IN SECURITIES-103.1% (Total Cost $14,309) (b) 14,913 Liabilities in excess of Cash and Other Assets - (3.1%) (450) -------- NET ASSETS--100.0% $ 14,463 ========
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing security. Tax Information (b) At June 30, 2003, the net unrealized appreciation of investments, based on cost for federal income tax purposes of $14,323,317, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $ 980,470 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (390,835) ---------- Unrealized appreciation - net $ 589,635 ========== (c) At December 31, 2002, the capital loss carryforward was: expiring 2009 $ 826,204 expiring 2010 745,096 ---------- $1,571,300 ==========
The Notes to Financial Statements are an integral part of these statements. -- 23 Large Cap Growth/Morgan Stanley Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ---------------------------------------------------------------- COMMON STOCKS-97.1% AGRICULTURE-1.6% Altria Group, Inc. 4,075 $ 185 ------ BANKS-2.5% Bank of New York, Inc. 3,675 106 Fifth Third Bancorp 1,000 57 Wells Fargo & Co. 2,450 123 ------ 286 ------ BIOTECHNOLOGY-2.3% Amgen, Inc. (a) 4,080 271 ------ COMMERCIAL SERVICES-0.4% Weight Watchers International, Inc. (a) 1,015 46 ------ COMPUTERS & PERIPHERALS-3.3% Dell Computer Corp. (a) 5,325 170 EMC Corp. (a) 3,475 36 Hewlett-Packard Co. 3,200 68 International Business Machines Corp. 1,375 113 ------ 387 ------ COSMETICS/PERSONAL CARE-3.3% Colgate-Palmolive Co. 1,350 78 Gillette (The) Co. 2,125 68 Procter & Gamble Co. 2,575 230 ------ 376 ------ ELECTRONICS-0.3% Jabil Circuit, Inc. (a) 1,515 33 ------ FINANCIAL-6.3% American Express Co. 2,450 102 Citigroup, Inc. 9,941 425 Goldman Sachs Group, Inc. 1,025 86 Morgan (J.P.) Chase & Co. 1,350 46 Schwab (The) Charles Corp. 6,625 67 ------ 726 ------ FOOD & BEVERAGES-4.0% Anheuser-Busch Cos., Inc. 1,220 62 Coca-Cola (The) Co. 4,300 200 Kraft Foods, Inc., Class A 1,350 44 PepsiCo, Inc. 3,385 151 ------ 457 ------ HEALTH CARE-6.2% Boston Scientific Corp. (a) 800 49 Health Management Associates, Inc., Class A 1,300 24 Johnson & Johnson 5,300 274 Medtronic, Inc. 3,425 164
NUMBER OF VALUE SHARES (000) ---------------------------------------------------------------- HEALTH CARE continued St. Jude Medical, Inc. (a) 1,075 $ 62 UnitedHealth Group, Inc. 2,850 143 ------ 716 ------ INSURANCE-2.6% Aflac, Inc. 2,500 77 American International Group, Inc. 3,950 218 ------ 295 ------ INTERNET-2.1% eBay, Inc. (a) 800 83 InterActive Corp. (a) 2,105 83 Symantec Corp. (a) 810 36 Yahoo!, Inc. (a) 1,400 46 ------ 248 ------ MANUFACTURING-5.7% General Electric Co. 15,300 439 3M Co. 1,725 222 ------ 661 ------ MEDIA-5.4% Clear Channel Communications, Inc. (a) 4,400 187 Comcast Corp., Class A (a) 3,250 98 EchoStar Communications Corp., Class A (a) 1,800 62 Gannett Co., Inc. 675 52 Univision Communications, Inc., Class A (a) 2,287 70 Viacom, Inc., Class B (a) 3,450 151 ------ 620 ------ OIL & GAS-3.4% BJ Services Co. (a) 1,200 45 Baker Hughes, Inc. 1,700 57 Exxon Mobil Corp. 6,300 226 Smith International, Inc. (a) 1,850 68 ------ 396 ------ PHARMACEUTICALS-13.4% Abbott Laboratories 2,775 121 AmerisourceBergen Corp. 1,100 76 Bristol-Myers Squibb Co. 1,900 52 Celgene Corp. (a) 1,050 32 Forest Laboratories, Inc. (a) 800 44 Gilead Sciences, Inc. (a) 1,325 74 Lilly (Eli) and Co. 2,000 138 Merck & Co., Inc. 3,000 182 Pfizer, Inc. 18,969 648 Wyeth 3,975 181 ------ 1,548 ------
-- The Notes to Financial Statements are an integral part of these statements. 24 Large Cap Growth/Morgan Stanley Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------------ COMMON STOCKS continued RETAIL-11.3% Abercrombie & Fitch Co., Class A (a) 2,000 $ 57 Bed Bath & Beyond, Inc. (a) 1,600 62 Costco Wholesale Corp. (a) 2,950 108 Dollar Tree Stores, Inc. (a) 2,000 63 Home Depot, Inc. 5,790 192 Kohl's Corp. (a) 975 50 Limited Brands 825 13 Lowe's Companies., Inc. 1,575 68 McDonald's Corp. 2,000 44 TJX (The) Companies, Inc. 2,225 42 Target Corp. 2,200 83 Tiffany & Co. 750 25 Wal-Mart Stores, Inc. 7,075 380 Walgreen Co. 1,650 50 Yum! Brands, Inc. (a) 2,150 64 -------- 1,301 -------- SEMICONDUCTORS-7.6% Altera Corp. (a) 2,800 46 Analog Devices, Inc. (a) 2,200 77 Applied Materials, Inc. (a) 6,400 102 Broadcom Corp., Class A (a) 1,100 27 Emulex Corp. (a) 1,300 30 Intel Corp. 15,700 326 Linear Technology Corp. 2,525 81 Maxim Integrated Products, Inc. 1,975 68 Novellus Systems, Inc. (a) 850 31 Texas Instruments, Inc. 4,775 84 -------- 872 -------- SOFTWARE-10.3% Adobe Syustems, Inc. 1,000 32 Automatic Data Processing, Inc. 1,350 46 First Data Corp. 2,125 88 Mercury Interactive Corp. (a) 400 15 Microsoft Corp. 30,900 791 Oracle Corp. (a) 11,875 143 Peoplesoft, Inc. (a) 1,100 19 Siebel Systems, Inc. (a) 1,600 15 Veritas Software Corp. (a) 1,550 44 -------- 1,193 --------
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------------ TELECOMMUNICATIONS-5.1% AT&T Wireless Services, Inc. (a) 3,550 $ 29 Cisco Systems, Inc. (a) 17,250 288 Juniper Networks, Inc. (a) 2,300 28 Qualcomm, Inc. 2,150 77 UTStarcom, Inc. (a) 700 25 Verizon Communications, Inc. 3,491 138 -------- 585 -------- TOTAL COMMON STOCKS (Cost $10,391) 11,202 -------- SHORT-TERM OBLIGATION-2.2% MONEY MARKET FUND CIGNA Funds Group - Money Market Fund (Cost $249) 249,116 249 -------- TOTAL INVESTMENTS IN SECURITIES-99.3% (Total Cost $10,640) (b) 11,451 Cash and Other Assets, Less Liabilities - 0.7% 84 -------- NET ASSETS-100.0% $ 11,535 ========
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing security. Tax Information (b) At June 30, 2003, the net unrealized depreciation of investments, based on cost for federal income tax purposes of $11,526,788, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost. $ 366,388 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (442,161) ---------- Unrealized depreciation - net $ (75,773) ========== (c) At December 31, 2002, the capital loss carryforward was: expiring 2008 $ 387,542 expiring 2009 1,807,002 expiring 2010 2,456,593 ---------- $4,651,137 ==========
The Notes to Financial Statements are an integral part of these statements. -- 25 Large Cap Value/John A. Levin & Co. Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------------- COMMON STOCKS-95.4% AEROSPACE & DEFENSE-5.0% Lockheed Martin Corp. 7,900 $ 376 Northrop Grumman Corp. 3,500 302 Raytheon Co. 9,300 305 ------ 983 ------ AGRICULTURE-0.5% Monsanto Co. 4,667 101 ------ BANKS-10.3% Bank of America Corp. 6,300 498 Bank of New York, Inc. 18,700 538 FleetBoston Financial Corp. 10,100 300 PNC Financial Services Group, Inc. 6,400 312 US Bancorp 15,991 392 ------ 2,040 ------ CHEMICALS-3.1% Dow (The) Chemical Co. 6,300 195 du Pont (E.I.) de Nemours & Co. 10,000 416 ------ 611 ------ COMMERCIAL SERVICES-1.9% Accenture Ltd., Class A (a) 20,600 373 ------ COMPUTERS-3.3% Hewlett-Packard Co. 9,800 209 International Business Machines Corp. 2,800 231 Sungard Data Systems, Inc. (a) 8,200 213 ------ 653 ------ COSMETIC/PERSONAL CARE-2.6% Kimberly Clark Corp. 4,100 214 Procter & Gamble Co. 3,400 303 ------ 517 ------ ELECTRIC-2.3% Constellation Energy Group, Inc. 9,300 319 FPL Group, Inc. 2,200 147 ------ 466 ------ ELECTRONICS-3.7% Hughes Electronics Corp. (a) 11,500 147 Koninklijke (Royal) Philips Electronics Corp. ADR 17,596 336 Thermo Electron Corp. (a) 11,900 250 ------ 733 ------ FINANCIAL-5.1% CIT Group, Inc. 11,800 291 Citigroup, Inc. 13,000 556 Morgan (JP) Chase & Co. 4,800 164 ------ 1,011 ------
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------------- FOOD & BEVERAGES-7.0% Anheuser-Busch Companies, Inc. 5,000 $ 255 Archer-Daniels-Midland Co. 17,400 224 Heinz (H.J.) Co. 8,200 270 Kraft Foods, Inc., Class A 3,100 101 PepsiCo., Inc. 3,900 174 Sara Lee Corp. 19,200 361 ------ 1,385 ------ HEALTH CARE-0.6% HCA, Inc. 3,900 125 ------ INSURANCE-6.8% American International Group, Inc. 3,000 166 Aon Corp. 16,100 388 Hancock (John) Financial Services, Inc. 12,800 393 UnumProvident Corp. 13,400 180 XL Capital Ltd., Class A 2,700 224 ------ 1,351 ------ MACHINERY-1.0% Deere & Co. 4,200 192 ------ MANUFACTURING-8.9% Alcan, Inc. 9,300 291 Cooper Industries Ltd. 2,500 103 General Electric Co. 15,300 439 Honeywell International, Inc. 6,200 167 Ingersoll-Rand Co., Class A 3,600 170 Textron, Inc. 5,900 230 Tyco International Ltd. 18,800 357 ------ 1,757 ------ MEDIA-5.2% Comcast Corp., Class A (a) 3,900 112 Disney (Walt) Co. 7,300 144 Liberty Media Corp., Class A (a) 23,000 266 News Corp. Ltd 5,900 148 Tribune Co. 7,400 357 ------ 1,027 ------ OIL & GAS-6.8% Burlington Resources, Inc. 2,700 146 ChevronTexaco Corp. 1,900 137 EL Paso Corp. 14,625 118 Exxon Mobil Corp. 13,500 485 Unocal Corp. 10,100 290 Williams Companies, Inc. 21,100 167 ------ 1,343 ------
-- 26 The Notes to Financial Statements are an integral part of these statements. Large Cap Value/John A. Levin & Co. Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------------ COMMON STOCKS continued PHARMACEUTICALS-5.5% Bristol-Myers Squibb Co. 11,200 $ 304 Lilly (Eli) & Co. 1,400 97 Pfizer, Inc. 20,400 697 -------- 1,098 -------- RETAIL-4.0% Home Depot, Inc. 11,800 391 Limited Brands 5,400 84 McDonald's Corp. 14,300 316 -------- 791 -------- SEMICONDUCTORS-0.4% Texas Instruments, Inc. 4,900 86 -------- SOFTWARE-4.6% First Data Corp. 5,100 211 Microsoft Corp. 16,700 428 Oracle Corp. (a) 23,500 282 -------- 921 -------- TELECOMMUNICATIONS-5.1% BellSouth Corp. 15,600 415 Motorola, Inc. 11,700 110 SBC Communications, Inc. 3,800 97 Verizon Communications, Inc. 9,600 379 -------- 1,001 -------- TRANSPORTATION-1.7% CSX Corp. 11,100 333 -------- TOTAL COMMON STOCKS (Cost $17,744) 18,898 --------
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------------ SHORT-TERM OBLIGATION-4.5% MONEY MARKET FUND CIGNA Funds Group - Money Market Fund (Cost $884) 883,558 $ 884 -------- TOTAL INVESTMENTS IN SECURITIES-99.9% (Total Cost $18,628) (b) 19,782 Cash and Other Assets, Less Liabilities - 0.1% 33 -------- NET ASSETS-100.0% $ 19,815 ========
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing security. Tax Information (b) At June 30, 2003, the net unrealized appreciation of investments, based on cost for federal income tax purposes of $19,245,581, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost. $1,436,848 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (900,223) ---------- Unrealized appreciation - net $ 536,625 ========== (c) At December 31, 2002, the capital loss carryforward was: expiring 2009 $ 56,200 expiring 2010 780,786 ---------- $ 836,986 ==========
The Notes to Financial Statements are an integral part of these statements. -- 27 S&P 500(R) Index Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- COMMON STOCKS-93.1% General Electric Co. 159,700 $ 4,580 Microsoft Corp. 171,800 4,400 Pfizer, Inc. 127,906 4,368 Exxon Mobil Corp. 107,994 3,878 Wal-Mart Stores, Inc. 70,800 3,800 Citigroup, Inc. 82,489 3,531 Johnson & Johnson 47,634 2,463 American International Group, Inc. 41,871 2,311 International Business Machines Corp. 27,100 2,236 Intel Corp. 106,300 2,209 Merck & Co., Inc. 36,000 2,180 Bank of America Corp. 24,116 1,906 Cisco Systems, Inc. (a) 114,100 1,904 Procter & Gamble Co. 20,800 1,855 Coca-Cola (The) Co. 39,800 1,847 Verizon Communications, Inc. (a) 43,928 1,733 Altria Group, Inc. 33,200 1,509 Amgen, Inc. (a) 20,672 1,374 Wells Fargo & Co. 27,200 1,371 SBC Communications Inc. (a) 53,406 1,365 Dell Computer Corp. (a) 41,400 1,323 Eli Lilly and Co. 18,000 1,241 Home Depot, Inc. 37,400 1,239 ChevronTexaco Corp. 17,129 1,237 PepsiCo, Inc. 27,770 1,236 Viacom, Inc. (a) 28,288 1,235 AOL Time Warner, Inc. (a) 71,900 1,157 United Parcel Service, Inc. 18,000 1,147 Comcast Corp. Class A (a) 37,053 1,118 Abbott Laboratories 25,100 1,098 JP Morgan Chase & Co. 32,060 1,096 Fannie Mae 16,000 1,079 Hewlett-Packard Co. 48,926 1,042 Oracle Corp. (a) 84,600 1,017 Wyeth (a) 21,300 970 Medtronic, Inc. 19,600 940 American Express Co. 21,100 882 Wachovia Corp. 21,870 874 Bristol-Myers Squibb Co. 31,200 847 3M Co. (a) 6,300 813 BellSouth Corp. 29,900 796 U.S. Bancorp 30,796 755 Morgan Stanley Dean Witter & Co. 17,400 744 Anheuser-Busch Cos., Inc. 13,700 699
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- Bank One Corp. 18,702 $ 695 du Pont (E.I.) de Nemours and Co. 16,029 667 Disney (Walt) Co. 32,900 650 Merrill Lynch & Co., Inc. 13,900 649 Goldman Sachs Group, Inc. 7,600 637 Washington Mutual, Inc. 15,260 630 Tyco International Ltd. 32,071 609 ConocoPhillips 10,845 594 Freddie Mac 11,200 569 Target Corp. 14,500 549 Lowe's Companies, Inc. 12,500 537 Gillette Co. 16,800 535 United Technologies Corp. 7,500 531 Fifth Third Bancorp 9,246 530 eBay, Inc. (a) 5,000 521 First Data Corp. 12,100 501 FleetBoston Financial Corp. 16,860 501 Colgate-Palmolive Co. 8,600 498 Walgreen Co. 16,500 497 UnitedHealth Group, Inc. 9,800 492 Texas Instruments, Inc. 27,900 491 Boeing Co. 13,550 465 Cardinal Health, Inc. 7,225 465 Dow Chemical Co. 14,660 454 QUALCOMM, Inc. 12,600 450 McDonald's Corp. 20,300 448 Schlumberger Ltd. 9,300 442 Marsh & McLennan Companies, Inc. 8,600 439 Schering-Plough Corp. 23,600 439 Kimberly-Clark Corp. 8,300 433 MBNA Corp. 20,362 424 Applied Materials, Inc. (a) 26,500 420 Clear Channel Communications, Inc. (a) 9,800 415 Allstate Corp. 11,300 403 Boston Scientific Corp. 6,500 397 EMC Corp. (a) 35,474 371 Honeywell International, Inc. 13,762 370 Southern Co. 11,500 358 AT&T Wireless Services, Inc. (a) 43,136 354 Bank of New York Co., Inc. 12,300 354 Emerson Electric Co. 6,800 347 Lockheed Martin Corp. 7,300 347 Motorola, Inc. 36,835 347 Alcoa, Inc. 13,444 343 Gannett Co., Inc. 4,300 330
-- 28 The Notes to Financial Statements are an integral part of these statements. S&P 500(R) Index Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) --------------------------------------------------------------- COMMON STOCKS continued Automatic Data Processing, Inc. 9,600 $ 325 Ford Motor Co. 29,488 324 General Motors Corp. 9,000 324 Illinois Tool Works, Inc. 4,900 323 National City Corp. 9,800 321 Dominion Resources, Inc. 4,968 319 Forest Laboratories, Inc. (a) 5,800 318 MetLife, Inc. (a) 11,200 317 SYSCO Corp. 10,500 315 Yahoo!, Inc. (a) 9,500 311 Carnival Corp. 9,400 306 Caterpillar, Inc. 5,500 306 Prudential Financial, Inc. 9,100 306 Cendant Corp. (a) 16,585 304 FedEx Corp. 4,800 298 SLM Corp. (a) 7,500 294 Exelon Corp. 4,862 291 Duke Energy Corp. 14,300 285 General Mills, Inc. 5,900 280 Nextel Communications, Inc. Class A (a) 15,500 280 Kohl's Corp. (a) 5,400 277 International Paper Co. 7,664 274 Costco Wholesale Corp. (a) 7,300 267 Gap (The), Inc. 14,250 267 SunTrust Banks, Inc. 4,500 267 HCA, Inc. 8,200 263 BB&T Corp. 7,600 261 Lehman Brothers Holdings, Inc. 3,900 259 Northrop Grumman Corp. 2,971 256 Progressive Corp. 3,500 256 AFLAC, Inc. 8,300 255 Travelers Property Casualty Corp. Class B 16,077 254 Baxter International, Inc. 9,600 250 Alltel Corp. 5,000 241 AT&T Corp. 12,336 238 Union Planters Corp. 4,100 238 Tribune Co. 4,900 237 Avon Products, Inc. 3,800 236 Sun Microsystems, Inc. (a) 51,300 236 Sara Lee Corp. 12,500 235 General Dynamics Corp. 3,200 232 Waste Management, Inc. 9,595 231 NIKE, Inc. Class B 4,200 225 Best Buy Co., Inc. (a) 5,100 224
NUMBER OF VALUE SHARES (000) --------------------------------------------------------------- Kellogg Co. 6,500 $ 223 Stryker Corp. 3,200 222 Schwab (Charles) Corp. 21,875 221 PNC Financial Services Group 4,500 220 Guidant Corp. 4,900 218 Omnicome Group, Inc. 3,000 215 Raytheon Co. 6,500 213 Southwest Airlines Co. 12,330 212 State Street Corp. 5,300 209 Newmont Mining Corp. 6,400 208 Kroger Co. (a) 12,400 207 Hartford Financial Services Group, Inc. 4,100 206 Computer Associates International, Inc. 9,200 205 Sprint Corp. 14,200 204 ConAgra Foods, Inc. 8,600 203 Analog Devices, Inc. (a) 5,800 202 Wellpoint Health Networks, Inc. (a) 2,400 202 Wrigley (Wm.) Jr., Co. 3,600 202 Occidental Petroleum Corp. 6,000 201 Golden West Financial Corp. 2,500 200 Devon Energy Corp. 3,700 198 FPL Group, Inc. 2,900 194 Mellon Financial Corp. 7,000 194 McGraw-Hill Companies, Inc. 3,100 192 Harley-Davidson, Inc. 4,800 191 Entergy Corp. 3,600 190 Weyerhaeuser Co. 3,500 189 Masco Corp. 7,900 188 American Electric Power Co., Inc. 6,220 186 VERITAS Software Corp. (a) 6,500 186 H.J. Heinz Co. 5,600 185 XL Capital Ltd. Class. A 2,200 183 Bed Bath & Beyond, Inc. (a) 4,700 182 FirstEnergy Corp. 4,700 181 Anadarko Petroleum Corp. 4,029 179 Baker Hughes, Inc. 5,340 179 Anthem, Inc. (a) 2,300 178 Equity Office Properties Trust 6,600 178 Maxim Integrated Products, Inc. (a) 5,200 178 CVS Corp. 6,300 177 Janus Capital Group, Inc. 10,700 175 Paychex, Inc. 5,975 175 Burlington Resources, Inc. 3,210 174 Deere & Co. 3,800 174 Apollo Group, Inc. Class A (a) 2,800 173
-- The Notes to Financial Statements are an integral part of these statements. 29 S&P 500(R) Index Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------ COMMON STOCKS continued Burlington Northern Santa Fe Corp. 6,100 $ 173 Capital One Financial Corp. 3,500 172 KeyCorp 6,800 172 Electronic Arts, Inc. (a) 2,300 170 Apache Corp. 2,583 168 Sears, Roebuck & Co. 5,000 168 Progress Energy, Inc. 3,800 167 Franklin Resources, Inc. 4,200 164 Principal Financial Group, Inc. 5,100 164 Danaher Corp. 2,400 163 Electronic Data Systems Corp. 7,600 163 McKesson HBOC, Inc. 4,573 163 Allergan, Inc. 2,100 162 Chubb Corp. 2,700 162 Linear Technology Corp. 5,000 161 St. Jude Medical, Inc. (a) 2,800 161 Becton, Dickinson & Co. 4,100 159 Campbell Soup Co. 6,500 159 Halliburton Co. 6,900 159 TJX Companies, Inc. 8,400 158 Praxair, Inc. 2,600 156 Hershey Foods Corp. 2,200 153 Public Service Enterprise Group 3,600 152 Starbucks Corp. (a) 6,200 152 Air Products & Chemicals, Inc. 3,600 150 SouthTrust Corp. 5,500 150 Clorox Co. 3,500 149 Consolidated Edison, Inc. 3,400 147 Intuit, Inc. (a) 3,300 147 Marriott International, Inc. Class A 3,800 146 Northern Trust Corp. 3,500 146 Pitney Bowes, Inc. 3,800 146 Agilent Technologies, Inc. (a) 7,413 145 MedImmune, Inc. (a) 4,000 145 Safeway, Inc. (a) 7,100 145 Ace, Ltd. 4,200 144 Aetna, Inc. 2,400 144 John Hancock Financial Services, Inc. 4,700 144 International Game Technology 1,400 143 Corning, Inc. (a) 19,200 142 Genzyme Corp. (a) 3,400 142 Lexmark International, Inc. (a) 2,000 142 Loews Corp. 3,000 142 Zimmer Holdings, Inc. (a) 3,130 141
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------------ Countrywide Credit Industries, Inc. 2,000 $ 139 KLA-Tencor Corp. (a) 3,000 139 Staples, Inc. (a) 7,550 139 Yum! Brands, Inc. (a) 4,680 138 PG&E Corp. (a) 6,500 137 PPG Industries, Inc. 2,700 137 Xilinx, Inc. (a) 5,400 137 Archer-Daniels-Midland Co. 10,369 134 Comerica, Inc. 2,850 133 Mattel, Inc. 7,000 132 St. Paul Companies, Inc. 3,628 132 Chiron Corp. (a) 3,000 131 Coca-Cola Enterprises, Inc. 7,100 129 Ltd Brands 8,300 129 Marathon Oil Corp. 4,900 129 Ingersoll-Rand Co. 2,700 128 Qwest Communications International, Inc. (a) 26,709 128 Lucent Technologies, Inc. (a) 62,730 127 Moody's Corp. 2,400 127 AmSouth BanCorp. 5,750 126 Eastman Kodak Co. 4,600 126 AmerisourceBergen Corp. 1,800 125 Fortune Brands, Inc. 2,400 125 H&R Block, Inc. 2,900 125 PACCAR, Inc. 1,850 125 Xerox Corp. (a) 11,800 125 AutoZone, Inc. (a) 1,600 122 Regions Financial Corp. 3,600 122 Johnson Controls, Inc. 1,400 120 Unocal Corp. 4,200 120 Adobe Systems, Inc. 3,700 119 Aon Corp. 4,950 119 Biomet, Inc. 4,150 119 Centerpoint Energy, Inc. (a) 14,622 119 Concord EFS, Inc. (a) 8,100 119 Norfolk Southern Corp. 6,200 119 SunGard Data Systems, Inc. (a) 4,600 119 Newell Rubbermaid, Inc. 4,210 118 Symantec Corp. (a) 2,700 118 Albertson's, Inc. 6,088 117 Bear (The) Stearns Companies, Inc. 1,617 117 Simon Property Group, Inc. (a) 3,000 117 TXU Corp. 5,200 117 Computer Sciences Corp. (a) 3,000 114 Equity Residential Properties Trust 4,400 114
-- 30 The Notes to Financial Statements are an integral part of these statements. S&P 500(R) Index Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- COMMON STOCKS continued Federated Department Stores, Inc. 3,100 $ 114 Charter One Financial, Inc. 3,627 113 MBIA, Inc. 2,300 112 Micron Technology, Inc. 9,600 112 PPL Corp. 2,600 112 Transocean Sedco Forex, Inc. (a) 5,042 111 Ameren Corp. 2,500 110 Rohm & Haas Co. 3,553 110 Ambac Financial Group, Inc. 1,650 109 Apple Computer, Inc. 5,700 109 Fiserv, Inc. 3,050 109 New York Times Co. Class A 2,400 109 Univision Communications, Inc. (a) 3,600 109 Ecolab, Inc. 4,200 108 Quest Diagnostics (a) 1,700 108 Broadcom Corp. Class A (a) 4,300 107 Family Dollar Stores, Inc. 2,800 107 Marshall & Ilsley Corp. 3,500 107 DTE Energy Co. 2,700 104 Kinder Morgan, Inc. 1,900 104 Synovus Financial Corp. 4,850 104 CIGNA Corp. (b) 2,200 103 CSX Corp. 3,400 102 May Department Stores Co. 4,550 101 Altera Corp. (a) 6,100 100 Lincoln National Corp. 2,800 100 Cinergy Corp. 2,700 99 Union Planters Corp. 3,200 99 ITT Industries, Inc. 1,500 98 Cincinnati Financial Corp. 2,600 96 Cintas Corp. 2,700 96 Dollar General Corp. 5,260 96 Dover Corp. 3,200 96 UST, Inc. 2,700 95 Jefferson-Pilot Corp. 2,275 94 Xcel Energy, Inc. 6,265 94 BJ Services Co. (a) 2,500 93 Sempra Energy 3,255 93 Biogen, Inc. (a) 2,400 91 Monsanto Co. 4,217 91 Nabors Industries, Ltd. (a) 2,300 91 Sprint Corp. (PCS Group) (a) 15,800 91 Starwood Hotels & Resorts Worldwide, Inc. 3,200 91 Avery Dennison Corp. 1,800 90
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- Genuine Parts Co. 2,800 $ 90 Knight-Ridder, Inc. 1,300 90 Pepsi Bottling Group, Inc. 4,500 90 American Standard Companies, Inc. (a) 1,200 89 Constellation Energy Group, Inc. 2,600 89 KeySpan Corp. 2,500 89 North Fork Bancorporation, Inc. (a) 2,600 89 Tenet Healthcare Corp. (a) 7,600 89 First Tennessee National Corp. (a) 2,000 88 Novellus Systems, Inc. (a) 2,400 88 Eaton Corp. 1,100 86 Network Appliance, Inc. (a) 5,300 86 PeopleSoft, Inc. (a) 4,912 86 Textron, Inc. 2,200 86 Edison International (a) 5,200 85 Molex, Inc. 3,125 84 Interpublic Group of Cos., Inc. (a) 6,100 82 JDS Uniphase Corp. (a) 22,700 80 Brown-Forman Corp. Class B 1,000 79 Centex Corp. 1,000 78 CenturyTel, Inc. 2,250 78 MeadWestvaco Corp. 3,155 78 Parker-Hannifin Corp. 1,850 78 SAFECO Corp. 2,200 78 Delphi Automotive Systems Corp. 8,920 77 El Paso Corp. 9,390 76 Georgia-Pacific Corp. 4,010 76 T. Rowe Price Group, Inc. 2,000 76 Zions Bancorporation 1,500 76 EOG Resources, Inc. 1,800 75 Hilton Hotels Corp. 5,900 75 MGIC Investment Corp. 1,600 75 Plum Creek Timber Company, Inc. 2,900 75 Tiffany & Co. 2,300 75 Autonation, Inc. (a) 4,700 74 NiSource, Inc. 3,900 74 RadioShack Corp. 2,800 74 Huntington Bancshares, Inc. 3,751 73 Harrah's Entertainment, Inc. 1,800 72 J.C. Penney Co., Inc., (Holding Co.) 4,300 72 Kerr-McGee Corp. 1,607 72 Noble Corp. (a) 2,100 72 Qlogic Corp. (a) 1,500 72 Rockwell International Corp. 3,000 72 Siebel Systems, Inc. (a) 7,500 72
-- The Notes to Financial Statements are an integral part of these statements. 31 S&P 500(R) Index Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- COMMON STOCKS continued Office Depot, Inc. (a) 4,900 $ 71 Rockwell Collins, Inc. 2,900 71 Torchmark Corp. 1,900 71 Health Management Associates, Inc. 3,800 70 IMS Health, Inc. 3,900 70 Whirlpool Corp. 1,100 70 WW Grainger, Inc. 1,500 70 Amerada Hess Corp. 1,400 69 Jabil Circuit, Inc. (a) 3,100 69 Watson Pharmaceuticals, Inc. (a) 1,700 69 Applera Corp., Applied Biosystems Group 3,400 65 Sherwin-Williams (The) Co. 2,400 65 Sigma-Aldrich Corp. 1,200 65 Williams Cos, Inc. 8,200 65 BMC Software, Inc. (a) 3,900 64 Leggett & Platt, Inc. 3,100 64 Unisys Corp. (a) 5,100 63 Cooper Industries, Ltd. (a) 1,500 62 Pulte Homes, Inc. 1,000 62 Sealed Air Corp. (a) 1,296 62 Jones Apparel Group, Inc. 2,100 61 V. F. Corp. 1,800 61 Waters Corp. (a) 2,100 61 Equifax, Inc. 2,300 60 Liz Claiborne, Inc. 1,700 60 McCormick & Co. Inc., 2,200 60 Scientific-Atlanta, Inc. 2,500 60 Citrix Systems, Inc. (a) 2,900 59 King Pharmaceuticals, Inc. 4,000 59 Nucor Corp. 1,200 59 Vulcan Materials Co. 1,600 59 Citizens Communications Co. (a) 4,500 58 C.R. Bard, Inc. 800 57 National Semiconductor Corp. (a) 2,900 57 Sabre Holdings Corp. 2,307 57 Thermo Electron Corp. (a) 2,700 57 Black & Decker Corp. 1,300 56 Dow Jones & Co., Inc. 1,300 56 Freeport-McMoRan Copper & Gold, Inc. 2,300 56 Federated Investors, Inc. 2,000 55 NVIDIA Corp. (a) 2,400 55 AES Corp. (a) 8,500 54 Phelps Dodge Corp. (a) 1,400 54 Robert Half International, Inc. (a) 2,800 53
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- Sanmina-SCI Corp. (a) 8,400 $ 53 Apartment Investment & Management Co. 1,500 52 Darden Restaurants, Inc. 2,750 52 Engelhard Corporation 2,100 52 Pinnacle West Capital Corp. 1,400 52 R.J. Reynold Tobacco Holdings, Inc. (a) 1,400 52 UnumProvident Corp. 3,874 52 Wendy's International, Inc. 1,800 52 KB HOME (a) 800 50 Mercury Interactive Corp. (a) 1,300 50 Teradyne, Inc. (a) 2,900 50 Hasbro, Inc. 2,800 49 Pactiv Corp. 2,500 49 Solectron Corp. (a) 13,100 49 Americian Power Conversion Corp. (a) 3,100 48 International Flavors & Fragrances, Inc. 1,500 48 R. R. Donnelley & Sons Co. 1,800 47 Symbol Technologies, Inc. 3,650 47 Alberto-Culver Co. Class B 900 46 Energizer Holdings, Inc. (a) 1,466 46 Comverse Technology, Inc. (a) 3,000 45 Convergys Corp. (a) 2,800 45 Deluxe Corp. 1,000 45 Pall Corp. 2,000 45 Sunoco, Inc. 1,200 45 SUPERVALU, Inc. 2,100 45 Fluor Corp. 1,300 44 Providian Financial Corp. (a) 4,600 43 Tellabs, Inc. (a) 6,500 43 LSI Logic Corp. (a) 5,900 42 Ball Corp. 900 41 Humana, Inc. (a) 2,700 41 NCR Corp. (a) 1,600 41 Nordstrom, Inc. 2,100 41 Toys R Us 3,400 41 Calpine Corp. (a) 6,000 40 Goodrich Corp. 1,900 40 Manor Care, Inc. (a) 1,600 40 Stanley Works (The) 1,400 39 Temple-Inland, Inc. 900 39 Eastman Chemical Co. 1,200 38 Avaya, Inc. (a) 5,735 37 Bemis Company, Inc. 800 37 CIENA Corp. (a) 6,900 36 Monster Worldwide, Inc. 1,800 36
-- 32 The Notes to Financial Statements are an integral part of these statements. S&P 500(R) Index Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) --------------------------------------------------------------- COMMON STOCKS continued Advanced Micro Devices, Inc. (a) 5,400 $ 35 Brunswick Corp. 1,400 35 Compuware Corp. (a) 6,000 35 Meredith Corp. 800 35 Millipore Corp. 800 35 Ashland, Inc. 1,100 34 Bausch & Lomb, Inc. 900 34 Rowan Companies, Inc. 1,500 34 TECO Energy, Inc. 2,800 34 Navistar International Corp. (a) 1,000 33 PMC-Sierra, Inc. (a) 2,700 32 Tektronix, Inc. (a) 1,500 32 Allied Waste Industries, Inc. (a) 3,100 31 Carmax, Inc. (a) 1,035 31 ADC Telecommunications, Inc. (a) 12,700 30 Reebok International Ltd. (a) 900 30 Applied Micro Circuits Corp. (a) 4,800 29 Autodesk, Inc. 1,800 29 Circuit City Stores-Circuit City Group 3,300 29 Coors (Adolph) Co. Class B 600 29 Delta Air Lines, Inc. 2,000 29 Maytag Corp. 1,200 29 Certegy, Inc. (a) 1,000 28 Dana Corp. 2,401 28 PerkinElmer, Inc. 2,000 28 Big Lots, Inc. (a) 1,800 27 Quintiles Transnational Corp. (a) 1,900 27 Winn-Dixie Stores, Inc. 2,200 27 NICOR, Inc. 700 26 Peoples Energy Corp. 600 26 Ryder System, Inc. 1,000 26 Snap-on, Inc. 900 26 United States Steel Corp. 1,600 26 Cummins, Inc. 700 25 Dynegy, Inc. Class A (a) 5,800 24 Crane Co. 1,000 23 Reliant Energy, Inc. (a) 3,802 23 Boise Cascade Corp. 900 22 Del Monte Foods Co. (a) 2,500 22 Cooper Tire & Rubber Co. 1,200 21 American Greetings Corp. Class A (a) 1,000 20 Gateway, Inc. (a) 5,200 19 Worthington Industries, Inc. (a) 1,400 19 Dillard's, Inc. Class A 1,300 18 Louisina-Pacific Corp. 1,700 18
NUMBER OF VALUE SHARES (000) --------------------------------------------------------------- Mirant Corp. 6,377 $ 18 Novell, Inc. (a) 5,800 18 Allegheny Energy, Inc. (a) 2,000 17 CMS Energy Corp. (a) 2,100 17 Hercules, Inc. (a) 1,700 17 Great Lakes Chemical Corp. 800 16 Rite-Aid Corp. (a) 3,600 16 Timken Co. 900 16 Andrew Corp. (a) 1,600 15 JM Smucker Co./The 386 15 FMC Technologies, Inc. (a) 687 14 Goodyear Tire & Rubber Co. (a) 2,600 14 Visteon Corp. (a) 2,090 14 Massey Energy Co. 1,000 13 Parametric Technology Corp. (a) 4,200 13 Thomas & Betts Corp. (a) 900 13 Tupperware Corp. 900 13 Acuity Brands, Inc. 600 11 Kansas City Southern Industries, Inc. (a) 800 10 Longs Drug Stores Corp. 600 10 Potlach Corp. 400 10 Allegheny Technologies, Inc. 1,300 9 FMC Corp. (a) 400 9 Power-One, Inc. (a) 1,300 9 Advanced Medical Optics, Inc. (a) 466 8 Viasys Healthcare, Inc. (a) 365 8 Imagistics International, Inc. (a) 280 7 Arch Coal, Inc. 244 6 McDermott International, Inc. (a) 1,000 6 Texas Genco Holdings, Inc. 241 6 Mykrolls Corp. (a) 406 4 EnPro Industries, Inc. (a) 280 3 Hudson Highland Group, Inc. (a) 135 3 Kadant, Inc. (a) 153 3 Dun & Bradstreet Corp. 50 2 Abercrombie & Fitch Co. Class A (a) 27 1 Agere Systems, Inc. Class A (a) 580 1 Agere Systems, Inc. Class B (a) 553 1 Armstrong Holdings, Inc. (a) 600 1 Owens Corning (a) 800 1 Unilever NV 1 - WorldCom, Inc. (a) 1 - WorldCom, Inc.-MCI Group (a) 16 - -------- TOTAL COMMON STOCKS (Cost $163,892) $144,718 --------
-- The Notes to Financial Statements are an integral part of these statements. 33 S&P 500(R) Index Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) -------------------------------------------------------------------------- SHORT-TERM OBLIGATIONS-6.8% MONEY MARKET FUND-6.00% CIGNA Funds Group - Money Market Fund 9,283,743 $ 9,283 --------- PRINCIPAL (000) ---------- U.S. GOVERNMENT-0.8% U.S. Treasury Bills, (c) 1.03%, 9/4/03 $ 100 100 1.08%, 10/02/03 50 50 1.16%, 10/2/03 100 100 1.09%, 10/30/03 1,075 1,071 --------- 1,321 --------- TOTAL SHORT-TERM OBLIGATIONS (Cost $10,604) 10,604 --------- TOTAL INVESTMENTS IN SECURITIES-99.9% (Total Cost $174,496) (d) 155,322 Cash and Other Assets, Less Liabilities - 0.1% 106 --------- NET ASSETS-100.0% $ 155,428 =========
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing securities. (b) TimesSquare Capital Management, Inc., the fund's Investment Advisor, is an indirect wholly owned subsidiary of CIGNA Corp. (c) This security or a portion thereof is pledged as collateral for Stock Index Futures Contracts. At June 30, 2003, the Fund was long 40, S&P 500 Futures Contracts expiring in September 2003. Unrealized loss amounted to $405,500. Underlying face value was $10,138,500 and underlying market value was $9,733,000. Tax Information (d) At June 30, 2003, the net unrealized depreciation of investments, based on cost for federal income tax purposes of $174,526,890, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $ 16,115,511 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (35,320,582) ------------ Unrealized depreciation - net $(19,205,071) ============ (e) At December 31, 2002, the capital loss carryforward was: expiring 2009 $ 6,961,541 expiring 2010 9,431,252 ------------ $ 16,392,793 ============
-- 34 The Notes to Financial Statements are an integral part of these statements. Small Cap Growth/TimesSquare Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------- COMMON STOCKS-92.4% ADVERTISING-2.5% Catalina Marketing Corp. (a) 45,000 $ 794 Getty Images, Inc. (a) 90,000 3,717 -------- 4,511 -------- AEROSPACE/DEFENSE-1.2% MTC Technologies, Inc. (a) 45,000 1,056 Orbital Sciences Corp. (a) 150,000 1,095 -------- 2,151 -------- BIOTECHNOLOGY-2.6% Bio-Rad Laboratories, Inc. (Class A) (a) 30,000 1,660 Digene Corp. (a) 35,000 953 Myriad Genetics, Inc. (a) 80,000 1,089 Protein Design Labs, Inc. (a) 60,000 839 -------- 4,541 -------- COMMERCIAL SERVICES-15.5% Advisory Board Co. (a) 30,000 1,216 Alliance Data Systems Corp. (a) 150,000 3,510 Arbitron, Inc. (a) 75,000 2,678 Career Education Corp. (a) 20,000 1,368 ChoicePoint, Inc. (a) 45,000 1,553 Corporate Executive Board Co. (a) 75,000 3,061 Education Management Corp. (a) 80,000 4,254 First Health Group Corp. (a) 69,000 1,904 FTI Consulting, Inc. (a) 50,000 1,248 Rent-A-Center, Inc. (a) 55,000 4,170 Ritchie Bros. Auctioneers, Inc. (a) 25,000 963 Valassis Communications, Inc. (a) 60,000 1,543 -------- 27,468 -------- COMPUTERS-4.5% BISYS Group, Inc. (The) (a) 150,000 2,755 Factset Research Systems, Inc. 25,000 1,101 Henry (Jack) & Associates, Inc. 100,900 1,795 NetScreen Technologies, Inc. (a) 50,000 1,127 Synaptics, Inc. (a) 91,900 1,237 -------- 8,015 -------- DISTRIBUTION/WHOLESALE-1.6% SCP Pool Corp. (a) 85,050 2,926 -------- ELECTRICAL COMPONENTS & EQUIPMENT-0.8% Advanced Energy Industries, Inc. (a) 100,000 1,425 -------- ELECTRONICS-3.5% Cymer, Inc. (a) 50,000 1,601 Gentex Corp. (a) 55,000 1,684 Mettler-Toledo International, Inc. (a) 60,000 2,199 Photon Dynamics, Inc. (a) 25,000 691 -------- 6,175 --------
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------- ENTERTAINMENT-1.3% AMC Entertainment, Inc. (a) 140,000 $ 1,602 Macrovision Corp. (a) 39,000 777 -------- 2,379 -------- ENVIRONMENTAL-1.3% Stericycle, Inc. (a) 60,000 2,309 -------- FINANCIAL-6.7% Boston Private Financial Holdings, Inc. 100,000 2,108 City National Corp. 45,000 2,005 Investment Technology Group, Inc. (a) 30,000 558 Investors Financial Services Corp. 100,000 2,901 Jefferies Group, Inc. 24,600 1,225 UCBH Holdings, Inc. 70,000 2,008 Wintrust Financial Corp. 37,500 1,110 -------- 11,915 -------- FOOD & BEVERAGES-2.7% American Italian Pasta Co. Class A (a) 50,000 2,082 Constellation Brands, Inc. Class A (a) 50,000 1,570 United Natural Foods, Inc. (a) 40,000 1,126 -------- 4,778 -------- HEALTH CARE-7.6% DaVita, Inc. (a) 165,316 4,427 Lincare Holdings, Inc. (a) 120,000 3,781 Pediatrix Medical Group, Inc. (a) 26,500 945 Respironics, Inc. (a) 82,000 3,077 Steris Corp. (a) 55,000 1,270 -------- 13,500 -------- INSURANCE-2.2% Markel Corp. (a) 15,000 3,840 -------- INTERNET-1.5% Avocent Corp. (a) 45,000 1,347 ProQuest Co. (a) 50,000 1,290 -------- 2,637 -------- MACHINERY-DIVERSIFIED-0.8% Graco, Inc. 45,000 1,440 -------- MEDIA-3.1% Emmis Communications Corp. (a) 40,000 918 Entercom Communications Corp. (a) 35,000 1,715 LodgeNet Entertainment Corp. (a) 35,000 383 Radio One, Inc. Class D (a) 100,000 1,777 Scholastic Corp. (a) 25,000 745 -------- 5,538 --------
-- The Notes to Financial Statements are an integral part of these statements. 35 Small Cap Growth/TimesSquare Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) -------------------------------------------------------------------------------------- COMMON STOCKS continued OIL & GAS-4.3% Evergreen Resources, Inc. (a) 36,000 $ 1,955 Hydril Co. (a) 35,000 954 Patina Oil & Gas Corp. 25,000 804 Patterson-UTI Energy, Inc. (a) 35,000 1,134 Varco International, Inc. (a) 81,000 1,588 Westport Resources Corp. (a) 50,000 1,137 --------- 7,572 --------- PHARMACEUTICALS-7.1% AdvancePCS (a) 50,000 1,912 Atrix Laboratories, Inc. (a) 80,000 1,759 Ligand Pharmaceuticals, Inc. (a) 85,000 1,155 Medicis Pharmaceutical Corp. Class A 25,000 1,417 MGI Pharma, Inc. (a) 38,300 982 Omnicare, Inc. 100,000 3,379 Pharmaceutical Resources, Inc. (a) 18,000 876 VCA Antech, Inc. (a) 60,000 1,174 --------- 12,654 --------- RETAIL-1.4% Advanced Auto Parts, Inc. (a) 40,000 2,436 --------- SEMICONDUCTORS-6.8% ASM International NV (a) 106,000 1,576 Emulex, Corp. (a) 55,000 1,252 Globespan Virata, Inc. (a) 130,000 1,072 Intergrated Circuit Systems, Inc. (a) 65,000 2,043 LTX Corp. (a) 120,000 1,034 Photronics, Inc. (a) 140,000 2,443 Semtech Corp. (a) 72,900 1,038 Skyworks Solutions, Inc. (a) 95,000 643 Supertex, Inc. (a) 50,000 919 --------- 12,020 --------- SOFTWARE-8.8% Altiris, Inc. (a) 60,000 1,203 Business Objects SA, ADR (a) 15,000 329 Cognos, Inc. (a) 50,000 1,350 Concur Technologies, Inc. (a) 85,000 856 Documentum, Inc. (a) 22,000 433 Fair Isaac & Co. 20,000 1,029 Global Payments, Inc. 70,000 2,485 IMPAC Medical Systems, Inc. (a) 40,000 835 Informatica Corp. (a) 200,000 1,382 Lawson Software, Inc. (a) 95,000 738 Mantech International Corp. (a) 60,000 1,151
NUMBER OF VALUE SHARES (000) -------------------------------------------------------------------------------------- SOFTWARE continued National Instruments Corp. (a) 50,000 $ 1,889 NDCHealth Corp. 105,000 1,927 --------- 15,607 --------- STORAGE/WAREHOUSING-0.5% Mobile Mini, Inc. (a) 50,000 816 --------- TELECOMMUNICATIONS-2.2% 3Com Corp. (a) 200,000 936 Plantronics, Inc. (a) 65,000 1,409 West Corp. (a) 60,000 1,599 --------- 3,944 --------- TOYS/GAMES-0.5% Marvel Enterprises, Inc. (a) 50,000 955 --------- TRANSPORTATION-1.4% P.A.M. Transportation Services, Inc. (a) 55,000 1,331 Pacer International, Inc. (a) 60,000 1,132 --------- 2,463 --------- TOTAL COMMON STOCKS (Cost $144,083) 164,015 --------- SHORT-TERM OBLIGATION-8.0% MONEY MARKET FUND CIGNA Funds Group - Money Market Fund (Cost $14,279) 14,279,314 14,279 --------- TOTAL INVESTMENTS IN SECURITIES-100.4% (Total Cost $158,362) (b) 178,294 Liabilities in excess of Cash and Other Assets - (0.4)% (706) --------- NET ASSETS-100.0% $ 177,588 =========
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing security. Tax Information (b) At June 30, 2003, the net unrealized appreciation of investments, based on cost for federal income tax purposes of $159,338,392, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $20,929,206 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (1,973,114) ----------- Unrealized appreciation - net $18,956,092 =========== (c) At December 31, 2002, the capital loss carryforward was: expiring 2009 $ 1,413,051 expiring 2010 2,191,996 ----------- $ 3,605,047 ===========
-- 36 The Notes to Financial Statements are an integral part of these statements. Small Cap Value/Perkins, Wolf, McDonnell Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- COMMON STOCKS-83.1% APPAREL-1.0% Wolverine World Wide, Inc. 34,700 $ 668 ------ AUTO PARTS & EQUIPMENT-0.5% Superior Industries International 8,000 334 ------ BANKS-14.1% Brookline Bancorp, Inc. 45,000 630 Chittenden Corp. 33,500 916 Community Bank System, Inc. 30,000 1,140 First Niagara Financial Group Inc. 160,000 2,234 FNB Corp. 29,400 890 Greater Bay Bancorp. 45,200 928 Seacoast Financial Services Corp. 45,000 891 Susquehanna Bancshares Inc. 55,000 1,284 Waypoint Financial Corp. 20,000 361 ------ 9,274 ------ BUILDING MATERIALS-2.2% Texas Industries, Inc. 60,000 1,428 ------ CHEMICALS-2.3% Great Lakes Chemical Corp. 33,500 683 Schulman (A.), Inc. 50,000 803 ------ 1,486 ------ COMMERCIAL SERVICES-0.9% Spherion Corp. (a) 90,000 625 ------ COMPUTERS-2.2% Advanced Digital Information Corp. (a) 32,000 320 Covansys Corp. (a) 100,000 307 Infocus Corp. (a) 62,300 294 Silicon Storage Technology, Inc. (a) 120,000 503 ------ 1,424 ------ ELECTRONICS-1.4% Mettler-Toledo International, Inc. (a) 25,000 916 ------ ENGINEERING & CONSTRUCTION-1.7% Dycom Industries, Inc. (a) 67,000 1,092 ------ FINANCIAL SERVICES-0.8% Affiliated Managers Group (a) 8,600 524 ------ FOREST PRODUCTS & PAPER-1.5% Rayonier, Inc. 30,000 990 ------ HEALTH CARE-3.1% Cytyc Corp. (a) 24,000 252 Invacare Corp. 16,000 528 LifePoint Hospitals, Inc. (a) 31,000 649 Province Healthcare Co. (a) 57,600 638 ------ 2,067 ------
NUMBER OF VALUE SHARES (000) ------------------------------------------------------------- HOME BUILDERS-2.8% Ryland Group, Inc. 12,000 $ 833 Standard-Pacific Corp. 30,000 995 ------ 1,828 ------ HOME FURNISHINGS-2.2% La-Z-Boy, Inc. 65,000 1,455 ------ HOUSEWARES-1.4% Libbey, Inc. 40,000 908 ------ INSURANCE-2.0% Horace Mann Educators Corp. 80,000 1,290 ------ INTERNET-0.9% Openwave Systems, Inc. (a) 190,000 370 SonicWALL, Inc. (a) 51,000 245 ------ 615 ------ IRON & STEEL-1.6% Steel Dynamics, Inc. (a) 75,000 1,027 ------ MACHINERY-6.1% Briggs & Stratton Corp. 19,000 960 Flowserve Corp. (a) 11,000 216 Global Power Equipment Group, Inc. (a) 165,000 767 Joy Global, Inc. (a) 60,000 886 Manitowoc Co. 25,000 558 Tecumseh Products Co., Class A 15,600 598 ------ 3,985 ------ MANUFACTURING-3.3% Federal Signal Corp. 45,000 791 Harsco Corp. 17,600 634 Trinity Industries, Inc. 40,000 740 ------ 2,165 ------ METAL FABRICATE/HARDWARE-1.9% Kaydon Corp. 60,000 1,248 ------ OIL & GAS-8.7% Brown (Tom), Inc. (a) 40,000 1,112 Cal Dive International, Inc. (a) 50,000 1,090 Cimarex Energy Co. (a) 22,000 522 Forest Oil Corp. (a) 26,500 666 Key Energy Services, Inc. (a) 84,000 900 Newfield Exploration Co. (a) 11,000 413 Noble Energy, Inc. 12,000 454 Stone Energy Corp. (a) 13,300 558 ------ 5,715 ------
-- The Notes to Financial Statements are an integral part of these statements. 37 Small Cap Value/Perkins, Wolf, McDonnell Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------------------- COMMON STOCKS continued REAL ESTATE INVESTMENT TRUST-9.2% Alexandria Real Estate Equities, Inc. 20,000 $ 900 Brandywine Realty Trust 60,000 1,477 Equity One, Inc. 60,000 984 Home Properties of NY, Inc. 34,000 1,198 Manufactured Home Communities, Inc. 25,000 878 Parkway Properties, Inc. 15,000 631 --------- 6,068 --------- RETAIL-1.5% Casey's General Stores, Inc. 70,000 990 --------- SEMICONDUCTORS-1.3% Asyst Technologies, Inc. (a) 36,000 241 Integrated Silicon Solutions, Inc. (a) 90,000 625 --------- 866 --------- SOFTWARE-2.2% Informatica Corp. (a) 115,000 795 Inter-Tel, Inc. 32,000 679 --------- 1,474 --------- TELECOMMUNICATIONS-2.1% C-Cor. net Corp. (a) 80,000 392 Newport Corp. (a) 24,000 355 Remec, Inc. (a) 40,000 278 Stratex Networks, Inc. (a) 120,000 384 --------- 1,409 --------- TRANSPORTATION-3.2% CNF, Inc. 21,200 538 Kansas City Southern 55,000 662 USF Corp. 33,000 890 --------- 2,090 --------- TRUCKING & LEASING-1.0% GATX Corp. 40,000 654 --------- TOTAL COMMON STOCKS (Cost $50,624) 54,615 ---------
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------------------- SHORT-TERM OBLIGATION-16.4% MONEY MARKET FUND CIGNA Funds Group - Money Market Fund (Cost $10,778) 10,777,666 $ 10,778 --------- TOTAL INVESTMENTS IN SECURITIES-99.5% (Total Cost $61,402) (b) 65,393 Cash and Other Assets, Less Liabilities - 0.5% 310 --------- NET ASSETS-100.0% $ 65,703 =========
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing security. Tax Information (b) At June 30, 2003, the net unrealized appreciation of investments, based on cost for federal income tax purposes of $61,660,675, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $ 6,298,954 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (2,566,869) ----------- Unrealized appreciation - net $ 3,732,085 =========== (c) At December 31, 2002, the capital loss carryforward was: expiring 2010 $ 137,402
-- 38 The Notes to Financial Statements are an integral part of these statements. International Blend/Bank of Ireland Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------- COMMON STOCKS-97.1% AUSTRALIA-2.8% Foster's Group Ltd. 10,146 $ 29 National Australia Bank Ltd. 3,740 84 News Corp. Ltd. 9,602 72 Westpac Banking Corp. 7,030 77 ------ 262 ------ CHINA-0.9% Petrochina Co. Ltd. 276,000 83 ------ FINLAND-1.5% Nokia OYJ 8,652 143 ------ FRANCE-8.3% Aventis SA 4,622 255 AXA 8,152 127 LaFarge SA 1,170 68 Total Fina Elf SA 2,261 342 ------ 792 ------ GERMANY-6.6% Bayer AG 3,384 79 Bayerische Motoren Werke AG 4,604 177 Deutsche Bank AG 2,027 132 E. ON AG 4,650 239 ------ 627 ------ HONG KONG-2.0% Cheung Kong Holdings Ltd. 11,000 66 Hong Kong Electric Holdings Ltd. 10,000 39 Sun Hung Kai Properties Ltd. 9,000 45 Swire Pacific Ltd. 10,000 44 ------ 194 ------ IRELAND-0.7% CRH PLC 3,911 62 ------ ITALY-4.1% ENI-Ente Nazionale Idrocarburi SpA 12,841 195 Telecom Italia SpA 21,217 192 ------ 387 ------ JAPAN-14.7% Acom Co. Ltd. (a) 1,130 41 Canon, Inc. (a) 8,000 368 Fanuc Ltd. 1,200 60 Fuji Photo Film Co. Ltd. (a) 4,000 116 Honda Motor Co. Ltd. (a) 4,500 171 Hoya Corp. 1,600 110 Nintendo Co. Ltd. (a) 500 36
NUMBER OF VALUE SHARES (000) ----------------------------------------------------------------- JAPAN continued Nippon Telegraph & Telephone Corp. (a) 42 $ 165 NTT DoCoMo, Inc. (a) 34 74 Rohm Co. Ltd. (a) 600 65 Shin-Etsu Chemical Co. Ltd. (a) 1,700 58 SMC Corp. (a) 300 25 Takeda Chemical Industries Ltd. (a) 3,100 115 ------ 1,404 ------ NETHERLANDS-9.4% ABN-Amro Holdings NV 10,756 206 Heineken NV 1,394 50 ING Groep NV 12,901 225 Koninklijke Ahold NV (a) 7,756 64 Koninklijke Philips Electronics NV 7,969 152 Reed Elsevier NV 8,039 95 TPG NV 3,000 52 VNU NV 1,710 53 ------ 897 ------ SOUTH KOREA-2.0% POSCO (a) 1,950 51 Samsung Electronics Co., Ltd. GDR 144A (a) 923 137 ------ 188 ------ SPAIN-4.0% Banco Santander Central Hispano SA 21,776 191 Telefonica SA 16,343 190 ------ 381 ------ SWITZERLAND-12.3% Nestle SA 1,613 334 Novartis AG 4,899 194 Roche Holdings AG 2,306 181 Swiss Reinsurance 3,060 170 UBS AG 5,285 295 ------ 1,174 ------ UNITED KINGDOM-27.8% Barclays PLC 36,170 269 BP PLC 13,531 94 British American Tobacco PLC 7,817 89 BT Group PLC 6,906 23 Cadbury Schweppes PLC 22,118 131 Centrica PLC 13,290 39 Compass Group PLC 15,723 85 Diageo PLC 20,984 224 GlaxoSmithKline PLC 13,176 266 Hilton Group PLC 17,126 52
-- The Notes to Financial Statements are an integral part of these statements. 39 International Blend/Bank of Ireland Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) ---------------------------------------------------------------------- COMMON STOCKS continued UNITED KINGDOM continued HSBC Holdings PLC 12,111 $ 143 Kingfisher PLC 11,772 54 Lloyds TSB Group PLC 22,884 163 Prudential PLC 14,831 90 Shell Transport and Trading Co. 27,938 185 Smith & Nephew PLC 5,967 34 Smiths Group PLC 2,853 33 Tesco PLC 27,398 99 TI Automotive Ltd. (a) 5,550 - Unilever PLC 25,621 204 Vodafone Group PLC 135,055 265 Wolseley PLC 5,593 62 WPP Group PLC 5,993 47 ------- 2,651 ------- TOTAL COMMON STOCKS (Cost $10,470) 9,245 ------- RIGHTS-0.0% FRANCE- LaFarge SA, expiring 7/2/03 (Cost $0) 1,170 3 -------
NUMBER OF VALUE SHARES (000) ---------------------------------------------------------------------- SHORT-TERM OBLIGATION-1.9% MONEY MARKET FUND CIGNA Funds Group - Money Market Fund (Cost $183) 183,079 $ 183 ------- TOTAL INVESTMENT IN SECURITIES-99.0% (Total Cost $10,653) (b) 9,431 Cash and Other Assets, Less Liabilities - 1.0% 89 ------- NET ASSETS-100.0% $ 9,520 =======
NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing security. Tax Information (b) At June 30, 2003, the net unrealized depreciation of investments, based on cost for federal income tax purposes of $11,058,311, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $ 525,318 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (2,152,507) ----------- Unrealized depreciation - net $(1,627,189) =========== (c) At December 31, 2002, the capital loss carryforward was: expiring 2008 $ 129,744 expiring 2009 597,403 expiring 2010 1,509,282 ----------- $ 2,236,429 ===========
-- 40 The Notes to Financial Statements are an integral part of these statements. TimesSquare Core Plus Bond Fund INVESTMENTS IN SECURITIES June 30, 2003 (Unaudited)
PRINCIPAL VALUE (000) (000) -------------------------------------------------------------------------------- LONG-TERM BONDS-86.8% BASIC MATERIALS-0.4% Abitibi-Consolidated, Inc., 6.00%, 2013 $ 65 $ 62 Stora Enso Oyj, 7.38%, 2011 60 72 Weyerhaeuser Co., 5.25%, 2009 55 59 ------ 193 ------ COMMUNICATIONS & MEDIA-8.0% AOL Time Warner, Inc., 7.63%, 2031 30 35 AT&T Corp., 8.50%, 2031 35 40 AT&T Wireless Services, Inc., 8.13%, 2012 45 54 British Telecommunications PLC, 8.88% (coupon change based on rating), 2030 80 109 Comcast Corp., 5.85%, 2010 50 55 Deutsche Telekom International Finance BV, 8.50%, (coupon change based on rating), 2010 120 147 8.75%, (coupon change based on rating), 2030 210 268 France Telecom SA, 8.70%, (coupon change based on rating), 2006 30 34 9.25%, (coupon change based on rating), 2011 375 472 10.00%, (coupon change based on rating), 2031 35 48 Kyivstar GSM, 12.75%, 2005 144A 80 88 Koninklijke KPN, NV, 8.00%, 2010 310 384 Liberty Media Corp., 5.70%, 2013 20 20 News America Holdings, 7.75%, 2045 100 119 News America, Inc., 6.75%, 2038 15 17 PTC International Finance II SA, 11.25%, 2009 95 107 Qwest Capital Funding Inc., 7.00%, 2009 15 12 6.50%, 2018 10 7 Speedway Motorsports, Inc., 6.75%, 2013 144A 35 36 Sprint Capital Corp., 6.13%, 2008 45 49 8.38%, 2012 5 6 8.75%, 2032 100 120 Tele Communications, Inc., 9.80%, 2012 115 152 7.88%, 2013 180 218 TELUS Corp., 8.00%, 2011 135 156 Time Warner, Inc., 8.18%, 2007 250 293 9.13%, 2013 60 77 7.57%, 2024 95 108 TPSA Finance BV, 7.75%, 2008 144A 100 114 Univision Communications, Inc., 7.85%, 2011 115 137 Verizon Florida, Inc., 6.13%, 2013 60 68 ------ 3,550 ------
PRINCIPAL VALUE (000) (000) -------------------------------------------------------------------------------- CONSUMER & RETAIL-2.6% Ahold Finance USA, Inc., 8.25%, 2010 $ 125 $ 128 Campbell Soup Co., 5.88%, 2008 65 74 Foster's Finance Corp., 6.88%, 2011 144A 55 65 Heinz (H.J.) Co., 6.38%, 2028 10 11 Heinz (H.J.) Finance Co., 6.75%, 2032 70 83 Kellogg Co., 7.45%, 2031 95 121 Kraft Foods, Inc., 5.25%, 2007 35 38 5.63%, 2011 95 104 Kroger Co., 7.50%, 2031 15 18 Safeway, Inc., 7.25%, 2031 15 17 Sears Roebuck Acceptance Corp., 7.00%, 2032 25 28 VFB LLC, 10.25%, 2009 (a) 1,950 468 ------ 1,155 ------ DIVERSIFIED-1.7% Bombardier, Inc., 6.75%, 2012 144A 100 103 General Electric Co., 5.00%, 2013 190 201 ITT Industries, Inc., 7.40%, 2025 245 286 Hutchison Whampoa International Ltd., 6.50%, 2013 144A 135 142 ------ 732 ------ FINANCIAL-13.0% American Express Credit, Ser.1999-1A, 5.60%, 2006 415 429 Amvescap PLC, 5.90%, 2007 120 131 BankBoston Corp., 8.25%, 2026 150 176 Boeing Capital Corp., 6.10%, 2011 100 110 CIT Group, Inc., 6.50%, 2006 80 87 6.88%, 2009 30 34 Citigroup, Inc., 3.50%, 2008 345 355 7.25%, 2010 100 121 Countrywide Home Loans, Inc., 5.50%, 2007 45 49 Credit Suisse First Boston Mortgage Securities Corp., 4.63%, 2008 55 59 Interest Only 7.50%, 2032 340 33 Interest Only 8.00%, 2032 460 46 Dresdner Funding Trust I, 8.15%, 2031 144A 160 176 Fifth Third Bank Michigan, 7.75%, 2010 155 172 First Union Capital 1, 7.94%, 2027 45 52 Ford Motor Credit Co., 6.88%, 2006 255 270 7.38%, 2009 170 178 7.38%, 2011 55 57
-- The Notes to Financial Statements are an integral part of these statements. 41 TimesSquare Core Plus Bond Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
PRINCIPAL VALUE (000) (000) ------------------------------------------------------------------------------ LONG-TERM BONDS continued FINANCIAL continued General Motors Acceptance Corp., 5.13%, 2008 $ 70 $ 69 6.88%, 2011 290 291 7.00%, 2012 45 45 Golden West Financial Corp., 4.13%, 2007 85 90 Goldman Sachs Group, Inc., 6.88%, 2011 180 212 Household Finance Corp., 6.38%, 2011 105 119 6.38%, 2012 90 103 HVB Funding Trust III, 9.00%, 2031 144A 185 193 International Lease Finance Corp., 6.38%, 2009 90 101 Kazkommerts International BV, 8.50%, 2013 144A 70 70 Korea Development Bank, 4.25%, 2007 20 21 5.50%, 2012 10 11 Lehman Brothers Holdings, Inc., 6.63%, 2012 90 106 Manufacturers & Traders Trust, 8.00%, 2010 60 74 Morgan (J.P.) Co., 6.00%, 2009 95 107 Morgan Stanley Group, Inc., 6.75%, 2011 105 123 National Rural Utilities Cooperative Finance Corp., 5.75%, 2009 55 61 NB Capital Trust IV, 8.25%, 2027 65 79 Prudential Funding LLC, 6.60%, 2008 60 69 Residential Asset Mortgage Products, Inc., Interest Only, 5.75%, 2005 1,697 102 Santander Financial Issuances, 6.80%, 2005 40 44 Sovereign Bancorp., Inc., 10.50%, 2006 555 667 Standard Chartered Bank, 8.00%, 2031 144A 120 153 Union Planters Corp., 6.75%, 2005 130 143 Zions Bancorp., Step Coupon (6.50%, 10/15/2006), 2011 135 150 ------ 5,738 ------ FOREIGN GOVERNMENT-2.2% Bulgaria (Republic of), Floating Rate, 2.19%, 2024 100 97 Quebec (Province of Canada), 5.50%, 2006 255 278 5.00%, 2009 20 22 7.50%, 2023 185 242 Russian Federation, Step Coupon (5.00% to 3/31/07), 2030 144A 145 141 Ukraine Government, 7.65%, 2013 144A 100 99 United Mexican States, 8.30%, 2031 90 104 ------ 983 ------
PRINCIPAL VALUE (000) (000) ------------------------------------------------------------------------------ INDUSTRIAL-1.9% BAE Systems Holdings, 6.40%, 2011 144A $ 225 $ 252 Lockheed Martin Corp., 8.20%, 2009 240 304 8.50%, 2029 105 143 Systems 2001 Asset Trust LLC, 7.16%, 2011 144A 113 127 ------ 826 ------ INSURANCE-1.4% American Re Corp., 7.45%, 2026 55 61 AXA SA, 8.60%, 2030 50 64 Monumental Global Funding II, 3.85%, 2008 144A 95 98 Progressive Corp., 6.38%, 2012 5 6 6.25%, 2032 15 17 Travelers Property Casualty Corp., 5.00%, 2013 65 68 XL Capital Europe PLC, 6.50%, 2012 85 97 Zurich Capital Trust I, 8.38%, 2037 144A 180 198 ------ 609 ------ MEDICAL-0.3% Tenet Healthcare Corp., 7.38%, 2013 120 116 ------ OIL & GAS-2.2% Amerada Hess Corp., 7.30%, 2031 65 75 Conoco Funding, Co., 6.35%, 2011 250 292 Devon Financing Corp. ULC, 6.88%, 2011 70 82 Duke Energy Field Services LLC, 5.75%, 2006 20 21 6.88%, 2011 15 17 Gazprom OAO, 9.63%, 2013 144A 100 110 Occidental Petroleum Corp., 7.65%, 2006 215 243 6.75%, 2012 20 24 Petroleos Mexicanos, 9.50%, 2027 75 93 ------ 957 ------ PHARMACEUTICALS-0.5% Lilly (Eli) & Co., 6.77%, 2036 165 202 Wyeth, 5.25%, 2013 20 21 ------ 223 ------ TRANSPORTATION-2.5% American Airlines, 7.38%, 2016 166 78 Burlington Northern Santa Fe, 6.75%, 2029 85 96 Continental Airlines, Inc., 6.90%, 2017 200 150 6.55%, 2020 4 4 Delta Air Lines, Inc., 7.90%, 2009 75 60
-- 42 The Notes to Financial Statements are an integral part of these statements. TimesSquare Core Plus Bond Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
PRINCIPAL VALUE (000) (000) ------------------------------------------------------------------------ LONG-TERM BONDS continued TRANSPORTATION continued Federal Express Corp., 7.60%, 2097 $ 55 $ 63 Ford Motor Co., 6.38%, 2029 60 49 General Motors Corp., 7.13%, 2013 60 60 Norfolk Southern Corp., 7.70%, 2017 140 179 Union Pacific Corp., 7.60%, 2005 145 160 5.75%, 2007 110 122 6.13%, 2012 85 96 ------- 1,117 ------- U.S. GOVERNMENT & AGENCIES-47.4% Fannie Mae, 5.50%, 2017 725 753 8.00%, 2030 179 193 7.00%, 2031 576 610 8.00%, 2031 142 152 6.50%, 2032 1,903 1,985 7.00%, 2032 1,339 1,415 6.50%, 2033 585 610 Interest Only 7.20%, 2042 3,731 76 Financing Corp., Principal Strips from 9.90%, 2018 260 120 10.00%, 2018 240 115 8.60%, 2019 240 105 9.65%, 2019 200 91 9.70%, 2019 360 162 Freddie Mac, 6.00%, 2017 698 726 4.50%, 2018 736 753 5.00%, 2018 1,098 1,135 6.00%, 2032 2,064 2,140 7.50%, 2032 782 831 5.50%, 2033 1,731 1,788 Interest Only 9.89%, 2043 3,480 96 Ginnie Mae, 6.50%, 2031 350 368 6.50%, 2032 254 266 5.50%, 2033 204 212 6.00%, 2033 452 474
PRINCIPAL VALUE (000) (000) ------------------------------------------------------------------------ U.S. GOVERNMENT & AGENCIES continued U.S. Treasury Bonds, 8.75%, 2017 $ 395 $ 591 6.00%, 2026 670 801 U.S. Treasury Notes, 7.88%, 2004 330 360 4.63%, 2006 2,550 2,764 4.38%, 2007 840 913 6.00%, 2009 195 230 5.00%, 2011 105 118 ------- 20,953 ------- UTILITIES-2.7% American Electric Power, Inc., 5.38%, 2010 20 21 Carolina Power & Light Co., 6.50%, 2012 55 64 CenterPoint Energy 5.70%, 2013 144A 70 76 7.88%, 2013 144A 35 40 Columbus Southern Power Co., 5.50%, 2013 144A 30 32 Detroit Edison Co., 6.13%, 2010 115 131 6.35%, 2032 15 17 Dominion Resources Inc., 6.25%, 2012 35 40 DPL, Inc., 8.25%, 2007 85 96 Duke Capital Corp., 6.25%, 2013 15 16 First Energy Corp., 5.50%, 2006 140 150 6.45%, 2011 80 88 7.38%, 2031 35 39 Nisource Finance Corp., 7.88%, 2010 105 124 Ohio Power Co., 5.50%, 2013 144A 15 16 Oncor Electric Delivery Co., 7.25%, 2033 144A 70 83 Pinnacle Partners, 8.83%, 2004 144A 80 83 Progress Energy, Inc., 7.00%, 2031 60 66 ------- 1,182 ------- TOTAL LONG-TERM BONDS (Cost $36,391) 38,334 -------
-- The Notes to Financial Statements are an integral part of these statements. 43 TimesSquare Core Plus Bond Fund INVESTMENTS IN SECURITIES continued June 30, 2003 (Unaudited)
NUMBER OF VALUE SHARES (000) -------------------------------------------------------------------------- PREFERRED STOCK-2.0% COMMUNICATIONS & MEDIA-0.3% Centaur Funding Corp., 9.08% 144A 120 $ 144 -------- FINANCIAL-1.7% BCI US Funding Trust, Step Coupon (8.01% to 7/15/08) 144A 190 221 Natexis AMBS Co. LLC., Step Coupon (8.44% to 6/30/08) 144A 105 127 RBS Capital Trust I, Step Coupon (4.71% to 7/01/13) 390 390 -------- 738 -------- TOTAL PREFERRED STOCK (Cost $843) 882 -------- SHORT-TERM OBLIGATIONS-11.2% MONEY MARKET FUND-10.9% CIGNA Funds Group - Money Market Fund 4,826,709 4,827 -------- PRINCIPAL (000) ---------- U.S. GOVERNMENT-0.2% U.S. Treasury Bills, 1.10%, 10/3/03 (b) $ 50 50 1.17%, 10/3/03 (b) 25 25 -------- 75 -------- UTILITIES-0.1% Niagara Mohawk Power Co., 7.38%, 2003 39 39 -------- TOTAL SHORT-TERM OBLIGATIONS (Cost $4,941) 4,941 -------- TOTAL INVESTMENTS IN SECURITIES-100.0% (Total Cost $42,175) (d) 44,157 Cash and Other Assets, Less Liabilities - 0.0% 22 -------- NET ASSETS-100.0% $ 44,179 ========
NOTES TO INVESTMENTS IN SECURITIES (a) Indicates defaulted security. (b) Pledged as collateral for financial futures contracts. At June 30, 2003, the Fund was long 9, 2-year U.S. Treasury Notes and was short 1, U.S. Treasury Bond futures contract, 7, 10-year and 12, 5-year U.S. Treasury Note futures contracts, all expiring in September 2003. Net unrealized gain amounted to $25,242. Underlying face values of the long and short positions were $1,944,000 and ($2,343,477), respectively, and underlying market values were $1,946,671 and ($2,320,906), respectively. (c) A summary of outstanding forward currency contracts, as of June 30, 2003, is as follows:
Net Unrealized Settlement Forward Foreign Contract Appreciation Date Contract Currency Value (Depreciation) ---------- -------- -------- -------- -------------- Buys 09/15/03 EURO 390,000 $451,019 $ (3,415)
(d) At June 30, 2003, the net unrealized appreciation of investments, based on cost for federal income tax purposes of $42,350,395, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $1,948,570 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (141,801) ---------- Unrealized appreciation - net $1,806,769 ========== (e) At December 31, 2002, the capital loss carryforward was: expiring 2010 $1,593,398
-- 44 The Notes to Financial Statements are an integral part of these statements. CIGNA Funds Group STATEMENTS OF ASSETS AND LIABILITIES June 30, 2003 (Unaudited) (In Thousands)
Balanced Large Large Fund Cap Growth/ Cap Value/ (sub-advised by Morgan John A. Wellington Stanley Levin & Co. Management) Fund Fund ---------------------------------------------------------------------------------------------- Assets: Investments in securities at value $14,913 $11,451 $19,782 Cash 1 51 1 Foreign currency (Cost $71) - - - Interest and dividends receivable, net of withholding taxes 66 11 27 Receivable for investments sold - 302 288 Receivable for fund shares sold - - - Swap contracts receivable - - - Receivable from investment adviser 3 5 - Prepaid expenses 5 5 6 Investment for Trustees' deferred compensation plan (A) 1 (A) ------- ------- ------- Total assets 14,988 11,826 20,104 ------- ------- ------- Liabilities: Payable for investments purchased 482 246 206 Payable for fund shares purchased - - 30 Futures variation margin payable - - - Payable for forward currency contracts - - - Custodian fees payable 11 12 15 Audit and legal fees payable 17 17 17 Advisory fees payable - - 1 Administrative services fees payable 5 5 5 Shareholder servicing and distribution fees payable to Distributor 8 8 13 Deferred Trustees' fees payable (A) 1 (A) Other accrued expenses 2 2 2 ------- ------- ------- Total liabilities 525 291 289 ------- ------- ------- Net Assets $14,463 $11,535 $19,815 ======= ======= ======= Components of Net Assets: Paid-in capital $15,662 $16,858 $22,849 Undistributed (overdistributed) net investment income 194 8 234 Accumulated net realized gain (loss) on investments (1,997) (6,142) (4,422) Net unrealized appreciation (depreciation) of investments, futures, forward contracts and swaps 604 811 1,154 ------- ------- ------- Net Assets $14,463 $11,535 $19,815 ======= ======= ======= Net Assets Institutional Class $ 4,453 $ 2,816 $ 4,270 Premier Class 4,934 3,685 6,517 Retail Class 5,076 5,034 9,028 ------- ------- ------- $14,463 $11,535 $19,815 ======= ======= ======= Shares Outstanding Institutional Class 488 473 517 Premier Class 542 623 791 Retail Class 560 858 1,102 Net Asset Value and Redemption Price per Share Institutional Class $ 9.12 $ 5.96 $ 8.26 Premier Class $ 9.10 $ 5.92 $ 8.24 Retail Class $ 9.06 $ 5.87 $ 8.20 Cost of Investments $14,309 $10,640 $18,628 ======= ======= ======= Small International TimesSquare S&P Small Cap Value/ Blend/ Core 500(R) Cap Growth/ Perkins, Wolf Bank of Plus Index TimesSquare McDonnell Ireland Bond Fund Fund Fund Fund Fund -------------------------------------------------------------------------------------------------------------------------- Assets: Investments in securities at value $155,322 $178,294 $65,393 $ 9,431 $44,157 Cash 38 313 388 34 - Foreign currency (Cost $71) - - - 71 - Interest and dividends receivable, net of withholding taxes 187 11 47 37(1) 424 Receivable for investments sold 1 335 130 6 480 Receivable for fund shares sold - 5,817 - - - Swap contracts receivable - - - - 39 Receivable from investment adviser - - - 4 - Prepaid expenses 6 18 5 5 7 Investment for Trustees' deferred compensation plan 5 (A) (A) (A) 2 -------- -------- ------- ------- ------- Total assets 155,559 184,788 65,963 9,588 45,109 -------- -------- ------- ------- ------- Liabilities: Payable for investments purchased - 7,041 158 3 848 Payable for fund shares purchased - - - - - Futures variation margin payable - - - - 7 Payable for forward currency contracts - - - - 4 Custodian fees payable 38 8 10 34 27 Audit and legal fees payable 21 17 17 17 16 Advisory fees payable 1 116 41 - - Administrative services fees payable 18 2 5 4 10 Shareholder servicing and distribution fees payable to Distributor 35 16 26 7 5 Deferred Trustees' fees payable 5 (A) (A) (A) 2 Other accrued expenses 13 - 3 3 11 -------- -------- ------- ------- ------- Total liabilities 131 7,200 260 68 930 -------- -------- ------- ------- ------- Net Assets $155,428 $177,588 $65,703 $ 9,520 $44,179 ======== ======== ======= ======= ======= Components of Net Assets: Paid-in capital $187,622 $161,243 $62,142 $13,685 $42,628 Undistributed (overdistributed) net investment income 1,154 (506) 189 117 (327) Accumulated net realized gain (loss) on investments (13,768) (3,081) (619) (3,063) (125) Net unrealized appreciation (depreciation) of investments, futures, forward contracts and swaps (19,580) 19,932 3,991 (1,219) 2,003 -------- -------- ------- ------- ------- Net Assets $155,428 $177,588 $65,703 $ 9,520 $44,179 ======== ======== ======= ======= ======= Net Assets Institutional Class $119,807 $141,228 $33,543 $ 3,072 $39,896 Premier Class 3,492 28,412 14,819 4,331 1,260 Retail Class 32,129 7,948 17,341 2,117 3,023 -------- -------- ------- ------- ------- $155,428 $177,588 $65,703 $ 9,520 $44,179 ======== ======== ======= ======= ======= Shares Outstanding Institutional Class 19,976 14,935 2,911 479 3,793 Premier Class 581 3,016 1,292 676 120 Retail Class 5,387 851 1,523 334 290 Net Asset Value and Redemption Price per Share Institutional Class $ 6.00 $ 9.46 $ 11.52 $ 6.42 $ 10.52 Premier Class $ 6.01 $ 9.42 $ 11.47 $ 6.41 $ 10.47 Retail Class $ 5.96 $ 9.34 $ 11.39 $ 6.35 $ 10.42 Cost of Investments $174,496 $158,362 $61,402 $10,653 $42,175 ======== ======== ======= ======= =======
(1) Including foreign tax reclaim receivable of $25 and cost of $22. (A) Amount less than $1. -- The Notes to Financial Statements are an integral part of these statements. 45 CIGNA Funds Group STATEMENTS OF OPERATIONS For the Six Months ended June 30, 2003 (Unaudited) (In Thousands)
Balanced Large Large Fund Cap Growth/ Cap Value/ (sub-advised by Morgan John A. Wellington Stanley Levin & Co. Management) Fund Fund ------------------------------------------------------------------------------------------ Investment Income: Dividends (net of foreign taxes withheld) $ 99 $ 64 $ 178 Interest 119 - - ------ ------ ------- 218 64 178 Expenses: Investment advisory fees 48 42 63 Custodian fees and expenses 29 31 30 Administrative services fees 12 11 12 Registration fees 18 18 17 Audit and legal fees 13 13 13 Distribution fees Premier Class - - - Retail Class 6 6 9 Shareholder servicing fees Premier Class 4 3 6 Retail Class 5 5 8 Shareholder reports 1 1 1 Other 3 2 3 ------ ------ ------- Total expenses 139 132 162 Less expenses waived and reimbursed by Adviser or distributor (71) (76) (70) ------ ------ ------- Net expenses 68 56 92 ------ ------ ------- Net Investment Income (Loss) 150 8 86 ------ ------ ------- Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) from: Currency contracts - - - Futures contracts - - - Securities transactions (189) (192) (2,941) ------ ------ ------- (189) (192) (2,941) ------ ------ ------- Net change in unrealized appreciation (depreciation): Currency contracts - - - Futures contracts - - - Swaps - - - Investments 1,156 1,269 4,962 ------ ------ ------- 1,156 1,269 4,962 ------ ------ ------- Net Realized and Unrealized Gain on Investments 967 1,077 2,021 ------ ------ ------- Net Increase in Net Assets Resulting from Operations $1,117 $1,085 $ 2,107 ====== ====== ======= Small International TimesSquare S&P Small Cap Value/ Blend/ Core 500(R) Cap Growth/ Perkins, Wolf Bank of Plus Index TimesSquare McDonnell Ireland Bond Fund Fund Fund Fund Fund --------------------------------------------------------------------------------------------------------------------- Investment Income: Dividends (net of foreign taxes withheld) $ 1,366 $ 105 $ 380 $ 172 $ 73 Interest 8 - - - 2,708 ------- ------- ------ ----- ------- 1,374 105 380 172 2,781 Expenses: Investment advisory fees 159 532 214 43 257 Custodian fees and expenses 88 38 31 59 67 Administrative services fees 40 16 14 11 28 Registration fees 17 24 19 17 16 Audit and legal fees 20 14 13 13 14 Distribution fees Premier Class - - - - 1 Retail Class 34 9 19 2 3 Shareholder servicing fees Premier Class 3 15 15 5 2 Retail Class 27 7 15 2 3 Shareholder reports 5 3 2 1 6 Other 11 5 3 3 6 ------- ------- ------ ----- ------- Total expenses 404 663 345 156 403 Less expenses waived and reimbursed by Adviser or distributor (166) (53) (58) (102) (188) ------- ------- ------ ----- ------- Net expenses 238 610 287 54 215 ------- ------- ------ ----- ------- Net Investment Income (Loss) 1,136 (505) 93 118 2,566 ------- ------- ------ ----- ------- Realized and Unrealized Gain (Loss) on Investments: Net realized gain (loss) from: Currency contracts - - - 3 77 Futures contracts 2,948 - - - (371) Securities transactions (250) 1,459 107 (312) 4,757 ------- ------- ------ ----- ------- 2,698 1,459 107 (309) 4,463 ------- ------- ------ ----- ------- Net change in unrealized appreciation (depreciation): Currency contracts - - - 6 (6) Futures contracts (177) - - - 152 Swaps - - - - (1) Investments 14,333 21,569 5,532 796 (1,705) ------- ------- ------ ----- ------- 14,156 21,569 5,532 802 (1,560) ------- ------- ------ ----- ------- Net Realized and Unrealized Gain on Investments 16,854 23,028 5,639 493 2,903 ------- ------- ------ ----- ------- Net Increase in Net Assets Resulting from Operations $17,990 $22,523 $5,732 $ 611 $ 5,469 ======= ======= ====== ===== =======
-- 46 The Notes to Financial Statements are an integral part of these statements. CIGNA Funds Group STATEMENTS OF CHANGES IN NET ASSETS (In Thousands)
Balanced Fund (sub-advised by Large Cap Growth/ Wellington Management) Morgan Stanley Fund ----------------------------- ---------------------------- For the Six For the Year For the Six For the Year Months Ended Ended Months Ended Ended June 30, 2003 December 31, June 30, 2003 December 31, (Unaudited) 2002 (Unaudited) 2002 -------------------------------------------------------------------------------------------------------------- Operations: Net investment income (loss) $ 150 $ 309 $ 8 $ (2) Net realized gain (loss) on Investments (189) (890) (192) (2,935) Net unrealized appreciation (depreciation) on Investments 1,156 (913) 1,269 (383) ------- ------- ------- ------- Net increase (decrease) from operations 1,117 (1,494) 1,085 (3,320) ------- ------- ------- ------- Dividends and Distributions: From net investment income Institutional Class - (112) - - Premier Class - (113) - - Retail Class - (107) - - ------- ------- ------- ------- Total dividends and distributions - (332) - - ------- ------- ------- ------- Capital Share Transactions: Institutional Class Net proceeds from sales of shares 9 - 56 226 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 112 - - ------- ------- ------- ------- 9 112 56 226 Cost of shares redeemed - - (38) (85) ------- ------- ------- ------- Total from Institutional Class 9 112 18 141 ------- ------- ------- ------- Premier Class Net proceeds from sales of shares 179 229 350 586 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 113 - - ------- ------- ------- ------- 179 342 350 586 Cost of shares redeemed (50) (57) (147) (253) ------- ------- ------- ------- Total from Premier Class 129 285 203 333 ------- ------- ------- ------- Retail Class Net proceeds from sales of shares 484 2,075 1,467 3,062 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 107 - - ------- ------- ------- ------- 484 2,182 1,467 3,062 Cost of shares redeemed (341) (582) (1,217) (654) ------- ------- ------- ------- Total from Retail Class 143 1,600 250 2,408 ------- ------- ------- ------- Net increase (decrease) from Fund share transactions 281 1,997 471 2,882 ------- ------- ------- ------- Total Net Increase (Decrease) in Net Assets 1,398 171 1,556 (438) Net Assets: Beginning of period 13,065 12,894 9,979 10,417 ------- ------- ------- ------- End of period* $14,463 $13,065 $11,535 $ 9,979 ======= ======= ======= ======= * Includes undistributed net investment income of: $ 194 $ 44 $ 8 $ - ======= ======= ======= ======= Large Cap Value/ John A. Levin & Co. Fund S&P 500(R) Index Fund ---------------------------- ---------------------------- For the Six For the Year For the Six For the Year Months Ended Ended Months Ended Ended June 30, 2003 December 31, June 30, 2003 December 31, (Unaudited) 2002 (Unaudited) 2002 -------------------------------------------------------------------------------------------------------------- Operations: Net investment income (loss) $ 86 $ 155 $ 1,136 $ 2,075 Net realized gain (loss) on Investments (2,941) (1,378) 2,698 (9,347) Net unrealized appreciation (depreciation) on Investments 4,962 (3,838) 14,156 (33,650) ------- ------- -------- -------- Net increase (decrease) from operations 2,107 (5,061) 17,990 (40,922) ------- ------- -------- -------- Dividends and Distributions: From net investment income Institutional Class - (40) - (1,832) Premier Class - (49) - (33) Retail Class - (44) - (260) ------- ------- -------- -------- Total dividends and distributions - (133) - (2,125) ------- ------- -------- -------- Capital Share Transactions: Institutional Class Net proceeds from sales of shares 57 292 107 428 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 40 - 1,832 ------- ------- -------- -------- 57 332 107 2,260 Cost of shares redeemed (2) (62) (15,849) (3) ------- ------- -------- -------- Total from Institutional Class 55 270 (15,742) 2,257 ------- ------- -------- -------- Premier Class Net proceeds from sales of shares 465 1,820 1,031 1,673 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 49 - 33 ------- ------- -------- -------- 465 1,869 1,031 1,706 Cost of shares redeemed (404) (752) (473) (918) ------- ------- -------- -------- Total from Premier Class 61 1,117 558 788 ------- ------- -------- -------- Retail Class Net proceeds from sales of shares 3,166 4,909 8,120 14,389 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 44 - 260 ------- ------- -------- -------- 3,166 4,953 8,120 14,649 Cost of shares redeemed (1,570) (1,128) (2,508) (4,502) ------- ------- -------- -------- Total from Retail Class 1,596 3,825 5,612 10,147 ------- ------- -------- -------- Net increase (decrease) from Fund share transactions 1,712 5,212 (9,572) 13,192 ------- ------- -------- -------- Total Net Increase (Decrease) in Net Assets 3,819 18 8,418 (29,855) Net Assets: Beginning of period 15,996 15,978 147,010 176,865 ------- ------- -------- -------- End of period* $19,815 $15,996 $155,428 $147,010 ======= ======= ======== ======== * Includes undistributed net investment income of: $ 234 $ 148 $ 1,154 $ 18 ======= ======= ======== ========
-- The Notes to Financial Statements are an integral part of these statements. 47 CIGNA Funds Group STATEMENTS OF CHANGES IN NET ASSETS continued (In Thousands)
Small Cap Growth/ Small Cap Value/ TimesSquare Fund Perkins, Wolf, McDonnell Fund ---------------------------- ----------------------------- For the Six For the Year For the Six For the Year Months Ended Ended Months Ended Ended June 30, 2003 December 31, June 30, 2003 December 31, (Unaudited) 2002 (Unaudited) 2002 -------------------------------------------------------------------------------------------------------------- Operations: Net investment income (loss) $ (505) $ (341) $ 93 $ 109 Net realized gain (loss) on Investments 1,459 (2,761) 107 (725) Net unrealized appreciation (depreciation) on Investments 21,569 (2,920) 5,532 (3,305) -------- ------- ------- ------- Net increase (decrease) from operations 22,523 (6,022) 5,732 (3,921) -------- ------- ------- ------- Dividends and Distributions: From net investment income Institutional Class - - - (16) Premier Class - - - (8) Retail Class - - - - From net realized capital gains Institutional Class - - - (120) Premier Class - - - (114) Retail Class - - - (138) -------- ------- ------- ------- Total dividends and distributions - - - (396) -------- ------- ------- ------- Capital Share Transactions: Institutional Class Net proceeds from sales of shares 72,226 46,629 22,256 5,805 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - - - 136 -------- ------- ------- ------- 72,226 46,629 22,256 5,941 Cost of shares redeemed (1,471) (731) (2,545) (9) -------- ------- ------- ------- Total from Institutional Class 70,755 45,898 19,711 5,932 -------- ------- ------- ------- Premier Class Net proceeds from sales of shares 21,479 600 6,768 4,582 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - - - 122 -------- ------- ------- ------- 21,479 600 6,768 4,704 Cost of shares redeemed (1,263) (290) (4,775) (598) -------- ------- ------- ------- Total from Premier Class 20,216 310 1,993 4,106 -------- ------- ------- ------- Retail Class Net proceeds from sales of shares 1,955 4,334 5,478 10,723 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - - - 138 -------- ------- ------- ------- 1,955 4,334 5,478 10,861 Cost of shares redeemed (1,612) (1,472) (3,188) (2,035) -------- ------- ------- ------- Total from Retail Class 343 2,862 2,290 8,826 -------- ------- ------- ------- Net increase (decrease) from Fund share transactions 91,314 49,070 23,994 18,864 -------- ------- ------- ------- Total Net Increase (Decrease) in Net Assets 113,837 43,048 29,726 14,547 Net Assets: Beginning of period 63,751 20,703 35,977 21,430 -------- ------- ------- ------- End of period* $177,588 $63,751 $65,703 $35,977 ======== ======= ======= ======= * Includes undistributed (overdistributed) net investment income of: $ (506) $ (1) $ 189 $ 96 ======== ======= ======= ======= International Blend/ TimesSquare Bank of Ireland Fund Core Plus Bond Fund ---------------------------- ---------------------------- For the Six For the Year For the Six For the Year Months Ended Ended Months Ended Ended June 30, 2003 December 31, June 30, 2003 December 31, (Unaudited) 2002 (Unaudited) 2002 -------------------------------------------------------------------------------------------------------------- Operations: Net investment income (loss) $ 118 $ 88 $ 2,566 $ 4,383 Net realized gain (loss) on Investments (309) (1,844) 4,463 (275) Net unrealized appreciation (depreciation) on Investments 802 (137) (1,560) 4,437 ------ ------- --------- -------- Net increase (decrease) from operations 611 (1,893) 5,469 8,545 ------ ------- --------- -------- Dividends and Distributions: From net investment income Institutional Class - (32) (2,547) (5,963) Premier Class - (35) (33) (47) Retail Class - (13) (77) (60) From net realized capital gains Institutional Class - - - (64) Premier Class - - - (1) Retail Class - - - (1) ------ ------- --------- -------- Total dividends and distributions - (80) (2,657) (6,136) ------ ------- --------- -------- Capital Share Transactions: Institutional Class Net proceeds from sales of shares 19 1,271 52,004 4,176 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 32 2,547 6,027 ------ ------- --------- -------- 19 1,303 54,551 10,203 Cost of shares redeemed (1) (1,252) (119,062) (1,656) ------ ------- --------- -------- Total from Institutional Class 18 51 (64,511) 8,547 ------ ------- --------- -------- Premier Class Net proceeds from sales of shares 132 707 191 882 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 35 33 48 ------ ------- --------- -------- 132 742 224 930 Cost of shares redeemed (136) (446) (188) (235) ------ ------- --------- -------- Total from Premier Class (4) 296 36 695 ------ ------- --------- -------- Retail Class Net proceeds from sales of shares 378 2,240 2,667 3,260 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions - 13 76 61 ------ ------- --------- -------- 378 2,253 2,743 3,321 Cost of shares redeemed (289) (1,519) (1,708) (2,056) ------ ------- --------- -------- Total from Retail Class 89 734 1,035 1,265 ------ ------- --------- -------- Net increase (decrease) from Fund share transactions 103 1,081 (63,440) 10,507 ------ ------- --------- -------- Total Net Increase (Decrease) in Net Assets 714 (892) (60,628) 12,916 Net Assets: Beginning of period 8,806 9,698 104,807 91,891 ------ ------- --------- -------- End of period* $9,520 $ 8,806 $ 44,179 $104,807 ====== ======= ========= ======== * Includes undistributed (overdistributed) net investment income of: $ 117 $ (1) $ (327) $ (236) ====== ======= ========= ========
-- 48 The Notes to Financial Statements are an integral part of these statements. CIGNA Funds Group FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS
Balanced Fund (sub-advised by Wellington Management)(1) ------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 -------------------------------------------- (Unaudited) 2002 2001(e) 2000 --------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 8.40 $ 9.68 $10.07 $10.00 Income from investment operations Net investment income (loss)(d) 0.11 0.24 (f) 0.24 0.27 Net realized and unrealized gain (loss) on investments 0.61 (1.28) (0.41) 0.10 ------ ------- ------ ------ Total from investment operations 0.72 (1.04) (0.17) 0.37 ------ ------- ------ ------ Less dividends and distributions: Dividends from net investment income - (0.24) (0.22) (0.30) ------ ------- ------ ------ Total dividends and distributions - (0.24) (0.22) (0.30) ------ ------- ------ ------ Net asset value, end of period $ 9.12 $ 8.40 $ 9.68 $10.07 ====== ======= ====== ====== Total Return(a) 8.57%(b) (10.77)% (1.67)% 3.66%(b) Ratios to Average Net Assets Gross expenses 1.87%(c) 1.78% 1.72% 1.76%(c) Fees and expenses waived or borne by the Adviser or Distributor 1.07%(c) 0.98% 0.92% 0.96%(c) Net expenses 0.80%(c) 0.80% 0.80% 0.80%(c) Net investment income (loss)(d) 2.58%(c) 2.59% 2.49% 2.78%(c) Portfolio Turnover 29%(b) 56% 104% 67%(b) Net Assets, End of Period (000 omitted) $4,453 $ 4,094 $4,585 $4,663 Large Cap Growth/Morgan Stanley Fund(1) ------------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ------------------------------------------------- (Unaudited) 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.39 $ 7.44 $ 8.72 $ 10.00 Income from investment operations Net investment income (loss)(d) 0.01 0.01 (A)(f) (0.01) Net realized and unrealized gain (loss) on investments 0.56 (2.06) (1.28) (1.27) ------ ------- ------- ------- Total from investment operations 0.57 (2.05) (1.28) (1.28) ------ ------- ------- ------- Less dividends and distributions: Dividends from net investment income - - - - ------ ------- ------- ------- Total dividends and distributions - - - - ------ ------- ------- ------- Net asset value, end of period $ 5.96 $ 5.39 $ 7.44 $ 8.72 ====== ======= ======= ======= Total Return(a) 10.58%(b) (27.55)% (14.68)% (12.80)%(b) Ratios to Average Net Assets Gross expenses 2.25%(c) 2.18% 2.18% 1.79%(c) Fees and expenses waived or borne by the Adviser or Distributor 1.45%(c) 1.35% 1.38% 0.99%(c) Net expenses 0.80%(c) 0.80% 0.80% 0.80%(c) Net investment income (loss)(d) 0.42%(c) 0.21% 0.06% (0.11)%(c) Portfolio Turnover 78%(b) 149% 91% 75%(b) Net Assets, End of Period (000 omitted) $2,816 $ 2,528 $ 3,347 $ 3,926
Large Cap Value/John A. Levin & Co. Fund(1) --------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ----------------------------------------------- (Unaudited) 2002 2001 2000 --------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 7.41 $ 10.24 $10.85 $ 0.00 Income from investment operations Net investment income(d) 0.04 0.09 0.11(f) 0.13 Net realized and unrealized gain (loss) on investments 0.81 (2.84) (0.57) 1.28 ------ ------- ------ ------ Total from investment operations 0.85 (2.75) (0.46) 1.41 ------ ------- ------ ------ Less dividends and distributions: Dividends from net investment income - (0.08) (0.15) (0.56) Distributions from net realized capital gains - - - - ------ ------- ------ ------ Total dividends and distributions - (0.08) (0.15) (0.56) ------ ------- ------ ------ Net asset value, end of period $ 8.26 $ 7.41 $10.24 $10.85 ====== ======= ====== ====== Total Return(a) 11.47%(b) (26.85)% (4.21)% 14.03%(b) Ratios to Average Net Assets Gross expenses 1.61%(c) 1.48% 1.47% 1.55%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.81%(c) 0.68% 0.67% 0.75%(c) Net expenses 0.80%(c) 0.80% 0.80% 0.80%(c) Net investment income(d) 1.23%(c) 1.17% 1.36% 1.05%(c) Portfolio Turnover 46%(b) 44% 45% 62%(b) Net Assets, End of Period (000 omitted) $4,270 $ 3,778 $4,915 $5,130 S&P 500(R) Index Fund(2) -------------------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 --------------------------------------------------------------- (Unaudited) 2002 2001 2000 1999 1998 -------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.37 $ 7.01 $ 8.11 $ 10.09 $ 8.55 $ 6.77 Income from investment operations Net investment income(d) 0.05 0.08 0.12 0.14 0.11 0.08 Net realized and unrealized gain (loss) on investments 0.58 (1.64) (1.10) (0.98) 1.66 1.83 -------- -------- -------- -------- -------- -------- Total from investment operations 0.63 (1.56) (0.98) (0.84) 1.77 1.91 -------- -------- -------- -------- -------- -------- Less dividends and distributions: Dividends from net investment income - (0.08) (0.12) (0.19) (0.14) (0.10) Distributions from net realized capital gains - - (A) (0.95) (0.09) (0.03) -------- -------- -------- -------- -------- -------- Total dividends and distributions - (0.08) (0.12) (1.14) (0.23) (0.13) -------- -------- -------- -------- -------- -------- Net asset value, end of period $ 6.00 $ 5.37 $ 7.01 $ 8.11 $ 10.09 $ 8.55 ======== ======== ======== ======== ======== ======== Total Return(a) 11.73%(b) (22.21)% (12.08)% (9.24)% 20.66% 28.28% Ratios to Average Net Assets Gross expenses 0.45%(c) 0.44% 0.44% 0.38% 0.36% 0.43% Fees and expenses waived or borne by the Adviser or Distributor 0.20%(c) 0.19% 0.19% 0.13% 0.01% 0.08% Net expenses 0.25%(c) 0.25% 0.25% 0.25% 0.35% 0.35% Net investment income(d) 1.56%(c) 1.35% 1.59% 1.46% 1.11% 1.27% Portfolio Turnover 1%(b) 4% 2% 9% 3% 3% Net Assets, End of Period (000 omitted) $119,807 $121,170 $155,364 $176,707 $352,417 $291,265
(1) Commenced operations on January 20, 2000. (2) All per share data for the S&P 500(R) Index Fund's Institutional Class as of December 31, 2001 and earlier has been restated to reflect a 1.62 to 1 stock split effective August 15, 2001. (A) Less than $0.01 per share. (a) Had the Adviser or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (b) Not annualized. (c) Annualized. (d) Net investment income per share has been calculated in accordance with SEC requirements, with the exception that end of the year accumulated undistributed/ (overdistributed) net investment income has not been adjusted to reflect current year permanent differences between financial and tax accounting. (e) Effective January 1, 2001, the Fund was required to start amortizing premium and discount on all debt securities. The effect of this change on net investment income per share was an increase of $0.01 per share. The effect to the ratio of net investment income to average net assets was an increase of 0.05%. Per share, ratios, and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in accounting principle. (f) Per share numbers have been calculated using average shares. -- The Notes to Financial Statements are an integral part of these statements. 49 CIGNA Funds Group FINANCIAL HIGHLIGHTS - INSTITUTIONAL CLASS continued
Small Cap Growth/TimesSquare Fund(2) ------------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ----------------------------------------------- (Unaudited) 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 8.16 $ 10.00 $11.00 $ 10.00 Income from investment operations Net investment income (loss)(d) (0.03) (0.07)(f) (0.06) (0.01) Net realized and unrealized gain (loss) on investments 1.33 (1.77) (0.94) 1.16 -------- ------- ------ ------- Total from investment operations 1.30 (1.84) (1.00) 1.15 -------- ------- ------ ------- Less dividends and distributions: Dividends from net investment income - - - (0.10) Distributions from net realized capital gains - - - - Distributions from capital - - - (0.05) -------- ------- ------ ------- Total dividends and distributions - - - (0.15) -------- ------- ------ ------- Net asset value, end of period $ 9.46 $ 8.16 $10.00 $ 11.00 ======== ======= ====== ======= Total Return(a) 15.93%(b) (18.40)% (9.09)% 11.51%(b) Ratios to Average Net Assets Gross expenses 1.15%(c) 1.45% 1.75% 1.81%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.10%(c) 0.40% 0.70% 0.76%(c) Net expenses 1.05%(c) 1.05% 1.05% 1.05%(c) Net investment income (loss)(d) (0.86)%(c) (0.85)% (0.66)% (0.12)%(c) Portfolio Turnover 30%(b) 57% 160% 140%(b) Net Assets, End of Period (000 omitted) $141,228 $51,762 $9,441 $16,552 Small Cap Value/Perkins, Wolf, McDonnell Fund(1) ------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 -------------------------------------------------- (Unaudited) 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 10.23 $ 12.15 $11.38 $10.00 Income from investment operations Net investment income (loss)(d) 0.03(f) 0.07(f) 0.13(f) 0.34 Net realized and unrealized gain (loss) on investments 1.26 (1.87) 2.38 2.59 ------- ------- ------ ------ Total from investment operations 1.29 (1.80) 2.51 2.93 ------- ------- ------ ------ Less dividends and distributions: Dividends from net investment income - (0.01) (1.36) (1.55) Distributions from net realized capital gains - (0.11) (0.38) - Distributions from capital - - - - ------- ------- ------ ------ Total dividends and distributions - (0.12) (1.74) (1.55) ------- ------- ------ ------ Net asset value, end of period $ 11.52 $ 10.23 $12.15 $11.38 ======= ======= ====== ====== Total Return(a) 12.61%(b) (14.80)% 21.78% 29.22%(b) Ratios to Average Net Assets Gross expenses 1.31%(c) 1.54% 1.70% 1.98%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.26%(c) 0.49% 0.65% 0.93%(c) Net expenses 1.05%(c) 1.05% 1.05% 1.05%(c) Net investment income (loss)(d) 0.68%(c) 0.64% 1.03% 1.69%(c) Portfolio Turnover 18%(b) 42% 59% 102%(b) Net Assets, End of Period (000 omitted) $33,543 $11,913 $7,079 $5,812
International Blend/Bank of Ireland Fund(3) -------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ---------------------------------------------- (Unaudited) 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 6.01 $ 7.46 $ 9.41 $10.00 Income from investment operations Net investment income(d) 0.09 0.08 0.07 0.07 Net realized and unrealized gain (loss) on investments 0.32 (1.46) (1.94) (0.46) ------ ------- ------- ------ Total from investment operations 0.41 (1.38) (1.87) (0.39) ------ ------- ------- ------ Less dividends and distributions: Dividends from net investment income - (0.07) (0.08) (0.11) Distributions from net realized capital gains - - - - Distributions from capital - - - (0.09) ------ ------- ------- ------ Total dividends and distributions - (0.07) (0.08) (0.20) ------ ------- ------- ------ Net asset value, end of period $ 6.42 $ 6.01 $ 7.46 $ 9.41 ====== ======= ======= ====== Total Return(a) 6.82%(b) (18.50)% (19.85)% (3.84)%(b) Ratios to Average Net Assets Gross expenses 3.39%(c) 3.19% 2.55% 2.59%(c) Fees and expenses waived or borne by the Adviser or Distributor 2.34%(c) 2.14% 1.50% 1.54%(c) Net expenses 1.05%(c) 1.05% 1.05% 1.05%(c) Net investment income(d) 2.93%(c) 1.13% 0.91% 0.69%(c) Portfolio Turnover 7%(b) 29% 12% 27%(b) Net Assets, End of Period (000 omitted) $3,072 $ 2,855 $ 3,466 $4,326 TimesSquare/Core Plus Bond Fund ------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 --------------------------------------------- (Unaudited) 2002 2001(e) 2000 ---------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 10.19 $ 9.96 $ 10.27 $ 10.00 Income from investment operations Net investment income(d) 0.28(f) 0.45(f) 0.59(f) 0.63 Net realized and unrealized gain (loss) on investments 0.34 0.41 0.29 0.34 ------- -------- ------- ------- Total from investment operations 0.62 0.86 0.88 0.97 ------- -------- ------- ------- Less dividends and distributions: Dividends from net investment income (0.29) (0.62) (1.12) (0.69) Distributions from net realized capital gains - (0.01) (0.07) (0.01) Distributions from capital - - - - ------- -------- ------- ------- Total dividends and distributions (0.29) (0.63) (1.19) (0.70) ------- -------- ------- ------- Net asset value, end of period $ 10.52 $ 10.19 $ 9.96 $ 10.27 ======= ======== ======= ======= Total Return(a) 6.12%(b) 8.90% 8.80% 9.93% Ratios to Average Net Assets Gross expenses 0.86%(c) 0.80% 0.80% 0.83% Fees and expenses waived or borne by the Adviser or Distributor 0.41%(c) 0.35% 0.35% 0.38% Net expenses 0.45%(c) 0.45% 0.45% 0.45% Net investment income(d) 5.63%(c) 4.48% 5.69% 6.74% Portfolio Turnover 118%(b) 396% 351% 310% Net Assets, End of Period (000 omitted) $39,896 $101,734 $90,835 $83,540
(1) Commenced operations on January 20, 2000. (2) Commenced operations on January 21, 2000. (3) Commenced operations on January 24, 2000. (a) Had the Adviser or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (b) Not annualized. (c) Annualized. (d) Net investment income per share has been calculated in accordance with SEC requirements, unless otherwise noted, with the exception that end of the year accumulated undistributed/(overdistributed) net investment income has not been adjusted to reflect current year permanent differences between financial and tax accounting. (e) The Fund was required to start amortizing premium and discount on all debt securities. The effect of this change on net investment income per share was a decrease of $0.01 per share. The effect to the ratio of net investment income to average net assets was a decrease of 0.07%. Per share, ratios, and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in accounting principle. (f) Per share numbers have been calculated using average shares. -- 50 The Notes to Financial Statements are an integral part of these statements. CIGNA Funds Group FINANCIAL HIGHLIGHTS - PREMIER CLASS
Balanced Fund (sub-advised by Wellington Management)(1) ------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 -------------------------------------------- (Unaudited) 2002 2001(e) 2000 --------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 8.39 $ 9.67 $10.05 $10.00 Income from investment operations Net investment income (loss)(d) 0.10 0.22(f) 0.23 0.25 Net realized and unrealized gain (loss) on investments 0.61 (1.28) (0.41) 0.09 ------ ------- ------ ------ Total from investment operations 0.71 (1.06) (0.18) 0.34 ------ ------- ------ ------ Less dividends and distributions: Dividends from net investment income - (0.22) (0.20) (0.29) Total dividends and distributions - (0.22) (0.20) (0.29) ------ ------- ------ ------ Net asset value, end of period $ 9.10 $ 8.39 $ 9.67 $10.05 ====== ======= ====== ====== Total Return(a) 8.46%(b) (10.97)% (1.78)% 3.41%(b) Ratios to Average Net Assets Gross expenses 2.07%(c) 1.98% 1.92% 1.96%(c) Fees and expenses waived or borne by the Adviser or Distributor 1.07%(c) 0.98% 0.92% 0.96%(c) Net expenses 1.00%(c) 1.00% 1.00% 1.00%(c) Net investment income (loss)(d) 2.38%(c) 2.40% 2.32% 2.58%(c) Portfolio Turnover 29%(b) 56% 104% 67%(b) Net Assets, End of Period (000 omitted) $4,934 $ 4,429 $4,786 $4,964 Large Cap Growth/Morgan Stanley Fund(1) -------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 --------------------------------------------------- (Unaudited) 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.36 $ 7.41 $ 8.71 $ 10.00 Income from investment operations Net investment income (loss)(d) 0.01 (A) (0.01)(f) (0.03) Net realized and unrealized gain (loss) on investments 0.55 (2.05) (1.29) (1.26) ------ ------- ------- ------- Total from investment operations 0.56 (2.05) (1.30) (1.29) ------ ------- ------- ------- Less dividends and distributions: Dividends from net investment income - - - - Total dividends and distributions - - - - ------ ------- ------- ------- Net asset value, end of period $ 5.92 $ 5.36 $ 7.41 $ 8.71 ====== ======= ======= ======= Total Return(a) 10.45%(b) (27.67)% (14.93)% (12.90)%(b) Ratios to Average Net Assets Gross expenses 2.45%(c) 2.38% 2.38% 1.99%(c) Fees and expenses waived or borne by the Adviser or Distributor 1.45%(c) 1.38% 1.38% 0.99%(c) Net expenses 1.00%(c) 1.00% 1.00% 1.00%(c) Net investment income (loss)(d) 0.22%(c) 0.01% (0.15)% (0.31)%(c) Portfolio Turnover 78%(b) 149% 91% 75%(b) Net Assets, End of Period (000 omitted) $3,685 $ 3,140 $ 3,984 $ 4,377
Large Cap Value/John A. Levin & Co. Fund.(1) ------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 --------------------------------------------- (Unaudited) 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 7.40 $10.22 $ 10.83 $10.00 Income from investment operations Net investment income(d) 0.04 0.06 0.13(f) 0.10 Net realized and unrealized gain (loss) on investments 0.80 (2.82) (0.61) 1.28 ------ ------ ------ ------ Total from investment operations 0.84 (2.76) (0.48) 1.38 ------ ------ ------ ------ Less dividends and distributions: Dividends from net investment income - (0.06) (0.13) (0.55) Distributions from net realized capital gains - - - - ------ ------ ------ ------ Total dividends and distributions - (0.06) (0.13) (0.55) ------ ------ ------ ------ Net asset value, end of period $ 8.24 $ 7.40 $10.22 $10.83 ====== ====== ====== ====== Total Return(a) 11.35%(b) 26.97% (4.39)% 13.78%(b) Ratios to Average Net Assets Gross expenses 1.81%(c) 1.68% 1.67% 1.75%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.81%(c) 0.68% 0.67% 0.75%(c) Net expenses 1.00%(c) 1.00% 1.00% 1.00%(c) Net investment income(d) 1.03%(c) 0.99% 0.89% 0.85%(c) Portfolio Turnover 46%(b) 44% 45% 62%(b) Net Assets, End of Period (000 omitted) $6,517 $5,780 $6,657 $5,842 S&P 500(R) Index Fund(2) ---------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ----------------------------------------------- (Unaudited) 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.38 $ 7.01 $ 8.11 $10.00 Income from investment operations Net investment income(d) 0.04 0.08 0.08 0.15 Net realized and unrealized gain (loss) on investments 0.59 (1.64) (1.07) (0.82) ------ ------- ------- ------ Total from investment operations 0.63 (1.56) (0.99) (0.67) ------ ------- ------- ------ Less dividends and distributions: Dividends from net investment income - (0.07) (0.11) (0.25) Distributions from net realized capital gains - - (A) (0.97) ------ ------- ------- ------ Total dividends and distributions - (0.07) (0.11) (1.22) ------ ------- ------- ------ Net asset value, end of period $ 6.01 $ 5.38 $ 7.01 $ 8.11 ====== ======= ======= ====== Total Return(a) 11.71%(b) (22.24)% (12.20)% (7.64)%(b) Ratios to Average Net Assets Gross expenses 0.65%(c) 0.63% 0.64% 0.58%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.30%(c) 0.28% 0.29% 0.23%(c) Net expenses 0.35%(c) 0.35% 0.35% 0.35%(c) Net investment income(d) 1.47%(c) 1.25% 1.59% 1.36%(c) Portfolio Turnover 1%(b) 4% 2% 9%(b) Net Assets, End of Period (000 omitted) $3,492 $ 2,561 $ 2,596 $ 846
(1) Commenced operations on January 20, 2000. (2) Commenced operations on January 21, 2000. (A) Less than $0.01 per share. (a) Had the Adviser or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (b) Not annualized. (c) Annualized. (d) Net investment income per share has been calculated in accordance with SEC requirements, unless otherwise noted, with the exception that end of the year accumulated undistributed/ (overdistributed) net investment income has not been adjusted to reflect current year permanent differences between financial and tax accounting. (e) The Fund was required to start amortizing premium and discount on all debt securities. The effect of this change on net investment income to per share was an increase of $0.01 per share. The effect to the ratio of net investment income to average net assets was an increase of 0.04%. Per share, ratios, and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in accounting principle. (f) Per share numbers have been calculated using average shares. -- The Notes to Financial Statements are an integral part of these statements. 51 CIGNA Funds Group FINANCIAL HIGHLIGHTS - PREMIER CLASS continued
Small Cap Growth/TimesSquare Fund(2) ------------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ----------------------------------------------- (Unaudited) 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 8.12 $ 9.97 $10.98 $10.00 Income from investment operations Net investment income (loss)(d) (0.03) (0.09)(f) (0.08) (0.02) Net realized and unrealized gain (loss) on investments 1.33 (1.76) (0.93) 1.15 ------- ------- ------ ------ Total from investment operations 1.30 (1.85) (1.01) 1.13 ------- ------- ------ ------ Less dividends and distributions: Dividends from net investment income - - - (0.10) Distributions from net realized capital gains - - - - Distributions from capital - - - (0.05) ------- ------- ------ ------ Total dividends and distributions - - - (0.15) ------- ------- ------ ------ Net asset value, end of period $ 9.42 $ 8.12 $ 9.97 $10.98 ======= ======= ====== ====== Total Return(a) 16.01%(b) (18.56)% (9.20)% 11.26%(b) Ratios to Average Net Assets Gross expenses 1.35%(c) 1.65% 1.95% 2.01%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.10%(c) 0.40% 0.70% 0.76%(c) Net expenses 1.25%(c) 1.25% 1.25% 1.25%(c) Net investment income (loss)(d) (1.06)%(c) (1.06)% (0.87)% (0.32)%(c) Portfolio Turnover 30%(b) 57% 160% 140%(b) Net Assets, End of Period (000 omitted) $28,412 $ 5,482 $6,370 $6,640 Small Cap Value/Perkins, Wolf, McDonnell Fund(1) ------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 -------------------------------------------------- (Unaudited) 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 10.19 $ 12.12 $11.37 $10.00 Income from investment operations Net investment income (loss)(d) 0.02(f) 0.05(f) 0.10(f) 0.32 Net realized and unrealized gain (loss) on investments 1.26 (1.86) 2.37 2.59 ------- ------- ------ ------ Total from investment operations 1.28 (1.81) 2.47 2.91 ------- ------- ------ ------ Less dividends and distributions: Dividends from net investment income - (0.01) (1.34) (1.54) Distributions from net realized capital gains - (0.11) (0.38) - Distributions from capital - - - - ------- ------- ------ ------ Total dividends and distributions - (0.12) (1.72) (1.54) ------- ------- ------ ------ Net asset value, end of period $ 11.47 $ 10.19 $12.12 $11.37 ======= ======= ====== ====== Total Return(a) 12.56%(b) (14.97)% 21.53% 28.96%(b) Ratios to Average Net Assets Gross expenses 1.51%(c) 1.74% 1.90% 2.18%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.26%(c) 0.49% 0.65% 0.93%(c) Net expenses 1.25%(c) 1.25% 1.25% 1.25%(c) Net investment income (loss)(d) 0.39%(c) 0.47% 0.82% 1.49%(c) Portfolio Turnover 18%(b) 42% 59% 102%(b) Net Assets, End of Period (000 omitted) $14,819 $10,934 $8,125 $6,178
International Blend/Bank of Ireland Fund(3) -------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ---------------------------------------------- (Unaudited) 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 6.00 $ 7.45 $ 9.39 $10.00 Income from investment operations Net investment income(d) 0.08 0.06 0.05 0.04 Net realized and unrealized gain (loss) on investments 0.33 (1.46) (1.93) (0.45) ------ ------- ------- ------ Total from investment operations 0.41 (1.40) (1.88) (0.41) ------ ------- ------- ------ Less dividends and distributions: Dividends from net investment income - (0.05) (0.06) (0.11) Distributions from net realized capital gains - - - - Distributions from capital - - - (0.09) ------ ------- ------- ------ Total dividends and distributions - (0.05) (0.06) (0.20) ------ ------- ------- ------ Net asset value, end of period $ 6.41 $ 6.00 $ 7.45 $ 9.39 ====== ======= ======= ====== Total Return(a) 6.83%(b) (18.76)% (19.98)% (4.09)%(b) Ratios to Average Net Assets Gross expenses 3.64%(c) 3.44% 2.80% 2.84%(c) Fees and expenses waived or borne by the Adviser or Distributor 2.39%(c) 2.19% 1.55% 1.59%(c) Net expenses 1.25%(c) 1.25% 1.25% 1.25%(c) Net investment income(d) 2.72%(c) 0.95% 0.65% 0.49%(c) Portfolio Turnover 7%(b) 29% 12% 27%(b) Net Assets, End of Period (000 omitted) $4,331 $ 4,059 $ 4,739 $5,001 TimesSquare/Core Plus Bond Fund(2) ------------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ------------------------------------------------- (Unaudited) 2002 2001(e) 2000 --------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $10.16 $ 9.95 $10.28 $10.00 Income from investment operations Net investment income(d) 0.28(f) 0.43(f) 0.50(f) 0.57 Net realized and unrealized gain (loss) on investments 0.32 0.38 0.34 0.40 ------ ------ ------ ------ Total from investment operations 0.60 0.81 0.84 0.97 ------ ------ ------ ------ Less dividends and distributions: Dividends from net investment income (0.29) (0.59) (1.10) (0.68) Distributions from net realized capital gains - (0.01) (0.07) (0.01) Distributions from capital - - - - ------ ------ ------ ------ Total dividends and distributions (0.29) (0.60) (1.17) (0.69) ------ ------ ------ ------ Net asset value, end of period $10.47 $10.16 $ 9.95 $10.28 ====== ====== ====== ====== Total Return(a) 5.94%(b) 8.44% 8.36% 9.92%(b) Ratios to Average Net Assets Gross expenses 1.29%(c) 1.20% 1.20% 1.23%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.44%(c) 0.35% 0.35% 0.38%(c) Net expenses 0.85%(c) 0.85% 0.85% 0.85%(c) Net investment income(d) 5.37%(c) 4.41% 5.15% 6.34%(c) Portfolio Turnover 118%(b) 396% 351% 310%(b) Net Assets, End of Period (000 omitted) $1,260 $1,186 $ 462 $ 128
(1) Commenced operations on January 20, 2000. (2) Commenced operations on January 21, 2000. (3) Commenced operations on January 24, 2000. (a) Had the Adviser or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (b) Not annualized. (c) Annualized. (d) Net investment income per share has been calculated in accordance with SEC requirements, unless otherwise noted, with the exception that end of the year accumulated undistributed/ (overdistributed) net investment income has not been adjusted to reflect current year permanent differences between financial and tax accounting. (e) The Fund was required to start amortizing premium and discount on all debt securities. The effect of this change on net investment income to per share was a decrease of $0.01 per share. The effect to the ratio of net investment income to average net assets was a decrease of 0.06%. Per share, ratios, and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in accounting principle. (f) Per share numbers have been calculated using average shares. -- 52 The Notes to Financial Statements are an integral part of these statements. CIGNA Funds Group FINANCIAL HIGHLIGHTS - RETAIL CLASS
Balanced Fund (sub-advised by Wellington Management)(1) ------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 -------------------------------------------- (Unaudited) 2002 2001(e) 2000 --------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 8.36 $ 9.64 $10.04 $10.00 Income from investment operations Net investment income (loss)(d) 0.09 0.19(f) 0.21 0.17 Net realized and unrealized gain (loss) on investments 0.61 (1.27) (0.42) 0.16 ------ ------- ------ ------ Total from investment operations 0.70 (1.08) (0.21) 0.33 ------ ------- ------ ------ Less dividends and distributions: Dividends from net investment income - (0.20) (0.19) (0.29) Total dividends and distributions - (0.20) (0.19) (0.29) ------ ------- ------ ------ Net asset value, end of period $ 9.06 $ 8.36 $ 9.64 $10.04 ====== ======= ====== ====== Total Return (a) 8.37%(b) (11.17)% (2.14)% 3.25%(b) Ratios to Average Net Assets Gross expenses 2.32%(c) 2.23% 2.17% 2.21%(c) Fees and expenses waived or borne by the Adviser or Distributor 1.07%(c) 0.98% 0.92% 0.96%(c) Net expenses 1.25%(c) 1.25% 1.25% 1.25%(c) Net investment income (loss)(d) 2.13%(c) 2.16% 2.07% 2.33%(c) Portfolio Turnover 29%(b) 56% 104% 67%(b) Net Assets, End of Period (000 omitted) $5,076 $ 4,542 $3,523 $2,180 Large Cap Growth/Morgan Stanley Fund(1) ---------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 --------------------------------------------------- (Unaudited) 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.32 $ 7.37 $ 8.69 $ 10.00 Income from investment operations Net investment income (loss)(d) (A) (A) (0.03)(f) (0.04) Net realized and unrealized gain (loss) on investments 0.55 (2.05) (1.29) (1.27) ------ ------- ------- ------- Total from investment operations 0.55 (2.05) (1.32) (1.31) ------ ------- ------- ------- Less dividends and distributions: Dividends from net investment income - - - - Total dividends and distributions - - - - ------ ------- ------- ------- Net asset value, end of period $ 5.87 $ 5.32 $ 7.37 $ 8.69 ====== ======= ======= ======= Total Return (a) 10.34%(b) (27.82)% (15.19)% (13.10)%(b) Ratios to Average Net Assets Gross expenses 2.69%(c) 2.63% 2.63% 2.24%(c) Fees and expenses waived or borne by the Adviser or Distributor 1.44%(c) 1.38% 1.38% 0.99%(c) Net expenses 1.25%(c) 1.25% 1.25% 1.25%(c) Net investment income (loss)(d) (0.03)%(c) (0.20)% (0.39)% (0.56)%(c) Portfolio Turnover 78%(b) 149% 91% 75%(b) Net Assets, End of Period (000 omitted) $5,034 $ 4,311 $ 3,086 $ 2,107
Large Cap Value/John A. Levin & Co. Fund(1) ------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 --------------------------------------------- (Unaudited) 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 7.37 $10.19 $10.81 $10.00 Income from investment operations Net investment income(d) 0.03 0.06 0.06(f) 0.07 Net realized and unrealized gain (loss) on investments 0.80 (2.83) (0.56) 1.28 ------ ------ ------ ------ Total from investment operations 0.83 (2.77) (0.50) 1.35 ------ ------ ------ ------ Less dividends and distributions: Dividends from net investment income - (0.05) (0.12) (0.54) Distributions from net realized capital gains - - - - ------ ------ ------ ------ Total dividends and distributions - (0.05) (0.12) (0.54) ------ ------ ------ ------ Net asset value, end of period $ 8.20 $ 7.37 $10.19 $10.81 ====== ====== ====== ====== Total Return(a) 11.26%(b) 27.17% (4.61)% 13.52%(b) Ratios to Average Net Assets Gross expenses 2.04%(c) 1.93% 1.92% 2.00%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.79%(c) 0.68% 0.67% 0.75%(c) Net expenses 1.25%(c) 1.25% 1.25% 1.25%(c) Net investment income(d) 0.80%(c) 0.80% 0.64% 0.60%(c) Portfolio Turnover 46%(b) 44% 45% 62%(b) Net Assets, End of Period (000 omitted) $9,028 $6,438 $4,406 $1,934 S&P 500(R) Index Fund(2) ---------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ----------------------------------------------- (Unaudited) 2002 2001 2000 ------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.35 $ 6.99 $ 8.09 $ 10.00 Income from investment operations Net investment income(d) 0.04 0.06 0.09 0.13 Net realized and unrealized gain (loss) on investments 0.57 (1.64) (1.09) (0.83) ------- ------- ------- ------- Total from investment operations 0.61 (1.58) (1.00) (0.70) ------- ------- ------- ------- Less dividends and distributions: Dividends from net investment income - (0.06) (0.10) (0.24) Distributions from net realized capital gains - - (A) (0.97) ------- ------- ------- ------- Total dividends and distributions - (0.06) (0.10) (1.21) ------- ------- ------- ------- Net asset value, end of period $ 5.96 $ 5.35 $ 6.99 $ 8.09 ======= ======= ======= ======= Total Return(a) 11.40%(b) (22.59)% (12.41)% (7.94)%(b) Ratios to Average Net Assets Gross expenses 0.90%(c) 0.88% 0.89% 0.83%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.30%(c) 0.28% 0.29% 0.23%(c) Net expenses 0.60%(c) 0.60% 0.60% 0.60%(c) Net investment income(d) 1.22%(c) 1.02% 1.27% 1.11%(c) Portfolio Turnover 1%(b) 4% 2% 9%(b) Net Assets, End of Period (000 omitted) $32,129 $23,279 $18,905 $10,427
(1) Commenced operations on January 20, 2000. (2) Commenced operations on January 21, 2000. (A) Less than $0.01 per share (a) Had the Adviser or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (b) Not annualized. (c) Annualized. (d) Net investment income per share has been calculated in accordance with SEC requirements, unless otherwise noted, with the exception that end of the year accumulated undistributed/ (overdistributed) net investment income has not been adjusted to reflect current year permanent differences between financial and tax accounting. (e) The Fund was required to start amortizing premium and discount on all debt securities. The effect of this change on net investment income to per share was an increase of $0.02 per share. The effect to the ratio of net investment income to average net assets was an increase of 0.05%. Per share, ratios, and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in accounting principle. (f) Per share numbers have been calculated using average shares. -- The Notes to Financial Statements are an integral part of these statements. 53 CIGNA Funds Group FINANCIAL HIGHLIGHTS - RETAIL CLASS continued
Small Cap Growth/TimesSquare Fund(2) ------------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ----------------------------------------------- (Unaudited) 2002 2001 2000 --------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 8.07 $ 9.93 $10.96 $10.00 Income from investment operations Net investment income (loss)(d) (0.05) (0.11)(f) (0.07) (0.04) Net realized and unrealized gain (loss) on investments 1.32 (1.75) (0.96) 1.14 ------ ------- ------ ------ Total from investment operations 1.27 (1.86) (1.03) 1.10 ------ ------- ------ ------ Less dividends and distributions: Dividends from net investment income - - - (0.09) Distributions from net realized capital gains - - - - Distributions from capital - - - (0.05) ------ ------- ------ ------ Total dividends and distributions - - - (0.14) ------ ------- ------ ------ Net asset value, end of period $ 9.34 $ 8.07 $ 9.93 $10.96 ====== ======= ====== ====== Total Return(a) 15.74%(b) (18.73)% (9.40)% 11.00%(b) Ratios to Average Net Assets Gross expenses 1.59%(c) 1.90% 2.18% 2.26%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.09%(c) 0.40% 0.68% 0.76%(c) Net expenses 1.50%(c) 1.50% 1.50% 1.50%(c) Net investment income (loss)(d) (1.31)%(c) (1.30)% (1.14)% (0.57)%(c) Portfolio Turnover 30%(b) 57% 160% 140%(b) Net Assets, End of Period (000 omitted) $7,948 $ 6,507 $4,892 $2,905 Small Cap Value/Perkins, Wolf, McDonnell Fund(1) ------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 -------------------------------------------------- (Unaudited) 2002 2001 2000 ---------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 10.14 $ 12.07 $11.34 $10.00 Income from investment operations Net investment income (loss)(d) 0.01(f) 0.03(f) 0.07(f) 0.27 Net realized and unrealized gain (loss) on investments 1.24 (1.85) 2.36 2.60 ------- ------- ------ ------ Total from investment operations 1.25 (1.82) 2.43 2.87 ------- ------- ------ ------ Less dividends and distributions: Dividends from net investment income - - (1.32) (1.53) Distributions from net realized capital gains - (0.11) (0.38) - Distributions from capital - - - - ------- ------- ------ ------ Total dividends and distributions - (0.11) (1.70) (1.53) ------- ------- ------ ------ Net asset value, end of period $ 11.39 $ 10.14 $12.07 $11.34 ======= ======= ====== ====== Total Return(a) 12.33%(b) (15.18)% 21.28% 28.60%(b) Ratios to Average Net Assets Gross expenses 1.76%(c) 1.99% 2.15% 2.43%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.26%(c) 0.49% 0.65% 0.93%(c) Net expenses 1.50%(c) 1.50% 1.50% 1.50%(c) Net investment income (loss)(d) 0.15%(c) 0.24% 0.58% 1.24%(c) Portfolio Turnover 18%(b) 42% 59% 102%(b) Net Assets, End of Period (000 omitted) $17,341 $13,130 $6,226 $1,973
International Blend/Bank of Ireland Fund(3) -------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ---------------------------------------------- (Unaudited) 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $ 5.95 $ 7.42 $ 9.37 $10.00 Income from investment operations Net investment income(d) 0.07 0.04 0.04 (A) Net realized and unrealized gain (loss) on investments 0.33 (1.47) (1.94) (0.44) ------ ------- ------- ------ Total from investment operations 0.40 (1.43) (1.90) (0.44) ------ ------- ------- ------ Less dividends and distributions: Dividends from net investment income - (0.04) (0.05) (0.10) Distributions from net realized capital gains - - - - Distributions from capital - - - (0.09) ------ ------- ------- ------ Total dividends and distributions - (0.04) (0.05) (0.19) ------ ------- ------- ------ Net asset value, end of period $ 6.35 $ 5.95 $ 7.42 $ 9.37 ====== ======= ======= ====== Total Return(a) 6.72%(b) (19.23)% (20.29)% (4.35)%(b) Ratios to Average Net Assets Gross expenses 3.89%(c) 3.69% 3.05% 3.09%(c) Fees and expenses waived or borne by the Adviser or Distributor 2.39%(c) 2.19% 1.55% 1.59%(c) Net expenses 1.50%(c) 1.50% 1.50% 1.50%(c) Net investment income(d) 2.52%(c) 0.61% 0.38% 0.24%(c) Portfolio Turnover 7%(b) 29% 12% 27%(b) Net Assets, End of Period (000 omitted) $2,117 $ 1,892 $ 1,493 $1,371 TimesSquare/Core Plus Bond Fund(2) ------------------------------------------------------------------ For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ------------------------------------------------- (Unaudited) 2002 2001(e) 2000 --------------------------------------------------------------------------------------------------------------------------- Per Share Operating Performance: Net asset value, beginning of period $10.12 $ 9.92 $10.27 $10.00 Income from investment operations Net investment income(d) 0.27(f) 0.41(f) 0.54(f) 0.51 Net realized and unrealized gain (loss) on investments 0.32 0.39 0.28 0.45 ------ ------ ------ ------ Total from investment operations 0.59 0.80 0.82 0.96 ------ ------ ------ ------ Less dividends and distributions: Dividends from net investment income (0.29) (0.59) (1.10) (0.68) Distributions from net realized capital gains - (0.01) (0.07) (0.01) Distributions from capital - - - - ------ ------ ------ ------ Total dividends and distributions (0.29) (0.60) (1.17) (0.69) ------ ------ ------ ------ Net asset value, end of period $10.42 $10.12 $ 9.92 $10.27 ====== ====== ====== ====== Total Return(a) 5.86%(b) 8.38% 8.20% 9.79%(b) Ratios to Average Net Assets Gross expenses 1.40%(c) 1.30% 1.30% 1.33%(c) Fees and expenses waived or borne by the Adviser or Distributor 0.45%(c) 0.35% 0.35% 0.38%(c) Net expenses 0.95%(c) 0.95% 0.95% 0.95%(c) Net investment income(d) 5.33%(c) 4.26% 5.15% 6.24%(c) Portfolio Turnover 118%(b) 396% 351% 310%(b) Net Assets, End of Period (000 omitted) $3,023 $1,887 $ 594 $ 215
(1) Commenced operations on January 20, 2000. (2) Commenced operations on January 21, 2000. (3) Commenced operations on January 24, 2000. (A) Less than $0.01 per share (a) Had the Adviser or Distributor not waived or reimbursed a portion of expenses, total return would have been reduced. (b) Not annualized. (c) Annualized. (d) Net investment income per share has been calculated in accordance with SEC requirements, unless otherwise noted, with the exception that end of the year accumulated undistributed/ (overdistributed) net investment income has not been adjusted to reflect current year permanent differences between financial and tax accounting. (e) The Fund was required to start amortizing premium and discount on all debt securities. The effect of this change on net investment income to per share was a decrease of $0.01 per share. The effect to the ratio of net investment income to average net assets was a decrease of 0.06%. Per share, ratios, and supplemental data for periods prior to January 1, 2001, have not been restated to reflect this change in accounting principle. (f) Per share numbers have been calculated using average shares. -- 54 The Notes to Financial Statements are an integral part of these statements. CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Organization. CIGNA Funds Group, a Massachusetts business trust (the "Trust") is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. At June 30, 2003 the Trust offered nine separate series. Information on eight of these series (referred to as the "Funds" or individually as the "Fund") is presented in this report, including: Balanced Fund (sub-advised by Wellington Management) ("Balanced Fund"), Large Cap Growth/Morgan Stanley Fund ("Large Cap Growth Fund"), Large Cap Value/John A. Levin & Co. Fund ("Large Cap Value Fund"), S&P 500 Index Fund, Small Cap Growth/TimesSquare Fund ("Small Cap Growth Fund"), Small Cap Value/Perkins, Wolf, McDonnell Fund ("Small Cap Value Fund") (formerly called the Small Cap Value/Berger(R) Fund), International Blend/ Bank of Ireland Fund ("International Blend Fund"), and TimesSquare Core Plus Bond Fund ("Core Plus Bond Fund"). The financial statements of Money Market Fund are presented in a separate report. The Trust offers three classes of shares in each Fund: Institutional Class, Premier Class and Retail Class. Expenses of the Fund are borne pro rata by the holders of each Class of shares, except that each Class bears expenses unique to that Class (including any applicable shareholder servicing fee or distribution fee). Shares of each Class would receive their pro rata share of net assets of the Fund if the Fund were liquidated. In addition, the Trustees approve separate dividends on each Class of shares. The Premier Class Shares of the Funds have a shareholder servicing fee. The Retail Class Shares of the Funds (and Premier Class shares of the Core Plus Bond Fund) have a shareholder servicing fee and a distribution fee. 2. Significant Accounting Policies. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. A. Security Valuation - Equity securities, including warrants, that are listed on a national securities exchange or part of the NASDAQ National Market System are valued at the last sale price (NASDAQ Official Closing Price ["NOCP"] for NASDAQ stocks) or, if there has been no sale that day, at the last bid price. Debt securities traded in the over-the-counter market, including listed securities whose primary markets are believed to be over-the-counter, are valued on the basis of valuations furnished by brokers trading in the securities or a pricing service, which determines valuations for normal, institutional-size trading units of such securities using market information, transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Short-term investments with remaining maturities of up to and including 60 days are valued at amortized cost, which approximates market. Short-term investments that mature in more than 60 days are valued at current market quotations. Other securities and assets of the Funds are appraised at fair value as determined in good faith by, or under the authority of, the Board of Trustees. If events occurring after the close of the principal market in which securities are traded (but before the close of regular trading on the NYSE) are believed to materially affect the value of those securities, such securities are valued at their fair value taking such events into account. B. Delayed Delivery Commitments - The Funds may enter into commitment agreements - i.e., TBA's - for the purchase of securities at an agreed-upon price on a specified future date. Since the delivery and payment for such securities can be scheduled to take place up to three months after the transaction date, they are subject to market fluctuations. The Funds do not begin to earn interest on such purchase commitments until settlement date. The Funds may sell a purchase commitment prior to settlement for the purpose of enhancing its total return. The Funds segregate assets with a market value equal to the amount of its purchase commitments. To the extent securities are segregated, they may not be available for sale or to meet redemptions. Delayed delivery commitments may increase a Fund's exposure to market fluctuations and may increase the possibility that a Fund may realize a short-term gain (subject to taxation) or loss if the Fund must engage in portfolio transactions in order to honor its commitments. Due to the longer settlement period, there may be an increased risk of failure of the other party to honor the transaction. The Funds record changes in market value of the securities underlying unsettled commitments in unrealized gains and losses. Gains and losses are realized upon sale of the commitment. -- 55 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued C. Foreign Currency Translations - Foreign currency transactions from foreign investment activity are translated into U.S. dollars on the following basis: (1) market value of investment securities, other assets and liabilities at the daily rates of exchange, and (2) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. The Funds do not isolate that portion of gains and losses on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains and losses from investments. Net realized and unrealized gains (losses) from foreign currency-related transactions include gains and losses between trade and settlement dates on securities transactions, gains and losses arising from the sales of foreign currency, and gains and losses between the ex-dividend and payment dates on dividends, interest, and foreign withholding taxes. D. Foreign Investments - The Funds may invest in securities of foreign countries and governments, which involve certain risks in addition to those inherent in domestic investments. Such risks generally include, among others, currency risk (fluctuations in currency exchange rates), information risk (key information may be inaccurate or unavailable) and political risk (expropriation, nationalization or the imposition of capital or currency controls or punitive taxes). Other risks of investing in foreign securities include inadequate accounting controls, liquidity and valuation risks. E. Forward Currency Transactions - Certain Funds may enter into forward exchange contracts for the purpose of hedging against foreign exchange risk arising from the Fund's investment or anticipated investment in securities denominated in foreign currencies. A Fund may also enter into these contracts for purposes of increasing exposure to a foreign currency or to shift exposure to foreign currency fluctuations from one country to another. All commitments are marked to market daily at the applicable translation rates and any resulting unrealized gains or losses are recorded. Realized gains or losses are recorded at the time the forward contract matures or by delivery of the currency. Risks may arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. F. Futures Contracts - Certain Funds may enter into futures contracts. A Fund may use futures contracts for reasons such as managing its exposure to the markets or movements in interest rates and currency values. Upon entering into a futures contract, the Fund is required to pledge to the broker an amount of cash and/or securities equal to the initial margin requirements. During the period a futures contract is open, changes in the value of a contract are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Daily variation margin payments are received or made, depending on whether there were unrealized gains or losses. When a contract is closed, the Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Futures contracts include the risk that a change in the value of the contract may not correlate with the value of the underlying securities and the possibility of an illiquid market. G. High Yield Bonds - The Core Plus Bond Fund may invest in high yield bonds; i.e., fixed income securities rated below investment grade. While the market values of these securities tend to react less to fluctuations in interest rate levels than do those of investment-grade securities, the market values of certain of these securities also tend to be more sensitive to individual corporate developments and changes in economic conditions than investment-grade securities. In addition, these securities are often highly leveraged and may not have more traditional methods of financing available to them so that their ability to service their debt obligations during an economic downturn or during sustained periods of rising interest rates may be impaired. H. Repurchase Agreements - Certain Funds may engage in repurchase agreements. Under the terms of a typical repurchase agreement, the Fund takes possession of an underlying debt obligation, subject to an obligation of the seller to repurchase, and the Fund to resell, the obligation at -- 56 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued an agreed-upon price and time. It is the Funds' policy that the market value of the collateral must be at least equal at all times to the total amount of the repurchase obligations, including interest. Generally, in the event of counterparty default, the Fund has the right to use the collateral to offset any losses incurred. I. Swap Agreements - Certain Funds may enter into swap agreements for investment, liquidity, hedging and risk management purposes. For example, a Fund may enter into swap agreements to preserve a return on a particular investment or a portion of its portfolio and as a technique for managing duration (i.e., price sensitivity to changes in interest rates). Swaps involve the exchange of commitments to pay or receive - e.g., an exchange of floating rate payments for fixed rate payments and/or payments of the appreciation or depreciation of a security or an index. If forecasts of interest rates and other market factors, including those that may impact the indexes of the total return swaps, are incorrect, investment performance will differ compared to what performance would have been if these investment techniques were not used. Even if the forecasts are correct, there are risks that the positions may correlate imperfectly with the asset or liability being hedged, a liquid secondary market may not always exist, or the counterparty to a transaction may default. As of June 30, 2003, the Core Plus Bond Fund had the following outstanding swap agreements:
Spread Unrealized Notional (Basis Termination Appreciation/ Amount Points) Date (Depreciation) $250,000(1) 75 07/01/03 $ 0 $300,000(1) 57.5 09/01/03 89 $ 80,000(1) 10 10/01/03 130 $790,000(2) 85 11/01/03 (261) $ 30,000(2) 5 12/01/03 88
(1) These swap agreements were with Bear Stearns as the Counterparty and the Total Returns were based on the Bear Stearns High Yield Index. (2) These swap agreements were with Lehman Brothers as the Counterparty and the Total Returns were based on the Lehman US High Yield Index. The terms of the agreement require the Fund to pay LIBOR (which is set monthly) plus the spread and to receive the monthly total return on the Index, both based on the notional amount. The Fund records the net amount receivable/payable on a daily basis. The net receivable/ payable is settled in cash monthly and recorded as net investment income. J. Security Transactions and Related Investment Income - Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Dividend income is recorded on the ex-date, and interest income is recorded on the accrual basis, which includes amortization of premium and accrual of discount, except that certain dividends from foreign securities are recorded as soon as the Funds are informed of the ex-dividend date. Securities gains and losses are determined on the basis of identified cost. K. Federal Taxes - For federal income tax purposes, each Fund in the Trust is taxed as a separate entity. It is each Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and capital gains to its shareholders. Therefore, no federal income or excise taxes on realized income or net capital gains have been accrued. Distributions reported in the Statements of Changes in Net Assets from net investment income, including short-term capital gains, and capital gains are treated as ordinary income and long-term capital gains, respectively, for federal income tax purposes. During 2002, each Fund had a Post-October Loss Deferral of:
Fund Post-October Loss Balanced Fund $225,274 Large Cap Growth Fund 129,868 Large Cap Value Fund 324,703 S&P 500(R) Index Fund 266,817 Small Cap Growth Fund 358,686 Small Cap Value Fund 135,784 International Blend Fund 108,990 Core Plus Bond Fund 17,538
Under current tax law, capital losses realized after October 31 may be deferred and treated as occurring on the first day of the following year. -- 57 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued L. Foreign Taxes on Dividends - Dividend income on the Statement of Operations is shown net of foreign taxes withheld on dividends from foreign securities. Foreign taxes withheld were as follows: Balanced Fund, $359; Large Cap Value Fund, $1,590; and International Blend Fund, $22,133. M. Dividends and Distributions to Shareholders - Dividends from net investment income, if any, and distributions from net capital gains, to the extent such gains would otherwise be taxable to the Fund, are declared and distributed at least annually (net investment income is declared and distributed monthly for Core Plus Bond Fund). Dividends and distributions are recorded by the Fund on the ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations which may differ from generally accepted accounting principles. These differences are primarily due to differing book and tax treatment for foreign securities, capital loss carryforwards, deferred losses due to wash sales, excise tax regulations and net operating losses. To the extent that such differences are permanent, a reclassification of the components of Net Assets may be required. As a result, at December 31, 2002 the following reclassifications were done: (In Thousands)
Undistributed Accumulated (Overdistributed) Net Net Realized Investment Gain Paid-in Fund Income (Loss) Capital Balanced Fund $ 18 $ (18) $ -- Large Cap Growth Fund 2 -- (2) S&P 500(R) Index Fund (3) 4 (1) Small Cap Growth Fund 341 -- (341) Small Cap Value Fund (23) 23 -- International Blend Fund (19) 16 3 Core Plus Bond Fund 884 (886) 2
N. Multiclass Operations - Each Class offered by the Trust has equal rights as to net assets. Income, non-specific expenses, and realized and unrealized capital gains and losses are allocated to each Class of shares based on the relative net assets of each Class. 3. Investment Advisory Fees and Other Transactions with Affiliates. Investment advisory fees are paid or accrued to TimesSquare Capital Management, Inc. ("TimesSquare"), certain officers and directors of which are affiliated with the Fund. Such advisory fees are based on an annual rate for each Fund (see below) applied to the average daily net assets of the Fund. TimesSquare has contractually agreed to reimburse or bear any other expenses for each Fund for any amount by which expenses (including the advisory fee, but excluding interest, taxes, transaction costs incurred in acquiring and disposing of portfolio securities, and extraordinary expenses) exceed, on an annual basis, certain percentages of average daily net assets until April 30, 2004 and thereafter, to the extent described in the Fund's then current prospectus. These percentages are as follows:
Maximum Operating Expense Ratio --------------------------------- Advisory Institutional Premier Retail Fund Fee Class Class Class Balanced Fund 0.75% 0.80% 1.00% 1.25% Large Cap Growth Fund 0.80 0.80 1.00 1.25 Large Cap Value Fund 0.75 0.80 1.00 1.25 S&P 500(R) Index Fund 0.25 0.25 0.35 0.60 Small Cap Growth Fund 1.00 1.05 1.25 1.50 Small Cap Value Fund 1.00 1.05 1.25 1.50 International Blend Fund 1.00 1.05 1.25 1.50 Core Plus Bond Fund 0.60 0.45 0.85 0.95
TimesSquare retains the right to be repaid by a Fund if the Fund's expenses fall below the percentages specified above prior to the end of the fiscal year or within three years after TimesSquare waives advisory fees or reimburses a Fund's operating expenses. The following is a list of the Funds' remaining liability and respective dates of expiration: -- 58 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued (In Thousands)
Remaining Expires Expires Expires Expires Contingent during during during during Fund Liability 2003 2004 2005 2006 Balanced Fund $ 365 $ 49 $116 $129 $ 71 Institutional 127 20 42 43 22 Premier 137 20 48 45 24 Retail 101 9 26 41 25 Large Cap Growth Fund 412 61 134 141 76 Institutional 129 24 48 39 18 Premier 153 26 55 48 24 Retail 130 11 31 54 34 Large Cap Value Fund 310 37 93 110 70 Institutional 91 15 32 28 16 Premier 123 17 40 42 24 Retail 96 5 21 40 30 S&P 500(R) Index Fund 1,018 168 361 323 166 Institutional 790 163 252 253 122 Premier 16 0 4 8 4 Retail 212 5 105 62 40 Small Cap Growth Fund 360 39 128 140 53 Institutional 224 21 64 97 42 Premier 83 12 41 22 8 Retail 53 6 23 21 3 Small Cap Value Fund 352 52 114 128 58 Institutional 119 22 43 34 20 Premier 133 23 47 44 19 Retail 100 7 24 50 19 International Blend Fund 536 85 147 202 102 Institutional 193 36 58 67 32 Premier 253 39 70 97 47 Retail 90 10 19 38 23 Core Plus Bond Fund 1,002 157 309 348 188 Institutional 984 157 307 341 179 Premier 7 0 1 3 3 Retail 11 0 1 4 6
The Balanced, Large Cap Growth, Large Cap Value, Small Cap Value and International Blend Funds use sub-advisers. Each sub-adviser has the responsibility for determining what investments shall be purchased, held, and sold for its particular Fund. TimesSquare is responsible for selecting and monitoring the performance of the sub-advisers, and for overall management of the business affairs of all of the Funds. TimesSquare has the ultimate responsibility to oversee the sub-advisers and recommend their hiring, termination, and replacement. Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Funds may invest excess cash, up to 25% of each Fund's total assets, in the affiliated Money Market Fund (MMF) managed by TimesSquare. TimesSquare will waive the amount of its advisory fee for the Funds by an amount that offsets the amount of the advisory fees incurred in the affiliated Fund as a result of its investment in MMF. For the six months ended June 30, 2003, the advisory fees waived by TimesSquare were as follows: (In Thousands)
Fund Fees Waived Balanced Fund $ 1 Large Cap Growth Fund 1 Large Cap Value Fund 2 S&P 500(R) Index Fund 31 Small Cap Growth Fund 19 Small Cap Value Fund 12 International Blend Fund (a) Core Plus Bond Fund 17
(a) Less than $1. Income distributions from the MMF for the six months ended June 30, 2003, are included as dividend income in the Statement of Operations as follows: (In Thousands)
Fund Amount Balanced Fund $ 3 Large Cap Growth Fund 1 Large Cap Value Fund 5 S&P 500(R) Index Fund 77 Small Cap Growth Fund 47 Small Cap Value Fund 30 International Blend Fund 1 Core Plus Bond Fund 42
-- 59 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued For administrative services, the Funds reimburse TimesSquare for a portion of the compensation and related expenses of the Trust's Treasurer and Secretary and certain persons who assist in carrying out the responsibilities of those offices. For the six months ended June 30, 2003, the Funds paid or accrued $143,235. (The amount incurred by each Fund may be found in the Statement of Operations.) With respect to Retail Class shares (and also the Premier Class of Core Plus Bond Fund), the Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, which requires the payment of an annual rate of 0.25%, applied to the average daily net assets of each class (0.15% for the Premier Class of Core Plus Bond Fund), to CIGNA Financial Services, Inc. ("CFS"), the Funds' distributor. The distribution fees received from the 12b-1 plan are used for services provided to the Retail Class (and also the Premier Class of Core Plus Bond Fund) and expenses primarily intended to result in the sale of such shares. Premier and Retail Class shares are also subject to a shareholder servicing fee payable to CFS equal to 0.20% annually (0.25% for International Blend Fund and Core Plus Bond Fund) applied to the average daily net assets of each class. The shareholder servicing and distribution fees will be waived as necessary to limit Premier and Retail Class expenses, as a percentage of average daily net assets, to the amounts described above until April 30, 2004 and thereafter, to the extent described in the Fund's then current prospectus. TimesSquare and CFS are indirect, wholly-owned subsidiaries of CIGNA Corporation. At June 30, 2003, Life Insurance Company of North America, an indirect wholly-owned subsidiary of CIGNA Corporation, had investments in the Funds as follows: (In Thousands)
Fund Shares Balanced Fund 1,080 68% Large Cap Growth Fund 900 46 Large Cap Value Fund 968 40 Small Cap Growth Fund 912 5 Small Cap Value Fund 745 13 International Blend Fund 1,041 70
(a) Less than 1%. 4. Trustees' Fees. Trustees' fees represent remuneration paid or accrued to trustees who are not employees of CIGNA Corporation or any of its affiliates. Trustees may elect to defer all or a portion of their fees, which are invested in mutual fund shares in accordance with a deferred compensation plan. 5. Purchases and Sales of Securities. Purchases and sales of securities, excluding short-term obligations, for the six months ended June 30, 2003, were as follows (amounts in thousands): (In Thousands)
U.S. Government/Agency All Other ----------------------- ----------------------- Fund Purchases Sales Purchases Sales Balanced Fund $ 2,636 $ 2,455 $ 1,639 $ 1,307 Large Cap Growth Fund 154 563 8,387 7,412 Large Cap Value Fund -- -- 9,641 7,480 S&P 500(R) Index Fund 13 -- 1,447 966 Small Cap Growth Fund -- -- 113,948 31,597 Small Cap Value Fund -- -- 25,038 6,900 International Blend Fund -- -- 763 575 Core Plus Bond Fund 73,063 97,710 19,128 48,031
6. In-Kind Transactions. During the six months ended June 30, 2003, the Core Plus Fixed Income Fund incurred realized gains of $2,840,654 associated with in-kind redemptions on June 10, 2003. 7. Capital Stock. Each Fund is a separate series of the Trust, which offers an unlimited number of shares of beneficial interest, without par value. Changes in capital shares were as follows (shares and amounts in thousands): -- 60 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued (In Thousands)
Balanced Fund Large Cap Growth Fund ---------------------------- ---------------------------- For the Six For the Year For the Six For the Year Months Ended Months Ended Ended December 31, Ended December 31, June 30, 2002 June 30, 2002 2003 (Audited) 2003 (Audited) ------------------------------------------------------------------------------------------------ CAPITAL SHARES TRANSACTED: Institutional Class Shares sold 1 - 10 35 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 13 - - --- --- ---- --- 1 13 10 35 Shares redeemed - - (6) (16) --- --- ---- --- Net change 1 13 4 19 --- --- ---- --- Premier Class Shares sold 20 25 63 92 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 14 - - --- --- ---- --- 20 39 63 92 Shares redeemed (6) (6) (26) (43) --- --- ---- --- Net change 14 33 37 49 --- --- ---- --- Retail Class Shares sold 57 229 269 501 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 13 - - --- --- ---- --- 57 242 269 501 Shares redeemed (40) (65) (222) (109) --- --- ---- --- Net change 17 177 47 392 --- --- ---- --- Total net increase (decrease) in Fund shares 32 223 88 460 === === ==== === Large Cap Value Fund S&P 500(R) Index Fund ---------------------------- --------------------------- For the Six For the Year For the Six For the Year Months Ended Months Ended Ended December 31, Ended December 31, June 30, 2002 June 30, 2002 2003 (Audited) 2003 (Audited) ----------------------------------------------------------------------------------------------- CAPITAL SHARES TRANSACTED: Institutional Class Shares sold 7 34 20 72 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 5 - 343 ---- ---- ------ ----- 7 39 20 415 Shares redeemed (A) (9) (2,616) (1) ---- ---- ------ ----- Net change 7 30 (2,596) 414 - ---- ------ ----- Premier Class Shares sold 63 212 190 259 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 6 - 6 ---- ---- ------ ----- 63 218 190 265 Shares redeemed (53) (89) (85) (159) --- ---- ------ ----- Net change 10 129 105 106 --- ---- ------ ----- Retail Class Shares sold 437 571 1,490 2,362 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 6 - 49 ---- ---- ------ ----- 437 577 1,490 2,411 Shares redeemed (209) (135) (455) (765) ---- ---- ------ ----- Net change 228 442 1,035 1,646 ---- ---- ------ ----- Total net increase (decrease) in Fund shares 245 601 (1,456) 2,166 ==== ==== ====== =====
(A) Less than 1. -- 61 CIGNA Funds Group NOTES TO FINANCIAL STATEMENTS (Unaudited) continued (In Thousands)
Small Cap Growth Fund Small Cap Value Fund ---------------------------- ---------------------------- For the Six For the Year For the Six For the Year Months Ended Months Ended Ended December 31, Ended December 31, June 30, 2002 June 30, 2002 2003 (Audited) 2003 (Audited) ----------------------------------------------------------------------------------------------- CAPITAL SHARES TRANSACTED: Institutional Class Shares sold 8,762 5,485 1,967 569 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - - - 13 ------ ----- ----- ----- 8,762 5,485 1,967 582 Shares redeemed (167) (89) (220) (1) ------ ----- ----- ----- Net change 8,595 5,396 1,747 581 ------ ----- ----- ----- Premier Class Shares sold 2,491 70 656 447 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - - - 12 ------ ----- ----- ----- 2,491 70 656 459 Shares redeemed (150) (34) (437) (56) ------ ----- ----- ----- Net change 2,341 36 219 403 ------ ----- ----- ----- Retail Class Shares sold 237 487 533 957 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - - - 14 ------ ----- ----- ----- 237 487 533 971 Shares redeemed (192) (174) (305) (192) ------ ----- ----- ----- Net change 45 313 228 779 ------ ----- ----- ----- Total net increase in Fund shares 10,981 5,745 2,194 1,763 ====== ===== ===== ===== International Blend Fund Core Plus Bond Fund ---------------------------- --------------------------- For the Six For the Year For the Six For the Year Months Ended Months Ended Ended December 31, Ended December 31, June 30, 2002 June 30, 2002 2003 (Audited) 2003 (Audited) ---------------------------------------------------------------------------------------------- CAPITAL SHARES TRANSACTED: Institutional Class Shares sold 3 207 4,938 419 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 6 247 604 --- --- ------- ----- 3 213 5,185 1,023 Shares redeemed (A) (202) (11,373) (165) --- ---- ------- ----- Net change 3 11 (6,188) 858 --- ---- ------- ----- Premier Class Shares sold 23 103 18 89 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 6 3 5 --- ---- ------- ----- 23 109 21 94 Shares redeemed (23) (69) (18) (23) --- ---- ------- ----- Net change - 40 3 71 --- ---- ------- ----- Retail Class Shares sold 64 360 262 327 Shares issued to shareholders in connection with the reinvestment of dividends and distributions - 2 8 6 --- ---- ------- ----- 64 362 270 333 Shares redeemed (48) (245) (166) (207) --- ---- ------- ----- Net change 16 117 104 126 --- ---- ------- ----- Total net increase in Fund shares 19 168 (6,081) 1,055 === ==== ======= =====
(A) Less than 1. -- 62 CIGNA Funds Group (Unaudited) Trustees Russell H. Jones Senior Vice President, Chief Investment Officer, and Treasurer, Kaman Corporation Richard H. Forde Managing Director, CIGNA Retirement & Investment Services and TimesSquare Capital Management, Inc. Paul J. McDonald Special Advisor to the Board of Directors, Friendly Ice Cream Corporation Marnie Wagstaff Mueller Diocesan Consultant, Episcopal Diocese of Connecticut Officers Richard H. Forde Chairman of the Board and President Alfred A. Bingham III Vice President and Treasurer Jeffrey S. Winer Vice President and Secretary -------------------------------------------------------------------------------- CIGNA Funds Group Funds are open-end, diversified management investment companies. The investment adviser is TimesSquare Capital Management, Inc., 280 Trumbull Street, Hartford, Connecticut 06103. The Funds are distributed by CIGNA Financial Services, Inc., P.O. Box 150476, Hartford, Connecticut 06115-0476 (Telephone: 1.888.CIGNA.FS or 1.888.244.6237). -------------------------------------------------------------------------------- -- 63 THIS PAGE INTENTIONALLY LEFT BLANK [LOGO] CIGNA Financial Services P.O. Box 150476 Hartford, CT 06115-0476 www.cigna.com Member NASD/SIPC 545900 CIGNA Funds Group Money Market Fund Semi Annual Report June 30, 2003 -------------------------------------------------------------------------------- [LOGO] CIGNA Financial Services Dear Shareholders: We are pleased to provide this report for CIGNA Funds Group Money Market Fund (the "Fund") covering the six months ended June 30, 2003. MARKET ENVIRONMENT The Federal Reserve (Fed) met four times during the first half of 2003, but waited until the fourth meeting to cut interest rates. At the June 25 Open Market Committee meeting, the Fed cut the federal funds rate by 25 basis points to a 45-year low of 1%. This was the thirteenth interest rate cut since the easing cycle began in January 2001. The Fed statement noted recent firming in spending as well as a stabilization in labor and "markedly improved financial conditions." PORTFOLIO COMPOSITION AND PERFORMANCE On June 30, 2003, the portfolio contained: top-tier domestic commercial paper, 52%; top-tier foreign commercial paper, 22%; and U.S. Government and Agencies, 26%. The Fund is well diversified. Total returns for the six months ended June 30, 2003 were: Retail Class 0.19% Premier Class 0.31 Institutional Class 0.44 Lipper Money Market Funds Average 0.26 3-month U.S. Treasury Bill 0.59 As of June 30, 2003, the Fund's weighted average portfolio maturity was 45 days, and the annualized 7-day yield for each class was: Retail Class 0.21% Premier Class 0.46 Institutional Class 0.71 - 1 OUTLOOK Economists expect stimulus from low interest rates and tax cuts to help spur growth in the latter part of the year. Manufacturing is starting to show signs of strength. The Fed has openly signaled its willingness to support growth, and the markets are focused on trying to find strength in the economy. Sincerely, /s/ Richard H. Forde Richard H. Forde Chairman of the Board and President CIGNA Funds Group Money Market Fund Note: This commentary is not part of the Semiannual Report to Shareholders. - 2 Money Market Fund INVESTMENTS IN SECURITIES JUNE 30, 2003 (Unaudited)
(IN THOUSANDS) PRINCIPAL VALUE ------------------------------------------------------------------------ COMMERCIAL PAPER - 73.7% Domestic - 51.8% American Express Credit Corp., 0.75%, 7/1/03 $ 1,475 $ 1,475 1.00%, 7/2/03 11,506 11,506 0.87%, 7/3/03 9,938 9,938 Bellsouth Corp., 1.04%, 7/1/03 21,000 21,000 ChevronTexaco Corp., 1.04%, 7/1/03 9,000 9,000 0.90%, 7/9/03 10,678 10,676 Citicorp, 1.02%, 7/2/03 11,905 11,905 Coca Cola Co., 0.99%, 7/11/03 9,362 9,359 1.05%, 7/11/03 11,253 11,250 Colgate Palmolive Co., 1.00%, 7/28/03 9,023 9,016 Corporate Asset Funding Co., 1.22%, 7/2/03 10,000 10,000 du Pont (E.I.) de Nemours & Co., 1.03%, 7/7/03 16,052 16,049 Exxon Project Investment Corp., 1.00%, 7/8/03 7,130 7,129 Fortune Brands, Inc., 1.22%, 7/8/03 9,942 9,940 1.20%, 7/15/03 12,000 11,994 General Electric Capital Corp., 1.05%, 7/1/03 11,763 11,763 1.11%, 1/28/04 (a) 7,500 7,502 Kimberly Clark Worldwide, Inc., 1.02%, 7/17/03 8,000 7,996 Merck & Co., 0.95%, 7/9/03 970 970 1.18%, 7/9/03 7,952 7,950 1.06%, 7/10/03 5,025 5,024
The Notes to Financial Statements are an integral part of these statements. - 3 Money Market Fund INVESTMENTS IN SECURITIES continued JUNE 30, 2003 (Unaudited)
(IN THOUSANDS) PRINCIPAL VALUE --------------------------------------------------------------------- COMMERCIAL PAPER continued Domestic continued Morgan Stanley Dean Witter Co., 1.02%, 7/3/03 $ 9,557 $ 9,556 Nestle Capital Corp., 1.19%, 7/8/03 10,000 9,998 Paccar Financial Corp., 0.92%, 7/24/03 8,012 8,007 Pfizer, Inc., 0.93%, 8/1/03 5,023 5,019 Procter & Gamble Co., 1.00%, 7/29/03 15,000 14,988 State Street Corp., 1.00%, 7/1/03 10,000 10,000 0.90%, 7/14/03 10,300 10,297 Wells Fargo Bank NA, 1.12%, 1/14/04 (a) 5,000 5,000 Wells Fargo & Co., 1.01%, 7/2/03 15,081 15,081 Windmill Funding Corp., 1.10%, 7/14/03 13,010 13,005 -------- 302,393 -------- Foreign - 21.9% ANZ (Delaware), Inc., 1.21%, 7/7/03 15,000 14,997 BASF AG, 0.95%, 7/21/03 19,500 19,490 Diageo Capital PLC, 1.04%, 7/15/03 20,000 19,992 National Australia Funding (Delaware), Inc., 1.04%, 7/10/03 20,000 19,995 Rabobank Nederland NV, 1.22%, 7/2/03 11,265 11,265 1.06%, 7/9/03 10,000 9,998 Shell Finance PLC, 0.93%, 7/14/03 10,000 9,997 UBS Finance (Delaware), Inc., 1.31%, 7/1/03 22,000 22,000 -------- 127,734 -------- Total Commercial Paper 430,127 --------
The Notes to Financial Statements are an integral part of these statements. - 4 Money Market Fund INVESTMENTS IN SECURITIES continued JUNE 30, 2003 (Unaudited)
(IN THOUSANDS) PRINCIPAL VALUE ------------------------------------------------------- U.S. GOVERNMENT & AGENCIES - 26.1% Fannie Mae, 0.96%, 7/9/03 $ 3,046 $ 3,045 0.90%, 8/27/03 3,000 2,996 0.90%, 10/15/03 2,550 2,543 0.90%, 10/29/03 3,182 3,172 4.75%, 11/14/03 5,000 5,059 3.13%, 11/15/03 5,000 5,030 1.32%, 1/9/04 2,500 2,482 1.08%, 3/5/04 2,500 2,481 1.08%, 4/2/04 6,000 5,950 0.89%, 5/27/04 (a) 12,500 12,494 Federal Farm Credit Bank, 3.13%, 10/1/03 4,500 4,516 0.95%, 3/24/05 (a) 15,000 14,997 1.00%, 6/23/05 (a) 2,500 2,500 Federal Home Loan Bank, 5.60%, 9/2/03 2,500 2,517 3.18%, 12/3/03 6,000 6,039 5.38%, 1/5/04 2,460 2,508 1.35%, 3/30/04 5,000 5,000 1.25%, 4/15/04 2,500 2,499 1.08%, 4/19/04 4,672 4,631 Freddie Mac, 3.40%, 10/1/03 2,500 2,510 3.18%, 10/24/03 3,515 3,530 1.08%, 11/21/03 6,000 5,974 1.25%, 12/4/03 2,500 2,486 1.29%, 12/4/03 2,500 2,486
The Notes to Financial Statements are an integral part of these statements. - 5 Money Market Fund INVESTMENTS IN SECURITIES continued JUNE 30, 2003 (Unaudited)
(IN THOUSANDS) PRINCIPAL VALUE ------------------------------------------------------------------------ U.S. GOVERNMENT & AGENCIES continued 1.08%, 1/15/04 $ 8,000 $ 7,952 5.00%, 1/15/04 5,000 5,092 1.29%, 1/29/04 2,500 2,481 5.25%, 2/15/04 5,000 5,115 1.28%, 3/25/04 2,500 2,476 Sallie Mae, 2.60%, 7/2/03 4,500 4,500 2.25%, 7/2/03 5,000 5,000 1.21%, 7/16/03 (a) 5,000 5,000 0.91%, 12/18/03 (a) 2,000 2,000 4.75%, 4/23/04 5,500 5,651 -------- Total U.S. Government & Agencies 152,712 -------- TOTAL INVESTMENTS IN SECURITIES - 99.8% (Total Cost - $582,839) (b) 582,839 Cash and Other Assets Less Liabilities - 0.2% 1,450 -------- NET ASSETS - 100.0% $584,289 ========
NOTES TO INVESTMENTS IN SECURITIES (a) Variable rate security. Rate is as of June 30, 2002. Tax Information (b) At June 30, 2002, the cost for federal income tax purposes was equal to book cost. The Notes to Financial Statements are an integral part of these statements. - 6 Money Market Fund INVESTMENTS IN SECURITIES continued JUNE 30, 2003 (Unaudited) ----------------------------------------------------------- ----------------------------------------------------------- Ten Largest Positions (Unaudited) June 30, 2003
Market % of Value Net (000) Assets ----------------------------------------------------------- Fannie Mae $45,252 7.7% Freddie Mac 40,102 6.9 Federal Home Loan Bank 23,194 4.0 American Express Credit Corp. 22,919 3.9 Sallie Mae 22,151 3.8 Federal Farm Credit Bank 22,013 3.8 UBS Finance (Delaware), Inc. 22,000 3.8 Fortune Brands, Inc. 21,934 3.8 Rabobank Nederland NV, 21,263 3.6 Bellsouth Corp. 21,000 3.6
----------------------------------------------------------- The Notes to Financial Statements are an integral part of these statements. - 7 Money Market Fund STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2003 (Unaudited)
(IN THOUSANDS) ---------------------------------------------------------------- Assets: Investments in securities at value $582,839 Cash 1,450 Interest receivable 694 Investment for Trustees' deferred compensation plan 17 Prepaid expenses 13 -------- Total assets 585,013 -------- Liabilities: Shareholder servicing and distribution fees payable to Distributor 454 Investment advisory fees payable 135 Administrative services fees payable 37 Shareholder reports 36 Custodian fees payable 25 Deferred Tusteees' fees payable 17 Audit and legal fees payable 9 Other 11 -------- Total liabilities 724 -------- Net Assets $584,289 ======== Institutional Class $228,024 Premier Class 672 Retail Class 355,593 -------- $584,289 ======== Shares Outstanding Institutional Class ($1.00 net asset value per share) 228,026 ======== Premier Class ($1.00 net asset value per share) 672 ======== Retail Class ($1.00 net asset value per share) 355,596 ======== Components of Net Assets: Paid-in capital $584,289 ======== Net Assets $584,289 ========
The Notes to Financial Statements are an integral part of these statements. - 8 Money Market Fund STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2003 (Unaudited)
(IN THOUSANDS) ---------------------------------------------------------------- Investment Income: Interest $3,685 Expenses: Investment advisory fees 971 Distribution fees Retail Class 453 Shareholder servicing fees Premier 1 Retail 453 Administrative services fees 106 Custodian fees 70 Shareholder reports 40 Audit and legal fees 20 Registration fees 16 Trustees' fees 8 Other 18 ------ Net expenses 2,156 ------ Net Investment Income 1,529 ------ Realized and Unrealized Gain on Investments: Net realized gain from security transactions -- ------ Net Realized and Unrealized Gain on Investments -- ------ Net Increase in Net Assets Resulting From Operations $1,529 ======
The Notes to Financial Statements are an integral part of these statements. - 9 Money Market Fund STATEMENTS OF CHANGES IN NET ASSETS
For the Six For the Months Ended Year Ended June 30, 2003 December 31, (IN THOUSANDS) (Unaudited) 2002 ----------------------------------------------------------------------------------------- Operations: Net investment income $ 1,529 $ 5,103 Net realized gain from securities transactions -- 4 ----------- ----------- Net increase in net assets from operations 1,529 5,107 ----------- ----------- Dividends from Net Investment Income: Institutional Class (842) (2,328) Premier Class (1) (3) Retail Class (686) (2,739) ----------- ----------- Total dividends and distributions to shareholders (1,529) (5,070) ----------- ----------- Capital Share Transactions: Institutional Class Net proceeds from sales of shares 1,183,938 2,193,367 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions 1,001 2,463 ----------- ----------- 1,184,939 2,195,830 Cost of shares redeemed (1,146,817) (2,190,006) ----------- ----------- 38,122 5,824 ----------- ----------- Premier Class Net proceeds from sales of shares 713 464 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions 1 3 ----------- ----------- 714 467 Cost of shares redeemed (225) (492) ----------- ----------- 489 (25) ----------- ----------- Retail Class Net proceeds from sales of shares 48,377 133,881 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions 832 2,899 ----------- ----------- 49,209 136,780 Cost of shares redeemed (53,504) (68,290) ----------- ----------- (4,295) 68,490 ----------- ----------- Net increase from Fund share transactions 34,316 74,289 ----------- ----------- Net Increase in Net Assets 34,316 74,326 Net Assets: Beginning of period 549,973 475,647 ----------- ----------- End of period $ 584,289 $ 549,973 =========== ===========
The Notes to Financial Statements are an integral part of these statements. -- 10 Money Market Fund STATEMENTS OF CHANGES IN NET ASSETS continued
For the Six For the Months Ended Year Ended June 30, 2003 December 31, (IN THOUSANDS) (Unaudited) 2002 --------------------------------------------------------------------------------- TRANSACTIONS IN CAPITAL STOCK Institutional Class Shares sold 1,183,938 2,193,367 Shares issued in reinvestment of dividends and distributions 1,001 2,463 --------- --------- 1,184,939 2,195,830 Shares redeemed (1,146,817) (2,190,006) ---------- ---------- Net increase (decrease) in Institutional shares outstanding 38,122 5,824 ---------- ---------- Premier Class Shares sold 713 464 Shares issued in reinvestment of dividends and distributions 1 3 ---------- ---------- 714 467 Shares redeemed (225) (492) ---------- ---------- Net increase in Premier shares outstanding 489 (25) ---------- ---------- Retail Class Shares sold 48,377 133,881 Shares issued in reinvestment of dividends and distributions 832 2,899 ---------- ---------- 49,209 136,780 Shares redeemed (53,504) (68,290) ---------- ---------- Net increase in Retail shares outstanding (4,295) 68,490 ---------- ---------- Total net increase in Fund shares 34,316 74,289 ========== ==========
The Notes to Financial Statements are an integral part of these statements. -- 11 Money Market Fund FINANCIAL HIGHLIGHTS
INSTITUTIONAL CLASS -------------------------------------------------------------------------------------------------- For the Six Months Ended For the Year Ended December 31, June 30, 2003 ------------------------------- (Unaudited) 2002 2001 -------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (a) 0.01 0.04 Net realized and unrealized gain on securities -- (a) (a) -------- -------- -------- Total from investment operations -- 0.01 0.04 -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income (a) (0.01) (0.04) Distributions from capital gains -- -- -- -------- -------- -------- Total dividends and distributions -- (0.01) (0.04) -------- -------- -------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Total Return 0.44%(c) 1.36% 3.81%(b) Ratios to Average Net Assets Gross expenses 0.45%(d) 0.45% 0.49% Fees and expenses waived or borne by the Adviser 0.00% 0.00% 0.04% Net expenses 0.45%(d) 0.45% 0.45% Net investment income 0.88%(d) 1.36% 3.62% Net assets, end of period (000 omitted) $228,024 $189,902 $184,060 INSTITUTIONAL CLASS ----------------------------------------------- For the Year Ended December 31, ----------------------------------------------- 2000 1999 1998 --------------- --------------- --------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income 0.06 0.05 0.05 Net realized and unrealized gain on securities (a) (a) -- -------- -------- -------- Total from investment operations 0.06 0.05 0.05 -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income (0.06) (0.05) (0.05) Distributions from capital gains (a) (a) -- -------- -------- -------- Total dividends and distributions (0.06) (0.05) (0.05) -------- -------- -------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Total Return 6.12%(b) 4.87%(b) 5.18%(b) Ratios to Average Net Assets Gross expenses 0.47% 0.52% 0.47% Fees and expenses waived or borne by the Adviser 0.02% 0.07% 0.02% Net expenses 0.45% 0.45% 0.45% Net investment income 5.94% 4.76% 5.06% Net assets, end of period (000 omitted) $159,446 $178,234 $229,619
(a) Amount less than $0.01 per share (b) Had the Adviser not waived or reimbursed a portion of the expenses, total return would have been reduced. (c) Not annualized. (d) Annualized. -- -- 12 13 Money Market Fund FINANCIAL HIGHLIGHTS continued
PREMIER CLASS(1) ----------------------------------------------------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ---------------------------------------- (Unaudited) 2002 2001 2000 ----------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (a) 0.01 0.03 0.05 Net realized and unrealized gain on securities -- (a) (a) (a) -------- ------- -------- ---------- Total from investment operations -- 0.01 0.03 0.05 -------- ------- -------- ---------- LESS DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income (a) (0.01) (0.03) (0.05) Distributions from capital gains -- -- -- (a) -------- ------- -------- ------------- Total dividends and distributions -- (0.01) (0.03) (0.05) -------- ------- -------- ---------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======= ======== ========== Total Return 0.31%(c) 1.12% 3.55%(b) 5.50%(b)(c) Ratios to Average Net Assets Gross expenses 0.70%(d) 0.70% 0.73% 0.72%(d) Fees and expenses waived or borne by the Adviser 0.00% 0.00% 0.03% 0.02%(d) Net expenses 0.70%(d) 0.70% 0.70% 0.70%(d) Net investment income 0.61%(d) 1.13% 3.22% 5.69%(d) Net assets, end of period (000 omitted) $ 672 $ 183 $ 207 $ 105
(1) Commenced operations on January 26, 2000. (a) Amount less than $0.01 per share. (b) Had the Adviser not waived or reimbursed a portion of the expenses, total return would have been reduced. (c) Not annualized. (d) Annualized. -- -- 14 15 Money Market Fund FINANCIAL HIGHLIGHTS continued
RETAIL CLASS(1) ------------------------------------------------------------------------------------------------------------------------- For the Six Months Ended For the Year/Period Ended December 31, June 30, 2003 ---------------------------------------------------- (Unaudited) 2002 2001 2000 1999 ------------------------------------------------------------------------------------------------------------------------- PER SHARE OPERATING PERFORMANCE: Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 INCOME FROM INVESTMENT OPERATIONS: Net investment income (a) 0.01 0.03 0.05 0.03 Net realized and unrealized gain on securities -- (a) (a) (a) (a) -------- -------- -------- -------- -------- Total from investment operations -- 0.01 0.03 0.05 0.03 -------- -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income (a) (0.01) (0.03) (0.05) (0.03) Distributions from capital gains -- -- -- (a) (a) -------- -------- -------- -------- -------- Total dividends and distributions -- (0.01) (0.03) (0.05) (0.03) -------- -------- -------- -------- -------- Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== ======== ======== Total Return 0.19%(c) 0.87% 3.29%(b) 5.60%(b) 2.97%(b)(c) Ratios to Average Net Assets Gross expenses 0.95%(d) 0.95% 0.98% 0.97% 1.00%(d) Fees and expenses waived or borne by the Adviser 0.00% 0.00% 0.03% 0.02% 0.07%(d) Net expenses 0.95%(d) 0.95% 0.95% 0.95% 0.93%(d) Net investment income 0.38%(d) 0.86% 3.10% 5.44% 4.64%(d) Net assets, end of period (000 omitted) $355,593 $359,888 $291,380 $199,993 $123,655
(1) Commenced operations on April 29, 1999. (a) Amount less than $0.01 per share. (b) Had the Adviser not waived or reimbursed a portion of the expenses, total return would have been reduced. (c) Not annualized. (d) Annualized. -- -- 16 17 Money Market Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. Significant Accounting Policies. Money Market Fund (the "Fund") is a separate series of CIGNA Funds Group, a Massachusetts business trust (the "Trust"). The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company. The objective of the Fund is to provide as high a level of current income as is consistent with the preservation of capital and liquidity and the maintenance of $1.00 per share net asset value. The Fund invests exclusively in short-term money market instruments. The Trust offers three classes of shares: Institutional Class, Premier Class and Retail Class. Expenses of the Fund are borne pro rata by the holders of each class of shares, except that each class bears expenses unique to that class (including any applicable shareholder servicing fee or 12b-1 distribution fee). Shares of each class would receive their pro rata share of net assets of the Fund if the Fund were liquidated. In addition, the Trustees approve separate dividends on each class of shares. The Institutional Class has a separate transfer agent charge and no 12b-1 distribution fee or shareholder servicing fee. The Premier Class has a shareholder servicing fee. The Retail Class has a 12b-1 distribution fee and a shareholder servicing fee. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. A. Security Valuation -- The Fund's investments are valued at amortized cost, which the Board of Trustees has determined constitutes fair value and which, at June 30, 2003, approximates cost for federal income tax purposes. B. Security Transactions and Related Investment Income -- Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Interest income, which includes amortization of premium and accretion of discount, is recorded on -- 18 Money Market Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) continued the accrual basis. Securities gains and losses are recognized on the specific cost identification basis. C. Federal Taxes -- For federal income tax purposes, the Fund is taxed as a separate entity. Its policy is to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income and capital gains to its shareholders. Therefore, no federal income or excise taxes on realized income or net capital gains have been accrued. Distributions reported in the Statement of Changes in Net Assets from net investment income including short-term capital gains, and capital gains are treated as ordinary income and long-term capital gains, respectively, for federal income tax purposes. D. Dividends and Distributions -- Dividends from net investment income are declared and reinvested daily. Dividends and distributions are recorded by the Fund on the ex-dividend date. The timing and characterization of certain income and capital gains distributions are determined in accordance with federal tax regulations, which may differ from accounting principles generally accepted in the United States of America. To the extent that such differences are permanent, a reclassification to paid-in capital may be required. 2. Investment Advisory Fees and Other Transactions with Affiliates. Investment advisory fees are paid or accrued to TimesSquare Capital Management, Inc. ("TimesSquare"), certain officers and directors of which are affiliated with the Fund. Such advisory fees are based on an annual rate of 0.35% applied to the average daily net assets of the Fund. TimesSquare has voluntarily agreed to reimburse the Fund for any amount by which its expenses (including the advisory fee, but excluding interest, taxes, transaction costs incurred in acquiring and disposing of portfolio securities, and extraordinary expenses) exceed 0.45% of average daily net assets for the Institutional Class, 0.70% of average daily net assets for the Premier Class, and 0.95% for the Retail Class, until April 30, 2004, and thereafter, to the extent described in the Fund's then current prospectus. TimesSquare retains -- 19 Money Market Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) continued the ability to be repaid by the Fund if the Fund's expenses fall below the specified limit prior to the end of the fiscal year or within three years after TimesSquare waives management fees or reimburses Fund operating expenses. The Fund's remaining contingent liability and expiration dates are as shown below:
Remaining Contingent Expires during Expires during Class Liability (000's) 2003 (000's) 2004 (000's) -------------------------------------------------------------------------- Institutional $ 87 $19 $ 68 Retail 83 5 78 Total $170 $24 $146
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, other affiliated CIGNA Funds may invest their excess cash in the Fund. TimesSquare will waive the amount of its advisory fee for the affiliated Funds in an amount that offsets the amount of the advisory fees incurred by the Money Market Fund. For administrative services, the Fund reimburses TimesSquare Capital Management, Inc. for a portion of the compensation and related expenses of the Trust's Treasurer and Secretary and certain persons who assist in carrying out the responsibilities of those offices. For the six months ended June 30, 2003, the Fund paid or accrued $106,090. With respect to Retail Class shares, the Fund has adopted a Distribution plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, which requires the payment of 0.25% annually of the average daily net assets to CIGNA Financial Services, Inc. ("CFS"), the Fund's distributor. The distribution fees received from the 12b-1 plan are used for services provided to the Retail Class and expenses primarily intended to result in the sale of such shares. Premier and Retail Class shares are also subject to a shareholder servicing fee payable to CFS equal to 0.25% annually of the average daily net assets of the Fund. The distribution and shareholder servicing fees will be waived as necessary to limit Premier and Retail Class expenses, as a percentage of average daily net assets, to the amounts described above until April 30, 2004, and thereafter to the extent described in the Fund's then current prospectus. -- 20 Money Market Fund NOTES TO FINANCIAL STATEMENTS (Unaudited) continued TimesSquare and CFS are indirect, wholly-owned subsidiaries of CIGNA Corporation. 3. Trustees' Fees. Trustees' fees represent remuneration paid or accrued to trustees who are not employees of CIGNA Corporation or any of its affiliates. 4. Capital Stock. The Fund is a separate series of the Trust, which offers an unlimited number of shares of beneficial interest, without par value. At June 30, 2003, affiliates of CIGNA Corporation owned 99.94% and 0.01% of the Institutional and Premier Classes, respectively. -------------------------------------------------------------------------------- Money Market Fund is an open-end, diversified management investment company that invests in money market instruments. The investment adviser is TimesSquare Capital Management, Inc., 280 Trumbull Street, Hartford, Connecticut 06103. The Fund is distributed by CIGNA Financial Services, Inc., P.O. Box 150476, Hartford, Connecticut 06115-0476 (telephone: 1.888.CIGNA.FS or 1.888.244.6237). TRUSTEES Richard H. Forde Managing Director, CIGNA Retirement & Investment Services and TimesSquare Capital Management, Inc. Russell H. Jones Senior Vice President, Chief Investment Officer and Treasurer, Kaman Corporation Paul J. McDonald Special Advisor to Board of Directors, Friendly Ice Cream Corporation Marnie Wagstaff Mueller Diocesan Consultant, Episcopal Diocese of Connecticut OFFICERS Richard H. Forde Chairman of the Board and President Alfred A. Bingham III Vice President and Treasurer Jeffrey S. Winer Vice President and Secretary -- 21 [LOGO] CIGNA Financial Services P.O. Box 150476 [bullet] Hartford, Connecticut 06115-0476 www.cigna.com [bullet] Member NASD/SIPC 545719