EX-99.D 5 d15335-d.txt -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund 16 Dear Shareholders: Our commentary for TimesSquare VP S&P 500[RegTM] Index Fund (the "Fund") covering the six months ended June 30, 2004 follows. Economy The U.S. economic expansion continues to gather steam. The consensus is that real Gross Domestic Product will grow at a 4%+ rate in the second half of 2004. The manufacturing sector has been expanding for the past 13 months, and consumer confidence is improving. In the second quarter, companies began hiring new workers at a pace of around 250,000 jobs a month. The unemployment rate has fallen to 5.6%. Inflation, fueled by increasing food and energy prices, has become a concern. The year-over-year rate of increase of the Consumer Price Index was 3.0% in May, up from 1.7% at the end of March. Responding to the signs of inflation, the Federal Reserve raised the Fed Funds interest rate 0.25% to 1.25% on June 30 and announced that it was willing to move more aggressively in raising rates in the future if inflation data warranted. Equity Markets Equity markets were up nearly 4% through the first few weeks of the year, propelled by record revenues from Intel and good news in the auto and construction industries. After a brief period of profit-taking, a positive earnings surprise from CISCO, the highest non-manufacturing Institute for Supply Management Index number in seven years, and a two-year low in unemployment, the S&P 500[RegTM] Index reached its highest level since March 2002. Despite the strong durable goods report in late February, the market gave back much of its gains over the remainder of the quarter. A decrease in consumer confidence, increased terrorist threats and the unfavorable Microsoft ruling all took a toll and left the S&P 500[RegTM] Index up 1.69% for the first quarter. Also in the first quarter, both the S&P MidCap Index (+5.06%) and the S&P Small Cap Index (+6.22%) outperformed the large capitalization index during the period. Within the large capitalization segment, value (+3.35%) outpaced growth (+0.02%), as measured by the respective S&P/Barra Indexes. In the second quarter, the stock market, as measured by the S&P 500[RegTM] Index, returned 1.72%, as equity declines in April were offset by gains in May and June. Corporate earnings continued to surprise on the upside, but concerns over rising interest rates continued to dissuade buyers. For the second quarter, growth stocks (+2.69%) outperformed value stocks (+0.79%), as measured by the respective S&P/Barra Indexes. The S&P Small Cap Index (+3.60%) continued to outperform large cap stocks. Performance Summary Returns for the year ended December 31, 2003 (which do not reflect expenses associated with variable products through which the Fund may be offered and which would have been lower if such expenses were reflected) were:
Second Quarter Year-to-date Fund 1.68% 3.35% Lipper S&P 500 Funds Average 1.56 3.13 S&P 500[RegTM] Index 1.72 3.44
-------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund 17 Outlook Financial markets are likely to remain in a volatile trading pattern through year end, with equity markets expected to continue to outperform bonds. Fixed income markets remain in a cyclical bear market and, in an environment of rising inflation and tightening monetary conditions, further market declines are highly likely. Assuming the pace of Fed monetary tightening is moderate and cautious, equity markets should not be seriously impacted by the shift in policy until 2005. However, a more aggressive monetary tightening next year could result in a sharp, but brief and temporary, equity market correction. Sincerely, /s/ Richard H. Forde Richard H. Forde Chairman of the Board and President CIGNA Variable Products Group Note: This commentary is not part of the Semiannual Report to Shareholders. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 18 June 30, 2004 (Unaudited)
Number of Value Shares (000) ---------------- ------------- COMMON STOCKS - 92.2% General Electric Co. 157,800 $ 5,113 Microsoft Corp. 167,000 4,770 Exxon Mobil Corp. 101,424 4,504 Pfizer, Inc. 118,032 4,046 Citigroup, Inc. 79,672 3,705 Wal-Mart Stores, Inc. 67,000 3,535 American International Group 40,384 2,879 Intel Corp. 100,300 2,768 Bank of America Corp. 31,616 2,675 Johnson & Johnson 45,884 2,556 Cisco Systems, Inc. (a) 106,300 2,519 International Business Machine Corp. 26,300 2,318 Procter & Gamble Co. 40,000 2,178 Coca-Cola (The) Co. 37,800 1,908 Merck & Co., Inc. 34,400 1,634 Altria Group, Inc. 31,700 1,587 ChevronTexaco Corp. 16,534 1,556 Verizon Communications, Inc. 42,726 1,546 Wells Fargo & Co. 26,160 1,497 PepsiCo., Inc. 26,460 1,426 Dell, Inc. (a) 39,600 1,418 United Parcel Service, Inc., Class B 17,500 1,315 SBC Communications, Inc. 51,194 1,241 Home Depot, Inc. 35,250 1,241 Time Warner, Inc. (a) 70,400 1,238 Morgan (J.P.) Chase & Co. 31,806 1,233 Eli Lilly & Co. 17,400 1,216 Amgen, Inc. (a) 19,968 1,090 3M Co. 12,100 1,089 Fannie Mae 15,000 1,070 Tyco International Ltd. 30,965 1,026 American Express Co. 19,900 1,022 Hewlett-Packard Co. 47,224 996 Abbott Laboratories 24,200 986 Comcast Corp., Class A (a) 34,862 977 Viacom, Inc., Class B 27,033 966 Oracle Corp. (a) 80,872 965 eBay, Inc. (a) 10,000 920
Number of Value Shares (000) ---------------- ------------- Medtronic, Inc. 18,800 $ 916 Qualcomm, Inc. 12,500 912 Wachovia Corp. 20,328 905 Morgan Stanley Dean Witter & Co. 16,940 894 Bank One Corp. 17,319 883 US Bancorp 29,751 820 Merrill Lynch & Co., Inc. 15,000 810 Disney (Walt) Co. 31,700 808 ConocoPhillips 10,568 806 Yahoo, Inc. (a) 20,600 748 Wyeth 20,600 745 BellSouth Corp. 28,300 742 Bristol-Myers Squibb Co. 30,000 735 United Technologies Corp. 8,000 732 Goldman Sachs Group, Inc. 7,500 706 du Pont (E.I.) de Nemours & Co. 15,478 688 Anheuser-Busch Cos., Inc. 12,600 680 Freddie Mac 10,700 677 Boeing (The) Co. 13,076 668 Gillette (The), Co. 15,600 661 Motorola, Inc. 36,191 660 Texas Instruments, Inc. 26,800 648 Lowe's Companies, Inc. 12,200 641 First Data Corp. 13,758 613 UnitedHealth Group, Inc. 9,700 604 AT&T Wireless Services, Inc. (a) 42,139 603 Target Corp. 14,100 599 Dow (The) Chemical Co. 14,410 586 Schlumberger Ltd. 9,100 578 Walgreen Co. 15,900 576 Boston Scientific Corp. (a) 12,700 544 Washington Mutual, Inc. 13,907 537 Applied Materials, Inc. (a) 26,000 510 MBNA Corp. 19,752 509 Kimberly-Clark Corp. 7,732 509 Allstate (The) Corp. 10,896 507 McDonald's Corp. 19,500 507 Honeywell International, Inc. 13,287 487 Colgate-Palmolive Co. 8,200 479
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 19 June 30, 2004 (Unaudited) (Continued)
Number of Value Shares (000) ---------------- ------------- Cardinal Health, Inc. 6,775 $ 475 Fifth Third Bancorp 8,758 471 Illinois Tool Works, Inc. 4,800 460 Carnival Corp. 9,700 456 Nextel Communications, Inc., Class A (a) 17,000 453 Alcoa, Inc. 13,468 445 Ford Motor Co. 28,297 443 Caterpillar, Inc. 5,400 429 EMC Corp. (a) 37,424 427 Metlife, Inc. 11,800 423 Schering-Plough Corp. 22,800 421 St. Paul (The) Travelers Companies, Inc. 10,291 417 Emerson Electric Co. 6,500 413 General Motors Corp. 8,700 405 Prudential Financial, Inc. 8,400 390 Sprint Corp. (FON Group) 22,000 387 Cendant Corp. 15,604 382 Automatic Data Processing, Inc. 9,100 381 FedEx Corp. 4,600 376 Marsh & McLennan Cos., Inc. 8,200 372 Lockheed Martin Corp. 6,960 362 Sysco Corp. 10,000 359 Gannett Co., Inc. 4,200 356 Bank (The) of New York Co., Inc. 12,000 354 Clear Channel Communications, Inc. 9,500 351 Exelon Corp. 10,250 341 Stryker Corp. 6,200 341 Gap (The), Inc. 13,862 336 Zimmer Holdings, Inc. (a) 3,780 333 International Paper Co. 7,451 333 Avon Products, Inc. 7,200 332 Southern (The) Co. 11,300 329 National City Corp. 9,400 329 Baxter International, Inc. 9,400 324 Forest Laboratories, Inc. (a) 5,700 323 Aflac, Inc. 7,900 322 Lehman Brothers Holdings, Inc. 4,280 322 HCA, Inc. 7,700 320 Biogen Idec, Inc. (a) 5,035 318
Number of Value Shares (000) ---------------- ------------- Dominion Resources, Inc. 4,999 $ 315 BB&T Corp. 8,500 314 Nike, Inc., Class B 4,100 311 Hartford Financial Services Group 4,500 309 General Dynamics Corp. 3,100 308 Northrop Grumman Corp. 5,678 305 Countrywide Financial Corp. 4,200 295 Costco Wholesale Corp. 7,100 292 Harley-Davidson, Inc. 4,700 291 Occidental Petroleum Corp. 6,000 290 Progressive (The) Corp. 3,400 290 SunTrust Banks, Inc. 4,400 286 Duke Energy Corp. 14,024 285 SLM Corp. 7,000 283 Sara Lee Corp. 12,200 280 General Mills, Inc. 5,800 276 Waste Management, Inc. 8,932 274 Analog Devices, Inc. 5,800 273 Corning, Inc. (a) 20,900 273 WellPoint Health Networks (a) 2,400 269 Guidant Corp. 4,800 268 Kellogg Co. 6,400 268 Maxim Integrated Products 5,100 267 Deere & Co. 3,800 267 Starbucks Corp. (a) 6,100 265 Newmont Mining Corp. 6,735 261 CVS Corp. 6,100 256 Golden West Financial Corp. 2,400 255 State Street Corp. 5,200 255 Best Buy Co., Inc. 5,000 254 Computer Associates International, Inc. 9,012 253 Electronic Arts, Inc. (a) 4,600 251 Lucent Technologies, Inc. (a) 65,936 249 Danaher Corp. 4,800 249 Capital One Financial Corp. 3,600 246 Alltel Corp. 4,800 243 Apollo Group, Inc., Class A (a) 2,700 238 Union Pacific Corp. 4,000 238 Devon Energy Corp. 3,600 238
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 20 June 30, 2004 (Unaudited) (Continued)
Number of Value Shares (000) ---------------- ------------- Tribune Co. 5,100 $ 232 Anadarko Petroleum Corp. 3,933 230 McGraw-Hill (The) Cos., Inc. 3,000 230 Raytheon Co. 6,400 229 PNC Financial Services Group, Inc. 4,300 228 Caremark Rx, Inc. (a) 6,900 227 Staples, Inc. 7,750 227 Burlington Resources, Inc. 6,220 225 ConAgra Foods, Inc. 8,300 225 Kohl's Corp. (a) 5,300 224 Sun Microsystems, Inc. (a) 50,900 221 Wrigley (Wm) Jr. Co. 3,500 221 Omnicom Group 2,900 220 Broadcom Corp., Class A (a) 4,700 220 Apache Corp. 5,022 219 Masco Corp. 7,000 218 ManuLife Financial Corp. 5,333 216 Weyerhaeuser Co. 3,400 215 Agilent Technologies, Inc. (a) 7,328 215 Heinz (H.J) Co. 5,400 212 Symantec Corp. (a) 4,800 210 Kroger Co. (a) 11,500 209 International Game Technology 5,400 208 Coca-Cola Enterprises, Inc. 7,100 206 Halliburton Co. 6,800 206 Southwest Airlines Co. 12,187 204 St. Jude Medical, Inc. (a) 2,700 204 TXU Corp. 5,000 203 Burlington Northern Santa Fe Corp. 5,767 202 Schwab, (The) Charles Corp. 21,025 202 Becton Dickinson & Co. 3,900 202 Entergy Corp. 3,600 202 Marathon Oil Corp. 5,300 201 Praxair, Inc. 5,000 200 Aetna, Inc. 2,342 199 SouthTrust Corp. 5,100 198 Chubb Corp. 2,900 198 Mellon Financial Corp. 6,700 197 Paychex, Inc. 5,800 197
Number of Value Shares (000) ---------------- ------------- Baker Hughes, Inc. 5,190 $ 195 Franklin Resources, Inc. 3,900 195 American Electric Power Co., Inc. 6,100 195 Keycorp 6,516 195 Lexmark International, Inc., Class A (a) 2,000 193 FirstEnergy Corp. 5,100 191 Linear Technology Corp. 4,800 189 TJX Cos., Inc. 7,800 188 Anthem, Inc. (a) 2,100 188 Apple Computer, Inc. (a) 5,700 185 FPL Group, Inc. 2,900 185 Hershey Foods Corp. 4,000 185 Ingersoll-Rand Co., Class A 2,700 184 Air Products & Chemicals, Inc. 3,500 184 Veritas Software Corp. (a) 6,600 183 ACE Ltd. 4,300 182 PG&E Corp. (a) 6,500 182 AT&T Corp. 12,285 180 Marriott International, Inc., Class A 3,600 180 Allergan, Inc. 2,000 179 Xerox Corp. (a) 12,300 178 Biomet, Inc. 4,000 178 Clorox Co. 3,300 177 Bed Bath & Beyond, Inc. (a) 4,600 177 Xilinx, Inc. 5,300 177 Principal Financial Group 5,000 174 Loews Corp. 2,900 174 Fortune Brands, Inc. 2,300 173 Safeway, Inc. (a) 6,800 172 Adobe Systems, Inc. 3,700 172 Campbell Soup Co. 6,400 172 Yum! Brands, Inc. 4,580 170 Equity Office Properties Trust 6,200 169 Archer-Daniels-Midland Co. 9,987 168 Progress Energy, Inc. 3,800 167 Genzyme Corp. (General Division) (a) 3,500 166 PPG Industries, Inc. 2,600 162 Norfolk Southern Corp. 6,100 162 Univision Communications, Inc., Class A (a) 5,000 159
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 21 June 30, 2004 (Unaudited) (Continued)
Number of Value Shares (000) ----------- ------------- Pitney Bowes, Inc. 3,600 $ 159 Monsanto Co. 4,135 159 Penney (J.C.) Co., Inc. 4,200 159 XL Capital Ltd. 2,100 158 M&T Bank Corp 1,800 157 Medco Health Solutions, Inc. (a) 4,166 156 Paccar, Inc. 2,687 156 Eaton Corp. 2,400 155 McKesson Corp. 4,523 155 Johnson Controls, Inc. 2,900 155 Simon Property Group, Inc. 3,000 154 Unocal Corp. 4,000 152 Albertson's, Inc. 5,713 152 CIGNA Corp. (b) 2,200 151 Charter One Financial, Inc. 3,424 151 Comerica, Inc. 2,750 151 Moody's Corp. 2,300 149 Kla-Tencor Corp. (a) 3,000 148 Public Service Enterprise Group 3,700 148 Valero Energy Corp. 2,000 148 Rohm & Haas Co. 3,485 145 Georgia-Pacific Corp. 3,916 145 Micron Technology, Inc. (a) 9,400 144 Transocean, Inc. (a) 4,971 144 Northern Trust Corp. 3,400 144 Starwood Hotels & Resorts Worldwide, Inc. 3,200 144 Electronic Data Systems Corp. 7,400 142 Consolidated Edison, Inc. 3,500 139 AmSouth Bancorp 5,400 138 Federated Department Stores 2,800 137 AON Corp. 4,825 137 Bear Stearns (The) Cos., Inc. 1,625 137 Marshall & Ilsley Corp. 3,500 137 Quest Diagnostics 1,600 136 Computer Sciences Corp. (a) 2,900 135 Limited Brands, Inc. 7,200 135 Block (H&R), Inc. 2,800 134 American Standard Cos., Inc. (a) 3,300 133 Lincoln National Corp. 2,800 132
Number of Value Shares (000) ----------- ------------- Altera Corp. (a) 5,900 $ 131 Dover Corp. 3,100 131 Chiron Corp. (a) 2,900 129 Sears Roebuck and Co. 3,400 128 Edison International 5,000 128 Equity Residential 4,300 128 Ecolab, Inc. 4,000 127 MBIA, Inc. 2,200 126 Textron, Inc. 2,100 125 Regions Financial Corp. 3,400 124 Cintas Corp. 2,600 124 PPL Corp. 2,700 124 National Semiconductor Corp. (a) 5,600 123 Sempra Energy 3,554 122 May (The) Department Stores Co. 4,450 122 Pepsi Bottling Group, Inc. 4,000 122 Mattel, Inc. 6,645 121 AMBAC Financial Group, Inc. 1,650 121 Ameren Corp. 2,800 120 Intuit, Inc. (a) 3,100 120 Eastman Kodak Co. 4,400 119 Synovus Financial Corp. 4,650 118 Fiserv, Inc. (a) 3,000 117 ITT Industries, Inc. 1,400 116 BJ Services Co. (a) 2,500 115 Sungard Data Systems, Inc. (a) 4,400 114 Cincinnati Financial Corp. 2,625 114 Network Appliance, Inc. (a) 5,300 114 MGIC Investment Corp. 1,500 114 Kinder Morgan, Inc. 1,900 113 Jefferson-Pilot Corp. 2,212 112 Autozone, Inc. (a) 1,400 112 Affiliated Computer Services, Inc. (a) 2,100 111 Amerada Hess Corp. 1,400 111 Hilton Hotels Corp. 5,900 110 Phelps Dodge Corp. 1,416 110 Donnelley (RR) & Sons Co. 3,300 109 Avery Dennison Corp. 1,700 109 Rockwell Automation, Inc. 2,900 109
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 22 June 30, 2004 (Unaudited) (Continued)
Number of Value Shares (000) ---------------- ------------- Parker Hannifin Corp. 1,825 $ 109 CSX Corp. 3,300 108 EOG Resources, Inc. 1,800 107 DTE Energy Co. 2,600 105 Genuine Parts Co. 2,650 105 Peoplesoft, Inc. (a) 5,630 104 Nabors Industries Ltd. (a) 2,300 104 Xcel Energy, Inc. 6,220 104 Cinergy Corp. 2,720 103 Avaya, Inc. (a) 6,528 103 New York Times Co., Class A 2,300 103 Dollar General Corp. 5,247 103 AmerisourceBergen Corp. 1,700 102 Newell Rubbermaid, Inc. 4,207 99 Pulte Homes, Inc. 1,900 99 Constellation Energy Group, Inc. 2,600 99 Qwest Communications International (a) 27,301 98 Torchmark Corp. 1,800 97 Tenet Healthcare Corp. (a) 7,150 96 T. Price Rowe Group, Inc. 1,900 96 Sherwin-Williams (The) Co. 2,300 96 Molex, Inc. 2,975 95 AES (The) Corp. (a) 9,600 95 Williams Companies., Inc. 8,000 95 Express Scripts, Inc. (a) 1,200 95 Harrah's Entertainment, Inc. 1,750 95 UST, Inc. 2,600 94 Rockwell Collins, Inc. 2,800 93 Safeco Corp. 2,100 92 Prologis 2,800 92 Delphi Corp. 8,626 92 Nucor Corp. 1,200 92 KeySpan Corp. 2,500 92 Brown-Forman Corp., Class B 1,900 92 Plum Creek Timber Co., Inc. 2,800 91 Waters Corp. (a) 1,900 91 Bard (C.R.), Inc. 1,600 91 MeadWestvaco Corp. 3,076 90 Freeport-McMoRan Copper & Gold, Class B 2,700 90
Number of Value Shares (000) ---------------- ------------- Nordstrom, Inc. 2,100 $ 89 Medimmune, Inc. (a) 3,800 89 Union Planters Corp. 2,950 88 Interpublic (The) Group of Cos., Inc. (a) 6,400 88 Reynolds (RJ) Tobacco Holdings, Inc. 1,300 88 North Fork Bancorporation, Inc. 2,300 88 Centex Corp. 1,900 87 IMS Health, Inc. 3,700 87 Knight-Ridder, Inc. 1,200 86 First Horizon National Corp. 1,900 86 Zions Bancorporation 1,400 86 Office Depot, Inc. (a) 4,800 86 Advanced Micro Devices, Inc. (a) 5,400 86 Health Management Associates, Class A 3,800 85 Tiffany & Co. 2,300 85 NiSource, Inc. 4,100 85 JDS Uniphase Corp. (a) 22,200 84 Solectron Corp. (a) 12,900 83 Cooper Industries Ltd., Class A 1,400 83 Mylan Laboratories 4,100 83 Scientific-Atlanta, Inc. 2,400 83 VF Corp. 1,700 83 Kerr-McGee Corp. 1,538 83 Siebel Systems, Inc. (a) 7,700 82 Family Dollar Stores, Inc. 2,700 82 Huntington Bancshares, Inc. 3,566 82 Grainger (W.W.), Inc. 1,400 81 Leggett & Platt, Inc. 3,000 80 Thermo Electron Corp. (a) 2,600 80 Noble Corp. (a) 2,100 80 Jones Apparel Group, Inc. 2,000 79 EL Paso Corp. 9,943 78 Jabil Circuit, Inc. (a) 3,100 78 Robert Half International, Inc. 2,600 77 Sunoco, Inc. 1,200 76 Vulcan Materials Co. 1,600 76 Whirlpool Corp. 1,100 75 Novellus Systems, Inc. (a) 2,400 75 Black & Decker Corp. 1,200 75
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 23 June 30, 2004 (Unaudited) (Continued)
Number of Value Shares (000) ---------------- ------------- NCR Corp. (a) 1,500 $ 74 UnumProvident Corp. 4,625 74 Autonation, Inc. (a) 4,300 74 Sanmina-SCI Corp. (a) 8,000 73 Autodesk, Inc. 1,700 73 Sealed Air Corp. (a) 1,361 73 RadioShack Corp. 2,500 72 McCormick & Co., Inc. 2,100 71 Unisys Corp. (a) 5,100 71 Alberto-Culver Co. 1,400 70 Mercury Interactive Corp. (a) 1,400 70 Applera Corp.--Applied Biosystems Group 3,200 70 Teradyne, Inc. (a) 3,000 68 CenturyTel, Inc. 2,250 68 Hospira, Inc. (a) 2,420 67 Providian Financial Corp. (a) 4,500 66 Allied Waste Industries, Inc. (a) 5,000 66 Sigma-Aldrich Corp. 1,100 66 Ball Corp. 900 65 BMC Software, Inc. (a) 3,500 65 Supervalu, Inc. 2,100 64 E*Trade Financial Corp. (a) 5,700 64 United States Steel Corp. 1,800 63 Engelhard Corp. 1,950 63 Wendy's International, Inc. 1,800 63 Fluor Corp. 1,300 62 Liz Claiborne, Inc. 1,700 61 Janus Capital Group, Inc. 3,700 61 American Power Conversion 3,100 61 Pactiv Corp. (a) 2,400 60 Comverse Technology, Inc. (a) 3,000 60 Sabre Holdings Corp., Class A 2,140 59 Stanley (The) Works 1,300 59 Dow Jones & Co., Inc. 1,300 59 Goodrich Corp. 1,800 58 Ashland, Inc. 1,100 58 Brunswick Corp. 1,400 57 Pinnacle West Capital Corp. 1,400 57 Reliant Energy, Inc. (a) 5,210 56
Number of Value Shares (000) ---------------- ------------- Tellabs, Inc. (a) 6,400 $ 56 Eastman Chemical Co. 1,200 55 Temple-Inland, Inc. 800 55 Equifax, Inc. 2,200 54 Centerpoint Energy, Inc. 4,707 54 Citizens Communications Co. (a) 4,400 53 Symbol Technologies, Inc. 3,600 53 Toys R US, Inc. (a) 3,300 53 Darden Restaurants, Inc. 2,550 52 International Flavors & Fragrances, Inc. 1,400 52 Bausch & Lomb, Inc. 800 52 Federated Investors, Inc., Class B 1,700 52 Nvidia Corp. (a) 2,500 51 Citrix Systems, Inc. (a) 2,500 51 Hasbro, Inc. 2,675 51 Andrew Corp. (a) 2,493 50 Pall Corp. 1,900 50 Boise Cascade Corp. 1,300 49 Novell, Inc. (a) 5,800 49 KB Home 700 48 Dana Corp. 2,343 46 Manor Care, Inc. 1,400 46 Watson Pharmaceuticals, Inc. (a) 1,700 46 Bemis Co. 1,600 45 Millipore Corp. (a) 800 45 LSI Logic Corp. (a) 5,900 45 Tektronix, Inc. 1,300 44 Meredith Corp. 800 44 Cummins, Inc. 700 44 Monster Worldwide, Inc. (a) 1,700 44 Apartment Investment & Mgt. Co., Class A 1,400 44 Coors (Adolph) Co., Class B 600 43 King Pharmaceuticals, Inc. (a) 3,766 43 Circuit City Stores, Inc. 3,300 43 Navistar International Corp. (a) 1,100 43 Humana, Inc. (a) 2,500 42 PerkinElmer, Inc. 2,000 40 Ryder System, Inc. 1,000 40 QLogic Corp. (a) 1,500 40
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 24 June 30, 2004 (Unaudited) (Continued)
Number of Value Shares (000) ---------------- ------------- Compuware Corp. (a) 5,900 $ 39 Rowan Cos., Inc. (a) 1,600 39 PMC--Sierra, Inc. (a) 2,700 39 Louisiana-Pacific Corp. 1,600 38 ADC Telecommunications, Inc. (a) 12,500 35 Deluxe Corp. 800 35 TECO Energy, Inc. 2,900 35 Convergys Corp. (a) 2,200 34 Reebok International Ltd. 900 32 Carmax, Inc. (a) 1,475 32 Snap-On, Inc. 950 32 Del Monte Foods Co. (a) 3,081 31 Allegheny Energy, Inc. (a) 2,000 31 Maytag Corp. 1,200 29 Dillard's, Inc., Class A 1,300 29 Crane Co. 900 28 Calpine Corp. (a) 6,400 28 Advanced Medical Optics, Inc. (a) 644 27 Ciena Corp. (a) 7,300 27 Worthington Industries 1,300 27 Smucker (J.M.) Co. 578 27 Gateway, Inc. (a) 5,800 26 Big Lots, Inc. (a) 1,800 26 Applied Micro Circuits Corp. (a) 4,800 26 Cooper Tire & Rubber Co. 1,100 25 Peoples Energy Corp. 600 25 Dynegy, Inc., Class A (a) 5,800 25 Goodyear (The) Tire & Rubber Co. (a) 2,700 25 Thomas & Betts Corp. 900 25 Visteon Corp. 2,051 24 Nicor, Inc. 700 24 American Greetings, Class A (a) 1,000 23 Allegheny Technologies, Inc. 1,270 23 CMS Energy Corp. (a) 2,500 23 Great Lakes Chemical Corp. 800 22 Hercules, Inc. (a) 1,700 21 Parametric Technology Corp. (a) 4,100 21 Piper Jaffray Companies (a) 381 17 Winn-Dixie Stores, Inc. (a) 2,200 16
Number of Value Shares (000) ---------------- ------------- Power-One, Inc. (a) 1,300 $ 14 Delta Air Lines, Inc. (a) 1,900 14 Texas Genco Holdings, Inc. 300 14 Eagle Materials, Inc. 178 12 EnPro Industries, Inc. (a) 460 11 Hudson Highland Group, Inc. (a) 165 5 Eagle Materials, Inc. 53 4 Mirant Corp. (a) 7,960 3 Cavco Industries, Inc. (a) 60 2 Agere Systems, Inc., Class A (a) 823 2 Unilever NV 1 -- Kadant, Inc. (a) 1 -- -------- Total Common Stocks (Cost - $164,358) 164,668 -------- SHORT-TERM OBLIGATIONS - 7.7% Money Market Fund - 5.5% TimesSquare VP Money Market Fund (c) 9,730,888 9,731 --------
Principal (000) ---------- U.S. Government - 2.2% U.S. Treasury Bills, 0.98%, 9/30/04 (d) $ 1,500 1,496 1.00%, 9/30/04 (d) 2,500 2,494 ----- 3,990 ----- Total Short-Term Obligations (Cost - $13,721) 13,721 ------ TOTAL INVESTMENTS IN SECURITIES - 99.9% (Total Cost - $178,079) (e) 178,389 Cash and Other Assets, Less Liabilities - 0.1% 121 ------- NET ASSETS - 100.0% $ 178,510 =========
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 25 June 30, 2004 (Unaudited) (Continued) -------------------------------------------------------------------------------- NOTES TO INVESTMENTS IN SECURITIES (a) Non-income producing securities. (b) TimesSquare Capital Management, Inc., the fund's Investment Adviser, is an indirect wholly owned subsidiary of CIGNA Corp. (c) TimesSquare Capital Management, Inc., the fund's Investment Adviser, is also the Adviser to the TimesSquare VP Money Market Fund. (d) This security, or a portion thereof, was pledged as collateral for Stock Index Futures Contracts. At June 30, 2004, the Fund was long 50 S&P 500[RegTM] Futures Contracts expiring in September 2004. Unrealized gains amounted to $211,875. Underlying face value was $14,043,125 and underlying market value was $ 14,255,000. Tax Information (e) At June 30, 2004, the net unrealized depreciation of investments, based on cost for federal income tax purposes of $178,950,080, was as follows: Aggregate gross unrealized appreciation for all investments in which there was an excess of value over tax cost $27,339,124 Aggregate gross unrealized depreciation for all investments in which there was an excess of tax cost over value (27,900,693) ----------- Unrealized depreciation - net $ (561,569) ===========
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CIGNA Variable Products S&P 500[RegTM] Index Fund Market % of Value Net Ten Largest Positions (Unaudited) (000) Assets ----------------------------------- ---------- --------- General Electric Co. $ 5,113 2.9% Microsoft Corp. 4,770 2.7 Exxon Mobil Corp. 4,504 2.5 Pfizer, Inc. 4,046 2.3 Citigroup, Inc. 3,705 2.1 Wal-Mart Stores, Inc. 3,535 2.0 American International Group 2,879 1.6 Intel Corp. 2,768 1.6 Bank of America Corp. 2,675 1.5 Johnson & Johnson 2,556 1.4
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund 26 Statement of Assets and Liabilities June 30, 2004 (Unaudited) (In Thousands)
Assets: Investments in securities at value $ 178,389 Interest and dividends receivable, net of withholding taxes 184 Investment for Trustees' deferred compensation plan 88 Futures variation margin receivable 57 Receivable for fund shares sold 4 --------- Total assets 178,722 --------- Liabilities: Deferred Trustees' fees payable 88 Custodian fees payable 26 Audit and legal fees payable 21 Payable for Fund shares redeemed 19 Administrative services fees payable 19 Insurance expenses payable 14 Shareholder reports payable 13 Advisory fees payable 12 --------- Total liabilities 212 --------- Net Assets $ 178,510 ========= Components of Net Assets: Paid in capital $ 157,320 Undistributed net investment income 2,204 Accumulated net realized gain 18,464 Net unrealized appreciation of investments and futures 522 --------- Net Assets $ 178,510 ========= Shares Outstanding 10,914 ========= Net Asset Value and Redemption Price per Share $ 16.36 ========= Cost of Investments $ 178,079 =========
Statement of Operations For the Six Months Ended June 30, 2004 (Unaudited) (In Thousands)
Investment Income: Income: Dividends $ 1,581 Interest 17 ------- 1,598 Expenses: Investment advisory fees $ 225 Custodian fees and expenses 78 Administrative services fees 46 Auditing and legal fees 22 Shareholder reports 12 Transfer agent fees 3 Trustees' fees 3 Other 3 ----- Total expenses 392 Less expenses waived by Adviser (127) ----- Net expenses $265 ----- Net Investment Income 1,333 ------- Realized and Unrealized Gain on Investments: Net realized gain from: Futures contracts 1,747 Investments 16,845 ------- 18,592 ------- Net change in unrealized appreciation of: Futures contracts (332) Investments (11,832) ------- (12,164) ------- Net Realized and Unrealized Gain on Investments 6,428 ------- Net Increase in Net Assets Resulting from Operations $ 7,761 =======
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund 27 Statements of Changes in Net Assets (In Thousands)
For the Six For the Months Ended Year Ended June 30, 2004 December 31, (Unaudited) 2003 ----------------- ---------------- Operations: Net investment income $ 1,333 $ 2,898 Net realized gain on investments 18,592 5,298 Net unrealized appreciation (depreciation) on investments (12,164) 43,080 ---------- ---------- Net increase in net assets from operations 7,761 51,276 ---------- ---------- Dividends and Distributions: From net investment income -- (4,276) From net realized gain -- (2,574) ---------- ---------- Total dividends and distributions -- (6,850) ---------- ---------- Capital Share Transactions: Net proceeds from shares sold 4,866 66,928 Net asset value of shares issued to shareholders in reinvestment of dividends and distributions -- 6,850 ---------- ---------- 4,866 73,778 Cost of shares redeemed (68,206) (71,408) ---------- ---------- Net increase (decrease) in net assets from Fund share transactions (63,340) 2,370 ---------- ---------- Net Increase (Decrease) in Net Assets (55,579) 46,796 Net Assets: Beginning of period 234,089 187,293 ---------- ---------- End of period* $ 178,510 $ 234,089 ========== ========== * includes undistributed net investment income of: $ 2,204 $ 871 ========== ==========
For the Six For the Months Ended Year Ended June 30, 2004 December 31, (Unaudited) 2003 ----------------- ---------------- Transactions in Capital Stock: Shares sold 300 4,884 Shares issued in reinvestment of dividends and distributions -- 439 ---------- ---------- 300 5,323 Shares redeemed (4,172) (5,261) ---------- ---------- Net increase (decrease) in shares outstanding (3,872) 62 ========== ==========
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund 28 Financial Highlights
For the Six Months Ended June 30, 2004 (Unaudited) ----------------- Per Share Operating Performance: Net asset value, beginning of period $ 15.83 ---------- Income from investment operations: Net investment income (a) 0.14 Net realized and unrealized gain (loss) 0.39 ---------- Total from investment operations 0.53 ---------- Less dividends and distributions: From net investment income -- From capital gains -- ---------- Total dividends and distributions -- ---------- Net asset value, end of period $ 16.36 ========== Total Return (b) 3.35%(c) Ratios to Average Net Assets: Gross expenses 0.37%(d) Fees and expenses waived or borne by the Adviser 0.12%(d) Net expenses 0.25%(d) Net investment income 1.26%(d) Portfolio Turnover 1%(c) Net assets, End of Period (000 omitted) $ 178,510 (a) 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. (b) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced. (c) Not annualized (d) Annualized For the Year Ended December 31, ---------------------------------------------------------------------- 2003 2002 2001 2000 1999 ------------ -------------- -------------- -------------- ------------ Per Share Operating Performance: Net asset value, beginning of period $ 12.72 $ 17.31 $ 19.95 $ 22.83 $ 19.73 -------- --------- --------- --------- -------- Income from investment operations: Net investment income (a) 0.21 0.23 0.23 0.35 0.32 Net realized and unrealized gain (loss) 3.38 ( 4.13) ( 2.66) ( 2.49) 3.75 -------- --------- --------- --------- -------- Total from investment operations 3.59 ( 3.90) ( 2.43) ( 2.14) 4.07 -------- --------- --------- --------- -------- Less dividends and distributions: From net investment income ( 0.30) ( 0.22) ( 0.21) ( 0.44) ( 0.51) From capital gains ( 0.18) ( 0.47) -- ( 0.30) ( 0.46) --------- --------- --------- --------- --------- Total dividends and distributions ( 0.48) ( 0.69) ( 0.21) ( 0.74) ( 0.97) --------- --------- --------- --------- --------- Net asset value, end of period $ 15.83 $ 12.72 $ 17.31 $ 19.95 $ 22.83 ========= ========= ========= ========= ========= Total Return (b) 28.27% ( 22.51)% ( 12.18)% ( 9.37)% 20.77% Ratios to Average Net Assets: Gross expenses 0.37% 0.37% 0.35% 0.36% 0.38% Fees and expenses waived or borne by the Adviser 0.12% 0.12% 0.10% 0.11% 0.13% Net expenses 0.25% 0.25% 0.25% 0.25% 0.25% Net investment income 1.42% 1.32% 1.38% 1.64% 1.57% Portfolio Turnover 2% 7% 2% 4% 3% Net assets, End of Period (000 omitted) $ 234,089 $ 187,293 $ 302,802 $ 292,739 $ 282,781 (a) 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. (b) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced. (c) Not annualized (d) Annualized
The Notes to Financial Statements are an integral part of these statements. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Notes to Financial Statements 29 (Unaudited) 1. Utilization of Indexation Approach. TimesSquare VP S&P 500[RegTM] Index Fund (the "Fund") seeks to achieve its long-term growth objective by attempting to replicate the total return performance, reduced by Fund expenses, of the Standard & Poor's 500[RegTM] Composite Stock Price Index. 2. Significant Accounting Policies. The Fund is a separate series of CIGNA Variable Products 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 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 -- Equity securities, including warrants, that are listed on a national securities exchange or are part of the NASDAQ National Market System are valued at the last sale price or, if there has been no sale that day, at the last bid price. Debt and other equity securities traded in the over-the-counter market, including listed securities whose primary markets are believed to be over-the-counter, are valued at the most recent bid price. 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 Fund are appraised at fair value, as determined in good faith by, or under the authority of, the Trust's Board of Trustees. The Fund's Board of Trustees has designated the Pricing Committee of TimesSquare Capital Management, Inc. to make, pursuant to procedures approved by the Board and under the Board's supervision, all necessary determinations of fair value for the portfolio securities for which market quotations are not readily available. When fair valuing securities, the Pricing Committee takes into account factors such as fundamental and analytical information about the security, the nature and duration of any restrictions on disposition of the security, market information (including, for example, factors such as historical price relationships and valuations for securities with similar characteristics), and evaluation of significant market events. 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. Futures Contracts -- The Fund is authorized to enter into S&P 500[RegTM] futures contracts. The Fund may use futures contracts with the objective of earning returns on its short-term investments equivalent to returns on the S&P 500[RegTM] Composite Stock Index. As a result, the purchase of futures contracts simulates a fully invested position in the underlying index, while maintaining liquidity. 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 -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Notes to Financial Statements 30 (Unaudited) (Continued) 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. C. 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-dividend date, and interest income is recorded on the accrual basis. Securities gains and losses are determined on the basis of identified cost. D. Federal Taxes -- It is the Fund's policy to continue 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. E. Dividends and Distributions to Shareholders -- Dividends from net investment income 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. 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 wash sales, real estate investment trusts income and capital loss carryforwards. To the extent that such differences are permanent, a reclassification to Components of Net Assets may be required. As a result, at December 31, 2003, the Fund increased its undistributed net investment income by $2,123,183, decreased accumulated net realized gain by $2,124,450 and increased paid in capital by $1,267. 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 of 0.25% applied to the daily average net assets of the Fund. TimesSquare has contractually agreed to reimburse the Fund for any amount by which its expenses (including the advisory fee, but excluding interest, taxes, amortized organization expenses, transaction costs incurred in acquiring and disposing of portfolio securities, and extraordinary expenses) exceed, on an annual basis, 0.25% of average daily net assets until April 30, 2004, and thereafter to the extent described in the Fund's then current prospectus. Effective May 1, 2002, TimesSquare retains the right to be repaid by the Fund if the Fund's expenses fall below the percentage 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 Fund's remaining contingent liability and expiration dates are as shown below:
Remaining Contingent Liability Expires during Expires during Expires during (000's) 2005 (000's) 2006 (000's) 2007 (000's) ---------------------- ---------------- ---------------- --------------- $ 609 $230 $252 $127
Pursuant to an Exemptive Order issued by the Securities and Exchange Commission, the Fund may invest its excess cash in the affiliated TimesSquare VP Money Market Fund ("TSVPMM") managed by TimesSquare. TimesSquare will waive the amount of its advisory fee for the Fund in an amount that offsets the amount of the advisory fees incurred in the affiliated Fund. For the six months ended June 30, 2004, TimesSquare waived -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund Notes to Financial Statements 31 (Unaudited) (Continued) $39,925 of its advisory fees payable by the Fund. Income distributions from TSVPMM, which amounted to $72,602 for the six months ended June 30, 2004, are recorded as dividend income in the Statement of Operations. For administrative services, the Fund reimburses TimesSquare for a portion of the compensation and related expenses of the Fund's Treasurer and Secretary and certain persons who assist in carrying out the responsibilities of those offices. For the six months ended June 30, 2004, the Fund paid or accrued $45,662. TimesSquare is an indirect, wholly-owned subsidiary of CIGNA Corporation. 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 receipt of 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, 2004, were $0 and $501,847 respectively, for U.S. Government and Agency Obligations and $1,692,075 and $45,397,423 respectively, for all other securities. 6. Capital Stock. The Fund offers an unlimited number of shares of beneficial interest without par value. Of the 10,914,165 shares outstanding at June 30, 2004, 10,737,322 shares were held by Connecticut General Life Insurance Company ("CG Life") relating to variable annuity and variable universal life insurance contracts issued by CG Life. CG Life is an indirect, wholly-owned subsidiary of CIGNA Corporation. The remainder, representing 1.6% of the shares outstanding, was held by an employee benefit plan established by CG Life for certain of its employees. -------------------------------------------------------------------------------- TimesSquare VP S&P 500[RegTM] Index Fund 32 (Unaudited) Trustees Officers Russell H. Jones Marnie Wagstaff Mueller Richard H. Forde Senior Vice President, Diocesan Consultant, Episcopal Chairman of the Board Chief Investment Officer, and Diocese of Connecticut and President Treasurer, Kaman Corporation Paul J. McDonald Carol Ann Hayes Alfred A. Bingham III Special Advisor to the Board of Director and Chair of Audit Vice President and Directors, Friendly Ice Cream Committee, Reed and Barton Treasurer Corporation Corporation Richard H. Forde Jeffrey S. Winer Chief Investment Officer, CIGNA Vice President and Investment Management Secretary
-------------------------------------------------------------------------------- "Standard & Poor's[RegTM]," "S&P[RegTM]," "S&P 500[RegTM]," "Standard & Poor's 500," and "500" are trademarks of the Standard & Poor's Corporation (S&P) and have been licensed for use by CG Life. The TimesSquare VP S&P 500[RegTM] Index Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no representation regarding the advisability of investing in the Fund. TimesSquare VP S&P 500[RegTM] Index Fund is an open-end, diversified management investment company that seeks to achieve its long-term growth objective by attempting to replicate the total return performance, reduced by Fund expenses, of the Standard & Poor's 500[RegTM] Composite Stock Price Index. The investment adviser is TimesSquare Capital Management, Inc., 280 Trumbull Street, Hartford, Connecticut 06103. --------------------------------------------------------------------------------