<PAGE>
DEAR SHAREHOLDERS:
We are pleased to provide this report for Core Plus Fixed Income Fund (the
"Fund") covering the six months ended June 30, 2000.
THE MARKET ENVIRONMENT
The growth of the U.S. economy appeared to slow significantly during the second
quarter, following six quarters of economic boom. Based on preliminary monthly
indicators of retail sales, housing, and employment, the growth in real GDP
(gross domestic product) seemed to slow to a rate of around 3%. This change was
a sudden and sharp deceleration from the 6% rate for the prior three quarters
and the 5% annualized rate of GDP over the prior six quarters.
It is safe to say that the rate of economic growth has slowed, but probably not
to the extent suggested by the most recent monthly Government economic reports.
The basic underlying fundamentals appear to support continued steady, albeit
less robust, growth for the remainder of the year.
The rate of inflation continued to drift moderately higher during the quarter,
and inflationary pressures are still evident. The Consumer Price Index (CPI) has
risen at a 3.1% rate over the past year, while the "core" CPI, which excludes
volatile food and energy components, has risen at a 2.3% annual rate. Labor
costs also remain in a steady accelerating trend, with recent total compensation
(wages and benefits) rising at close to a 5% annual rate. Energy prices surged
during the spring, with crude oil reaching $33 a barrel, while natural gas
prices rose to an all-time high.
Primarily in response to the tight labor market and concern over future wage
inflation, the Fed raised short-term interest rates during May to 6.50%, but
left rates unchanged at its June FOMC (Federal Open Market Committee) meeting.
The cumulative increase in the Fed's target interest rate during the past 12
months has been 1.75%.
_
1
<PAGE>
STRATEGY
We increased our corporate bond allocation during the quarter and currently
carry a significant overweight in investment-grade corporate bonds. We continue
to overweight Yankee bonds (e.g., Japanese and European banks) as well as
aerospace, defense and cable/media securities.
A major strategy was the purchase of high-quality, long-duration corporates.
Because of the yield curve inversion, market participants were unclear on what
benchmark to use to price long-maturity corporate bonds. This confusion caused
long corporate bonds to underperform shorter maturity corporate bonds by a wide
margin. We seized upon this buying opportunity to add high-quality, long
corporates at an attractive price level. As these trades started to meet our
profit targets, we rotated back into intermediate-duration securities. This
strategy proved positive, as performance for long corporates led the Index
during the latter part of the quarter.
PERFORMANCE
For the second quarter and year-to-date, the Fund's Institutional Class returned
1.30% and 3.02%, respectively. The Lehman Brothers Aggregate Bond Index returned
1.74% and 3.99%, respectively for the quarter and year-to-date. The Fund's
Premier and Retail Classes (which commenced operations 01/21/00) returned 1.10%
and 1.20%, respectively, for the second quarter and both have returned 3.12%
since inception.
OUTLOOK
We are positive on corporate bonds given current valuation levels. We believe
that corporate bonds offer value on an absolute basis and as an alternative to
competing spread product. We continue to be cautious regarding `event risk' and
credit deterioration. We like high quality securities of large market
capitalization, solid businesses such as telecommunication and drug companies.
We also like sovereigns. In addition, as long-maturity Treasury securities
become scarcer we believe that investors will be forced to find long duration
elsewhere, which would include high-quality corporate issuers. As the Treasury
buy-back and
_
2
yield curve inversion create opportunities regarding the credit curves of
certain corporate bond issuers, we expect to take positions in the most
attractive part of the issuer curve.
We like Mortgage-backed Securities (MBS) versus U.S. Treasuries, but we do not
yet see the catalyst for substantial tightening of spreads. As a result, we are
maintaining our current MBS weight. We believe MBS offers very high quality and
excellent liquidity, with yield spreads wider than average. We would alter our
sector outlook if we perceived that the economy was stronger than consensus and
that the Fed would resume its tightening path. We believe that housing, while it
will continue to remain strong, has peaked and thus so have prepayments on
discount pass-throughs.
While it seems clear that the U.S. economy is no longer in an economic boom and
the rate of economic growth has peaked for the cycle, we nonetheless believe
that the most recent Government data exaggerates the magnitude of the slowdown.
It is most likely that the second quarter witnessed a temporary pause, to be
followed by a moderate re-acceleration in economic growth during the second half
of the year.
We expect the domestic economy to expand at a 4% annual rate during the
remainder of the year, a growth rate above current market and consensus
expectations. The implications of this forecast are very significant. In the
context of a fully employed economy, a 4% rate of growth is simply too rapid to
alleviate inflationary pressures. Federal Reserve Chairman Alan Greenspan has
cautioned that we could be close to the end of this tightening cycle. As the
year 2001 unfolds, we expect the domestic economy to exhibit a pattern of
progressive weakness with increasing recession risk.
The primary influence on the markets will be the need for continued monetary
restraint by the Fed in order to counter the emerging inflation risk, which
inevitably exerts downward pressure on the price of all financial assets. The
big unknown is the intensity of these opposing forces,
_
3
<PAGE>
specifically the duration and severity of the monetary tightening necessary to
effectively reduce economic growth to a non-inflationary rate.
On a short-term basis, we continue to believe that fixed income markets are
better positioned than equity markets to withstand the economic and financial
pressures that lie ahead.
Sincerely,
/s/ Richard H. Forde
Richard H. Forde
CHAIRMAN OF THE BOARD AND PRESIDENT
CORE PLUS FIXED INCOME FUND
-
4
CORE PLUS FIXED INCOME FUND
INVESTMENTS IN SECURITIES
JUNE 30, 2000 (UNAUDITED)
MARKET
PRINCIPAL VALUE
(000) (000)
-------------------------------------------------------------
LONG-TERM BONDS AND NOTES - 95.5%
CONSUMER AND RETAIL - 1.4%
Rite-Aid Corp., 7.7%, 2027 $ 570 $ 251
Wal-Mart Stores, Inc., 6.875%, 2009 900 879
---------
1,130
---------
ENTERTAINMENT & COMMUNICATIONS - 7.3%
ITT Corp., 7.4%, 2025 395 337
Lensfest Communications, Inc.,
8.25%, 2008 1,150 1,134
Nextel Communications, Inc.,
Step Coupon (0% to 9/15/02), 2007 360 283
NTL Communications Corp.,
Step Coupon (0% to 10/1/03), 2008 230 151
Orange PLC, 9.0%, 2009 900 909
Time Warner, Inc., 8.18%, 2028 1,000 1,020
US West Communications, Inc.,
7.2%, 2004 640 629
Vodafone Airtouch PLC, 7.875%, 2030
(144A security acquired Feb. 2000 for
$835)* 840 819
Winstar Communications, Inc., 0%, 2010
(144A security acquired April & June
2000 for $431)* 905 416
---------
5,698
---------
FINANCIAL - 16.6%
Abbey National PLC,
Floating Rate 8.963%, 2049 1,465 1,455
AT&T Capital Corp., 7.11%, 2001 150 150
Bank One Corp.
7.75%, 2025 475 443
6%, 2009 300 261
Bank Tokyo Mitsubishi Ltd., 8.4%, 2010 400 404
The Notes to Financial Statements are an integral part of these statements.
_
5
<PAGE>
MARKET
PRINCIPAL VALUE
(000) (000)
---------------------------------------------------------------
Banco Santander Central Hispanic Issuances
Ltd., 7.625%, 2009 $ 580 $ 576
Deutsche Telecom International Finance,
8.25%, 2030 780 792
FertiNitro Finance, Inc., 8.29%, 2020 (144A
security acquired Feb. 2000 for
$270)* 400 248
Finova Capital Corp., 7.625%, 2009 195 163
Ford Motor Credit Co.,
5.8%, 2009 355 309
7.875%, 2010 2,165 2,165
Household Finance Corp., 6%, 2004 150 141
Korea Development Bank, 7.625%, 2002
(144A security acquired Jan. 2000 for
$867)* 875 867
Merrill Lynch and Co., 6%, 2009 440 392
National Westminister Bank PLC,
7.375%, 2009 305 296
Prudential Ins. Co. of Amer., 6.875%, 2003 1,450 1,431
Sanwa Finance Aruba AEC,
8.35%, 2009 410 408
Shinhan Bank, 7.25%, 2002 1,195 1,149
Sumitomo Bank Int'l. NV, 8.5%, 2009 405 408
Transamerica Financial Corp., 6.8%, 2001 90 89
Wells Fargo & Co., 7.2%, 2003 855 851
---------
12,998
---------
FOREIGN GOVERNMENT - 4.2%
Brazil (Republic of), Floating Rate
7.375%, 2024 360 284
Poland (Government of), Step Coupon (4% to
10/27/00), 2024 1,200 774
Quebec (Province of), 7.5%, 2023 1,080 1,065
Russia (When Issued), 2.25%, 2030 430 162
The Notes to Financial Statements are an integral part of these statements.
_
6
MARKET
PRINCIPAL VALUE
(000) (000)
---------------------------------------------------------------
United Mexican States, 9.875%, 2010 $ 810 $ 846
Venezuela (Republic of), Floating Rate,
7.875%, 2007 179 145
---------
3,276
---------
INDUSTRIAL -6.4%
Lockheed Martin Corp., 8.5%, 2029 345 348
Loral Corp., 9.125%, 2022 825 890
Merck & Co., Inc., 6.3%, 2026 580 507
Raytheon Co., 8.2%, 2006 (144A security
acquired Mar. 2000 for $771)* 770 781
Reliance Industries Ltd., 10.5%, 2046 (144A
security acquired Feb. 2000 for $497)* 500 449
Sun Micro Systems, Inc., 7.5%, 2006 1,200 1,197
TFM S.A., Step Coupon (0% to 6/15/02), 2009 1,215 832
---------
5,004
---------
OIL & GAS - 1.1%
Conoco, Inc., 6.95%, 2029 995 904
---------
SERVICES - 0.4%
Laidlaw, Inc., 7.875%, 2005
7.65%, 2006+ 1,025 297
---------
STRUCTURED SECURITIES - 9.1%
Citibank Credit Card Master Trust, Ser. 1999
6.1%, 2008 1,375 1,301
Commercial Mortgage Asset Trust,
6.64%, 2010 540 509
First Union Lehman Bros. Ser. 1998,
Interest Only, 2028 3,639 116
General Electric Capital Corp, MTN
7.5%, 2005 1,250 1,263
7.375%, 2010 1,125 1,139
The Notes to Financial Statements are an integral part of these statements.
_
7
<PAGE>
CORE PLUS FIXED INCOME FUND
INVESTMENTS IN SECURITIES CONTINUED
JUNE 30, 2000 (UNAUDITED)
MARKET
PRINCIPAL VALUE
(000) (000)
-------------------------------------------------------------
IMC Home Equity Loan Trust, Ser. 1998,
Floating Rate 6.72%, 2029 $ 720 $ 664
MBNA Master Credit Card Trust II, Ser. 1999
6.4%, 2005 375 370
Nationslink Funding Corp., Ser. 1999
7.03%, 2008 561 553
Standard Credit Card Master Trust, Ser. 1994
7.25%, 2008 975 970
TMS Home Equity Loan Trust, 8.05%, 2024 290 292
---------
7,177
---------
TRANSPORTATION - 0.6%
Burlington Northern Santa Fe,
6.125%, 2009 200 178
8.125%, 2020 280 281
---------
459
---------
UTILITIES - 2.1%
Allied Waste North America Inc.,
10.0%, 2009 260 217
Cleveland Electric Illuminating Co.,
7.67%, 2004 50 49
Empressa Nacional De Electric,
8.125%, 2097 360 278
Korea Electric Power Corp., 6.375%, 2003 250 237
Niagara Mohawk Power Corp.,
7.375%, 2003 85 84
Toledo Edison Co., 7.875%, 2004 840 821
---------
1,686
---------
U.S. GOVERNMENT & AGENCIES - 46.3%
Federal Home Loan Mortgage Corp.,
5%, 2004 3,245 3,040
6.625%, 2009 250 241
6.5%, 2026 1,670 1,545
7.5%, 2030 1,650 1,625
The Notes to Financial Statements are an integral part of these statements.
_
8
MARKET
PRINCIPAL VALUE
(000) (000)
---------------------------------------------------------------
Federal National Mortgage Association
6.5%, 2028 $ 5,249 $ 4,954
6%, 2029 845 774
7%, 2029 2,842 2,744
7.5%, 2030 2,174 2,143
8.5%, 2030 4,688 4,774
Government National Mortgage Association
7.5%, 2022 128 128
7.5%, 2029 637 633
7.5%, 2030 1,567 1,549
8.5%, 2030 1,900 1,945
United States Treasury Bonds, 8.75%, 2017 1,405 1,770
United States Treasury Notes,
6.25%, 2002 2,075 2,069
7.875%, 2004 2,270 2,404
7%, 2006 1,750 1,813
6.625%, 2007 2,007 2,134
---------
36,285
---------
TOTAL LONG-TERM BONDS
(Cost - $74,869) 74,914
---------
SHORT-TERM OBLIGATIONS - 2.5%
COMMERCIAL PAPER - 2.4%
Household Finance Corp., 6.88%, 7/3/00 1,875 1,875
---------
The Notes to Financial Statements are an integral part of these statements.
_
9
<PAGE>
CORE PLUS FIXED INCOME FUND
INVESTMENTS IN SECURITIES CONTINUED
JUNE 30, 2000 (UNAUDITED)
MARKET
PRINCIPAL VALUE
(000) (000)
-------------------------------------------------------------
U.S. GOVERNMENT - 0.1%
U.S.Treasury Bill, 6.06%, 1/2/01** $ 96 $ 96
---------
TOTAL SHORT-TERM OBLIGATIONS
(Cost - $1,971) 1,971
---------
TOTAL INVESTMENTS IN SECURITIES - 98.0%
(Total Cost - $76,840) 76,885
Cash and Other Assets, Less Liabilities - 2.0% 1,562
---------
NET ASSETS - 100% $78,447
=========
* Indicates restricted security; the aggregate value of
restricted securities is $3,581,159 (aggregate cost - $3,670,788) which is
approximately 4.6% of net assets. Valuations have been furnished by
brokers trading in the securities or by a pricing service for all
restricted securities.
** Pledged as collateral for Financial Futures Contracts. At June 30, 2000
the Fund was long 20 30-year Treasury Bond futures contracts, short 50
10-year Treasury Notes futures contracts and long 10 5-year Treasury Notes
futures contracts expiring in September 2000. Net unrealized gain
amounted to $36,437. Underlying face values of the long and short
positions were $2,937,031 and $(4,924,218), respectively, and underlying
market values were $2,946,693 and $(4,951,093), respectively.
+ Defaulted Security.
---------------------------------------------------------------
PORTFOLIO COMPOSITION (UNAUDITED)
June 30, 2000
MARKET % OF
QUALITY RATINGS* OF VALUE MARKET
BONDS (000) VALUE
------------------------------------------------------------
Aaa/AAA $43,460 58.0%
Aa/AA 5,174 6.9%
A/A 9,664 12.9%
Baa/BBB 11,110 14.8%
Ba/BB 2,468 3.3%
B/B 2,579 3.5%
C/C 297 0.4%
Non - Rated 162 0.2%
-------------------
$ 74,914 100.0%
========= =========
---------------------------------------------------------------
*The higher of Moody's or Standard & Poor's Ratings.
The Notes to Financial Statements are an integral part of these statements.
__
10
CORE PLUS FIXED INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments in securities at value (Cost - $76,840) $ 76,885
Cash 11
Receivable for investments sold 6,727
Interest receivable 1,048
Other 60
----------------
Total assets 84,731
----------------
LIABILITIES:
Payable for investments purchased 6,202
Variation margin payable on futures contracts 17
Accrued advisory fees payable 37
Administrative services payable 12
Custodian fees payable 8
Accrued audit and legal fees payable 6
Other accrued expenses 2
----------------
Total liabilities 6,284
----------------
NET ASSETS $ 78,447
================
SHARES OUTSTANDING
Institutional Class ($10.20 net asset value per share) 7,674
================
Premier Class ($10.21 net asset value per share) 10
================
Retail Class ($10.21 net asset value per share) 10
================
COMPONENTS OF NET ASSETS:
Paid in capital $ 77,003
Undistributed net investment income 1,508
Accumulated net realized loss on investments, futures and
currencies (145)
Unrealized appreciation of investments, futures and
currencies 81
----------------
NET ASSETS $ 78,447
================
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
__
11
<PAGE>
CORE PLUS FIXED INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 2,419
EXPENSES:
Investment advisory fees 196
Registration fees 26
Custodian fees and expenses 18
Administrative services 17
Auditing and legal fees 8
Trustees' fees 1
Other 1
------------------
Total expenses 267
Less expenses waived by adviser or distributor (120)
------------------
Net expenses 147
------------------
NET INVESTMENT INCOME 2,272
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from securities transactions (129)
Net realized loss from futures contracts (16)
Unrealized appreciation of investments 45
Unrealized appreciation of futures and currencies 36
------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (64)
------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 2,208
==================
The Notes to Financial Statements are an integral part of these statements.
__
12
CORE PLUS FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,272
Net realized loss from securities transactions (129)
Net realized loss from futures contracts (16)
Unrealized appreciation of investments 45
Unrealized appreciation of futures and currencies 36
---------------
Net increase in net assets from operations 2,208
---------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Institutional Class (762)
Premier Class (1)
Retail Class (1)
---------------
Total distributions to shareholders (764)
---------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class
Net proceeds from sales of shares 76,036
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 762
---------------
76,798
Cost of shares redeemed -
---------------
76,798
---------------
Premier Class
Net proceeds from sales of shares 100
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 1
---------------
101
Cost of shares redeemed -
---------------
101
---------------
Retail Class
Net proceeds from sales of shares 103
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 1
---------------
104
Cost of shares redeemed -
---------------
104
---------------
Net increase from Fund share transactions 77,003
---------------
NET INCREASE IN NET ASSETS 78,447
NET ASSETS:
Beginning of period -
---------------
End of period (including undistributed net investment
income of $1,508) $ 78,447
===============
The Notes to Financial Statements are an integral part of these statements.
__
13
<PAGE>
CORE PLUS FIXED INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2000
(UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK
INSTITUTIONAL CLASS
Shares sold 7,598
Shares issued in reinvestment of dividends and
distributions 76
------------------
7,674
Shares redeemed -
------------------
Net increase in shares outstanding 7,674
==================
PREMIER CLASS
Shares sold 10
Shares issued in reinvestment of dividends and
distributions -
------------------
10
Shares redeemed -
------------------
Net increase in shares outstanding 10
==================
RETAIL CLASS
Shares sold 10
Shares issued in reinvestment of dividends and
distributions -
------------------
10
Shares redeemed -
------------------
Net increase in shares outstanding 10
==================
The Notes to Financial Statements are an integral part of these statements.
__
14
CORE PLUS FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES. Core Plus Fixed Income 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 Core Plus Fixed Income
Fund seeks a high level of total return by investing principally in fixed income
securities. 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 sub-accounting 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. Institutional Class Shares have a separate
transfer agent charge and no distribution fee or sub-accounting fee. The Premier
Class Shares have a sub-accounting fee. The Retail Class Shares have a 12b-1 fee
and a sub-accounting fee.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States 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 - 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,
__
15
<PAGE>
CORE PLUS FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
transactions for comparable securities and various relationships between
securities which are generally recognized by institutional traders. Prices are
taken from the primary market in which the security trades. 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 Board of Trustees.
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).
Dividend income is recorded on the ex-date, and interest income is recorded on
the accrual basis. The Fund does not amortize or accrete premiums or discounts
for book purposes, except for original issue discounts which are amortized over
the life of the respective securities. Securities gains and losses are
determined on the basis of identified cost.
C. FEDERAL TAXES - For federal income tax purposes, each fund in the Trust is
taxed as a separate entity. 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.
D. DIVIDENDS - 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
__
16
accounting principles. To the extent that such differences are permanent, a
re-classification to paid in capital may be required.
E. CURRENCY TRANSLATION AND FORWARD CURRENCY CONTRACTS - Foreign currency
amounts are translated into U.S. dollars at the prevailing exchange rates as
follows: assets and liabilities at the rate of exchange at the end of the
period, purchases and sales of securities and expenses at the rate of exchange
prevailing on the dates of such transactions. The Fund from time to time may
enter into foreign currency transactions to convert to and from different
foreign currencies and to convert foreign currencies to and from the U.S.
dollar. The Fund enters into these transactions either on a spot basis at the
spot rate prevailing in the foreign currency exchange market or uses forward
currency exchange contracts to purchase or sell foreign currencies. Realized and
unrealized gains and losses on foreign currency transactions represent foreign
exchange gains and losses arising from the sale of holdings of foreign
currencies, foreign currency exchange rate fluctuations between trade dates and
settlement dates on securities transactions, and the difference between the
amounts of interest and dividends recorded on the books of the Fund and the
amounts actually received.
F. FUTURES CONTRACTS - The Fund may purchase financial futures contracts. 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
__
17
<PAGE>
CORE PLUS FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
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.
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 0.60% 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%
annually of average daily net assets for the Institutional Class, 0.85% annually
of average daily net assets for the Premier Class, and 0.95% annually for the
Retail Class, until April 30, 2001 and thereafter to the extent described in the
Fund's then current prospectus. TimesSquare retains 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.
For administrative services, the Fund reimburses 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, 2000, the Fund paid or accrued
$16,863.
With respect to the Premier and Retail Classes of shares, the Fund has adopted a
12b-1 plan which requires the payment of 0.15% and 0.25% annually, respectively,
($68
__
18
and $116, respectively, through 6/30/00) to CIGNA Financial Services, Inc.
("CFS"), the Fund's distributor. The 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 sub-accounting fee payable to CFS equal to 0.25% annually ($114 and
$116, respectively, through 6/30/00). The sub-accounting and 12b-1 fees will be
waived as necessary to limit Premier and Retail Class expenses, as a percentage
of average net assets, to the amounts described above until April 30, 2001 and
thereafter to the extent described in the Fund's then current prospectus.
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.
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.
4. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities,
excluding short-term obligations, for the six months ended June 30, 2000 were
$192,051,158 and $117,053,123, respectively.
At June 30, 2000, the cost of securities for federal income tax purposes was
$74,968,448. The Fund had net unrealized depreciation of investments of $53,985,
consisting of gross unrealized appreciation of $489,491 and gross unrealized
depreciation of $543,476 for federal income tax purposes.
__
19
<PAGE>
CORE PLUS FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
5. 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, 2000, Life Insurance Company of North America, an indirect wholly-owned
subsidiary of CIGNA Corporation, owned 98% and 95%, respectively, of the Premier
and Retail Classes of the Fund.
__
20
CORE PLUS FIXED INCOME FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
CONTINUED
6. FINANCIAL HIGHLIGHTS. The following per share data is computed on the basis
of a share outstanding throughout the period:
<TABLE>
<CAPTION>
SIX MONTHS FOR THE PERIOD
ENDED 1/21/00(4) TO
06/30/2000(4) 6/30/00
INSTITUTIONAL PREMIER RETAIL
(UNAUDITED) CLASS CLASS CLASS
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.35 0.33 0.33
Net realized and unrealized gain (loss) on securities - 0.03 0.03
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.35 0.36 0.36
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.15) (0.15) (0.15)
Distributions from capital gains - - -
-------- --------- --------
TOTAL DISTRIBUTIONS (0.15) (0.15) (0.15)
-------- --------- --------
NET ASSET VALUE, END OF PERIOD $ 10.20 $ 10.21 $ 10.21
======== ======== ========
TOTAL RETURN (1) 3.02% (2) 3.12% (2) 3.12% (2)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.45% (3) 0.85% (3) 0.95% (3)
Net investment income 6.83% (3) 5.97% (3) 5.87% (3)
Fees and expenses waived or borne by the Adviser or
Distributor 0.34% (3) 0.34% (3) 0.34% (3)
Portfolio turnover 184% (2) 184% (2) 184% (2)
Net assets, end of period (000 omitted) $ 78,238 $ 103 $ 106
</TABLE>
(1) Had the Adviser or Distributor not waived or reimbursed a portion of
expenses, total return would have been reduced.
(2) Not annualized.
(3) Annualized.
(4) The Premier and Retail Classes commenced operations 1/21/00. The
Institutional Class commenced operations 12/31/99.
__
21
<PAGE>
CORE PLUS FIXED INCOME FUND
Core Plus Fixed Income Fund is an open-end, diversified management investment
company that invests primarily in fixed income securities. The investment
adviser is TimesSquare Capital Management, Inc., 900 Cottage Grove Road,
Hartford, Connecticut 06152. The Fund is distributed by CIGNA Financial
Services, Inc., P.O. Box 150476, Hartford, CT 06115-0476 (telephone:
1.888.CIGNA.FS or 1.888.244.6237).
TRUSTEES
Hugh R. Beath
ADVISORY DIRECTOR, ADMEDIA CORPORATE ADVISORS, INC.
Richard H. Forde
SENIOR MANAGING DIRECTOR, TIMESSQUARE CAPITAL MANAGEMENT, INC.
Russell H. Jones
VICE PRESIDENT AND TREASURER, KAMAN CORPORATION
Thomas C. Jones
PRESIDENT, CIGNA RETIREMENT AND INVESTMENT SERVICES &
CHAIRMAN OF THE BOARD, TIMESSQUARE CAPITAL MANAGEMENT, INC.
Paul J. McDonald
SPECIAL ADVISOR TO THE BOARD OF DIRECTORS,
FRIENDLY ICE CREAM CORPORATION
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 TREE LOGO GRAPHIC APPEARS HERE]
CIGNA FINANCIAL SERVICES, INC.
P.O. Box 150476 . Hartford, CT 06115-0476
www.cigna.com . Member NASD/SIPC
545720
________________________________________________________________________________
CIGNA FUNDS GROUP
________________________________________________________________________________
[A BUILDING GRAPHIC APPEARS IN THE BACKGROUND OF THIS PAGE]
CHARTER FUNDS/SM/
CHARTER
PLUS
FIXED
INCOME
FUND
Semiannual Report
June 30, 2000
[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA Financial Services, Inc.
