<PAGE>
DEAR SHAREHOLDERS:
We are pleased to provide this report for Charter Balanced Fund (the "Fund"),
sub-advised by INVESCO, Inc., covering the six months ended June 30, 2000.
Please read the sub-adviser's update below.
Sincerely,
/s/ Richard H. Forde
Richard H. Forde
CHAIRMAN OF THE BOARD AND PRESIDENT
CHARTER BALANCED FUND
SUB-ADVISER'S UPDATE
THE MARKET ENVIRONMENT
The only constant in the U.S. equity markets during the first quarter of the new
millennium seemed to be volatility. Investors moved between bargain-hunting in
"old economy" stocks and perceived opportunities for relative value rotation
within "new economy" stocks.
During the second quarter, U.S. equity markets were heavily influenced by events
unfolding in the domestic fixed income markets. Despite several early signals
that growth was slowing, the Federal Reserve (Fed) continued to raise interest
rates, increasing the federal funds rate to 6.50% in May, its highest level
since 1991.
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.
-
1
<PAGE>
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.
STRATEGY
Our equity market strategy remains focused on companies with good growth
prospects and solid balance sheets. We remain particularly interested in the
"digital upgrade cycle," which is seeing customers replace many appliances, from
telephones to televisions, with models using digital technologies.
The fixed income portion of the Fund (30.5% at 6/30/00) is split between
corporate bonds and U.S. Government and Agency obligations. We remain focused on
credit risk analysis. Issue-specific security selection and/or risk avoidance
will drive performance through 2000.
PERFORMANCE
For the quarter and from its inception (01/20/00), the Fund's Institutional
Class returned -1.35% and 2.20%, respectively. The Balanced Composite (60% S&P
500/40% Lehman Brothers Aggregate Bond Index) returned -2.03% and 1.25%,
respectively for the quarter and year-to-date. The Fund's Premier and Retail
Classes (which also commenced operations 01/20/00) both returned -1.45% for the
second quarter, and they returned 2.20% and 2.10%, respectively, through
06/30/00.
OUTLOOK
Second quarter results continue to reinforce the view that the Fed's interest
rate hikes to date should successfully produce a soft landing for the economy. A
shift in assets from overpriced technology names to undervalued and
_
2
ignored components of the equity markets has already begun. The wealth effect
that has fueled demand appears to be dissipating. Sustained increases in
corporate borrowing rates and rising business costs for labor and energy have
begun to erode profit margins. Although earnings growth has surpassed its peak,
earnings disappointments are likely to increase. However, an economic slowdown
should support positive, yet unspectacular, equity returns going forward.
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.
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.
_
3
<PAGE>
CHARTER BALANCED FUND
INVESTMENTS IN SECURITIES
JUNE 30, 2000 (UNAUDITED)
MARKET
VALUE
PRINCIPAL (000)
-----------------------------------------------------------------
BONDS- 30.5%
COMMUNICATIONS- 0.6%
Sprint Capital Corp, 6.125%, 2008 $ 75,000 $ 67
----------
CONSUMER PRODUCTS- 0.6%
Pepsico, Inc., 5.75%, 2008 75,000 67
----------
ENTERTAINMENT- 0.7%
Cox Communications, Inc., 7.5%, 2004 75,000 74
----------
74
----------
FINANCIAL- 4.5%
American Express Credit Corp., 7.2%, 2007 50,000 50
Associates Corp., 6.625%, 2005 75,000 72
Bank of America Corp., 6.25%, 2008 75,000 68
CIT Group Holdings Inc., 6.375%, 2002 50,000 49
First Union Corp., 6.625%, 2005 75,000 71
Household Finance Corp., 5.875%, 2009 75,000 65
National Australia Bank Ltd., 8.6%, 2010 50,000 52
Wells Fargo Co., 6.625%, 2004 75,000 73
----------
500
----------
MANUFACTURING- 1.0%
Bayerische Landesbank, 5.875%, 2008 50,000 44
Tyco International Group S A, 6.125%, 2009 75,000 66
----------
110
----------
OIL & GAS- 0.6%
Atlantic Richfield Co., 5.9%, 2009 75,000 68
----------
RETAIL- 2.0%
Albertsons, Inc., 7.45%, 2029 75,000 69
The Notes to Financial Statements are an integral part of these statements.
_
4
MARKET
VALUE
PRINCIPAL (000)
-----------------------------------------------------------------
Target Corp., 7.5%, 2005 $ 75,000 $ 76
Wal-Mart Stores, 6.55%, 2004 75,000 74
----------
219
----------
U.S. GOVERNMENT AGENCY OBLIGATIONS- 6.3%
Federal Home Loan Mtg., 5.75%, 2003 150,000 145
Federal National Mortgage Assoc.
7.125%, 2005 250,000 251
7.5%, 2029 97,560 96
7%, 2015 98,285 96
GNMA, 8.0%, 2030 99,725 101
----------
689
----------
U.S. TREASURY OBLIGATIONS- 13.0%
U.S. Treasury Bonds
8.1%, 2019 100,000 121
7.3%, 2022 200,000 225
7.6%, 2025 200,000 237
8.0%, 2001 150,000 152
U.S. Treasury Notes
6.6%, 2002 150,000 150
6.3%, 2003 250,000 249
7.3%, 2004 100,000 103
6.5%, 2005 100,000 101
6.1%, 2007 100,000 99
----------
1,437
----------
UTILITIES- 1.2%
Alabama Power Co., 5.49%, 2005 75,000 68
National Rural Utilities Co-op, 6.550%,
2018 75,000 66
----------
134
----------
TOTAL BONDS- 30.5%
(Cost $3,325) 3,365
----------
The Notes to Financial Statements are an integral part of these statements.
_
5
<PAGE>
CHARTER BALANCED FUND
INVESTMENTS IN SECURITIES CONTINUED
JUNE 30, 2000 (UNAUDITED)
MARKET
NUMBER OF VALUE
SHARES (000)
--------------------------------------------------------------------------------
COMMON STOCKS- 59.2%
AEROSPACE & DEFENSE- 2.0%
Honeywell International, Inc. 1,000 $ 34
Raytheon Co., Class B 1,800 35
Textron, Inc. 1,100 60
United Technologies Corp. 1,500 88
----------
217
----------
AUTOMOTIVE- 1.1%
Ford Motor Co. 2,900 125
----------
COMMUNICATIONS- 6.4%
AT&T Corp. 4,100 129
Alltel Corp. 500 31
Comcast Corp. 1,400 57
GTE Corp.* 1,200 75
Lucent Technologies, Inc. 700 41
MediaOne Group, Inc. 900 60
SBC Communications, Inc. 1,800 78
Sprint Corp. 2,900 146
U.S. West, Inc. 600 51
WORLDCOM, Inc.* 850 39
----------
707
----------
COMPUTER SERVICES- 1.2%
Cadence Design Systems, Inc. 1,200 24
First Data Corp. 2,200 107
----------
131
----------
CONSUMER PRODUCTS- 8.1%
Alcoa, Inc. 1,600 46
Anheuser Busch Cos. 1,000 75
The Notes to Financial Statements are an integral part of these statements.
_
6
MARKET
NUMBER OF VALUE
SHARES (000)
-----------------------------------------------------------------
Bristol-Myers Squibb Co. 2,000 $ 117
Eastman Kodak Co. 1,100 65
International Paper Co. 1,700 51
Johnson & Johnson 1,550 158
Kimberly-Clark Corp. 1,000 57
Liz Claiborne, Inc. 700 25
Loews Cos., Inc. 1,600 66
McDonalds Corp. 1,000 33
Philip Morris Cos., Inc. 3,500 93
Proctor & Gamble Co. 1,000 57
Whirlpool Corp. 1,100 51
----------
894
----------
DIVERSIFIED -1.9%
American General Corp. 1,600 98
General Electric Co. 2,250 115
----------
213
----------
ELECTRONICS- 4.6%
Adaptec, Inc.* 1,500 34
Hewlett Packard Co. 700 87
Intel Corp. 1,300 174
International Business Machines Corp. 1,000 110
Tellabs, Inc. * 1,100 75
Unisys Corp. 2,200 32
----------
512
----------
FINANCIAL- 10.9%
Associates First Capital Corp., Class A 2,000 45
Bank of America Corp. 3,600 155
Chase Manhattan Corp. 1,350 62
Citigroup, Inc. 3,000 181
The Notes to Financial Statements are an integral part of these statements.
_
7
<PAGE>
CHARTER BALANCED FUND
INVESTMENTS IN SECURITIES CONTINUED
JUNE 30, 2000 (UNAUDITED)
MARKET
NUMBER OF VALUE
SHARES (000)
-----------------------------------------------------------------
Federal National Mortgage Assoc. 3,200 $ 150
FleetBoston Financial Corp. 3,700 124
Household International Corp. 1,700 71
MGIC Investment Corp. 1,850 84
Morgan Stanley, Dean Witter, Discover & Co. 1,500 123
National City Corp. 2,500 43
PNC Bank Corp. 2,000 94
Wells Fargo & Co. 1,800 70
----------
1,202
----------
INSURANCE- 1.1%
Marsh & Mclennan Cos., Inc. 1,200 123
----------
MANUFACTURING- 6.7%
Caterpillar, Inc. 700 24
Cooper Tire & Rubber Co. 2,700 30
Dow Chemical Co. 2,100 63
Emerson Electric Co. 1,200 72
Illinois Tool Works, Inc. 1,600 91
Johnson Controls, Inc. 1,300 82
Minnesota Mining & Mfg. 900 74
Norsk Hydro A S ADR 500 19
Nucor Corp. 950 32
Praxair, Inc. 1,200 45
Sherwin-Williams Co. 3,000 64
Tyco International Ltd. 300 14
Union Carbide Corp. 300 15
Westvaco Corp. 1,000 25
The Notes to Financial Statements are an integral part of these statements.
_
8
MARKET
NUMBER OF VALUE
SHARES (000)
-----------------------------------------------------------------
Xerox Corp. 2,900 $ 60
York International Corp. 1,000 25
----------
735
----------
MEDICAL- 4.3%
Abbott Laboratories 1,600 71
American Home Products Corp. 1,300 76
Lilly (Eli) & Co. 900 90
Merck & Co. 1,700 130
Quintiles Transnational Co.* 1,700 24
Schering-Plough Corp. 1,600 81
----------
472
----------
OIL AND GAS- 4.9%
BP Amoco PLC* 2,460 139
Chevron Corp. 1,100 93
Exxon Mobil Corp. 2,200 173
Repsol S.A. ADS 5,000 99
Union Pacific Corp. 900 33
----------
537
----------
PUBLISHING- 0.3%
Gannett, Inc. 500 30
----------
RETAIL- 2.0%
Albertson's Inc. 2,000 66
Dillard, Inc., Class A 100 1
Office Depot, Inc.* 6,600 41
Supervalu, Inc. 3,800 72
Target Corp. 500 29
Visteon Corp. 380 5
----------
214
----------
The Notes to Financial Statements are an integral part of these statements.
_
9
<PAGE>
CHARTER BALANCED FUND
INVESTMENTS IN SECURITIES CONTINUED
JUNE 30, 2000 (UNAUDITED)
MARKET
NUMBER OF VALUE
SHARES (000)
-----------------------------------------------------------------
SOFTWARE-1.5%
Computer Associates International, Inc. 2,500 $ 126
Compuware Corp.* 4,000 41
----------
167
----------
TECHNOLOGY- 1.2%
Microsoft Corp.* 1,700 136
----------
UTILITIES- 1.0%
DTE Energy Co. 2,000 61
GPU, Inc. 1,300 35
Southern Co. 500 12
----------
108
----------
TOTAL COMMON STOCKS - 59.2%
(Cost $6,636) 6,523
----------
SHORT-TERM OBLIGATIONS - 9.9%
MONEY MARKET FUND
Charter Money Market Fund 1,091,000 1,091
----------
TOTAL SHORT-TERM OBLIGATIONS 1,091
(Cost $1,091) ----------
TOTAL INVESTMENT IN SECURITIES - 99.6%
(Total Cost $11,052) 10,979
Cash and Other Assets Less Liabilities -0.4% 44
----------
NET ASSETS - 100.0% $ 11,023
==========
* Non-income producing securities.
The Notes to Financial Statements are an integral part of these statements.
__
10
-----------------------------------------------------------------
CHARTER BALANCED FUND
TEN LARGEST POSITIONS (EXCLUDES U.S. GOV'T.) (UNAUDITED)
(000)
Citigroup, Inc. $181 1.6%
Intel Corp. 174 1.6%
Exxon Mobil Corp. 173 1.6%
Johnson & Johnson 158 1.4%
Bank Of America Corp. 155 1.4%
Sprint Corp. 146 1.3%
BP Amoco 139 1.3%
Microsoft Corp. 136 1.2%
Merck & Company 130 1.2%
AT&T Corp. 129 1.2%
-----------------------------------------------------------------
The Notes to Financial Statements are an integral part of these statements.
__
11
<PAGE>
CHARTER BALANCED FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
ASSETS:
Investments in securities at value (Cost - $11,052) $ 10,979
Cash 1
Interest and dividends receivable 79
Receivable for investments sold 4
Other 14
----------------
Total assets 11,077
----------------
LIABILITIES:
Payable for investments purchased 17
Custodian fees payable 8
Accrued audit and legal fees payable 7
Accrued advisory fees payable 6
Administrative services 6
12b-1 and sub-accounting fees payable to Distributor 4
Other accrued expenses 6
----------------
Total liabilities 54
----------------
NET ASSETS $ 11,023
================
SHARES OUTSTANDING
Institutional Class ($10.22 net asset value per share) 450
================
Premier Class ($10.21 net asset value per share) 473
================
Retail Class ($10.20 net asset value per share) 156
================
COMPONENTS OF NET ASSETS:
Paid in capital $ 10,823
Undistributed net investment income 137
Accumulated net realized gain on investments 136
Unrealized depreciation of investments (73)
----------------
NET ASSETS $ 11,023
================
The Notes to Financial Statements are an integral part of these statements.
__
12
CHARTER BALANCED FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD JANUARY 20, 2000* TO
JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 61
Interest 120
------------------
181
EXPENSES:
Investment advisory fees 35
Custodian fees and expenses 15
Administrative services 9
Shareholder reports 3
12b-1 fees 1
Sub-accounting fees 5
Auditing and legal fees 8
Registration fees 13
Other 5
------------------
Total expenses 94
Less expenses waived by adviser or distributor (50)
------------------
Net expenses 44
------------------
NET INVESTMENT INCOME 137
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 136
Unrealized depreciation of investments (73)
------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 63
------------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 200
==================
* Commencement of operations
The Notes to Financial Statements are an integral part of these statements.
__
13
<PAGE>
CHARTER BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD JANUARY 20, 2000* TO
JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 137
Net realized gain from securities transactions 136
Net realized gain from futures contracts -
Unrealized gain from futures contracts -
Unrealized depreciation of investments (73)
-------------------
Net increase in net assets from operations 200
-------------------
DISTRIBUTIONS FROM NET INVESTMENT INCOME:
Institutional Class -
Premier Class -
Retail Class -
-------------------
Total distributions to shareholders -
-------------------
CAPITAL SHARE TRANSACTIONS:
Institutional Class
Net proceeds from sales of shares 4,500
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions
-------------------
4,500
Cost of shares redeemed -
-------------------
4,500
-------------------
Premier Class
Net proceeds from sales of shares 5,381
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions -
-------------------
5,381
Cost of shares redeemed (632)
-------------------
4,749
-------------------
Retail Class
Net proceeds from sales of shares 1,641
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions -
-------------------
163
Cost of shares redeemed (67)
-------------------
1,574
-------------------
Net increase from Fund share transactions 10,823
-------------------
NET INCREASE IN NET ASSETS 11,023
NET ASSETS:
Beginning of period -
-------------------
End of period (including undistributed net investment
income of $137) $ 11,023
===================
* Commencement of operations
The Notes to Financial Statements are an integral part of these statements.
__
14
CHARTER BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS CONTINUED
FOR THE PERIOD JANUARY 20, 2000* TO
JUNE 30, 2000 (UNAUDITED)
(IN THOUSANDS)
--------------------------------------------------------------------------------
TRANSACTIONS IN CAPITAL STOCK
INSTITUTIONAL CLASS
Shares sold 450
Shares issued in reinvestment of dividends and
distributions -
------------------
450
Shares redeemed -
------------------
Net increase in shares outstanding 450
==================
PREMIER CLASS
Shares sold 538
Shares issued in reinvestment of dividends and
distributions -
------------------
538
Shares redeemed (65)
------------------
Net increase in shares outstanding 473
==================
RETAIL CLASS
Shares sold 163
Shares issued in reinvestment of dividends and
distributions -
------------------
163
Shares redeemed (7)
------------------
Net increase in shares outstanding 156
==================
* Commencement of operations
The Notes to Financial Statements are an integral part of these statements.
__
15
<PAGE>
CHARTER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. SIGNIFICANT ACCOUNTING POLICIES. Charter Balanced 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 Charter Balanced Fund
seeks a high total return through capital appreciation and current income by
investing principally in equity and 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 - 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 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
__
16
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 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 from net investment income and net capital gains, to
the extent such gains would otherwise be taxable to the Fund, are declared and
distributed annually.
__
17
<PAGE>
CHARTER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
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. To the extent that
such differences are permanent, a re-classification 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 0.75% 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 0.80%
annually of average daily net assets for the Institutional Class, 1.00% annually
of average daily net assets for the Premier Class, and 1.25% 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
$9,692.
__
18
With respect to Retail Class shares, the Fund has adopted a 12b-1 plan which
requires the payment of 0.25% annually ($1,369 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
0.20% annually ($4,363 and $1,095, 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
$12,112,797 and $2,287,192, respectively.
At June 30, 2000, the cost of securities for federal income tax purposes was
$11,051,339. The Fund had net unrealized depreciation of investment of $72,815,
consisting of gross unrealized appreciation of $451,569 and gross unrealized
depreciation of $524,384 for federal income tax purposes.
5. CAPITAL STOCK. The Fund is a separate series of the Trust which offers an
unlimited number of shares of beneficial
__
19
<PAGE>
CHARTER BALANCED FUND
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED) CONTINUED
interest, without par value. At June 30, 2000, Life Insurance Company of North
America, an indirect, wholly-owned subsidiary of CIGNA Corporation, owned 93% of
the Fund.
__
20
6. FINANCIAL HIGHLIGHTS. The following per share data is computed on the basis
of a share outstanding throughout the period:
<TABLE>
<CAPTION>
(UNAUDITED)
FOR THE PERIOD JANUARY 20, 2000/(4)/
TO JUNE 30, 2000
---------------------------------------------------------------------------------------------------------
INSTITUTIONAL PREMIER RETAIL
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 0.14 0.13 0.12
Net realized and unrealized gain
on securities 0.08 0.08 0.08
------- ------- -------
TOTAL FROM INVESTMENT OPERATIONS 0.22 0.21 0.20
------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment
income - - -
Distributions from capital gains - - -
-------- -------- -------
TOTAL DISTRIBUTIONS - - -
-------- -------- -------
NET ASSET VALUE, END OF PERIOD $ 10.22 $ 10.21 $ 10.20
======== ======== ========
TOTAL RETURN(1) 2.20% (2) 2.10% (2) 2.00% (2)
RATIOS TO AVERAGE NET ASSETS
Expenses 0.80% (3) 1.00% (3) 1.25% (3)
Net investment income 3.03% (3) 2.86% (3) 2.56% (3)
Fees and expenses waived or borne by the Adviser or
Distributor 0.94% (3) 0.94% (3) 0.98% (3)
Portfolio turnover 32% (2) 32% (2) 32% (2)
Net assets, end of period (000 omitted) $ 4,600 $ 4,832 $ 1,591
</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) Commencement of operations.
__
21
<PAGE>
CHARTER BALANCED FUND
Charter Balanced Fund is an open-end, diversified management investment company
that invests in equity and 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
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CIGNA FINANCIAL SERVICES, INC.
P.O. Box 150476 . Hartford, CT 06115-0476
www.cigna.com . Member NASD/SIPC
545727
________________________________________________________________________________
CIGNA FUNDS GROUP
________________________________________________________________________________
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CHARTER FUNDS/SM/
CHARTER
BALANCED
FUND
Semiannual Report
June 30, 2000
[CIGNA TREE LOGO GRAPHIC APPEARS HERE]
CIGNA Financial Services, Inc.
