CIGNA FUNDS GROUP, N-30D, 2000-03-09

CIGNA FUNDS GROUP
N-30D, 2000-03-09

Previous: CIGNA FUNDS GROUP, N-30D, 2000-03-09

Next: ARTESYN TECHNOLOGIES INC, 4, 2000-03-09

<PAGE>

CHARTER FUNDS(SM) LARGE
COMPANY STOCK INDEX FUND

TIMESSQUARE CAPITAL MANAGEMENT

In January 2000, CIGNA Investments, Inc, the Fund's manager, changed its name to
TimesSquare Capital Management, Inc. The new name underscores the critical
importance of investment management as a core CIGNA strength.

The TimesSquare Capital Management brand, like its namesake, symbolizes energy
and renaissance, and accurately reflects our intention to be at the center of
world commerce. It is also an expression of our ability to recognize and take
advantage of global economic and market themes that can be integrated across
investment disciplines.

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 INVESTMENT
MANAGEMENT AND 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

_
1

<PAGE>

"Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500," and
"500" are trademarks of the Standard & Poor's Corporation (S&P) and have been
licensed for use by Charter Funds(sm). The 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. The investment adviser is TimesSquare Capital
Management, Inc., 900 Cottage Grove Road, Hartford, Connecticut 06152.

_
2

<PAGE>

DEAR SHAREHOLDERS:

We are pleased to provide this report for Charter Funds(sm) Large Company Stock
Index Fund (the "Fund") (formerly known as CIGNA S&P 500 Index Fund), covering
the year ended December 31, 1999.

NEW NAME

Effective January 1, 2000, the Fund's new name is Large Company Stock Index
Fund. The Fund is now a member of the Charter Funds(sm) series of CIGNA Funds
Group, a flexible, disciplined, no-load mutual fund family for employee
retirement and investment plans. Charter Funds offer nine investment styles and
are available in three fund classes: institutional, premier and retail. The
funds feature some of the industry's most respected institutional portfolio
managers including Morgan Stanley Dean Witter Investment Management Inc., John
A. Levin & Co, Fiduciary International, Berger LLC, INVESCO, Bank of Ireland
Asset Management (U.S.) Limited and TimesSquare Capital Management, Inc.

THE MARKET ENVIRONMENT

For the sixth consecutive year, equities outperformed bonds by a wide margin in
U.S. financial markets. On a global basis, stocks also generally outperformed
bonds, with foreign equity markets outperforming domestic stocks. Equity markets
benefited from strong economic growth, rising corporate profits and favorable
financial liquidity trends, as reflected in the rapid growth of money and
credit. A gradual shift in global central bank monetary policies toward more
restrictive credit during the year did little to deter the favorable psychology
for common stock investing.

While 1999 appeared to be another excellent year for equity investors, there
were extreme winners and losers. The total return on the S&P 500 Index (the
"Index") was 21.04%, an unprecedented fifth consecutive year of 20+% returns.
The median Emerging Market equity fund rose by 69% while Japan's Nikkei Index
rose by 67% in dollars.

Within the U.S. market, growth managers continued to outperform value-style
managers by a wide margin. The big story in the equity market during 1999 was
the high

_
3
<PAGE>

technology sector, with the high tech-dominated NASDAQ Index registering its
best year ever with a gain of 85%.

In reality, the spectacular headline gains in high tech stocks have effectively
masked profound weakness in the broadly based domestic equity market.
Measurements of market breadth, including advance/decline statistics and the
number of new highs vs. new lows, were more symptomatic of a "bear market." The
median stock within the S&P 500 Index was virtually unchanged in price for the
year, while fully 60% of issues on the New York Stock Exchange suffered a
decline for the same period. The technology sector, which accounts for 30% of
the weighting in the S&P 500, rose by 75%, and was responsible for 90% of the
full-year Index gain. Excluding the technology sector, the remaining 70% of the
Index gained less than 8%.

The equity market of the past year has been one of the most highly concentrated
and speculative markets in decades, analogous to energy sector dominance between
1979 and 1980, and the "nifty fifty" consumer growth stock era of 1972 and 1973.

An examination of Fund results versus the market may be found in Management's
Discussion and Analysis (page 2).

OUTLOOK

We expect that domestic equities may underperform U.S. high-grade bonds for the
first full calendar year since 1993. The high-flying technology sector also
appears highly vulnerable to a reversal in investor psychology. On the plus
side, we expect cyclical stocks and value-style managers to outperform growth
managers, industrial cyclicals to outperform growth stocks, and small
capitalization stocks to outperform the large capitalization sector.

Sincerely,

/s/ Richard H. Forde

Richard H. Forde,
CHAIRMAN OF THE BOARD AND PRESIDENT
CHARTER FUNDS(SM) LARGE COMPANY STOCK INDEX FUND

_
4

<PAGE>

CHARTER FUNDS(SM) LARGE
COMPANY STOCK INDEX FUND

MANAGEMENT'S DISCUSSION AND ANALYSIS
(UNAUDITED)

As we entered 1999, expectations for progressive economic weakness and the
potential for an accommodative response by the Federal Reserve confined U.S.
equity markets to a narrow but volatile trading range over the first two months
of the year. By the first week of March, however, it became clear that domestic
economic growth continued to be much stronger than had been expected. Equity
markets continued to exhibit a lack of breadth. Over half the names in the S&P
500 produced negative returns for the quarter. Just five stocks (Microsoft,
America Online, Citigroup, MCI WorldCom and AIG) accounted for half of the total
return for this benchmark. The continued performance dominance of a limited
number of large capitalization companies again allowed the S&P 500 to outperform
active managers.

Momentum in large technology and brokerage companies pushed growth stocks well
ahead of their value counterparts. The S&P/BARRA Growth Index returned 6.88%
through March while the S&P/BARRA Value Index returned only 2.85%. The recovery
of small and midcap stocks in the fourth quarter of 1998 was reversed in the
first quarter of 1999 and both the S&P MidCap Index (-6.38%) and S&P SmallCap
Index (-9.00%) provided strongly negative returns.

The Fund returned 4.87% for the first quarter, compared with the 4.98% quarterly
return for the S&P 500. (Index results do not reflect brokerage or other
investment expenses.)

U.S. equity markets traded in a narrow range during April and May, achieving
negligible gains over that period. Concerns about the rapid growth in both
private sector debt and the money supply, as well as excess capacity, increased
potential for wage inflation and a record current account deficit had all but
made an interest rate increase during the June FOMC meeting a FAIT ACCOMPLI. By
June, however, continuing evidence of a strong rebound in corporate profits
generated by indefatigable consumer optimism,

_
5

<PAGE>

consequent demand and unmatched productivity growth propelled the Fund to a
7.06% second quarter return, compared with the S&P 500's 7.05% return.

Second quarter results saw many small and mid-capitalization cyclical stocks
increase in value, representing a significant shift on the part of market
participants. Accordingly, industry reversals were also in evidence as Aluminum,
Miscellaneous Metals, Chemicals, Diversified Manufacturing and Machinery all
posted better than 25% returns for the quarter while Health Care, Savings &
Loans and Drugs registered losses. As further evidence of expanding market
breadth, the S&P MidCap Index (14.16%) and S&P SmallCap Index (15.42%) provided
returns more than double those of the S&P 500 during the quarter.

In the third quarter, U.S. equity markets remained on a persistent "Fed watch",
fearful that the final 25 basis points of the 75-point easing that had been
granted last year to stem a global financial crisis would be reversed. Operating
under this pall, the equity markets drifted ultimately lower over the quarter,
giving back most of the second quarter gains. The Fund returned -6.28%, while
the S&P 500 was down -6.24%.

Market breadth exhibited in the second quarter waned, as did the resurgence in
value stocks. Large-capitalization technology names limited growth stocks losses
for the quarter to 3.49% as measured by the S&P BARRA Growth Index while the
S&P/BARRA Value Index fell 9.23% during the same period.

To be sure, the prospect of corrective measures to deal with unanticipated
growth did much to temper returns over most of the year, with the S&P earning
barely a quarter of it's yearly gains through September. However, as the
country's Y2K concerns began to dissipate before year-end, investors anticipated
renewed capital investing for enterprise technology. Tax avoidance strategies
and the usual year end window dressing actions on the part of fund managers
further supported prices of these select issues through December. As a result
the Fund returned 14.79% for the fourth quarter and 20.66% for the year. The S&P
500 provided a 14.88% return for the final quarter of 1999 and 21.04% for the
year.

<PAGE>

At the end of 1999, we now find ourselves in the midst of the longest running
expansion in U.S. history. The economy maintained the combination of strong real
economic growth, earnings that continued to surprise on the upside, and the lack
of significant wage inflation in the tightest job market in memory. In a year
when optimistic market prognosticators were hoping for a mere reversion to the
mean for equity returns, the S&P 500 produced a fifth consecutive year of 20+%
returns. More remarkably, this was accomplished in an environment when the
Federal Reserve was reclaiming all the interest rate cuts that had largely
supported last year's equity markets.

But the seemingly strong total return for this benchmark masked the underlying
weakness of the market as a whole during the year, and in fact continues a
pattern of lack of breadth that has persisted over several years. With the
exception of a brief period in the second quarter where we witnessed some
rotation into value and lower capitalization stocks, this has been a market
dominated by the performance of large capitalization high growth issues,
particularly concentrated in communication, media and technology.

Nearly half (49.5%) of the constituents of the S&P 500 actually produced
negative returns for the year. While the average stock in this benchmark was up
13.9%, the median stock only returned 0.4%. Clearly this was a stock picker's
year. As a result the average U.S. equity mutual fund manager outperformed the
S&P 500 in 1999 with a return of 26%, according to Lipper, Inc.

Many of the concerns that existed in the markets at the end of 1999 are still
outstanding; tight labor markets, stocks that remain fundamentally overvalued, a
large current account deficit. The fact that the market was able to advance in
the face of these impediments is testimony to the impact of productivity
improvements, resulting from corporate restructurings and technological
investments over a number of years. However, the market has become increasingly
dependent on further advances in this area. Investors have forecast continuing
increases in business efficiencies through adaptation of the Internet,
business-to-business and broadband technologies. The quest for efficiencies will
likely maintain

_
7

<PAGE>

the frenzied pace of mergers and acquisition activity witnessed in 1999. Stock
investors will continue to price issues as if efficiencies will be fully
realized until provided evidence to the contrary.

While it is possible that the Fed will follow with further "pre-emptive strikes"
the markets seem convinced that the current administration or any new
administration will be committed to maintaining a program of sustainable growth
and take these moves in stride. Many fear that a correction in overpriced
technology names may cause a correction in the broad market. However, given the
current market narrowness, a redeployment of assets into undervalued and ignored
components would appear more likely. On balance, we would project a continued
pattern of exceptional returns in specific names and somewhat more subdued
returns to the broad market in equities over the next year.

- --------------------------------------------------------------------------------
[THE FOLLOWING APPEARS AS A BAR CHART GRAPHIC]

GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
7/1/97 - 12/31/99

|------------------------------------------------------|
| AVERAGE ANNUAL TOTAL RETURN |
| |
| 1-Year Life of Fund |
|12/31/99 20.66% 23.83% |
|------------------------------------------------------|

CIGNA S&P 500 S&P 500
INVESTMENT INVESTMENT

7/1/97 $10,000 $10,000
12/31/97 $11,023 $11,033
12/31/98 $14,140 $14,185
12/31/99 $17,067 $17,170

Large Company Stock Index Fund

S&P 500 Index - Total Return

Large Company Stock Index Fund's performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions and changes in the
net asset value. The Fund does not charge a sales load. The Fund's investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Past performance
cannot guarantee comparable future results. The Fund's performance has been
compared with the total return performance for the Standard & Poor's Composite
Index of 500 Stocks (S&P 500). This index is a group of unmanaged securities
widely regarded by investors to be representative of the stock market in
general. An investment cannot be made in the index. Index results do not reflect
brokerage charges or other investment expenses.

_
8

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES
December 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

COMMON STOCKS - 97.0%

Microsoft Corp.* 142,500 $ 16,637

General Electric Co. 90,600 14,020

Cisco Systems, Inc.* 90,400 9,684

Wal-Mart Stores, Inc. 122,900 8,495

Exxon Corp. 95,447 7,689

Intel Corp. 92,300 7,597

Lucent Technologies, Inc. 86,530 6,474

International Business Machines Corp. 49,800 5,378

Citigroup, Inc. 93,546 5,198

America Online, Inc.* 61,800 4,662

American International Group, Inc. 42,812 4,629

SBC Communications, Inc. 94,306 4,597

AT&T Corp. 88,335 4,483

Oracle Systems Corp.* 39,325 4,407

Home Depot, Inc. 63,600 4,361

Merck & Co., Inc. 64,900 4,352

MCI WorldCom Inc.* 78,420 4,161

Coca-Cola Co. 68,500 3,990

Procter & Gamble Co. 36,300 3,977

Nortel Networks Corp. 36,860 3,723

Royal Dutch Petroleum Co. 59,500 3,596

Dell Computer Corp.* 70,300 3,585

Johnson & Johnson 38,400 3,576

Bristol-Myers Squibb Co. 54,900 3,524

Pfizer Inc. 107,400 3,484

Sun Microsystems, Inc.* 43,000 3,330

Qualcomm, Inc.* 18,400 3,241

The Notes to Financial Statements are an integral part of these statements.

_
9

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
DECEMBER 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Hewlett-Packard Co. 28,000 $ 3,190

Yahoo Inc.* 7,300 3,159

EMC Corp.* 28,137 3,074

Bell Atlantic Corp. 43,114 2,654

Time Warner, Inc. 35,800 2,593

Motorola, Inc. 16,700 2,459

BellSouth Corp. 52,000 2,434

BancAmerica Corp. 47,116 2,365

Morgan Stanley, Dean Witter, Discover & Co. 15,400 2,198

Texas Instruments, Inc. 22,200 2,151

American Express Company 12,400 2,061

Lilly (Eli) & Co. 30,100 2,002

Warner-Lambert Co. 23,600 1,934

du Pont (E.I.) de Nemours & Co. 28,829 1,899

GTE Corp. 26,800 1,891

Wells Fargo & Co. 45,900 1,856

Tyco International Ltd. 46,366 1,802

Ford Motor Co. 33,600 1,795

Chase Manhattan Corp. 23,000 1,787

Federal National Mortgage Association 28,400 1,773

Schering-Plough Corp. 40,800 1,721

Amgen, Inc. 28,400 1,706

Disney ( Walt) Co. 56,900 1,664

Sprint Corp. 24,000 1,616

Chevron Corp. 18,100 1,568

Philip Morris Companies, Inc. 66,200 1,535

Abbott Laboratories 42,100 1,529

McDonald's Corp. 37,600 1,516

The Notes to Financial Statements are an integral part of these statements.

__
10

<PAGE>

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

American Home Products Corp. 36,600 $ 1,443

PepsiCo, Inc. 40,700 1,435

CBS Corp. 21,220 1,357

Applied Materials, Inc.* 10,300 1,305

MediaOne Group, Inc.* 16,900 1,298

General Motors Corp. 17,700 1,287

Honeywell, Inc. 21,862 1,262

Compaq Computer Corp. 46,597 1,261

Gillette Co. 30,000 1,236

Sprint Corp. (PCS Group)* 11,950 1,225

Medtronic, Inc. 32,400 1,181

Viacom, Inc., Class B* 19,400 1,172

Minnesota Mining and Manufacturing Co. 11,100 1,086

GAP, Inc. 23,550 1,083

Boeing Company 25,850 1,074

Colgate-Palmolive Co. 16,200 1,053

Comcast Corp., Class A (Special) 20,600 1,042

Computer Associates International, Inc. 14,900 1,042

NEXTEL Communications, Inc.* 10,000 1,031

Global Crossing Ltd.* 20,540 1,027

BancOne Corp. 31,702 1,016

U.S. WEST Inc. 13,994 1,008

Kimberly-Clark Corp. 15,000 979

Automatic Data Processing, Inc. 17,200 927

Anheuser-Busch Companies, Inc. 12,900 914

Federal Home Loan Mortgage Corp. 19,300 908

Dayton Hudson Corp. 12,200 896

FleetBoston Financial Corp. 25,512 888

The Notes to Financial Statements are an integral part of these statements.

__
11

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

First Union Corp. 26,870 $ 882

Corning, Inc. 6,800 877

United Technologies Corp. 13,400 871

Electronics Data Systems Corp. 13,000 870

Enron Corp. 19,600 870

Schwab (Charles) Corp. 22,650 869

Unilever NV 15,892 865

Schlumberger Ltd. 15,200 855

Merrill Lynch & Co., Inc. 10,200 852

Alcoa, Inc. 10,200 847

Texaco, Inc. 15,300 831

Clear Channel Communications, Inc.* 9,300 830

Dow Chemical Co. 6,100 815

Walgreen Co. 27,800 813

Bank of New York, Inc. 20,300 812

Carnival Corp. 16,900 808

Solectron Corp* 8,100 771

Atlantic Richfield Co. 8,900 770

Alltel Corp. 8,500 703

Emerson Electric Co. 12,200 700

Marsh & McLennan Companies, Inc. 7,300 699

Tellabs, Inc.* 10,800 693

International Paper Co. 11,321 639

Gannett Co., Inc. 7,800 636

Pharmacia & Upjohn, Inc. 14,100 635

Fifth Third Bancorp 8,500 624

Gateway, Inc.* 8,600 620

Monsanto Company 17,400 620

The Notes to Financial Statements are an integral part of these statements.

__
12

<PAGE>

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Morgan (J.P.) & Co. 4,900 $ 620

Lowes Companies, Inc. 10,300 615

SunTrust Banks, Inc. 8,900 612

MBNA Corp. 22,175 604

Eastman Kodak Co. 9,000 596

Firstar Corp. 27,600 583

Micron Technology, Inc. 7,500 583

First Data Corp. 11,600 572

Illinois Tool Works, Inc. 8,300 561

Sara Lee Corp. 25,400 560

Associates First Capital Corp., Class A 20,064 551

Costco Companies, Inc.* 6,000 548

Allstate Corp. 22,400 538

BMC Software, Inc.* 6,700 536

Seagram Company Ltd. 11,900 535

American General Corp. 7,000 531

Cendant Corp. 19,985 531

Network Appliance, Inc.* 6,100 507

Duke Energy Co. 10,100 506

Safeway, Inc.* 14,100 501

Omnicom Group, Inc. 5,000 500

Household International, Inc. 13,378 498

Mellon Bank Corp. 14,600 497

Baxter International, Inc. 7,900 496

Halliburton Co. 12,200 491

U. S. Bancorp, Inc. 20,190 481

Campbell Soup Company 12,400 480

Caterpillar, Inc. 10,000 471

The Notes to Financial Statements are an integral part of these statements.

__
13

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
DECEMBER 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Weyerhaeuser Co. 6,500 $ 467

Columbia/HCA Healthcare Corp. 15,800 463

Conoco, Inc. 18,319 456

Southern Company 19,400 456

Apple Computer, Inc. 4,400 452

Interpublic Group of Companies, Inc. 7,800 450

3Com Corp.* 9,500 447

Analog Devices Inc. 4,800 446

CVS Corp. 10,800 431

Kroger Co. 22,800 430

Washington Mutual, Inc. 16,440 427

AES Corp. 5,700 426

Xilinx Inc.* 9,200 418

Computer Sciences Corp. 4,400 416

Bestfoods, Inc. 7,900 415

Xerox Corp. 18,200 413

National City Corp. 17,400 412

CIGNA Corp. 5,100 411

Heinz (H.J.) Co. 10,100 402

NIKE, Inc., Class B 8,000 397

Guidant Corp. 8,400 395

General Instrument Corp.* 4,600 391

Novell, Inc.* 9,800 391

Wachovia Corp. 5,600 381

Compuware Corp.* 10,100 376

Albertson's, Inc. 11,588 374

PNC Bank Corp. 8,400 374

Sysco Corp. 9,300 368

The Notes to Financial Statements are an integral part of these statements.

__
14

<PAGE>

ARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Pitney-Bowes, Inc. 7,600 $ 367

Williams Companies, Inc. 11,900 364

Tribune Co. 6,600 363

Cardinal Health, Inc. 7,550 361

Providian Corp. 3,950 360

Aflac, Inc. 7,400 349

Kellogg Co. 11,300 348

PE-Corp., Biosystems Group 2,800 337

FDX Corp.* 8,200 336

Phillips Petroleum Co. 7,100 334

McGraw-Hill, Inc. 5,400 333

Teradyne, Inc.* 5,000 330

Northern Trust Corp. 6,200 329

State Street Corp. 4,500 329

Sears, Roebuck & Company 10,600 323

Clorox Co. 6,400 322

Textron, Inc. 4,200 322

Citrix Systems, Inc. 2,600 320

Kohls Corp.* 4,400 318

Lexmark International Group, Inc.* 3,500 317

Burlington Northern Santa Fe Corp. 13,000 315

Masco Corp. 12,400 315

Hartford Financial Services Group 6,500 308

ConAgra, Inc. 13,600 307

PPG Industries, Inc. 4,900 307

Union Pacific Corp. 6,900 301

General Mills, Inc. 8,400 300

ADC Telecommunications, Inc.* 4,100 298

The Notes to Financial Statements are an integral part of these statements.

__
15

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

May Department Stores Co. 9,250 $ 298

General Dynamics Corp. 5,500 290

Waste Management, Inc. 16,895 290

Converse Technology, Inc.* 2,000 289

Seagate Technology, Inc.* 6,200 289

AMR Corp. 4,300 288

Federated Department Stores, Inc.* 5,700 288

Best Buy Co., Inc.* 5,700 286

Deere & Co. 6,600 286

Aon Corp. 7,050 282

KeyCorp 12,600 279

Texas Utilities Co. 7,800 277

Lehman Brothers Holdings, Inc. 3,200 271

Staples, Inc.* 13,050 271

Unisys Corp. 8,500 271

Paychex, Inc. 6,750 270

KLA Tencor Corp.* 2,400 267

Tandy Corp. 5,400 266

Wrigley (Wm.) Jr. Company 3,200 265

LSI Logic Corp.* 3,900 263

Capital One Financial Corp. 5,400 260

Alcan Aluminum Ltd. 6,300 259

Edison International 9,800 257

Limited, Inc. 5,900 256

Molex, Inc. 4,500 255

United Healthcare Corp. 4,800 255

Dover Corp. 5,600 254

Rockwell International Corp. 5,300 254

The Notes to Financial Statements are an integral part of these statements.

__
16

<PAGE>

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Chubb Corp. 4,500 $ 253

Ingersol-Rand Co. 4,600 253

Circuit City Stores, Inc. 5,600 252

El Paso Enetrgy Corp. 6,500 252

Raytheon Co. 9,400 250

Quaker Oats Co. 3,800 249

Union Carbide Corp. 3,700 247

Georgia-Pacific Corp. 4,800 244

Delphi Automotive Systems Corp. 15,420 243

Ralston Purina Co. 8,700 243

Adobe Systems, Inc. 3,600 242

Avon Products, Inc. 7,300 241

Lockheed Martin Corp. 11,000 241

New York Times Co., Class A 4,900 241

IMS Health Inc. 8,800 239

BB and T Corp. 8,700 238

Boston Scientific Corp.* 10,900 238

Rohm & Haas Co. 5,853 238

Coca-Cola Enterprises, Inc. 11,800 237

Aegon 2,441 233

Avery Dennison Corp. 3,200 233

Kansas City Southern Industries, Inc. 3,100 231

Newell Rubbermaid, Inc. 7,810 226

Southwest Airlines Co. 13,987 226

Unocal Corp. 6,700 225

Consolidated Edison Co. of N.Y., Inc. 6,500 224

Franklin Resource, Inc. 7,000 224

Lincoln National Corp. 5,600 224

The Notes to Financial Statements are an integral part of these statements.

__
17

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER VALUE
OF SHARES (000)
- -----------------------------------------------------------------

Aetna, Inc. 4,000 $ 223

Praxair, Inc. 4,400 221

St. Paul Companies, Inc. 6,528 220

Public Service Enterprises Group, Inc. 6,300 219

Marriott International, Inc. 6,900 218

PG & E Corp. 10,600 217

Republic New York Corp. 3,000 216

Air Products & Chemicals, Inc. 6,400 215

Norfolk Southern Corp. 10,500 215

FPL Group, Inc. 5,000 214

Dominion Resources, Inc. 5,400 212

Archer-Daniels-Midland Co. 17,323 211

UNUM Provident Corp. 6,574 211

AmSouth Bancorp. 10,850 210

USX-Marathon Group 8,500 210

Coastal Corp. 5,900 209

Occidental Petroleum Corp. 9,600 208

Parametric Technology Corp.* 7,600 206

Comerica, Inc. 4,350 203

Tenet Healthcare Corp. 8,600 202

Jefferson-Pilot Corp. 2,950 201

Unicom Corp. 6,000 201

Burlington Resources, Inc. 6,010 199

Delta Air Lines, Inc. 4,000 199

National Semiconductor Corp.* 4,600 197

Loews Corp. 3,200 194

SLM Holding Corp. 4,600 194

Transocean Sedco Forex, Inc. 5,743 193

The Notes to Financial Statements are an integral part of these statements.

__
18

<PAGE>

MARKET
NUMBER VALUE
OF SHARES (000)
- -----------------------------------------------------------------

CSX Corp. 6,100 $ 191

Baker Hughes, Inc. 9,040 190

Hershey Foods Corp. 4,000 190

Becton, Dickinson and Co. 6,900 185

Barrick Gold Corp. 10,400 184

PECO Energy Co. 5,300 184

TJX Companies, Inc. 8,900 182

MGIC Investment Corp. 3,000 181

Reliant Energy, Inc. 7,922 181

Allergan, Inc. 3,600 179

Danaher Corp. 3,700 179

Century Tel Enterprises, Inc. 3,750 178

Dow Jones & Co., Inc. 2,600 177

Consolidated Natural Gas Co. 2,700 175

Entergy Corp. 6,800 175

Southtrust Corp. 4,600 174

McKesson HBOC, Inc. 7,673 173

TRW, Inc. 3,300 171

American Electric Power Co., Inc. 5,300 170

Champion International Corp. 2,700 167

Fort James Corp. 6,100 167

Tricon Global Restaurants* 4,190 162

Golden West Financial Corp. 4,800 161

Conseco, Inc. 8,757 157

Parker-Hannifin Corp. 3,050 157

Fortune Brands, Inc. 4,700 155

Huntington Bancshares, Inc. 6,501 155

Paine Webber Group, Inc. 4,000 155

The Notes to Financial Statements are an integral part of these statements.

__
19

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Regions Financial Corp. 6,100 $ 153

Mattel, Inc. 11,600 152

First Energy Corp. 6,600 150

Union Planters Corp. 3,800 150

Kerr-McGee Corp. 2,407 149

MBIA, Inc. 2,800 148

Synovus Corp. 7,450 148

Dollar General Corp. 6,468 147

Peoplesoft, Inc. 6,912 147

Summit Bancorp. 4,800 147

Bear Stearns & Companies, Inc. 3,417 146

Progressive Corp. Ohio 2,000 146

Adaptec Inc.* 2,900 145

Columbia Energy Group. 2,300 145

Eaton Corp. 2,000 145

Willamette Industries, Inc. 3,100 144

Cincinnati Financial Corp. 4,600 143

Amerada Hess Corp. 2,500 142

Penney (J.C.) Co., Inc. 7,100 142

Ecolab, Inc. 3,600 141

Dana Corp. 4,601 138

Kmart Corp. 13,700 138

Reynolds Metals Co. 1,800 138

Johnson Controls, Inc. 2,400 137

Whirlpool Corp. 2,100 137

Autozone, Inc.* 4,200 136

Bed Bath & Beyond Inc.* 3,900 136

Dun & Bradstreet Corp. 4,600 136

The Notes to Financial Statements are an integral part of these statements.

__
20

<PAGE>

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Nucor Corp. 2,400 $ 132

Knight-Ridder, Inc. 2,200 131

UST, Inc. 5,200 131

Carolina Power & Light Co. 4,200 128

Phelps Dodge Corp. 1,900 128

DTE Energy Co. 4,000 126

Mead Corp. 2,900 126

Black & Decker Corp. 2,400 125

Wellpoint Health Networks 1,900 125

Ameren Corp. 3,800 124

Biomet, Inc. 3,100 124

Genuine Parts Co. 5,000 124

Grainger (W.W.), Inc. 2,600 124

Block (H & R), Inc. 2,800 122

Leggett & Platt, Inc. 5,700 122

T. Rowe Price & Associates Inc. 3,300 122

Goodyear Tire & Rubber Co. 4,300 121

Cabletron Systems, Inc.* 4,600 120

Maytag Corp. 2,500 120

Old Kent Financial Corp. 3,400 120

Constellation Energy Group 4,100 119

Sealed Air Corp.* 2,296 119

Central & Southwest Corp. 5,900 118

Cooper Industries, Inc. 2,900 117

Scientific Atlanta, Inc. 2,100 117

Advanced Micro Devices, Inc. 4,000 116

Sempra Energy Corp. 6,655 116

Vulcan Materials Co. 2,900 116

The Notes to Financial Statements are an integral part of these statements.

__
21

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Apache Corp. 3,100 $ 115

Office Depot, Inc.* 10,500 115

Times Mirror Co., Class A 1,700 114

Anadarko Petroleum Corp. 3,300 113

Newmont Mining Corp. 4,600 113

Torchmark Corp. 3,900 113

Tosco, Inc. 4,100 111

Florida Progress Corp. 2,600 110

Bausch & Lomb, Inc. 1,600 109

Brown-Forman Corporation, Class B 1,900 109

International Flavors & Fragrances, Inc. 2,900 109

GPU, Inc. 3,600 108

Inco Ltd. 4,600 108

Owens-Illinois, Inc.* 4,300 108

Nordstrom, Inc. 4,100 107

Cinergy Corp. 4,400 106

Eastman Chemical Co. 2,200 105

PE-Corp., Celera Genomics Group* 700 104

Toys 'R' Us, Inc.* 7,300 104

CMS Energy Corp. 3,300 103

Hasbro, Inc. 5,400 103

Northrop Grumman Corp. 1,900 103

Hilton Hotels Corp. 10,500 101

Sherwin-Williams Co. 4,800 101

Temple-Inland, Inc. 1,500 99

VF Corp. 3,300 99

Winn-Dixie Stores, Inc. 4,100 98

ALZA Corp. 2,800 97

The Notes to Financial Statements are an integral part of these statements.

__
22

<PAGE>

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Equifax, Inc. 4,100 $ 97

Freeport McMoRan Copper & Gold, Inc., Class B 4,600 97

New Century Energies, Inc. 3,200 97

PACCAR, Inc. 2,200 97

Placer Dome, Inc. 9,000 97

Fluor Corp. 2,100 96

Nabisco Group Holding Corp. 9,000 96

PP & L Resources, Inc. 4,200 96

SAFECO Corp. 3,800 95

Donnelley (R.R.) & Sons Co. 3,800 94

Harrah's Entertainment, Inc. 3,500 93

Watson Pharmaceuticals, Inc.* 2,600 93

Westvaco Corp. 2,800 91

Navistar International Corp. 1,900 90

Union Pacific Resources Group, Inc. 7,000 89

Ceridian Corp. 4,000 86

Sigma-Aldrich Corp. 2,800 84

USX-U.S. Steel Group 2,500 83

Goodrich (B.F.) Co. 3,000 82

Northern States Power Co. 4,200 82

Rite Aid Corp. 7,200 81

Harcourt General, Inc. 2,000 80

ITT Industries, Inc. 2,400 80

Bard (C. R.), Inc. 1,500 79

Countrywide Credit Industries, Inc. 3,100 78

Hercules, Inc. 2,800 78

Mirage Resorts, Inc. 5,000 77

Crown Cork & Seal Co., Inc. 3,400 76

The Notes to Financial Statements are an integral part of these statements.

__
23

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

Engelhard Corp. 4,000 $ 76

Stanley Works (The) 2,500 75

Pall Corp. 3,400 73

Pinnacle West Capital Corp. 2,400 73

Niagara Mohawk Power Co. 5,200 72

Wendy's International, Inc. 3,500 72

Darden Restaurants, Inc. 3,900 71

St. Jude Medical, Inc. 2,300 71

Ashland, Inc. 2,100 69

Liz Claiborne, Inc. 1,800 68

SuperValu, Inc. 3,300 66

Thermo Electron Corp. 4,400 66

Boise Cascade Corp. 1,600 65

Mallinckrodt Group, Inc. 2,000 64

US Airways Group, Inc. 2,000 64

HealthSouth Corp.* 11,700 63

Meredith Corp. 1,500 63

Quintiles Transnational Co.* 3,300 62

Allegheny Technologies, Inc. 2,700 61

Dillard, Inc., Class A 3,000 61

Great Lakes Chemical Corp. 1,600 61

Sunoco, Inc. 2,600 61

Brunswick Corp. 2,700 60

Deluxe Corp. 2,200 60

Cummins Engine Co., Inc. 1,200 58

Service Corporation International 7,600 53

Bemis Company, Inc. 1,500 52

Coors (Adolph) Co., Class B 1,000 52

The Notes to Financial Statements are an integral part of these statements.

__
24

<PAGE>

MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------

FMC Corp. 900 $ 52

Homestake Mining Co. 6,600 52

Tektronix, Inc. 1,350 52

Silicon Graphics, Inc.* 5,200 51

Thomas & Betts Corp. 1,600 51

Manor Care, Inc.* 3,100 50

PacifiCorp 4,700 50

Perkinelmer Inc. 1,200 50

Rowan Companies, Inc. 2,300 50

Consolidated Stores Corp.* 3,000 49

Ryder System, Inc. 2,000 49

Allied Waste Industries, Inc.* 5,300 47

American Greetings Corp., Class A 2,000 47

Millipore Corp. 1,200 46

Andrew Corp.* 2,400 45

Autodesk, Inc. 1,300 44

Louisiana-Pacific Corp. 3,000 43

Snap-On, Inc. 1,600 43

Worthington Industries, Inc. 2,600 43

NICOR, Inc. 1,300 42

Alberto-Culver Co., Class B 1,500 39

Centex Corp. 1,600 39

Crane Co. 1,900 38

Humana, Inc. 4,600 38

Armstrong World Industries, Inc. 1,100 37

Potlatch Corp. 800 36

Shared Medical Systems Corp. 700 36

Ball Corp. 900 35

The Notes to Financial Statements are an integral part of these statements.

__
25

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
December 31, 1999

MARKET
NUMBER VALUE
OF SHARES (000)
- -----------------------------------------------------------------

National Service Industries, Inc. 1,200 $ 35

Timken Co. 1,700 35

Eastern Enterprises 600 34

Peoples Energy Corp. 1,000 34

Cooper Tire & Rubber Co. 2,100 33

Briggs & Stratton Corp. 600 32

Great Atlantic & Pacific Tea Co., Inc. 1,100 31

Sealed Air Corp. New 617 31

Bethlehem Steel Corp. 3,600 30

Owens-Corning Fiberglas Corp. 1,500 29

Grace (W.R.) & Co. 2,000 28

Longs Drug Stores Corp. 1,100 28

Kaufman & Broad Home Corp. 1,100 27

Pulte Corp. 1,200 27

Tupperware Corp. 1,600 27

Ikon Office Solutions, Inc. 3,800 26

Jostens, Inc. 1,000 24

Oneok, Inc. 900 23

Polaroid Corp. 1,200 23

Fleetwood Enterprises, Inc. 1,000 21

Waddell & Reed Financial, Inc. Class B 832 21

Springs Industries, Inc., Class A 500 20

Ryerson Tull, Inc. 1,000 19

Milacron, Inc. 1,100 17

Russell Corp. 1,000 17

Corn Products International, Inc. 500 16

Neiman Marcus Group, Inc. 602 16

Pep Boys-Manny, Moe & Jack 1,800 16

The Notes to Financial Statements are an integral part of these statements.

__
27

<PAGE>

MARKET
NUMBER VALUE
OF SHARES (000)
- -----------------------------------------------------------------

McDermott International, Inc. 1,600 $ 15

R.H. Donnelley Corp. 740 14

Battle Mountain Gold Co. 6,400 13

CommScope, Inc.* 333 13

Reebok International Ltd. 1,600 13

NACCO Industries, Inc., Class A 200 11

Foster Wheeler Corp. 1,100 10

Agribands International, Inc.* 190 9

ChoicePoint, Inc.* 220 9

Tenneco, Inc. 940 9

Harland (J.H.) Co. 400 7

Teledyne Technologies, Inc.* 771 7

Safety Kleen Corp. 560 6

Waddell & Reed Financial, Inc. Class A 193 5

General Semiconductor, Inc.* 250 4

Abercombie & Fitch Co.* 130 3

Octel Corp.* 275 3

Water Pik Technologies, Inc.* 270 3

Huttig Building Products, Inc. 422 2

Allergan Specialty, Inc., Class A 45 1

Crescendo Pharmaceuticals, Inc. 45 1

Momentum Business Application Class A 130 1
----------
TOTAL COMMON STOCKS - 97.0%

(Cost $243,577,924) $ 341,767
----------

__
27

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

INVESTMENTS IN SECURITIES CONTINUED
DECEMBER 31, 1999

MARKET
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------

SHORT-TERM OBLIGATIONS - 3.0%

COMMERCIAL PAPER - 0.3%

American Express Credit Corp.
2.50%, 01/03/00 $ 1,033 $ 1,033
----------
$ 1,033
----------

U.S. GOVERNMENT AND AGENCIES - 2.7%
U. S. Treasury Bills,
4.00%, 01/04/00 8,660 8,657
4.95%, 01/20/00** 107 107
4.60%, 01/2700** 76 75
5.02%, 1/27/00** 619 617
5.085%, 03/02/00** 102 101
----------
9,557
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $10,590,458) 10,590
----------

TOTAL INVESTMENT IN SECURITIES - 100.0%
(Total Cost $254,168,382) 352,357

Cash and Other Assets Less Liabilities -0.0% 60
----------

NET ASSETS - 100.0% $ 352,417
==========

* Non-income producing securities.
** This security or a portion thereof is pledged as collateral for Stock Index
Futures Contracts. At December 31, 1999, the Fund was long 31 S&P 500
Futures Contracts expiring in March 2000. Unrealized gain amounted to
$343,938. Underlying face value was $11,159,612, and underlying market
value was $11,503,550.

The Notes to Financial Statements are an integral part of these statements.

__
28

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999

(IN THOUSANDS)
- --------------------------------------------------------------------------------
ASSETS:
Investments in securities at value
(Cost - $254,168,382) $ 352,357

Cash 5

Receivable for investments sold 30

Interest and dividends receivable 240

Investment for trustees' deferred compensation plan 4

Variation margin receivable 26

Other 5
----------------
Total assets 352,667
----------------

LIABILITIES:

Payable for investments purchased 101

Accrued advisory fee payable 69

Payable for trustees' deferred compensation plan 4

Other accrued expenses (including $23,769 due to affiliates) 76
----------------
Total liabilities 250
----------------
NET ASSETS $ 352,417
================

Shares outstanding 21,589
================

NET ASSET VALUE PER SHARE $ 16.32
================

COMPONENTS OF NET ASSETS:

Paid in capital $ 253,261

Overdistributed net investment income (4)

Accumulated net realized gain on investments and futures 628

Unrealized appreciation of investments and futures 98,532
----------------

NET ASSETS $ 352,417
================

The Notes to Financial Statements are an integral part of these statements.

__
29

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1999
(IN THOUSANDS)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:

Dividends (net of foreign taxes withheld of $39,277) $ 3,898
Interest 716
--------------
4,614

EXPENSES:
Investment advisory fees 788
Custodian fees and expenses 164
Administrative services 128
Auditing and legal fees 38
Trustees' fees 4
Other 2
--------------

Total expenses 1,124
Less expenses waived by adviser (16)
--------------
Net expenses 1,108
--------------

NET INVESTMENT INCOME 3,506

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 1,884
Net realized gain from futures contracts 2,165
Net unrealized depreciation from futures contracts (405)
Unrealized appreciation of investments 53,237
--------------

NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS 56,881
--------------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS $ 60,387
==============

The Notes to Financial Statements are an integral part of these statements.

__
30

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>

FOR THE YEAR ENDED
DECEMBER 31
(IN THOUSANDS)
--------------
1999 1998
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,506 $ 2,194
Net realized gain from securities transactions 1,884 542
Net realized gain from futures contracts 2,165 1,718
Unrealized appreciation from futures contracts (405) 738
Unrealized appreciation of investments 53,237 39,830
--------------- ----------------
Net increase in net assets from operations 60,387 45,022
--------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (4,723) (2,809)
From net realized capital gains (3,114) (893)
--------------- ----------------
Total distributions to shareholders (7,837) (3,702)
--------------- ----------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 765 140,398
Value of shares issued in reinvestment of
dividends and distributions 7,837 3,702
--------------- ----------------
8,602 144,100
Cost of shares redeemed - -
--------------- ----------------
Net increase from Fund share transactions 8,602 144,100
--------------- ----------------
NET INCREASE IN NET ASSETS 61,152 185,420
NET ASSETS:
Beginning of period 291,265 105,845
--------------- ----------------
End of period (including overdistributed net investment
income of $3,975 and $1,554, respectively) $ 352,417 $ 291,265
=============== ================

TRANSACTIONS IN CAPITAL STOCK:
Shares sold 51 11,107
Shares issued in reinvestment of dividends and distributions 491 270
--------------- ----------------
542 11,377
Shares redeemed - -
--------------- ----------------
Net increase in shares outstanding 542 11,377
=============== ================
</TABLE>

The Notes to Financial Statements are an integral part of these statements.

__
31

<PAGE>

CHARTER FUNDS(SM) LARGE
COMPANY STOCK INDEX FUND

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES. Charter Large Company Stock Index Fund is
separate series of CIGNA Funds Group, a Massachusetts business trust (the
"Trust"). The Trust is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The objective
of the S&P 500 Index Fund is to achieve long-term growth of capital by investing
principally in common stocks of companies in the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), an index emphasizing large-capitalization stocks.
The Trust offers three classes of shares: Institutional Class, Premier Class and
Retail Class. As of December 31, 1999, only the Institutional Class was active.
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, which will
be made available after 1999 year end, have a sub accounting fee. The Retail
Class Shares, which will be made available after 1999 year end, have a 12b-1 fee
and a sub accounting fee.

The preparation of financial statements in accordance with generally accepted
accounting principles 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

__
32

<PAGE>

sale price or, if there has been no sale that day, at the last 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 Board of Trustees.

FUTURES CONTRACTS - The Fund may purchase Standard & Poor's 500 futures
contracts with the objective of earning returns on its short-term investments
equivalent to returns on the S&P 500. 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
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.

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. 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 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.

__
33

<PAGE>

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.

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 0.25% 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, amortized organization expenses, transaction
costs incurred in acquiring and disposing of portfolio securities, and
extraordinary expenses) exceed 0.25% annually (0.35% annually prior to January
1, 2000) of average daily net assets for the Institutional Class, 0.35% annually
of average daily net assets for the Premier Class, and 0.60% annually for the
Retail Class, until April 30, 2001 and thereafter to the extent described in the
Fund's then current prospectus.

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 year ended
December 31, 1999, the Fund paid or accrued $128,070.

__
34

<PAGE>

With respect to Retail Class shares, the Fund has adopted a 12b-1 plan which
requires the payment of 0.25% annually 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. 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 year ended December 31, 1999 were
$17,366,643 and $8,102,864, respectively.

At December 31, 1999, the cost of securities for federal income tax purposes was
$254,172,936. The Fund had net unrealized appreciation of investment of
$98,183,997, consisting of gross unrealized appreciation of $117,473,027 and
gross unrealized depreciation of $19,289,030 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 interest, without par value. At
December 31, 1999, affiliates of Ace Limited, an independent insurance company,
were the only shareholders of the Fund.

__
35

<PAGE>

CHARTER FUNDS(SM) LARGE COMPANY
STOCK INDEX FUND

NOTES TO FINANCIAL STATEMENTS CONTINUED

6. FINANCIAL HIGHLIGHTS. The following per share data is computed on the basis
of a share outstanding throughout the period:

INSTITUTIONAL CLASS
YEARS ENDED DECEMBER 31,

1999 1998 1997*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE,
BEGINNING OF PERIOD $ 13.84 $ 10.95 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.17 0.13 0.07
Net realized and unrealized gain on securities 2.68 2.97 0.95
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 2.85 3.10 1.02
----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income (0.22) (0.16) (0.07)
Distributions from capital gains (0.15) (0.05) -
------ ------ -
TOTAL DISTRIBUTIONS (0.37) (0.21) (0.07)
------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 16.32 $ 13.84 $ 10.95
======== ======== ========
TOTAL RETURN /(a)/ 20.66% 28.28% 10.23% **
RATIOS TO AVERAGE NET ASSETS
Net expenses 0.35% 0.35% 0.35% +
Net investment income 1.11% 1.27% 1.57% +
Fees and expenses waived or
borne by the Advisor 0.01% 0.08% 0.35% +
Portfolio turnover 3% 3% 4%
Net assets, end of period
(000 omitted) $ 352,417 $ 291,265 $ 105,845
</TABLE>

/a/ Had the Advisor not waived or reimbursed a portion of expenses, total
return would have been reduced.
/*/ For the period July 1, 1997 to December 31, 1997.
/**/ Not annualized.
/+/ Annualized.

__
36

<PAGE>

REPORT OF INDEPENDENT
ACCOUNTANTS

TO THE TRUSTEES AND SHAREHOLDERS OF CHARTER FUNDS(SM) LARGE COMPANY STOCK INDEX
FUND

In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of Charter Large Company Stock Index
Fund (formerly CIGNA S&P 500 Index Fund) (the "Fund") at December 31, 1999, the
results of its operations, the changes in its net assets and the financial
highlights for of the periods indicated, in conformity with accounting
principles generally accepted in the United States. These financial statements
and financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at December
31, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.

PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2000

__
37
<PAGE>