- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund 16
Dear Shareholders:
Our commentary for TimesSquare VP S&P 500[RegTM] Index Fund (the "Fund")
covering the six months ended June 30, 2004 follows.
Economy
The U.S. economic expansion continues to gather steam. The consensus is that
real Gross Domestic Product will grow at a 4%+ rate in the second half of 2004.
The manufacturing sector has been expanding for the past 13 months, and
consumer confidence is improving. In the second quarter, companies began hiring
new workers at a pace of around 250,000 jobs a month. The unemployment rate has
fallen to 5.6%. Inflation, fueled by increasing food and energy prices, has
become a concern. The year-over-year rate of increase of the Consumer Price
Index was 3.0% in May, up from 1.7% at the end of March. Responding to the
signs of inflation, the Federal Reserve raised the Fed Funds interest rate
0.25% to 1.25% on June 30 and announced that it was willing to move more
aggressively in raising rates in the future if inflation data warranted.
Equity Markets
Equity markets were up nearly 4% through the first few weeks of the year,
propelled by record revenues from Intel and good news in the auto and
construction industries. After a brief period of profit-taking, a positive
earnings surprise from CISCO, the highest non-manufacturing Institute for
Supply Management Index number in seven years, and a two-year low in
unemployment, the S&P 500[RegTM] Index reached its highest level since March
2002. Despite the strong durable goods report in late February, the market gave
back much of its gains over the remainder of the quarter. A decrease in
consumer confidence, increased terrorist threats and the unfavorable Microsoft
ruling all took a toll and left the S&P 500[RegTM] Index up 1.69% for the first
quarter.
Also in the first quarter, both the S&P MidCap Index (+5.06%) and the S&P Small
Cap Index (+6.22%) outperformed the large capitalization index during the
period. Within the large capitalization segment, value (+3.35%) outpaced growth
(+0.02%), as measured by the respective S&P/Barra Indexes.
In the second quarter, the stock market, as measured by the S&P 500[RegTM]
Index, returned 1.72%, as equity declines in April were offset by gains in May
and June. Corporate earnings continued to surprise on the upside, but concerns
over rising interest rates continued to dissuade buyers. For the second
quarter, growth stocks (+2.69%) outperformed value stocks (+0.79%), as measured
by the respective S&P/Barra Indexes. The S&P Small Cap Index (+3.60%) continued
to outperform large cap stocks.
Performance Summary
Returns for the year ended December 31, 2003 (which do not reflect expenses
associated with variable products through which the Fund may be offered and
which would have been lower if such expenses were reflected) were:
Second Quarter Year-to-date
Fund 1.68% 3.35%
Lipper S&P 500
Funds Average 1.56 3.13
S&P 500[RegTM] Index 1.72 3.44
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TimesSquare VP S&P 500[RegTM] Index Fund 17
Outlook
Financial markets are likely to remain in a volatile trading pattern through
year end, with equity markets expected to continue to outperform bonds. Fixed
income markets remain in a cyclical bear market and, in an environment of
rising inflation and tightening monetary conditions, further market declines
are highly likely. Assuming the pace of Fed monetary tightening is moderate and
cautious, equity markets should not be seriously impacted by the shift in
policy until 2005. However, a more aggressive monetary tightening next year
could result in a sharp, but brief and temporary, equity market correction.
Sincerely,
/s/ Richard H. Forde
Richard H. Forde
Chairman of the Board and President
CIGNA Variable Products Group
Note: This commentary is not part of the Semiannual Report to Shareholders.
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TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 18
June 30, 2004 (Unaudited)
Number of Value
Shares (000)
---------------- -------------
COMMON STOCKS - 92.2%
General Electric Co. 157,800 $ 5,113
Microsoft Corp. 167,000 4,770
Exxon Mobil Corp. 101,424 4,504
Pfizer, Inc. 118,032 4,046
Citigroup, Inc. 79,672 3,705
Wal-Mart Stores, Inc. 67,000 3,535
American International Group 40,384 2,879
Intel Corp. 100,300 2,768
Bank of America Corp. 31,616 2,675
Johnson & Johnson 45,884 2,556
Cisco Systems, Inc. (a) 106,300 2,519
International Business Machine Corp. 26,300 2,318
Procter & Gamble Co. 40,000 2,178
Coca-Cola (The) Co. 37,800 1,908
Merck & Co., Inc. 34,400 1,634
Altria Group, Inc. 31,700 1,587
ChevronTexaco Corp. 16,534 1,556
Verizon Communications, Inc. 42,726 1,546
Wells Fargo & Co. 26,160 1,497
PepsiCo., Inc. 26,460 1,426
Dell, Inc. (a) 39,600 1,418
United Parcel Service, Inc., Class B 17,500 1,315
SBC Communications, Inc. 51,194 1,241
Home Depot, Inc. 35,250 1,241
Time Warner, Inc. (a) 70,400 1,238
Morgan (J.P.) Chase & Co. 31,806 1,233
Eli Lilly & Co. 17,400 1,216
Amgen, Inc. (a) 19,968 1,090
3M Co. 12,100 1,089
Fannie Mae 15,000 1,070
Tyco International Ltd. 30,965 1,026
American Express Co. 19,900 1,022
Hewlett-Packard Co. 47,224 996
Abbott Laboratories 24,200 986
Comcast Corp., Class A (a) 34,862 977
Viacom, Inc., Class B 27,033 966
Oracle Corp. (a) 80,872 965
eBay, Inc. (a) 10,000 920
Number of Value
Shares (000)
---------------- -------------
Medtronic, Inc. 18,800 $ 916
Qualcomm, Inc. 12,500 912
Wachovia Corp. 20,328 905
Morgan Stanley Dean Witter & Co. 16,940 894
Bank One Corp. 17,319 883
US Bancorp 29,751 820
Merrill Lynch & Co., Inc. 15,000 810
Disney (Walt) Co. 31,700 808
ConocoPhillips 10,568 806
Yahoo, Inc. (a) 20,600 748
Wyeth 20,600 745
BellSouth Corp. 28,300 742
Bristol-Myers Squibb Co. 30,000 735
United Technologies Corp. 8,000 732
Goldman Sachs Group, Inc. 7,500 706
du Pont (E.I.) de Nemours & Co. 15,478 688
Anheuser-Busch Cos., Inc. 12,600 680
Freddie Mac 10,700 677
Boeing (The) Co. 13,076 668
Gillette (The), Co. 15,600 661
Motorola, Inc. 36,191 660
Texas Instruments, Inc. 26,800 648
Lowe's Companies, Inc. 12,200 641
First Data Corp. 13,758 613
UnitedHealth Group, Inc. 9,700 604
AT&T Wireless Services, Inc. (a) 42,139 603
Target Corp. 14,100 599
Dow (The) Chemical Co. 14,410 586
Schlumberger Ltd. 9,100 578
Walgreen Co. 15,900 576
Boston Scientific Corp. (a) 12,700 544
Washington Mutual, Inc. 13,907 537
Applied Materials, Inc. (a) 26,000 510
MBNA Corp. 19,752 509
Kimberly-Clark Corp. 7,732 509
Allstate (The) Corp. 10,896 507
McDonald's Corp. 19,500 507
Honeywell International, Inc. 13,287 487
Colgate-Palmolive Co. 8,200 479
The Notes to Financial Statements are an integral part of these statements.
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TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 19
June 30, 2004 (Unaudited) (Continued)
Number of Value
Shares (000)
---------------- -------------
Cardinal Health, Inc. 6,775 $ 475
Fifth Third Bancorp 8,758 471
Illinois Tool Works, Inc. 4,800 460
Carnival Corp. 9,700 456
Nextel Communications, Inc., Class A (a) 17,000 453
Alcoa, Inc. 13,468 445
Ford Motor Co. 28,297 443
Caterpillar, Inc. 5,400 429
EMC Corp. (a) 37,424 427
Metlife, Inc. 11,800 423
Schering-Plough Corp. 22,800 421
St. Paul (The) Travelers Companies, Inc. 10,291 417
Emerson Electric Co. 6,500 413
General Motors Corp. 8,700 405
Prudential Financial, Inc. 8,400 390
Sprint Corp. (FON Group) 22,000 387
Cendant Corp. 15,604 382
Automatic Data Processing, Inc. 9,100 381
FedEx Corp. 4,600 376
Marsh & McLennan Cos., Inc. 8,200 372
Lockheed Martin Corp. 6,960 362
Sysco Corp. 10,000 359
Gannett Co., Inc. 4,200 356
Bank (The) of New York Co., Inc. 12,000 354
Clear Channel Communications, Inc. 9,500 351
Exelon Corp. 10,250 341
Stryker Corp. 6,200 341
Gap (The), Inc. 13,862 336
Zimmer Holdings, Inc. (a) 3,780 333
International Paper Co. 7,451 333
Avon Products, Inc. 7,200 332
Southern (The) Co. 11,300 329
National City Corp. 9,400 329
Baxter International, Inc. 9,400 324
Forest Laboratories, Inc. (a) 5,700 323
Aflac, Inc. 7,900 322
Lehman Brothers Holdings, Inc. 4,280 322
HCA, Inc. 7,700 320
Biogen Idec, Inc. (a) 5,035 318
Number of Value
Shares (000)
---------------- -------------
Dominion Resources, Inc. 4,999 $ 315
BB&T Corp. 8,500 314
Nike, Inc., Class B 4,100 311
Hartford Financial Services Group 4,500 309
General Dynamics Corp. 3,100 308
Northrop Grumman Corp. 5,678 305
Countrywide Financial Corp. 4,200 295
Costco Wholesale Corp. 7,100 292
Harley-Davidson, Inc. 4,700 291
Occidental Petroleum Corp. 6,000 290
Progressive (The) Corp. 3,400 290
SunTrust Banks, Inc. 4,400 286
Duke Energy Corp. 14,024 285
SLM Corp. 7,000 283
Sara Lee Corp. 12,200 280
General Mills, Inc. 5,800 276
Waste Management, Inc. 8,932 274
Analog Devices, Inc. 5,800 273
Corning, Inc. (a) 20,900 273
WellPoint Health Networks (a) 2,400 269
Guidant Corp. 4,800 268
Kellogg Co. 6,400 268
Maxim Integrated Products 5,100 267
Deere & Co. 3,800 267
Starbucks Corp. (a) 6,100 265
Newmont Mining Corp. 6,735 261
CVS Corp. 6,100 256
Golden West Financial Corp. 2,400 255
State Street Corp. 5,200 255
Best Buy Co., Inc. 5,000 254
Computer Associates International, Inc. 9,012 253
Electronic Arts, Inc. (a) 4,600 251
Lucent Technologies, Inc. (a) 65,936 249
Danaher Corp. 4,800 249
Capital One Financial Corp. 3,600 246
Alltel Corp. 4,800 243
Apollo Group, Inc., Class A (a) 2,700 238
Union Pacific Corp. 4,000 238
Devon Energy Corp. 3,600 238
The Notes to Financial Statements are an integral part of these statements.
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TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 20
June 30, 2004 (Unaudited) (Continued)
Number of Value
Shares (000)
---------------- -------------
Tribune Co. 5,100 $ 232
Anadarko Petroleum Corp. 3,933 230
McGraw-Hill (The) Cos., Inc. 3,000 230
Raytheon Co. 6,400 229
PNC Financial Services Group, Inc. 4,300 228
Caremark Rx, Inc. (a) 6,900 227
Staples, Inc. 7,750 227
Burlington Resources, Inc. 6,220 225
ConAgra Foods, Inc. 8,300 225
Kohl's Corp. (a) 5,300 224
Sun Microsystems, Inc. (a) 50,900 221
Wrigley (Wm) Jr. Co. 3,500 221
Omnicom Group 2,900 220
Broadcom Corp., Class A (a) 4,700 220
Apache Corp. 5,022 219
Masco Corp. 7,000 218
ManuLife Financial Corp. 5,333 216
Weyerhaeuser Co. 3,400 215
Agilent Technologies, Inc. (a) 7,328 215
Heinz (H.J) Co. 5,400 212
Symantec Corp. (a) 4,800 210
Kroger Co. (a) 11,500 209
International Game Technology 5,400 208
Coca-Cola Enterprises, Inc. 7,100 206
Halliburton Co. 6,800 206
Southwest Airlines Co. 12,187 204
St. Jude Medical, Inc. (a) 2,700 204
TXU Corp. 5,000 203
Burlington Northern Santa Fe Corp. 5,767 202
Schwab, (The) Charles Corp. 21,025 202
Becton Dickinson & Co. 3,900 202
Entergy Corp. 3,600 202
Marathon Oil Corp. 5,300 201
Praxair, Inc. 5,000 200
Aetna, Inc. 2,342 199
SouthTrust Corp. 5,100 198
Chubb Corp. 2,900 198
Mellon Financial Corp. 6,700 197
Paychex, Inc. 5,800 197
Number of Value
Shares (000)
---------------- -------------
Baker Hughes, Inc. 5,190 $ 195
Franklin Resources, Inc. 3,900 195
American Electric Power Co., Inc. 6,100 195
Keycorp 6,516 195
Lexmark International, Inc., Class A (a) 2,000 193
FirstEnergy Corp. 5,100 191
Linear Technology Corp. 4,800 189
TJX Cos., Inc. 7,800 188
Anthem, Inc. (a) 2,100 188
Apple Computer, Inc. (a) 5,700 185
FPL Group, Inc. 2,900 185
Hershey Foods Corp. 4,000 185
Ingersoll-Rand Co., Class A 2,700 184
Air Products & Chemicals, Inc. 3,500 184
Veritas Software Corp. (a) 6,600 183
ACE Ltd. 4,300 182
PG&E Corp. (a) 6,500 182
AT&T Corp. 12,285 180
Marriott International, Inc., Class A 3,600 180
Allergan, Inc. 2,000 179
Xerox Corp. (a) 12,300 178
Biomet, Inc. 4,000 178
Clorox Co. 3,300 177
Bed Bath & Beyond, Inc. (a) 4,600 177
Xilinx, Inc. 5,300 177
Principal Financial Group 5,000 174
Loews Corp. 2,900 174
Fortune Brands, Inc. 2,300 173
Safeway, Inc. (a) 6,800 172
Adobe Systems, Inc. 3,700 172
Campbell Soup Co. 6,400 172
Yum! Brands, Inc. 4,580 170
Equity Office Properties Trust 6,200 169
Archer-Daniels-Midland Co. 9,987 168
Progress Energy, Inc. 3,800 167
Genzyme Corp. (General Division) (a) 3,500 166
PPG Industries, Inc. 2,600 162
Norfolk Southern Corp. 6,100 162
Univision Communications, Inc., Class A (a) 5,000 159
The Notes to Financial Statements are an integral part of these statements.
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TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 21
June 30, 2004 (Unaudited) (Continued)
Number of Value
Shares (000)
----------- -------------
Pitney Bowes, Inc. 3,600 $ 159
Monsanto Co. 4,135 159
Penney (J.C.) Co., Inc. 4,200 159
XL Capital Ltd. 2,100 158
M&T Bank Corp 1,800 157
Medco Health Solutions, Inc. (a) 4,166 156
Paccar, Inc. 2,687 156
Eaton Corp. 2,400 155
McKesson Corp. 4,523 155
Johnson Controls, Inc. 2,900 155
Simon Property Group, Inc. 3,000 154
Unocal Corp. 4,000 152
Albertson's, Inc. 5,713 152
CIGNA Corp. (b) 2,200 151
Charter One Financial, Inc. 3,424 151
Comerica, Inc. 2,750 151
Moody's Corp. 2,300 149
Kla-Tencor Corp. (a) 3,000 148
Public Service Enterprise Group 3,700 148
Valero Energy Corp. 2,000 148
Rohm & Haas Co. 3,485 145
Georgia-Pacific Corp. 3,916 145
Micron Technology, Inc. (a) 9,400 144
Transocean, Inc. (a) 4,971 144
Northern Trust Corp. 3,400 144
Starwood Hotels & Resorts Worldwide, Inc. 3,200 144
Electronic Data Systems Corp. 7,400 142
Consolidated Edison, Inc. 3,500 139
AmSouth Bancorp 5,400 138
Federated Department Stores 2,800 137
AON Corp. 4,825 137
Bear Stearns (The) Cos., Inc. 1,625 137
Marshall & Ilsley Corp. 3,500 137
Quest Diagnostics 1,600 136
Computer Sciences Corp. (a) 2,900 135
Limited Brands, Inc. 7,200 135
Block (H&R), Inc. 2,800 134
American Standard Cos., Inc. (a) 3,300 133
Lincoln National Corp. 2,800 132
Number of Value
Shares (000)
----------- -------------
Altera Corp. (a) 5,900 $ 131
Dover Corp. 3,100 131
Chiron Corp. (a) 2,900 129
Sears Roebuck and Co. 3,400 128
Edison International 5,000 128
Equity Residential 4,300 128
Ecolab, Inc. 4,000 127
MBIA, Inc. 2,200 126
Textron, Inc. 2,100 125
Regions Financial Corp. 3,400 124
Cintas Corp. 2,600 124
PPL Corp. 2,700 124
National Semiconductor Corp. (a) 5,600 123
Sempra Energy 3,554 122
May (The) Department Stores Co. 4,450 122
Pepsi Bottling Group, Inc. 4,000 122
Mattel, Inc. 6,645 121
AMBAC Financial Group, Inc. 1,650 121
Ameren Corp. 2,800 120
Intuit, Inc. (a) 3,100 120
Eastman Kodak Co. 4,400 119
Synovus Financial Corp. 4,650 118
Fiserv, Inc. (a) 3,000 117
ITT Industries, Inc. 1,400 116
BJ Services Co. (a) 2,500 115
Sungard Data Systems, Inc. (a) 4,400 114
Cincinnati Financial Corp. 2,625 114
Network Appliance, Inc. (a) 5,300 114
MGIC Investment Corp. 1,500 114
Kinder Morgan, Inc. 1,900 113
Jefferson-Pilot Corp. 2,212 112
Autozone, Inc. (a) 1,400 112
Affiliated Computer Services, Inc. (a) 2,100 111
Amerada Hess Corp. 1,400 111
Hilton Hotels Corp. 5,900 110
Phelps Dodge Corp. 1,416 110
Donnelley (RR) & Sons Co. 3,300 109
Avery Dennison Corp. 1,700 109
Rockwell Automation, Inc. 2,900 109
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 22
June 30, 2004 (Unaudited) (Continued)
Number of Value
Shares (000)
---------------- -------------
Parker Hannifin Corp. 1,825 $ 109
CSX Corp. 3,300 108
EOG Resources, Inc. 1,800 107
DTE Energy Co. 2,600 105
Genuine Parts Co. 2,650 105
Peoplesoft, Inc. (a) 5,630 104
Nabors Industries Ltd. (a) 2,300 104
Xcel Energy, Inc. 6,220 104
Cinergy Corp. 2,720 103
Avaya, Inc. (a) 6,528 103
New York Times Co., Class A 2,300 103
Dollar General Corp. 5,247 103
AmerisourceBergen Corp. 1,700 102
Newell Rubbermaid, Inc. 4,207 99
Pulte Homes, Inc. 1,900 99
Constellation Energy Group, Inc. 2,600 99
Qwest Communications International (a) 27,301 98
Torchmark Corp. 1,800 97
Tenet Healthcare Corp. (a) 7,150 96
T. Price Rowe Group, Inc. 1,900 96
Sherwin-Williams (The) Co. 2,300 96
Molex, Inc. 2,975 95
AES (The) Corp. (a) 9,600 95
Williams Companies., Inc. 8,000 95
Express Scripts, Inc. (a) 1,200 95
Harrah's Entertainment, Inc. 1,750 95
UST, Inc. 2,600 94
Rockwell Collins, Inc. 2,800 93
Safeco Corp. 2,100 92
Prologis 2,800 92
Delphi Corp. 8,626 92
Nucor Corp. 1,200 92
KeySpan Corp. 2,500 92
Brown-Forman Corp., Class B 1,900 92
Plum Creek Timber Co., Inc. 2,800 91
Waters Corp. (a) 1,900 91
Bard (C.R.), Inc. 1,600 91
MeadWestvaco Corp. 3,076 90
Freeport-McMoRan Copper & Gold, Class B 2,700 90
Number of Value
Shares (000)
---------------- -------------
Nordstrom, Inc. 2,100 $ 89
Medimmune, Inc. (a) 3,800 89
Union Planters Corp. 2,950 88
Interpublic (The) Group of Cos., Inc. (a) 6,400 88
Reynolds (RJ) Tobacco Holdings, Inc. 1,300 88
North Fork Bancorporation, Inc. 2,300 88
Centex Corp. 1,900 87
IMS Health, Inc. 3,700 87
Knight-Ridder, Inc. 1,200 86
First Horizon National Corp. 1,900 86
Zions Bancorporation 1,400 86
Office Depot, Inc. (a) 4,800 86
Advanced Micro Devices, Inc. (a) 5,400 86
Health Management Associates, Class A 3,800 85
Tiffany & Co. 2,300 85
NiSource, Inc. 4,100 85
JDS Uniphase Corp. (a) 22,200 84
Solectron Corp. (a) 12,900 83
Cooper Industries Ltd., Class A 1,400 83
Mylan Laboratories 4,100 83
Scientific-Atlanta, Inc. 2,400 83
VF Corp. 1,700 83
Kerr-McGee Corp. 1,538 83
Siebel Systems, Inc. (a) 7,700 82
Family Dollar Stores, Inc. 2,700 82
Huntington Bancshares, Inc. 3,566 82
Grainger (W.W.), Inc. 1,400 81
Leggett & Platt, Inc. 3,000 80
Thermo Electron Corp. (a) 2,600 80
Noble Corp. (a) 2,100 80
Jones Apparel Group, Inc. 2,000 79
EL Paso Corp. 9,943 78
Jabil Circuit, Inc. (a) 3,100 78
Robert Half International, Inc. 2,600 77
Sunoco, Inc. 1,200 76
Vulcan Materials Co. 1,600 76
Whirlpool Corp. 1,100 75
Novellus Systems, Inc. (a) 2,400 75
Black & Decker Corp. 1,200 75
The Notes to Financial Statements are an integral part of these statements.
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TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 23
June 30, 2004 (Unaudited) (Continued)
Number of Value
Shares (000)
---------------- -------------
NCR Corp. (a) 1,500 $ 74
UnumProvident Corp. 4,625 74
Autonation, Inc. (a) 4,300 74
Sanmina-SCI Corp. (a) 8,000 73
Autodesk, Inc. 1,700 73
Sealed Air Corp. (a) 1,361 73
RadioShack Corp. 2,500 72
McCormick & Co., Inc. 2,100 71
Unisys Corp. (a) 5,100 71
Alberto-Culver Co. 1,400 70
Mercury Interactive Corp. (a) 1,400 70
Applera Corp.--Applied Biosystems Group 3,200 70
Teradyne, Inc. (a) 3,000 68
CenturyTel, Inc. 2,250 68
Hospira, Inc. (a) 2,420 67
Providian Financial Corp. (a) 4,500 66
Allied Waste Industries, Inc. (a) 5,000 66
Sigma-Aldrich Corp. 1,100 66
Ball Corp. 900 65
BMC Software, Inc. (a) 3,500 65
Supervalu, Inc. 2,100 64
E*Trade Financial Corp. (a) 5,700 64
United States Steel Corp. 1,800 63
Engelhard Corp. 1,950 63
Wendy's International, Inc. 1,800 63
Fluor Corp. 1,300 62
Liz Claiborne, Inc. 1,700 61
Janus Capital Group, Inc. 3,700 61
American Power Conversion 3,100 61
Pactiv Corp. (a) 2,400 60
Comverse Technology, Inc. (a) 3,000 60
Sabre Holdings Corp., Class A 2,140 59
Stanley (The) Works 1,300 59
Dow Jones & Co., Inc. 1,300 59
Goodrich Corp. 1,800 58
Ashland, Inc. 1,100 58
Brunswick Corp. 1,400 57
Pinnacle West Capital Corp. 1,400 57
Reliant Energy, Inc. (a) 5,210 56
Number of Value
Shares (000)
---------------- -------------
Tellabs, Inc. (a) 6,400 $ 56
Eastman Chemical Co. 1,200 55
Temple-Inland, Inc. 800 55
Equifax, Inc. 2,200 54
Centerpoint Energy, Inc. 4,707 54
Citizens Communications Co. (a) 4,400 53
Symbol Technologies, Inc. 3,600 53
Toys R US, Inc. (a) 3,300 53
Darden Restaurants, Inc. 2,550 52
International Flavors & Fragrances, Inc. 1,400 52
Bausch & Lomb, Inc. 800 52
Federated Investors, Inc., Class B 1,700 52
Nvidia Corp. (a) 2,500 51
Citrix Systems, Inc. (a) 2,500 51
Hasbro, Inc. 2,675 51
Andrew Corp. (a) 2,493 50
Pall Corp. 1,900 50
Boise Cascade Corp. 1,300 49
Novell, Inc. (a) 5,800 49
KB Home 700 48
Dana Corp. 2,343 46
Manor Care, Inc. 1,400 46
Watson Pharmaceuticals, Inc. (a) 1,700 46
Bemis Co. 1,600 45
Millipore Corp. (a) 800 45
LSI Logic Corp. (a) 5,900 45
Tektronix, Inc. 1,300 44
Meredith Corp. 800 44
Cummins, Inc. 700 44
Monster Worldwide, Inc. (a) 1,700 44
Apartment Investment & Mgt. Co., Class A 1,400 44
Coors (Adolph) Co., Class B 600 43
King Pharmaceuticals, Inc. (a) 3,766 43
Circuit City Stores, Inc. 3,300 43
Navistar International Corp. (a) 1,100 43
Humana, Inc. (a) 2,500 42
PerkinElmer, Inc. 2,000 40
Ryder System, Inc. 1,000 40
QLogic Corp. (a) 1,500 40
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 24
June 30, 2004 (Unaudited) (Continued)
Number of Value
Shares (000)
---------------- -------------
Compuware Corp. (a) 5,900 $ 39
Rowan Cos., Inc. (a) 1,600 39
PMC--Sierra, Inc. (a) 2,700 39
Louisiana-Pacific Corp. 1,600 38
ADC Telecommunications, Inc. (a) 12,500 35
Deluxe Corp. 800 35
TECO Energy, Inc. 2,900 35
Convergys Corp. (a) 2,200 34
Reebok International Ltd. 900 32
Carmax, Inc. (a) 1,475 32
Snap-On, Inc. 950 32
Del Monte Foods Co. (a) 3,081 31
Allegheny Energy, Inc. (a) 2,000 31
Maytag Corp. 1,200 29
Dillard's, Inc., Class A 1,300 29
Crane Co. 900 28
Calpine Corp. (a) 6,400 28
Advanced Medical Optics, Inc. (a) 644 27
Ciena Corp. (a) 7,300 27
Worthington Industries 1,300 27
Smucker (J.M.) Co. 578 27
Gateway, Inc. (a) 5,800 26
Big Lots, Inc. (a) 1,800 26
Applied Micro Circuits Corp. (a) 4,800 26
Cooper Tire & Rubber Co. 1,100 25
Peoples Energy Corp. 600 25
Dynegy, Inc., Class A (a) 5,800 25
Goodyear (The) Tire & Rubber Co. (a) 2,700 25
Thomas & Betts Corp. 900 25
Visteon Corp. 2,051 24
Nicor, Inc. 700 24
American Greetings, Class A (a) 1,000 23
Allegheny Technologies, Inc. 1,270 23
CMS Energy Corp. (a) 2,500 23
Great Lakes Chemical Corp. 800 22
Hercules, Inc. (a) 1,700 21
Parametric Technology Corp. (a) 4,100 21
Piper Jaffray Companies (a) 381 17
Winn-Dixie Stores, Inc. (a) 2,200 16
Number of Value
Shares (000)
---------------- -------------
Power-One, Inc. (a) 1,300 $ 14
Delta Air Lines, Inc. (a) 1,900 14
Texas Genco Holdings, Inc. 300 14
Eagle Materials, Inc. 178 12
EnPro Industries, Inc. (a) 460 11
Hudson Highland Group, Inc. (a) 165 5
Eagle Materials, Inc. 53 4
Mirant Corp. (a) 7,960 3
Cavco Industries, Inc. (a) 60 2
Agere Systems, Inc., Class A (a) 823 2
Unilever NV 1 --
Kadant, Inc. (a) 1 --
--------
Total Common Stocks
(Cost - $164,358) 164,668
--------
SHORT-TERM OBLIGATIONS - 7.7%
Money Market Fund - 5.5%
TimesSquare VP Money Market Fund (c) 9,730,888 9,731
--------
Principal
(000)
----------
U.S. Government - 2.2%
U.S. Treasury Bills,
0.98%, 9/30/04 (d) $ 1,500 1,496
1.00%, 9/30/04 (d) 2,500 2,494
-----
3,990
-----
Total Short-Term Obligations
(Cost - $13,721) 13,721
------
TOTAL INVESTMENTS IN SECURITIES - 99.9%
(Total Cost - $178,079) (e) 178,389
Cash and Other Assets, Less Liabilities - 0.1% 121
-------
NET ASSETS - 100.0% $ 178,510
=========
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund Investments in Securities 25
June 30, 2004 (Unaudited) (Continued)
- --------------------------------------------------------------------------------
NOTES TO INVESTMENTS IN SECURITIES
(a) Non-income producing securities.
(b) TimesSquare Capital Management, Inc., the fund's
Investment Adviser, is an indirect wholly owned
subsidiary of CIGNA Corp.
(c) TimesSquare Capital Management, Inc., the fund's
Investment Adviser, is also the Adviser to the
TimesSquare VP Money Market Fund.
(d) This security, or a portion thereof, was pledged as
collateral for Stock Index Futures Contracts. At June
30, 2004, the Fund was long 50 S&P 500[RegTM] Futures
Contracts expiring in September 2004. Unrealized
gains amounted to $211,875. Underlying face value
was $14,043,125 and underlying market value was
$ 14,255,000.
Tax Information
(e) At June 30, 2004, the net unrealized depreciation of
investments, based on cost for federal income tax
purposes of $178,950,080, was as follows:
Aggregate gross unrealized appreciation for all
investments in which there was an excess of value
over tax cost $27,339,124
Aggregate gross unrealized depreciation for all
investments in which there was an excess of tax
cost over value (27,900,693)
-----------
Unrealized depreciation - net $ (561,569)
===========
- --------------------------------------------------------------------------------
CIGNA Variable Products S&P 500[RegTM] Index Fund
Market % of
Value Net
Ten Largest Positions (Unaudited) (000) Assets
- ----------------------------------- ---------- ---------
General Electric Co. $ 5,113 2.9%
Microsoft Corp. 4,770 2.7
Exxon Mobil Corp. 4,504 2.5
Pfizer, Inc. 4,046 2.3
Citigroup, Inc. 3,705 2.1
Wal-Mart Stores, Inc. 3,535 2.0
American International Group 2,879 1.6
Intel Corp. 2,768 1.6
Bank of America Corp. 2,675 1.5
Johnson & Johnson 2,556 1.4
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund 26
Statement of Assets and Liabilities
June 30, 2004 (Unaudited)
(In Thousands)
Assets:
Investments in securities at value $ 178,389
Interest and dividends receivable, net of withholding taxes 184
Investment for Trustees' deferred compensation plan 88
Futures variation margin receivable 57
Receivable for fund shares sold 4
---------
Total assets 178,722
---------
Liabilities:
Deferred Trustees' fees payable 88
Custodian fees payable 26
Audit and legal fees payable 21
Payable for Fund shares redeemed 19
Administrative services fees payable 19
Insurance expenses payable 14
Shareholder reports payable 13
Advisory fees payable 12
---------
Total liabilities 212
---------
Net Assets $ 178,510
=========
Components of Net Assets:
Paid in capital $ 157,320
Undistributed net investment income 2,204
Accumulated net realized gain 18,464
Net unrealized appreciation of investments and futures 522
---------
Net Assets $ 178,510
=========
Shares Outstanding 10,914
=========
Net Asset Value and Redemption Price per Share $ 16.36
=========
Cost of Investments $ 178,079
=========
Statement of Operations
For the Six Months Ended June 30, 2004 (Unaudited)
(In Thousands)
Investment Income:
Income:
Dividends $ 1,581
Interest 17
-------
1,598
Expenses:
Investment advisory fees $ 225
Custodian fees and expenses 78
Administrative services fees 46
Auditing and legal fees 22
Shareholder reports 12
Transfer agent fees 3
Trustees' fees 3
Other 3
-----
Total expenses 392
Less expenses waived by Adviser (127)
-----
Net expenses $265
-----
Net Investment Income 1,333
-------
Realized and Unrealized Gain on
Investments:
Net realized gain from:
Futures contracts 1,747
Investments 16,845
-------
18,592
-------
Net change in unrealized appreciation of:
Futures contracts (332)
Investments (11,832)
-------
(12,164)
-------
Net Realized and Unrealized Gain on
Investments 6,428
-------
Net Increase in Net Assets Resulting from
Operations $ 7,761
=======
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund 27
Statements of Changes in Net Assets
(In Thousands)
For the Six For the
Months Ended Year Ended
June 30, 2004 December 31,
(Unaudited) 2003
----------------- ----------------
Operations:
Net investment income $ 1,333 $ 2,898
Net realized gain on investments 18,592 5,298
Net unrealized appreciation (depreciation)
on investments (12,164) 43,080
---------- ----------
Net increase in net assets from operations 7,761 51,276
---------- ----------
Dividends and Distributions:
From net investment income -- (4,276)
From net realized gain -- (2,574)
---------- ----------
Total dividends and distributions -- (6,850)
---------- ----------
Capital Share Transactions:
Net proceeds from shares sold 4,866 66,928
Net asset value of shares issued to
shareholders in reinvestment of
dividends and distributions -- 6,850
---------- ----------
4,866 73,778
Cost of shares redeemed (68,206) (71,408)
---------- ----------
Net increase (decrease) in net assets from
Fund share transactions (63,340) 2,370
---------- ----------
Net Increase (Decrease) in Net Assets (55,579) 46,796
Net Assets:
Beginning of period 234,089 187,293
---------- ----------
End of period* $ 178,510 $ 234,089
========== ==========
* includes undistributed net investment
income of: $ 2,204 $ 871
========== ==========
For the Six For the
Months Ended Year Ended
June 30, 2004 December 31,
(Unaudited) 2003
----------------- ----------------
Transactions in Capital Stock:
Shares sold 300 4,884
Shares issued in reinvestment of
dividends and distributions -- 439
---------- ----------
300 5,323
Shares redeemed (4,172) (5,261)
---------- ----------
Net increase (decrease) in shares
outstanding (3,872) 62
========== ==========
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund 28
Financial Highlights
For the Six
Months Ended
June 30, 2004
(Unaudited)
-----------------
Per Share Operating Performance:
Net asset value, beginning of period $ 15.83
----------
Income from investment operations:
Net investment income (a) 0.14
Net realized and unrealized gain (loss) 0.39
----------
Total from investment operations 0.53
----------
Less dividends and distributions:
From net investment income --
From capital gains --
----------
Total dividends and distributions --
----------
Net asset value, end of period $ 16.36
==========
Total Return (b) 3.35%(c)
Ratios to Average Net Assets:
Gross expenses 0.37%(d)
Fees and expenses waived or borne by the Adviser 0.12%(d)
Net expenses 0.25%(d)
Net investment income 1.26%(d)
Portfolio Turnover 1%(c)
Net assets, End of Period (000 omitted) $ 178,510
(a) Net investment income per share has been calculated in accordance
with SEC requirements, with the exception that end of the year
accumulated
undistributed/(overdistributed) net investment income has not been
adjusted to reflect current year permanent differences between
financial and
tax accounting.
(b) Had the Adviser not waived or reimbursed a portion of expenses,
total return would have been reduced.
(c) Not annualized
(d) Annualized
For the Year Ended December 31,
----------------------------------------------------------------------
2003 2002 2001 2000 1999
------------ -------------- -------------- -------------- ------------
Per Share Operating Performance:
Net asset value, beginning of period $ 12.72 $ 17.31 $ 19.95 $ 22.83 $ 19.73
-------- --------- --------- --------- --------
Income from investment operations:
Net investment income (a) 0.21 0.23 0.23 0.35 0.32
Net realized and unrealized gain (loss) 3.38 ( 4.13) ( 2.66) ( 2.49) 3.75
-------- --------- --------- --------- --------
Total from investment operations 3.59 ( 3.90) ( 2.43) ( 2.14) 4.07
-------- --------- --------- --------- --------
Less dividends and distributions:
From net investment income ( 0.30) ( 0.22) ( 0.21) ( 0.44) ( 0.51)
From capital gains ( 0.18) ( 0.47) -- ( 0.30) ( 0.46)
--------- --------- --------- --------- ---------
Total dividends and distributions ( 0.48) ( 0.69) ( 0.21) ( 0.74) ( 0.97)
--------- --------- --------- --------- ---------
Net asset value, end of period $ 15.83 $ 12.72 $ 17.31 $ 19.95 $ 22.83
========= ========= ========= ========= =========
Total Return (b) 28.27% ( 22.51)% ( 12.18)% ( 9.37)% 20.77%
Ratios to Average Net Assets:
Gross expenses 0.37% 0.37% 0.35% 0.36% 0.38%
Fees and expenses waived or borne by the Adviser 0.12% 0.12% 0.10% 0.11% 0.13%
Net expenses 0.25% 0.25% 0.25% 0.25% 0.25%
Net investment income 1.42% 1.32% 1.38% 1.64% 1.57%
Portfolio Turnover 2% 7% 2% 4% 3%
Net assets, End of Period (000 omitted) $ 234,089 $ 187,293 $ 302,802 $ 292,739 $ 282,781
(a) Net investment income per share has been calculated in accordance with SEC requirements, with the exception that end
of the year accumulated
undistributed/(overdistributed) net investment income has not been adjusted to reflect current year permanent
differences between financial and
tax accounting.
(b) Had the Adviser not waived or reimbursed a portion of expenses, total return would have been reduced.
(c) Not annualized
(d) Annualized
The Notes to Financial Statements are an integral part of these statements.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund Notes to Financial Statements 29
(Unaudited)
1. Utilization of Indexation Approach.
TimesSquare VP S&P 500[RegTM] Index Fund (the "Fund") seeks to achieve its
long-term growth objective by attempting to replicate the total return
performance, reduced by Fund expenses, of the Standard & Poor's 500[RegTM]
Composite Stock Price Index.
2. Significant Accounting Policies. The Fund is a separate series of CIGNA
Variable Products Group, a Massachusetts business trust (the "Trust"). The
Trust is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The preparation of
financial statements in accordance with accounting principles generally
accepted in the United States of America requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates. The
following is a summary of significant accounting policies consistently followed
by the Fund in the preparation of its financial statements.
A. Security Valuation -- Equity securities, including warrants, that are listed
on a national securities exchange or are part of the NASDAQ National Market
System are valued at the last sale price or, if there has been no sale that
day, at the last bid price. Debt and other equity securities traded in the
over-the-counter market, including listed securities whose primary markets are
believed to be over-the-counter, are valued at the most recent bid price.
Short-term investments with remaining maturities of up to and including 60 days
are valued at amortized cost, which approximates market. Short-term investments
that mature in more than 60 days are valued at current market quotations. Other
securities and assets of the Fund are appraised at fair value, as determined in
good faith by, or under the authority of, the Trust's Board of Trustees. The
Fund's Board of Trustees has designated the Pricing Committee of TimesSquare
Capital Management, Inc. to make, pursuant to procedures approved by the Board
and under the Board's supervision, all necessary determinations of fair value
for the portfolio securities for which market quotations are not readily
available. When fair valuing securities, the Pricing Committee takes into
account factors such as fundamental and analytical information about the
security, the nature and duration of any restrictions on disposition of the
security, market information (including, for example, factors such as
historical price relationships and valuations for securities with similar
characteristics), and evaluation of significant market events. If events
occurring after the close of the principal market in which securities are
traded (but before the close of regular trading on the NYSE) are believed to
materially affect the value of those securities, such securities are valued at
their fair value, taking such events into account.
B. Futures Contracts -- The Fund is authorized to enter into S&P 500[RegTM]
futures contracts. The Fund may use futures contracts with the objective of
earning returns on its short-term investments equivalent to returns on the S&P
500[RegTM] Composite Stock Index. As a result, the purchase of futures
contracts simulates a fully invested position in the underlying index, while
maintaining liquidity. Upon entering into a futures contract, the Fund is
required to pledge to the broker an amount of cash and/or securities equal to
the initial margin requirements. During the period a futures contract is open,
changes in the value of a contract are recognized as unrealized gains or losses
by "marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Daily variation margin payments are
received or made, depending on whether there were unrealized gains or losses.
When a contract is closed, the Fund records a realized gain or loss equal to
the
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund Notes to Financial Statements 30
(Unaudited) (Continued)
difference between the value of the contract at the time it was opened and the
value at the time it was closed. Futures contracts include the risk that a
change in the value of the contract may not correlate with the value of the
underlying securities and the possibility of an illiquid market.
C. Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is
executed). Dividend income is recorded on the ex-dividend date, and interest
income is recorded on the accrual basis. Securities gains and losses are
determined on the basis of identified cost.
D. Federal Taxes -- It is the Fund's policy to continue to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and capital gains to its
shareholders. Therefore, no federal income or excise taxes on realized income
or net capital gains have been accrued.
E. Dividends and Distributions to Shareholders -- Dividends from net investment
income and distributions from net capital gains, to the extent such gains would
otherwise be taxable to the Fund, are declared and distributed at least
annually. Dividends and distributions are recorded by the Fund on the
ex-dividend date. The timing and characterization of certain income and capital
gains distributions are determined in accordance with federal tax regulations,
which may differ from generally accepted accounting principles. These
differences are primarily due to differing book and tax treatment for wash
sales, real estate investment trusts income and capital loss carryforwards. To
the extent that such differences are permanent, a reclassification to
Components of Net Assets may be required. As a result, at December 31, 2003,
the Fund increased its undistributed net investment income by $2,123,183,
decreased accumulated net realized gain by $2,124,450 and increased paid in
capital by $1,267.
3. Investment Advisory Fees and Other Transactions with Affiliates. Investment
advisory fees are paid or accrued to TimesSquare Capital Management, Inc.
("TimesSquare"), certain officers and directors of which are affiliated with
the Fund. Such advisory fees are based on an annual rate of 0.25% applied to
the daily average net assets of the Fund. TimesSquare has contractually agreed
to reimburse the Fund for any amount by which its expenses (including the
advisory fee, but excluding interest, taxes, amortized organization expenses,
transaction costs incurred in acquiring and disposing of portfolio securities,
and extraordinary expenses) exceed, on an annual basis, 0.25% of average daily
net assets until April 30, 2004, and thereafter to the extent described in the
Fund's then current prospectus. Effective May 1, 2002, TimesSquare retains the
right to be repaid by the Fund if the Fund's expenses fall below the percentage
specified above prior to the end of the fiscal year or within three years after
TimesSquare waives advisory fees or reimburses a Fund's operating expenses. The
Fund's remaining contingent liability and expiration dates are as shown below:
Remaining
Contingent Liability Expires during Expires during Expires during
(000's) 2005 (000's) 2006 (000's) 2007 (000's)
- ---------------------- ---------------- ---------------- ---------------
$ 609 $230 $252 $127
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, the Fund may invest its excess cash in the affiliated TimesSquare
VP Money Market Fund ("TSVPMM") managed by TimesSquare. TimesSquare will waive
the amount of its advisory fee for the Fund in an amount that offsets the
amount of the advisory fees incurred in the affiliated Fund. For the six months
ended June 30, 2004, TimesSquare waived
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund Notes to Financial Statements 31
(Unaudited) (Continued)
$39,925 of its advisory fees payable by the Fund. Income distributions from
TSVPMM, which amounted to $72,602 for the six months ended June 30, 2004, are
recorded as dividend income in the Statement of Operations.
For administrative services, the Fund reimburses TimesSquare for a portion of
the compensation and related expenses of the Fund's Treasurer and Secretary and
certain persons who assist in carrying out the responsibilities of those
offices. For the six months ended June 30, 2004, the Fund paid or accrued
$45,662.
TimesSquare is an indirect, wholly-owned subsidiary of CIGNA Corporation.
4. Trustees' Fees. Trustees' fees represent remuneration paid or accrued to
trustees who are not employees of CIGNA Corporation or any of its affiliates.
Trustees may elect to defer receipt of all or a portion of their fees, which
are invested in mutual fund shares in accordance with a deferred compensation
plan.
5. Purchases and Sales of Securities.
Purchases and sales of securities, excluding short-term obligations, for the
six months ended June 30, 2004, were $0 and $501,847 respectively, for U.S.
Government and Agency Obligations and $1,692,075 and $45,397,423 respectively,
for all other securities.
6. Capital Stock. The Fund offers an unlimited number of shares of beneficial
interest without par value. Of the 10,914,165 shares outstanding at June 30,
2004, 10,737,322 shares were held by Connecticut General Life Insurance Company
("CG Life") relating to variable annuity and variable universal life insurance
contracts issued by CG Life. CG Life is an indirect, wholly-owned subsidiary of
CIGNA Corporation. The remainder, representing 1.6% of the shares outstanding,
was held by an employee benefit plan established by CG Life for certain of its
employees.
- --------------------------------------------------------------------------------
TimesSquare VP S&P 500[RegTM] Index Fund 32
(Unaudited)
Trustees Officers
Russell H. Jones Marnie Wagstaff Mueller Richard H. Forde
Senior Vice President, Diocesan Consultant, Episcopal Chairman of the Board
Chief Investment Officer, and Diocese of Connecticut and President
Treasurer, Kaman Corporation
Paul J. McDonald Carol Ann Hayes Alfred A. Bingham III
Special Advisor to the Board of Director and Chair of Audit Vice President and
Directors, Friendly Ice Cream Committee, Reed and Barton Treasurer
Corporation Corporation
Richard H. Forde Jeffrey S. Winer
Chief Investment Officer, CIGNA Vice President and
Investment Management Secretary
- --------------------------------------------------------------------------------
"Standard & Poor's[RegTM]," "S&P[RegTM]," "S&P 500[RegTM]," "Standard & Poor's
500," and "500" are trademarks of the Standard & Poor's Corporation (S&P) and
have been licensed for use by CG Life. The TimesSquare VP S&P 500[RegTM] Index
Fund is not sponsored, endorsed, sold or promoted by S&P, and S&P makes no
representation regarding the advisability of investing in the Fund.
TimesSquare VP S&P 500[RegTM] Index Fund is an open-end, diversified management
investment company that seeks to achieve its long-term growth objective by
attempting to replicate the total return performance, reduced by Fund expenses,
of the Standard & Poor's 500[RegTM] Composite Stock Price Index. The investment
adviser is TimesSquare Capital Management, Inc., 280 Trumbull Street, Hartford,
Connecticut 06103.
- --------------------------------------------------------------------------------