CIGNA ANNUITY FUNDS GROUP
N-30B-2, 1995-08-28
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<PAGE>
 
                      Semi-Annual Report to Shareholders

                              CIGNA Annuity Funds

                    For the Six Months Ended June 30, 1995

              [above text appears as a dividend circular graphic]
<PAGE>
 
CIGNA Annuity Money Market Fund

Investments in Securities
June 30, 1995 (Unaudited)

<TABLE> 
<CAPTION> 
                                                                                   Market
                                                                Principal          Value
                                                                  (000)            (000)
--------------------------------------------------------------------------------------------
<S>                                                            <C>             <C> 
COMMERCIAL PAPER - 9.9%
Domestic - 9.9%
American Express Credit Corp.
   5.85%, 8/9/95                                               $        50     $        50
Ford Motor Credit Corp.
   5.94%, 7/27/95                                                       50              50
                                                                                 --------- 
Total Commercial Paper                                                                 100
                                                                                 --------- 

U.S. GOVERNMENT and AGENCIES - 41.9%
Federal Farm Credit Bank
   5.77%, 7/21/95                                                      125             124
Federal Home Loan Banks
   6.04%, 2/22/96                                                      100             100
Federal Home Loan Mortgage
   5.86%, 8/21/95                                                      100              99
Federal National Mortgage Assn.,
   5.77%, 7/19/95                                                      100             100
                                                                                 --------- 
Total U.S. Government and Agencies                                                     423
                                                                                 --------- 
Repurchase Agreements - 48.1%
Repurchase Agreement with Goldman Sachs Inc, entered into
6/27/95 at 6%, maturing 7/5/95 at $486,648 (collateralized by
U.S. Treasury Notes, 8.5%, due 7/15/97 with a face value
of $486,000 and a value of $510,030)                                                   486
                                                                                 --------- 
TOTAL INVESTMENTS IN SECURITIES - 99.9%
  (Total Cost - $1,008,925)                                                          1,009
Cash and Other Assets Less Liabilities - 0.1%                                            1
                                                                                 --------- 
NET ASSETS - 100.0%
 (equivalent to $1.00 per share based on 1,009,785
  shares outstanding)                                                          $     1,010
                                                                                 ========= 
</TABLE> 

The Notes to Financial Statements are an integral part of these statements.
<PAGE>
 
CIGNA Annuity Income Fund

Investments in Securities
June 30, 1995 (Unaudited)

<TABLE> 
<CAPTION> 
                                                           Market
                                               Principal   Value
                                                 (000)     (000)
-------------------------------------------------------------------
<S>                                             <C>     <C> 
BONDS AND NOTES - 95.7%
Foreign Governments - 9.4%
Israel (The State of)., 5.75%, 2000             $ 100   $     98
                                                         -------
                                                              98
                                                         -------
U.S. Government & Agencies - 86.3%
Federal Home Loan Banks, 7.37%, 2002              100        106
Federal Home Loan Mortgage Corp., 7.75%, 2001     100        107
Federal National Mortage Assoc., 7.4%, 2004       100        106
Student Loan Marketing Assoc., 6.6%, 1999         100        102
Tennessee Valley Authority, 6.375%, 2005          100         99
United States Treasury Notes,
  5.25%, 1998                                     200        196
  7.875%, 2004                                    170        189
                                                         -------
                                                             905
                                                         -------
Total Bonds and Notes
  (Cost - $995,214)                                        1,003
                                                         -------
TOTAL INVESTMENT IN SECURITIES - 95.7%
  (Cost - $995,214)                                        1,003
Cash and Other Assets, Less Liabilities - 4.3%                45
                                                         -------
NET ASSETS - 100.0%
  (equivalent to $.96 per share based on
  1,086,956 shares outstanding)                         $  1,048
                                                         =======
</TABLE> 

The Notes to Financial Statements are an integral part of these statements.
<PAGE>
 
CIGNA Annuity Funds

Statement of Assets and Liabilities (In thousands)
June 30, 1995 (Unaudited)

<TABLE> 
<CAPTION> 
                                                                                              Money
                                                                                              Market          Income
                                                                                            ----------      -----------
<S>                                                                                         <C>             <C> 
Assets:
Investments in securities at value                                                          $   1,009       $   1,003
Cash                                                                                                2              34
Dividends and interest receivable                                                                   3              15
Investment for deferred compensation plan                                                          21              10
                                                                                             --------        --------
   Total Assets                                                                                 1,035           1,062
                                                                                             --------        --------
Liabilities:
Accrued advisory fees payable                                                                       1              -
Payable for deferred compensation plan                                                             21              11
Other accrued expenses                                                                              3               3
                                                                                             --------        --------
   Total Liabilities                                                                               25              14
                                                                                             --------        --------
Net Assets                                                                                  $   1,010       $   1,048
                                                                                             ========        ========
Shares outstanding                                                                              1,010           1,087
                                                                                             ========        ========
Net asset value per share                                                                   $    1.00       $    0.96
                                                                                             ========        ========

Components of Net Assets:
Capital paid in                                                                             $   1,045       $   1,046
Overdistributed net investment income                                                             (35)             (7)
Unrealized appreciation of investments                                                             -                9
                                                                                             ========        ========
Net Assets                                                                                  $   1,010       $   1,048
                                                                                             ========        ========
</TABLE> 


The Notes to Financial Statements are an integral part of these statements.
<PAGE>
 
CIGNA Annuity Funds

Statement of Operations (In thousands)
For the Six Months Ended June 30, 1995 (Unaudited)

<TABLE> 
<CAPTION> 
                                                            Money
                                                            Market           Income
                                                          ----------       ----------

<S>                                                        <C>             <C> 
Investment Income
Income:
  Interest                                                 $     309       $     354
                                                            --------        --------
Expenses:
  Investment advisory fees                                        24              23
  Custodian fees and expenses                                      5              12
  Administrative services                                          2               2
  Auditing and legal fees                                          3               3
  Shareholder reports                                              2              -
  Trustees' fees                                                   2               2
  Transfer agent fees and expenses                                 1               1
  Other                                                           -                1
                                                            --------        --------
  Total expenses                                                  39              44

Net Investment Income                                            270             310

Realized and Unrealized Gain on Investments
  Net realized gain from securities transactions                   4             128
  Unrealized appreciation of investments                          -              396
                                                            --------        --------
Net Realized and Unrealized Gain on Investments                    4             524
                                                            --------        --------
Net Increase in Net Assets Resulting From Operations       $     274       $     834
                                                            ========        ========
</TABLE> 

The Notes to Financial Statements are an integral part of these statements.
<PAGE>
 
CIGNA Annuity Funds

Statement of Changes in Net Assets (In thousands)
For the Six Months Ended June 30, 1995 (Unaudited)

<TABLE> 
<CAPTION> 
                                                                        Money
                                                                        Market           Income
                                                                     ------------     ------------
<S>                                                                   <C>              <C> 
Operations:
Net investment income                                                 $      270       $      310
Net realized gain from securities transactions                                 4              128
Unrealized appreciation of investments                                        -               396
                                                                       ---------        ---------
Net increase in net assets from operations                                   274              834
                                                                       ---------        ---------
Distributions to Shareholders:
From net investment income                                                  (305)            (317)
From net realized capital gains                                               (4)            (423)
                                                                       ---------        ---------
Total distributions to shareholders                                         (309)            (740)
                                                                       ---------        ---------
Capital Share Transactions:
Net proceeds from sales of shares                                          1,208            1,029
Net asset value of shares issued to shareholders
  in reinvestment of dividends and distributions                             264              296
                                                                       ---------        ---------
                                                                           1,472            1,325
Cost of shares redeemed (Note 6)                                         (17,100)         (15,581)
                                                                       ---------        ---------
Net decrease from Fund share transactions                                (15,628)         (14,256)
                                                                       ---------        ---------
Net Decrease in Net Assets                                               (15,663)         (14,162)
Net Assets:
Beginning of period                                                       16,673           15,210
                                                                       ---------        ---------
End of period                                                         $    1,010       $    1,048
                                                                       =========        =========

Transactions in Capital Stock:
Shares sold                                                                1,208            1,118
Shares issued in reinvestment of dividends and distributions                 264              316
                                                                       ---------        ---------
                                                                           1,472            1,434
Shares redeemed                                                          (17,100)         (16,887)
                                                                       ---------        ---------
Net decrease                                                             (15,628)         (15,453)
                                                                       =========        =========
</TABLE> 

The Notes to Financial Statements are an intergal part of these statements.
<PAGE>
 
CIGNA Annuity Funds

Statement of Changes in Net Assets (In thousands)
For the Year Ended December 31, 1994 (Unaudited)

<TABLE> 
<CAPTION> 
                                                                     Money
                                                                     Market          Income
                                                                   ----------      ----------
<S>                                                                <C>             <C> 
Operations:
Net investment income                                              $     614       $   1,103
Net realized loss from securities transactions                            -             (124)
Unrealized depreciation of investments                                    -           (1,584)
                                                                    --------        --------
Net increase (decrease) in net assets from operations                    614            (605)
                                                                    --------        --------
Distributions to Shareholders:
From net investment income                                              (614)         (1,103)
                                                                    --------        --------
Capital Share Transactions:
Net proceeds from sales of shares                                        844             462
Net asset value of shares issued to shareholders
  in reinvestment of dividends and distributions                         614           1,103
                                                                    --------        --------
                                                                       1,458           1,565
Cost of shares redeemed                                               (5,293)         (4,557)
                                                                    --------        --------
Net decrease from Fund share transactions                             (3,835)         (2,992)
                                                                    --------        --------
Net Decrease in Net Assets                                            (3,835)         (4,700)
Net Assets:
Beginning of period                                                   20,508          19,910
                                                                    --------        --------
End of period                                                      $  16,673       $  15,210
                                                                    ========        ========

Transactions in Capital Stock:
Shares sold                                                              844             488
Shares issued in reinvestment of dividends and distributions             614           1,154
                                                                    --------        --------
                                                                       1,458           1,642
Shares redeemed                                                       (5,293)         (4,779)
                                                                    --------        --------
Net decrease                                                          (3,835)         (3,137)
                                                                    ========        ========
</TABLE> 


The Notes to Financial Statements are an intergal part of these statements.
<PAGE>
 
CIGNA Annuity Funds  Notes to Financial Statements (Unaudited)

1.  Significant Accounting Policies. CIGNA Annuity Money Market Fund and CIGNA
Annuity Income Fund are separate series of CIGNA Annuity Funds Group, a
Massachusetts business trust (the "Trust"). The funds are referred to
collectively as the "CIGNA Annuity Funds" or the "Funds." The Trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company. The following is a summary
of significant accounting policies consistently followed by the Funds in the
preparation of financial statements.

A.  Security Valuation -- Debt securities traded in the over the counter market,
including listed securities whose primary markets are believed to be over the
counter, are valued on the basis of valuations furnished by a pricing service,
which determines valuations for normal, institutional-size trading units of such
securities using market information, transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders.   Except for the Money Market Fund, 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.  The
investments in the Money Market Fund are valued at amortized cost, which the
Board of Trustees has determined constitutes fair value.  Other securities and
assets of the Funds are appraised at fair value as determined in good faith by,
or under the authority of, the Board of Trustees.

B.  Security Transactions and Related Investment Income -- Security transactions
are accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis.  Securities gains and losses are determined on
the basis of identified cost.  The cost for Federal income tax purposes is
substantially the same.

C.  Federal Taxes -- For Federal income tax purposes, each Fund in the Trust is
taxed as a separate entity.  It is each 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
have been accrued.

D.  Dividends -- For the Money Market Fund, dividends from net investment income
and net realized gains are declared daily and reinvested monthly.  Prior to
April 19, 1995, dividends from net investment income were reinvested daily.  For
the Income Fund, 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.  Prior to April 19, 1995, dividends from net investment
income of the Income Fund were distributed daily.

Payments in excess of financial accounting income due to differences between
financial and tax accounting, to meet the minimum distribution requirements for
tax basis income, are deducted from paid in capital when such differences are
determined to be permanent.

2.  Investment Advisory Fees and Other Transactions with Affiliates.  Investment
advisory fees were paid or accrued to CIGNA Investments, Inc. ("CII"), certain
officers and directors of which are affiliated with the Funds.  Such advisory
fees are based on an annual rate of 0.5% applied to the average daily net assets
of each Fund.  CII has voluntarily agreed to reimburse each 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 1% of
average daily net assets of any Fund.

Each Fund reimburses CII for a portion of the compensation and related expenses
of the Trust's Treasurer and Secretary and certain persons who assist in
carrying out the responsibilities of those offices.  For the six months ended
June 30, 1995, the Funds paid or accrued $4,193.

CII is an indirect, wholly-owned subsidiary of CIGNA Corporation.
<PAGE>
 
CIGNA Annuity Funds  Notes to Financial Statements (Unaudited) (Continued)


3.  Trustees' Fees.  Trustees' fees represent remuneration paid or accrued to
trustees who are not employees of CIGNA Corporation or any of their affiliates.
Trustees may elect to defer all or a portion of their fees which are inverted in
mutual fund shares in accordance with a deferred compensation plan.

4.  Purchases and Sales of Securities.  Purchases and sales of securities,
excluding short-term obligations, for the six months ended June 30, 1995 were as
follows (shown in thousands):

<TABLE> 
<CAPTION> 

             Fund                      Purchases         Sales
     ----------------------         ---------------   -----------
     <S>                             <C>               <C>  
     Money Market Fund               $        --       $    --

     Income Fund                             1,719        15,618
</TABLE> 

Purchases and sales of U.S. Government obligations for the Income Fund of
$972,000 and $5,718,000, respectively, are included in the above aggregate
purchases and sales.

5.  Capital Loss Carryover.  At December 31, 1994, the Income Fund had a capital
loss carryover for Federal income tax purposes of $119,326, which expires in
2002.  To the extent these losses are used to offset any future capital gains
realized during the carryover period, no capital gains tax liabilities will be
incurred by the Income Fund for gains realized and not distributed.

Each Fund had aggregate gross unrealized appreciation and depreciation and net
unrealized appreciation (depreciation) for Federal income tax purposes as
follows (shown in thousands):

<TABLE> 
<CAPTION> 

                           Unrealized       Unrealized      Net Unrealized
       Fund               Appreciation     Depreciation      Appreciation
----------------------- ---------------- ---------------- -------------------
 <S>                     <C>              <C>              <C> 
 Money Market Fund       $          --    $          --    $            --

 Income Fund                          14                6                  8
</TABLE> 
 

6.  Capital Stock.  Each Fund is a separate series of the Trust which offers an
unlimited number of shares of beneficial interest, without par value.

As of April 18, 1995, Investors Life Insurance Company of North America, an
affiliate of InterContinental Life Corporation, on behalf of holders of its
variable annuity contracts redeemed all of the outstanding shares of the CIGNA
Annuity Funds.  The proceeds of the redemption were $15,717,142 and $14,509,838
for the Money Market Fund and the Income Fund, respectively.  The amounts
redeemed from the CIGNA Annuity Funds were used to acquire shares of certain PCM
Funds, managed by Putnam Investments.  Immediately following the redemption,
Connecticut General Life Insurance Company ("CG Life") invested $1,000,000 in
each of the Money Market Fund and the Income Fund.  At June 30, 1995, CG Life is
the sole shareholder of the Funds.
<PAGE>
 
CIGNA Annuity Funds  Notes to Financial Statements (Unaudited) (Continued)


7. Financial Highlights. The following selected per share data is computed on
the basis of a share outstanding throughout the period:

<TABLE> 
<CAPTION> 
                                                         Net                                                
                                                       Realized                                              
                       Net                                &                                                  
                      Asset                           Unrealized                              Dividends      
                     Value,             Net           Gain(Loss)          Total from           from Net          Distributions
    Period          Beginning        Investment           on              Investment          Investment         From Realized
    Ended           of Period         Income*         Investments         Operations            Income           Capital Gains 
----------------------------------------------------------------------------------------------------------------------------------
<S>                 <C>              <C>              <C>                 <C>                 <C>                <C>  
Money Market Fund
     1990             $1.00           $.0755              -                 $.0755             $.0755                  -
     1991              1.00            .0561              -                  .0561              .0561                  -
     1992              1.00            .0334              -                  .0334              .0334                  -
     1993              1.00            .0237              -                  .0237              .0237                  -
     1994              1.00            .0337              -                  .0337              .0337                  -
  6/30/95              1.00            .0274              -                  .0274              .0271               $.0003
                 
Income Fund      
     1990             $1.02             $.08           $(.02)                 $.06               $.08                 $.05
     1991               .95              .08             .09                   .17                .08                  -
     1992              1.04              .07            (.01)                  .06                .07                  .01 
     1993              1.02              .06             .07                   .13                .06                  .08
     1994              1.01              .06            (.09)                 (.03)               .06                  -
  6/30/95               .92              .05             .04                   .09                .02                  .03 
</TABLE> 
 
<TABLE> 
<CAPTION> 
                                                                                                          Ratio of
                                      Net                              Net             Ratio of             Net    
                                     Asset                           Asset of          Expenses          Investment    
                                     Value,                           End of              to               Income         Portfolio
    Period           Total            End           Total             Period            Average          to Average       Tunover 
    Ended         Distributions    of Period       Return             (000)            Net Assets        Net Assets         Rate
------------------------------------------------------------------------------------------------------------------------------------
<S>               <C>              <C>             <C>               <C>               <C>               <C>               <C> 
Money Market Fund                                                                                  
     1990            $.0755          $1.00           7.82%            $41,818             0.81%             7.55%            -
     1991             .0561           1.00           5.75              32,555             0.81              5.66             - 
     1992             .0334           1.00           3.36              25,808             0.84              3.35             -
     1993             .0237           1.00           2.39              20,508             1.00 a            2.39 b           -  
     1994             .0337           1.00           3.43              16,673             1.00 a            3.32 b           -
  6/30/95             .0274           1.00           2.78               1,010             0.50              2.70             -   
                
Income Fund     
     1990              $.13           $.95           6.15%            $24,096             0.89%             8.21%           132%
     1991               .08           1.04          17.94              22,716             0.84              7.81             62
     1992               .08           1.02           7.08              20,588             0.90              7.29             23
     1993               .14           1.01          13.36              19,910             1.00 c            6.06 d          116
     1994               .06           0.92          -3.12              15,210             1.00 c            6.37 d            8
  6/30/95               .05            .96          10.27               1,048             0.47              3.31             21
</TABLE> 



a. Ratios of expenses to average net assets prior to the reduction of advisory
   fee were 1.11% and 1.02%, respectively, for 1994 and 1993.
b. Ratios of net investment income to average net assets prior to the reduction
   of advisory fee were 3.22% and 2.37%, respectively, for 1994 and 1993.
c. Ratios of expenses to average net assets prior to the reduction of advisory
   fee were 1.15% and 1.01%, respectively, in 1994 and 1993.
d. Ratios of net investment income to average net assets prior to the reduction
   of advisory fee were 6.22% and 6.06%, respectively, in 1994 and 1993.

* Net investment income per share has been calculated in accordance with SEC
  requirements, except that end of year accumulated/undistributed net investment
  income has not been adjusted to reflect current year permanent differences
  between financial and tax accounting.
<PAGE>
 
MATTERS SUBMITTED TO A VOTE OF SHAREHOLDERS (Unaudited)

A Special Meeting of the Shareholder of CIGNA Annuity Funds Group (the "Trust")
was held on Tuesday, April 25, 1995 at 11:15 a.m., Eastern Time.

Two trustees were elected by a vote of the Shareholder to serve as members of
the Board of the Trust until the election and qualification of their successors.
The Shareholder of the Trust voted to elect the following Trustees:

<TABLE> 
<CAPTION> 

                                         For              Withheld
                                         ---              --------
           <S>                        <C>                     <C>  
           Russell H. Jones           2,086,957               -
      
           Paul J. McDonald           2,086,957               -
</TABLE> 


The terms of Messrs. R. Bruce Albro, Hugh R. Beath and Arthur C. Reeds, III as
Trustees of the Trust continued after the meeting.

The appointment of Price Waterhouse LLP to serve as independent accountants for
the fiscal year ending December 31, 1995 was ratified by a vote of the
Shareholder of the Trust as follows:

<TABLE> 
<CAPTION> 

           For        Against        Abstain
           ---        -------        -------
        <S>              <C>            <C> 
        2,086,957        -              -
</TABLE> 


No other business was transacted at the meeting.


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