<PAGE>
Semi-Annual Report to Shareholders
CIGNA Funds Group (Unaudited)
For the Six Months Ended June 30, 1996
<PAGE>
CIGNA Money Market Fund
Investments in Securities
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
(000) (000)
- -------------------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 15.1%
American Express Credit Corp., 5.338347%, 7/10/96 $ 40 $ 40
Ford Motor Credit Corp., 5.29%, 7/22/96 40 40
General Electric Capital Corp., 5.326663%, 7/8/96 40 40
Household Finance Corp., 5.337555%, 7/9/96 40 40
---------
Total Commercial Paper 160
---------
U.S. GOVERNMENT & AGENCIES - 85.1%
Federal Home Loan Banks, 4.41%, 7/8/96 100 100
Federal Home Loan Banks, 8.0%, 7/25/96 190 190
Federal Home Loan Mortgage, 5.27%, 8/1/96 145 145
Federal Home Loan Mortgage, 5.30%, 8/12/96 85 84
Federal Home Loan Mortgage, 5.30%, 8/28/96 121 120
Federal National Mortgage Association, 8.625%, 9/10/96 45 45
Federal National Mortgage Association, 8.45%, 10/21/96 115 116
Federal National Mortgage Association, 5.19%, 7/1/96* 100 100
---------
Total U.S. Government & Agencies 900
---------
TOTAL INVESTMENT IN SECURITIES - 100.2%
(Total Cost - $1,060,234) $ 1,060
Cash and Other Assets Less Liabilities - (0.2%) (2)
---------
NET ASSETS - 100.0%
(equivalent to $1.00 per share based on 1,057,782
shares outstanding) $ 1,058
=========
</TABLE>
*Variable rate
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA Income Fund
Investments in Securities
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Market
Principal Value
(000) (000)
- --------------------------------------------------------------------------------
<S> <C> <C>
BONDS AND NOTES - 92.5%
Foreign Governments - 9.0%
Israel (The State of)., 5.75%, 2000 $ 100 $ 97
-----------
U.S. Government & Agencies - 83.5%
Federal Home Loan Banks, 7.37%, 2002 100 103
Federal Home Loan Mortgage Corp., 7.75%, 2001 100 105
Federal National Mortage Assoc., 7.4%, 2004 100 103
Student Loan Marketing Assoc., 6.6%, 1999 100 100
Tennessee Valley Authority, 6.375%, 2005 100 96
United States Treasury Notes,
5.875%, 1998 95 94
6.5%, 2005 300 296
-----------
897
-----------
Total Bonds and Notes (Cost - $1,025,902) 994
-----------
SHORT-TERM OBLIGATIONS - 6.8%
Commercial Paper - 6.8%
American Express Credit Corp., 5.36%, 7/11/96 30 30
Ford Motor Credit Co., 5.29%, 7/22/96 43 43
-----------
Total Short-Term Obligations (Cost - $73,000) 73
-----------
TOTAL INVESTMENT IN SECURITIES
(Cost - $1,098,902) 1,067
Cash and Other Assets, Less Liabilities - 0.7% 7
-----------
NET ASSETS - 100.0%
(equivalent to $.99 per share based on
1,086,956 shares outstanding) $ 1,074
===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA Funds Group
Statement of Assets and Liabilities (In thousands)
June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Money
Market Income
--------- ---------
<S> <C> <C>
Assets:
Investments in securities at value (Cost - $1,060,234 and
$1,098,902, respectively) $ 1,060 $ 1,067
Cash 7 5
Interest receivable 13 19
Investment for deferred compensation plan (Cost - $18,739
and $10,581, respectively) 25 14
Receivable from advisor 1 -
Other 2 6
---------- ---------
Total assets 1,108 1,111
---------- ---------
Liabilities:
Payable for deferred compensation plan 25 14
Other accrued expenses 25 23
---------- ---------
Total liabilities 50 37
---------- ---------
Net Assets $ 1,058 $ 1,074
========== =========
Shares outstanding 1,058 1,087
========== =========
Net Asset Value Per Share $ 1.00 $ 0.99
========== =========
Components of Net Assets:
Capital paid in $ 1,058 $ 1,045
Undistributed net investment income - 17
Accumulated net realized gain on investments - 42
Unrealized depreciation of investments - (30)
---------- ---------
Net Assets $ 1,058 $ 1,074
========== =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA Funds Group
Statement of Operations (In thousands)
For the Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Money
Market Income
-------- --------
<S> <C> <C>
Investment Income:
Interest $ 28 $ 33
-------- --------
Expenses:
Administrative services 12 12
Custodian fees and expenses 10 10
Auditing and legal fees 9 9
Investment advisory fees 2 3
Transfer agent fees and expenses 2 2
Trustees' fees 2 2
Other 2 -
-------- --------
Total expenses 39 38
Less expenses waived by advisor (35) (33)
-------- --------
Net expenses 4 5
-------- --------
Net Investment Income 24 28
Realized and Unrealized Loss on Investments:
Unrealized depreciation of investments - (59)
-------- --------
Net Realized and Unrealized Loss on Investments - (59)
-------- --------
Net Increase in Net Assets Resulting from Operations $ 24 $ (31)
======== ========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA Funds Group
Statement of Changes in Net Assets (In thousands)
For the Six Months Ended June 30, 1996 (Unaudited)
<TABLE>
<CAPTION>
Money
Market Income
--------- ---------
<S> <C> <C>
Operations:
Net investment income $ 24 $ 28
Unrealized depreciation of investments - (59)
--------- ---------
Net increase (decrease) in net assets from operations 24 (31)
--------- ---------
Distributions to Shareholders:
From net investment income (24) -
--------- ---------
Total distributions to shareholders (24) -
--------- ---------
Capital Share Transactions:
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 24 -
--------- ---------
24 -
--------- ---------
Net increase from Fund share transactions 24 -
--------- ---------
Net Increase (Decrease) in Net Assets 24 (31)
Net Assets:
Beginning of period 1,034 1,105
--------- ---------
End of period (including undistributed net investment
income of $0 and $17,427, respectively) $ 1,058 $ 1,074
========= =========
Transactions in Capital Stock:
Shares issued in reinvestment of dividends and distributions 24 -
--------- ---------
Net increase 24 -
========= =========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA Funds Group
Statement of Changes in Net Assets (In thousands)
For the Year Ended December 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
Money
Market Income
----------- -----------
<S> <C> <C>
Operations:
Net investment income $ 294 $ 336
Net realized gain from securities transactions 4 140
Unrealized appreciation of investments - 415
----------- -----------
Net increase in net assets from operations 298 891
----------- -----------
Distributions to Shareholders:
From net investment income (294) (713)
From net realized capital gains (4) (27)
----------- -----------
Total distributions to shareholders (298) (740)
----------- -----------
Capital Share Transactions:
Net proceeds from sales of shares 1,193 1,029
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 298 296
----------- -----------
1,491 1,325
Cost of shares redeemed (Note 6) (17,130) (15,581)
----------- -----------
Net decrease from Fund share transactions (15,639) (14,256)
----------- -----------
Net Decrease in Net Assets (15,639) (14,105)
Net Assets:
Beginning of period 16,673 15,210
----------- -----------
End of period (including overdistributed net investment
income of $0 and $11,002, respectively) $ 1,034 $ 1,105
=========== ===========
Transactions in Capital Stock:
Shares sold 1,193 1,118
Shares issued in reinvestment of dividends and distributions 298 316
----------- -----------
1,491 1,434
Shares redeemed (17,130) (16,887)
Net decrease ----------- -----------
(15,639) (15,453)
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA Funds Group Notes to Financial Statements (Unaudited)
1. Significant Accounting Policies. CIGNA Money Market Fund and CIGNA Income
Fund , known as CIGNA Annuity Money Market Fund and CIGNA Annuity Income Fund,
respectively, prior to February 15, 1996, are separate series of CIGNA Funds
Group, known as CIGNA Annuity Funds prior to February 15, 1996, a Massachusetts
business trust (the "Trust"). The funds are referred to collectively as "CIGNA
Funds Group" 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 objective of the Money Market Fund is to provide as
high a level of current income as is consistent with the preservation of capital
and liquidity and the maintenance of a stable $1.00 per share net asset value by
investing in short-term money market instruments. The objective of the Income
Fund is to provide as high a level of current income as possible consistent with
reasonable concern for safety of principal by investing primarily in investment
grade corporate debt securities and U.S. Government securities. 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 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).
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
or net capital gains 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.
Dividends and distributions are recorded by the Funds 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-class to paid in capital may be required.
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
<PAGE>
CIGNA Funds Group Notes to Financial Statements (Unaudited) (Continued)
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, 1996, the Money Market Fund and Income Fund paid $11,683 and $11,939,
respectively.
CII is an indirect, wholly-owned subsidiary 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 their affiliates.
Trustees may elect to defer all or a portion of their fees which are invested in
mutual fund shares in accordance with a deferred compensation plan.
4. Purchases and Sales of Securities. Purchases and sales of securities,
excluding short-term obligations, for the six months ended June 30, 1996 were as
follows (shown in thousands):
Fund Purchases Sales
------------------------------ ------------- -----------
Money Market Fund $ - $ -
Income Fund 31,706 -
Purchases of U.S. Government obligations for the Income Fund of $31,706 are
included in the above aggregate purchases and sales. There were no sales of
U.S. Government obligations for the Income Fund.
5. Aggregate Gross Unrealized Appreciation. The Income Fund had aggregate gross
and net unrealized appreciation for Federal income tax purposes as follows
(shown in thousands):
Unrealized Unrealized Net Unrealized
Fund Appreciation Depreciation Appreciation
------------------------------- ------------ ------------ --------------
Money Market Fund $ - $ - $ -
Income Fund 32 - 26
As of June 30, 1996, the Money Market and Income Funds' cost of securities for
Federal income tax purposes was $1,060,234 and $1,025,901, respectively.
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
Funds Group. 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 Funds Group were used to acquire shares of certain PCM
Funds, managed by Putnam Investments. Immediately following the redemption,
Connecticut General Life Insurance Company ("CG Life"), an affiliate of CIGNA
Funds Group, invested $1,000,000 in each of the Money Market Fund and the Income
Fund. At June 30, 1996, CG Life is the sole shareholder of the Funds.
<PAGE>
CIGNA FUNDS GROUP 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
1991 $1.00 $.0561 - $.0561 $.0561 -
1992 1.00 .0334 - .0334 .0334 -
1993 e 1.00 .0237 - .0237 .0237 -
1994 e 1.00 .0337 - .0337 .0337 -
1995 f 1.00 .0516 - .0516 .0516 $.0003
6/30/96 f 1.00 .0227 - .0227 .0227 -
Income Fund
1991 $0.95 $.08 $.09 $.17 $.08 -
1992 1.04 .07 (.01) .06 .07 .01
1993 e 1.02 .06 .07 .13 .06 .08
1994 e 1.01 .06 (.09) (.03) .06 -
1995 f .92 .06 .09 .15 .05 -
6/30/96 f 1.02 .03 (.06) (.03) - -
<CAPTION>
Ratio of
Net Net Ratio of Net
Asset Assets at Expenses Investment
Value, End of to Income Portfolio
Period Total End Total Period Average to Average Turnover
Ended Distributions of Period Return (000) Net Assets Net Assets Rate
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Money Market Fund
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 e .0237 1.00 2.39 20,508 1.00 a 2.39 b -
1994 e .0337 1.00 3.43 16,673 1.00 a 3.32 b -
1995 f .0519 1.00 5.33 1,034 0.80 a 5.38 b -
6/30/96 f .0227 1.00 2.30 1,058 0.35 a 2.29 b -
Income Fund
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 e .14 1.01 13.36 19,910 1.00 c 6.06 d 116
1994 e .06 0.92 -3.12 15,210 1.00 c 6.37 d 8
1995 f .05 1.02 16.21 1,105 0.95 c 6.50 d 45
6/30/96 f - 0.99 -2.74 1,074 0.50 c 2.58 d -
</TABLE>
a. Ratios of expenses to average net assets prior to the reduction of advisory
fee were 3.64%, 1.21%, 1.11% and 1.02%, respectively, for the six months
ended June 30, 1996 and the years ended December 31, 1995, 1994 and 1993.
b. Ratios of net investment income to average net assets prior to the reduction
of advisory fee were (1.00%), 4.91%, 3.22% and 2.37%, respectively, for the
six months ended June 30, 1996 and the years ended December 31, 1995, 1994
and 1993 .
c. Ratios of expenses to average net assets prior to the reduction of advisory
fee were 3.59%, 1.37%, 1.15% and 1.01%, respectively, for the six months
ended June 30, 1996 and the years ended December 31, 1995, 1994 and 1993 .
d. Ratios of net investment income to average net assets prior to the reduction
of advisory fee were (.51%), 6.08%, 6.22% and 6.06%, respectively, for the
six months ended June 30, 1996 and the years ended December 31, 1995, 1994
and 1993 .
e. 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.
f. Per share amounts have been calculated using the average shares method, which
more appropriately presents the the per share data for the period since the
use of the undistributed income method did not accord with the results of
operations.
g. Beginning in 1996, each Fund is required to disclose the average commission
paid per transaction. Neither the CIGNA Money Market Fund nor the CIGNA
Income Fund has paid any commissions in 1996.
