<PAGE>
ANNUAL REPORT TO SHAREHOLDERS
CIGNA FUNDS GROUP
FOR THE YEAR ENDED DECEMBER 31, 1997
[TEXT APPEARS AS A DIVIDED CIRCLE GRAPHIC]
<PAGE>
CIGNA MONEY MARKET FUND MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
There was little surprise in the fact that the Federal Reserve (the "Fed") left
monetary policy unchanged in the fourth quarter of 1997. The ongoing crisis in
Southeast Asia, and the corresponding threat of an Asian recession and asset
deflation risks, as expected, kept the Fed on hold. Expectations are that,
although the Asian situation will reduce U.S. growth in 1998, perhaps as much as
one full percentage point, that growth will continue in the range of 2-2 1/2%.
The Fed may eventually ease monetary policy.
On December 31, 1997, the portfolio composition of CIGNA Money Market Fund (the
"Fund") was as follows: top-tier domestic commercial paper, 39%; top tier
foreign commercial paper, 10%; U.S. Government and agencies, 17%; and repurchase
agreements, 34%.
The Fund is well diversified.
As of December 31, total return for the twelve months ended December 31, 1997
was 5.27%, after expenses and reinvestment of dividends. By comparison, the
Lipper Money Market Instrument Fund Average and three-month treasury bills, as
reported by Lehman Brothers (which does not include investment expenses),
returned 4.90% and 5.52%, respectively, for the year ended December 31, 1997.
The Fund's annualized yield for the seven days and thirty days ended December
31, 1997 was 5.30% and 5.22%, respectively. AN INVESTMENT IN THE FUND IS NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. (Fund and Lipper returns are
after expenses and reinvestment of dividends.)
1998 started with a bang, as long bond yields fell to historic lows in the first
few trading days. Fueling the rally were the Asian crisis and Fed Chairman Alan
Greenspan's speech on deflation. These two issues highlight both the fundamental
and technical factors that must be considered in assessing future activity. We
currently expect that Fed policy will remain steady for the first quarter of
1998. The portfolio is structured to take advantage of this environment. We
will, however, continue to monitor the situation in Asia as well as economic
trends in the U.S., as we believe both are key indicators of future Fed
direction - and will adjust our portfolio strategy accordingly.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
1/1/88-12/31/97
- -----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year 10 Year
5.27% 4.26% 5.43%
- -----------------------------------------
3-Month U.S.
Point of CIGNA Money Treasury Bills
Measurement Market Fund - Total Return (1)
----------- ---------------- -------------------
12/87 $10,000 $10,000
12/88 $10,729 $10,669
12/89 $11,690 $11,592
12/90 $12,604 $12,511
12/91 $13,328 $13,226
12/92 $13,776 $13,706
12/93 $14,105 $14,127
12/94 $14,589 $14,723
12/95 $15,366 $15,567
12/96 $16,121 $16,385
12/97 $16,971 $17,244
(1) Source: Lehman Brothers
CIGNA Money Market Fund's performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions and changes in net
asset value. The Fund does not charge a sales load. The Fund's investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Past performance cannot
guarantee comparable future results. The Fund's performance has been compared
with the total return performance of three-month U.S. Treasury Bills. Treasury
Bill performance does not reflect brokerage charges or other investment
expenses. The Fund's average 7-day annualized yield as of December 31, 1997 was
5.30%.
<PAGE>
CIGNA S&P 500 INDEX FUND MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
A year ago, we suggested that while history argued against a third consecutive
year of significant returns to the S&P 500 Index, the essentially sound state of
the economy enhanced the potential for such an occurrence. In retrospect, that
forecast was an understatement. For the 6-month period from July 1, 1997
(commencement of operations) to December 31, 1997, CIGNA S&P 500 Index Fund's
return, after expenses and allowing for reinvestment of dividends, was 10.23%,
compared to the 10.33% total return of the S&P 500 Index. The Index returned
33.36% for the full year, and 1997 was the third consecutive year in which this
benchmark produced returns of 20% or more.
Continuing the trend of recent years, the S&P 500 Index once again outperformed
the average domestic stock manager, in part because of the outperformance of
large capitalization stocks over their small-cap counterparts. Although posting
impressive results for the year, returns for the S&P MidCap Index (32.25%) and
S&P SmallCap Index (25.58%) fell short of the returns provided by the
large-cap-dominated S&P 500 Index. According to Lipper Analytical Services, the
average U.S. stock fund returned 24.36% in 1997, with only 10.3% of these funds
beating the S&P 500 Index for the year. Growth stocks (36.53%), as measured by
the S&P/BARRA Indices, also maintained their advantage over Value stocks
(29.99%). Industry group performance was led by Trucking (153%), which was
1996's big loser. Meanwhile, Shoes (-33%), which was among the best groups that
year, was one of 1997's worst-performing groups. Brokerage (81%), Savings &
Loans (74%), Airlines (68%) and Broadcast Media (64%) were major winners, while
Metals (-35%), Gold (-35%) and Engineering & Construction (-37%) did the worst.
Our expectation of high market volatility in 1997 stemming from weak consensus
was also correct. The number of trading days during the year that saw at least
1% daily closing change was among the highest for any year in recent history.
Market participants appeared to gradually accept the notion of "new era
economics" and set aside earlier worries over growth-induced inflation that had
prompted a small rate increase by the Federal Reserve in March.
The impact of Asian market turmoil on the U.S. economy is shaping up to be a key
to 1998 market performance. While economic growth will likely slow as a result
of increased foreign competition and weakened foreign export demand, the U.S.
equity markets barring unforeseen investor psychology - appear poised for
potentially positive but perhaps more normal returns in 1998.
<PAGE>
CIGNA S&P 500 INDEX FUND MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
(Continued)
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
7/1/97 - 12/31/97
- -----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
From Inception (7/1/97)
10.23%
- -----------------------------------------
Point of CIGNA S&P 500 S&P 500 Index
Measurement Index Fund - Total Return
----------- ---------------- ---------------
7/1/97 $10,000 $10,000
12/31/97 $11,023 $11,033
CIGNA S&P 500 Index Fund's performance figures are historical and reflect
reinvestment of dividends and capital gains distributions and changes in net
asset value. The Fund does not charge a sales load. The Fund's investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Past performance cannot
guarantee comparable future results. The Fund's performance has been compared
with the total return performance for the Standard & Poor's Corporation
Composite Index of 500 Stocks (S&P 500). This index is a group of unmanaged
securities widely regarded by investors to be representative of the stock market
in general. An investment cannot be made in the index. Index results do not
reflect brokerage charges or other investment expenses.
<PAGE>
CIGNA INCOME FUND MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited)
1997 once again highlighted the market's ability to completely reverse course,
both in sentiment and return. The bond market started the year on a strong note,
aided by very high levels of liquidity and aggressive buying of both high yield
and investment grade debt. However, during the first quarter, concern over
robust growth and a potential acceleration in inflation caused stocks to
decline, bond yields to rise and prices to fall, and quality spreads to widen,
especially in high yield and emerging markets. The Federal Reserve (the "Fed")
raised rates by 0.25%, increasing the Fed Funds rate to 5.50%. The bond market
slumped, causing yields to rise from 6.64% on the benchmark 30-year Treasury at
year-end to 7.10% at the end of the first quarter. As measured by the Lehman
Brothers Government/Corporate Bond Index (the "Index"), bonds returned -.86% for
the first quarter compared to -0.77% for the CIGNA Income Fund.
The second quarter saw a reversal of market psychology, as economic growth eased
and inflation remained benign. Heartened by more modest growth and lower
inflation than normally expected in the later stages of a drawn-out business
cycle, investors returned to the market in force. The benchmark 30-year Treasury
bond rallied as yields fell from 7.10% to 6.78% by the quarter's end. The bond
market, as measured by the Index, returned 3.64% during the second quarter
compared to 3.20% for the Fund.
Investors in the third quarter reacted to a market environment of continued
robust growth and low inflation by driving bond market yields lower. The
benchmark 30-year Treasury closed the third quarter at a yield of 6.40%. The
Treasury yield curve shifted downward as rates declined and flattened slightly.
Longer-dated Treasury bonds outperformed shorter notes. There was little concern
that the Fed would tighten monetary conditions anytime soon. The bond market, as
measured by the Index, returned 3.51% during the third quarter compared to 2.97%
for the Fund.
In the fourth quarter, there was a significant decline in interest rates to
5.92% at year-end, prompted by the Asian crisis which reached a flash point in
October. Decimated currency and stock markets in Pacific Rim countries prompted
a "flight to quality," which both bolstered the U.S. Treasury market and widened
corporate spreads - particularly in emerging market debt. Ratings agencies
reacted by lowering the ratings of many issuers, including some previously
investment-grade sovereigns. Bids for less liquid corporate issuers quickly
dried up. Fund performance of 3.46% for the fourth quarter surpassed the Index
return of 3.21%.
A crisis born of extreme speculation, financial abuses, and "crony capitalism"
will not be quickly resolved. The fallout in the U.S. is just beginning to be
felt. Reduced exports will subtract at least 0.5% from gross domestic product
growth - but should be partially offset by lower inflation and interest rates.
As the focus shifts away from the Pacific Rim, continued tight domestic labor
markets and solid economic momentum could once again prompt concern over Fed
tightening action, resulting in a modest rise in interest rates.
<PAGE>
CIGNA INCOME FUND MANAGEMENT'S DISCUSSION AND ANALYSIS (Unaudited) (Continued)
After deducting expenses and allowing for the reinvestment of dividends, based
on the net asset value of its underlying assets, the Fund returned 9.10% for the
year. This trailed the 9.76% return for the Index.
As long as the Pacific Rim crisis continues to positively impact U.S. interest
rates, we expect to maintain a portfolio duration modestly longer than the
Index. If the economy shows signs of re-accelerating after the Asian-related
dampening fades, we plan to shorten duration exposure to help preserve asset
values.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
1/1/88-12/31/97
- -----------------------------------------
AVERAGE ANNUAL TOTAL RETURN
1 Year 5 Year 10 Year
9.10% 7.14% 8.84%
- -----------------------------------------
Lehman Brothers
Point of CIGNA Government/Corporate
Measurement Income Fund Index - Total Return
----------- ---------------- --------------------
12/87 $10,000 $10,000
12/88 $10,787 $10,753
12/89 $12,329 $12,285
12/90 $13,087 $13,304
12/91 $15,435 $15,451
12/92 $16,527 $16,618
12/93 $18,735 $18,452
12/94 $18,152 $17,806
12/95 $21,095 $21,233
12/96 $21,382 $21,847
12/97 $23,328 $23,979
CIGNA Income Fund's performance figures are historical and reflect reinvestment
of all dividends and capital gains distributions and changes in net asset value.
The Fund does not charge a sales load. The Fund's investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Past performance cannot
guarantee comparable future results. The Fund's performance has been compared
with the total return performance of the Lehman Brothers Government/Corporate
Bond Index. The index is a group of unmanaged securities widely regarded by
investors to be representative of the taxable U.S. government and corporate bond
market in general. Index results do not reflect brokerage charges or other
investment expenses. An investment cannot be made in the index.
<PAGE>
CIGNA MONEY MARKET FUND
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
PRINCIPAL VALUE
(000) (000)
- -------------------------------------------------------------------------------
COMMERCIAL PAPER - 49.1%
DOMESTIC - 39.1%
American Express Co.,
5.50%, 1/12/98 $ 4,400 $ 4,400
AT&T Co.,
5.75%, 1/16/98 5,550 5,537
Bell Atlantic Network Funding Corp.,
6.15%, 1/7/98 5,100 5,095
Bellsouth Telecommunications, Inc.,
5.70%, 2/3/98 5,770 5,740
du Pont (E.I.) de nemours & Co.,
6.06%, 1/7/98 3,900 3,896
5.55%, 1/12/98 725 724
Ford Motor Credit Co.,
5.50%, 1/5/98 5,920 5,916
Hewlett-Packard Co.,
5.90%, 1/21/98 3,364 3,353
Kellogg Co.,
5.72%, 1/6/98 6,400 6,395
Kimberly Clark Corp.,
6.0%, 1/6/98 4,500 4,496
Lucent Technologies, Inc.,
5.50%, 1/5/98 4,015 4,012
Merck & Co.,
6.05%, 1/5/98 1,773 1,772
Pitney Bowes Credit Corp.,
6.0%, 1/14/98 3,800 3,792
5.80%, 1/16/98 997 995
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA MONEY MARKET FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1997
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------------------
PHH Corp., Inc.,
5.55%, 1/30/98 $ 4,585 $ 4,564
Teco Finance, Inc.,
6.0%, 1/16/98 2,109 2,104
Warner Lambert Co.,
6.0%, 1/8/98 4,000 3,995
-----------------
66,786
-----------------
FOREIGN - 10.0%
British Columbia (Providence of), Canada,
5.63%, 2/10/98 4,500 4,472
BTR Dunlop Finance, Inc.,
5.60%, 1/22/98 4,200 4,186
Glaxo Wellcome, plc
5.67%, 1/21/98 2,534 2,526
National Australia Funding (Delaware), Inc.,
5.80%, 1/13/98 5,936 5,924
-----------------
17,108
-----------------
TOTAL COMMERCIAL PAPER 83,894
-----------------
U.S. GOVERNMENT & AGENCIES - 16.9%
Federal Farm Credit Bank,
5.53%, 2/2/98 5,000 5,000
5.65%, 2/2/98 5,000 5,000
5.60%, 10/1/98 2,000 1,998
Federal Home Loan Banks,
5.80%, 2/5/98 4,000 4,000
5.80%, 9/18/98 2,500 2,501
5.685%, 10/2/98 1,000 1,000
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA MONEY MARKET FUND
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federal National Mortgage Association,
5.50%, 2/18/98 850 $ 850
Student Loan Marketing Association,
5.82%, 9/16/98 5,500 5,498
5.919%, 11/12/98* 3,000 3,000
-----------------
TOTAL U.S. GOVERNMENT & AGENCIES 28,847
-----------------
REPURCHASE AGREEMENTS - 34.1%
Repurchase Agreement with J.P. Morgan & Co.,
entered into 12/31/97 at 5.75%, maturing 1/2/98
at $58,425,658 (collateralized by U.S. Treasury Bond,
11.875%, due 11/15/03 with a face value of $45,391,000
and a value of $58,686,024) 58,407 58,407
-----------------
TOTAL INVESTMENT IN SECURITIES - 100.1% $ 171,148
(Total Cost - $171,147,696)
Liabilities, Less Cash and Other Assets - (0.1%) (83)
-----------------
NET ASSETS - 100.0%
(equivalent to $1.00 per share based on 171,064,584
shares outstanding) $ 171,065
=================
</TABLE>
* Variable Rate Note. Rate is as of December 31, 1997.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997
MARKET
NUMBER OF VALUE
SHARES (000)
- -------------------------------------------------------------------
COMMON STOCKS - 98.0%
General Electric Co. 44,900 $ 3,295
Coca-Cola Co. 34,000 2,265
Microsoft Corp.* 16,500 2,133
Exxon Corp. 34,000 2,080
Merck & Co., Inc. 16,600 1,764
Royal Dutch Petroleum Co. 29,400 1,593
Intel Corp. 22,400 1,574
Philip Morris Companies, Inc. 33,200 1,504
Procter & Gamble Co. 18,500 1,477
International Business Machines Corp. 13,400 1,401
A T & T Corp. 22,300 1,366
Pfizer, Inc. 17,800 1,327
Bristol-Myers Squibb Co. 13,700 1,296
Wal-Mart Stores, Inc. 31,100 1,226
Johnson & Johnson 18,400 1,212
Lilly (Eli) & Co. 15,300 1,065
American International Group, Inc. 9,600 1,044
Bell Atlantic Corp. 10,657 970
du Pont (E.I.) de Nemours & Co. 15,500 931
SBC Communications, Inc. 12,500 916
Disney ( Walt) Co. 9,200 911
Hewlett-Packard Co. 14,200 888
Travelers Group, Inc. 15,714 846
Federal National Mortgage Association 14,500 827
Ford Motor Co. 16,400 798
Citicorp 6,300 797
Mobil Corp. 10,800 780
Gillette Co. 7,700 773
Cisco Systems, Inc.* 13,800 769
BellSouth Corp. 13,600 766
PepsiCo, Inc. 20,900 762
Lucent Technologies, Inc. 8,800 703
BankAmerica Corp. 9,600 701
Chevron Corp. 9,000 693
GTE Corp. 13,200 690
American Home Products Corp. 9,000 689
Abbott Laboratories 10,500 688
Boeing Company 13,750 673
Chase Manhattan Corp. 5,800 635
Schering-Plough Corp. 10,000 621
Ameritech Corp. 7,500 604
General Motors Corp. 9,900 600
MARKET
NUMBER OF VALUE
SHARES (000)
- ---------------------------------------------------------------
NationsBank Corp. 9,800 $ 596
Home Depot, Inc. 10,050 592
Compaq Computer Corp.* 10,420 588
American Express Company 6,400 571
Amoco Corp. 6,700 570
Unilever NV 8,900 556
Schlumberger Ltd. 6,800 547
Allstate Corp. 5,900 536
Morgan Stanley, Dean Witter, Discover &
Co. 8,100 479
Time Warner, Inc. 7,700 477
Motorola, Inc. 8,200 468
Minnesota Mining and Manufacturing Co. 5,700 468
Warner-Lambert Co. 3,700 459
McDonald's Corp. 9,500 454
Banc One Corp. 8,000 435
Wells Fargo & Co. 1,200 407
MCI Communications Corp. 9,500 407
First Union Corp. 7,900 405
Norwest Corp. 10,300 398
Federal Home Loan Mortgage Corp. 9,500 398
Computer Associates International, Inc. 7,500 397
Texaco, Inc. 7,200 391
Dell Computer Corp.* 4,500 378
Cendant Corp. 10,985 378
WorldCom, Inc.* 12,400 375
Kimberly-Clark Corp. 7,600 375
U. S. Bancorp, Inc. 3,330 373
Sara Lee Corp. 6,600 372
Campbell Soup Company 6,300 366
Atlantic Richfield Co. 4,400 353
Sprint Corp. 5,900 346
Emerson Electric Co. 6,100 344
First Chicago NBD Corp. 4,100 342
Monsanto Company 8,100 340
Medtronic, Inc. 6,500 340
Tyco International Ltd. 7,400 333
Xerox Corp. 4,500 332
Merrill Lynch & Co., Inc. 4,500 328
Dow Chemical Co. 3,200 325
Chrysler Corp. 9,200 324
Northern Telecom Ltd. 3,600 320
Allied-Signal, Inc. 7,800 304
Colgate-Palmolive Co. 4,100 301
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Bank of New York, Inc. 5,200 $ 301
Oracle Systems Corp.* 13,450 300
U. S. WEST Communications, Inc. 6,600 298
Anheuser-Busch Companies, Inc. 6,700 295
Airtouch Communications, Inc.* 6,900 287
Kellogg Co. 5,700 283
Morgan (J.P.) & Co. 2,500 282
Eastman Kodak Co. 4,500 274
Duke Energy Co. 4,900 271
CBS Corp. 9,000 265
Columbia/HCA Healthcare Corp. 8,900 264
Pharmacia & Upjohn, Inc. 7,000 256
Lockheed Martin Corp. 2,600 256
Fleet Financial Group, Inc. 3,400 255
Heinz (H.J.) Co. 5,000 254
- -----------------------------------------------------------------
TOTAL 100-LARGEST STOCKS 68,642
- -----------------------------------------------------------------
Caterpillar, Inc. 5,100 248
Automatic Data Processing, Inc. 4,000 246
Sears, Roebuck & Company 5,400 244
Southern Company 9,400 243
Gannett Co., Inc. 3,900 241
United Technologies Corp. 3,300 240
U. S. WEST Media Group* 8,300 240
PNC Bank Corp. 4,200 240
Texas Instruments, Inc. 5,300 238
General Re Corp. 1,100 233
Raytheon Co. 4,601 232
CoreStates Financial Corp. 2,800 224
Washington Mutual, Inc. 3,500 223
ConAgra, Inc. 6,600 217
CPC International, Inc. 2,000 216
Union Pacific Corp. 3,400 212
KeyCorp 3,000 212
Walgreen Co. 6,700 210
SunTrust Banks, Inc. 2,900 207
Mellon Bank Corp. 3,400 206
Penney (J.C.) Co., Inc. 3,400 205
Illinois Tool Works, Inc. 3,400 204
Viacom, Inc., Class B* 4,900 203
Dayton Hudson Corp. 3,000 203
Amgen, Inc.* 3,700 200
Sun Microsystems, Inc.* 5,000 199
Deere & Co. 3,400 198
Wachovia Corp. 2,400 195
MARKET
NUMBER OF VALUE
SHARES (000)
- ---------------------------------------------------------------
Tele-Communications, Inc., Class A* 7,000 $ 195
GAP, Inc. 5,500 195
Burlington Northern Santa Fe Corp. 2,100 195
Barnett Banks, Inc. 2,700 194
Baxter International, Inc. 3,800 192
National City Corp. 2,900 191
Household International, Inc. 1,500 191
MBNA Corp. 6,950 190
BankBoston Corp. 2,000 188
EMC Corp.* 6,800 187
PG & E Corp. 6,100 186
American General Corp. 3,400 184
Halliburton Co. 3,500 182
Chubb Corp. 2,400 182
Pitney-Bowes, Inc. 2,000 180
Marsh & McLennan Companies, Inc. 2,400 179
Enron Corp. 4,300 179
International Paper Co. 4,100 177
First Data Corp. 6,000 176
Phillips Petroleum Co. 3,600 175
CIGNA Corp. 1,000 173
Fifth Third Bancorp 2,100 172
Waste Management, Inc. 6,200 170
Loews Corp. 1,600 170
May Department Stores Co. 3,200 169
Aluminum Co. of America 2,400 169
AMR Corp.* 1,300 167
Seagram Company Ltd. 5,100 165
Archer-Daniels-Midland Co. 7,590 165
3Com Corp.* 4,700 164
CSX Corp. 3,000 162
Albertson's, Inc. 3,400 161
General Mills, Inc. 2,200 158
Norfolk Southern Corp. 5,100 157
NIKE, Inc., Class B 4,000 157
CVS Corp. 2,400 154
Schwab (Charles) Corp. 3,650 153
Comcast Corp., Class A (Special) 4,800 152
Rockwell International Corp. 2,900 151
Applied Materials, Inc.* 5,000 151
Hartford Financial Services Group 1,600 150
Mattel, Inc. 4,000 149
FPL Group, Inc. 2,500 148
Aetna, Inc. 2,100 148
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ------------------------------------------------------------------
Edison International 5,400 $ 147
Bankers Trust New York Corp. 1,300 146
PPG Industries, Inc. 2,500 143
Tenet Healthcare Corp. 4,200 139
Ralston Purina Co. 1,500 139
Weyerhaeuser Co. 2,800 137
Textron, Inc. 2,200 137
Texas Utilities Co. 3,300 137
HealthSouth Corp.* 4,900 136
USX-Marathon Group 4,000 135
Aon Corp. 2,300 135
HBO & Co. 2,800 134
Goodyear Tire & Rubber Co. 2,100 134
American Electric Power Co., Inc. 2,600 134
ITT Corp. 1,600 133
Unocal Corp. 3,400 132
Tellabs, Inc.* 2,500 132
Occidental Petroleum Corp. 4,500 132
Consolidated Edison Co. of N.Y., Inc. 3,200 131
United Healthcare Corp. 2,600 129
Costco Companies, Inc.* 2,900 129
State Street Corp. 2,200 128
Wrigley (Wm.) Jr. Company 1,600 127
Williams Companies, Inc. 4,500 127
Service Corporation International 3,400 126
Kroger Co.* 3,400 126
Comerica, Inc. 1,400 126
AMP, Inc. 3,000 126
- ------------------------------------------------------------------
TOTAL 200-LARGEST STOCKS 86,111
- ------------------------------------------------------------------
Guidant Corp. 2,000 125
Federated Department Stores, Inc.* 2,900 125
Hershey Foods Corp. 2,000 124
Toys 'R' Us, Inc.* 3,900 123
Air Products & Chemicals, Inc. 1,500 123
BB and T Corp. 1,900 122
Progressive Corp. Ohio 1,000 120
Delta Air Lines, Inc. 1,000 119
Corning, Inc. 3,200 119
Boston Scientific Corp.* 2,600 119
Marriott International, Inc. 1,700 118
Conseco, Inc. 2,600 118
Honeywell, Inc. 1,700 116
MARKET
NUMBER OF VALUE
SHARES (000)
- ---------------------------------------------------------------
Lowes Companies, Inc. 2,400 $ 114
Cincinnati Financial Corp. 800 113
Cardinal Health, Inc. 1,500 113
PacifiCorp 4,100 112
Masco Corp. 2,200 112
Dover Corp. 3,100 112
Burlington Resources, Inc. 2,510 112
SunAmerica, Inc. 2,600 111
Clorox Co. 1,400 111
Avon Products, Inc. 1,800 110
UNUM Corp. 2,000 109
Sysco Corp. 2,400 109
Lincoln National Corp. 1,400 109
Browning-Ferris Industries, Inc. 2,900 107
Tribune Co. 1,700 106
MGIC Investment Corp. 1,600 106
Dominion Resources, Inc. 2,500 106
Baker Hughes, Inc. 2,400 105
Northrop Grumman Corp. 900 104
Fort James Corp. 2,700 103
Clear Channel Communications, Inc.* 1,300 103
ALLTEL Corp. 2,500 103
Houston Industries, Inc. 3,822 102
Public Service Enterprises Group, Inc. 3,200 101
Hilton Hotels Corp. 3,400 101
Dresser Industries, Inc. 2,400 101
Rite Aid Corp. 1,700 100
Quaker Oats Co. 1,900 100
Entergy Corp. 3,300 99
St. Paul Companies, Inc. 1,200 98
Federal Express Corp.* 1,600 98
Eaton Corp. 1,100 98
Cognizant Corp. 2,200 98
Transamerica Corp. 900 96
Pioneer Hi-Bred International, Inc. 900 96
McGraw-Hill, Inc. 1,300 96
Tenneco, Inc. 2,400 95
Praxair, Inc. 2,100 95
Barrick Gold Corp. 5,100 95
Newell Company 2,200 94
Limited, Inc. 3,700 94
Thermo Electron Corp.* 2,100 93
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ------------------------------------------------------------------
First Energy Corp. 3,200 $ 93
Coastal Corp. 1,500 93
UST, Inc. 2,500 92
Unicom Corp. 3,000 92
Computer Sciences Corp.* 1,100 92
TRW, Inc. 1,700 91
Republic New York
Corp. 800 91
Omnicom Group, Inc. 2,100 89
Ingersol-Rand Co. 2,200 89
Fortune Brands, Inc. 2,400 89
Carolina Power & Light Co. 2,100 89
SAFECO Corp. 1,800 88
Alcan Aluminum Ltd. 3,200 88
Winn-Dixie Stores, Inc. 2,000 87
MBIA, Inc. 1,300 87
Ahmanson (H. F.) & Co. 1,300 87
New York Times Co., Class A 1,300 86
Interpublic Group of Companies, Inc. 1,700 85
Genuine Parts Co. 2,500 85
Crown Cork & Seal Co., Inc. 1,700 85
Becton, Dickinson and Co. 1,700 85
VF Corp. 1,800 83
Huntington Bancshares, Inc. 2,300 83
Cooper Industries, Inc. 1,700 83
Union Pacific Resources Group, Inc. 3,400 82
Parametric Technology Corp.* 1,700 81
Torchmark Corp. 1,900 80
Times Mirror Co., Class A 1,300 80
Grace (W.R.) & Co. 1,000 80
Cinergy Corp. 2,100 80
Synovus Corp. 2,400 79
Georgia-Pacific Corp. 1,300 79
Consolidated Natural Gas Co. 1,300 79
Golden West Financial Corp. 800 78
General Dynamics Corp. 900 78
Digital Equipment Corp.* 2,100 78
Central & Southwest Corp. 2,900 78
Rohm & Haas Co. 800 77
Kmart Corp. 6,700 77
International Flavors & Fragrances, Inc. 1,500 77
TJX Companies, Inc. 2,200 76
Owens-Illinois, Inc.* 2,000 76
American Stores Co. 3,700 76
MARKET
NUMBER OF VALUE
SHARES (000)
- ---------------------------------------------------------------
Micron Technology, Inc. 2,900 $ 75
Donnelley (R.R.) & Sons Co. 2,000 75
- ---------------------------------------------------------------
TOTAL 300-LARGEST STOCKS 95,775
- ---------------------------------------------------------------
Equifax, Inc. 2,100 74
Dun & Bradstreet Corp. 2,400 74
Union Carbide Corp. 1,700 73
Southwest Airlines Co. 2,950 73
PECO Energy Co. 3,000 73
GPU, Inc. 1,700 72
Bay Networks,
Inc.* 2,800 72
Parker-Hannifin Corp. 1,550 71
Amerada Hess Corp. 1,300 71
Jefferson-Pilot Corp. 900 70
Dow Jones & Co., Inc. 1,300 70
US Airways Group, Inc.* 1,100 69
DTE Energy Co. 2,000 69
Grainger (W.W.), Inc. 700 68
Baltimore Gas & Electric Co. 2,000 68
Sherwin-Williams Co. 2,400 67
Dana Corp. 1,400 67
Beneficial Corp. 800 67
Nordstrom, Inc. 1,100 66
Eastman Chemical Co. 1,100 66
Morton International, Inc. 1,900 65
Hercules, Inc. 1,300 65
Seagate Technology, Inc.* 3,300 64
Harris Corp. 1,400 64
Countrywide Credit Industries, Inc. 1,500 64
Columbia Gas Systems, Inc. 800 63
Block (H & R), Inc. 1,400 63
Avery Dennison Corp. 1,400 63
Newmont Mining Corp. 2,100 62
Knight-Ridder, Inc. 1,200 62
Allegheny Teledyne, Inc. 2,400 62
Tricon Global Restaurants 2,090 61
Laidlaw, Inc. 4,500 61
Autozone, Inc. 2,100 61
Union Electric Co. 1,400 60
Reynolds Metals Co. 1,000 60
Case Corp. 1,000 60
Western Atlas, Inc.* 800 59
Providian Corp. 1,300 59
Champion International Corp. 1,300 59
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -------------------------------------------------------------------
PACCAR, Inc. 1,100 $ 58
Nucor Corp. 1,200 58
Northern States Power Co. 1,000 58
Stanley Works (The) 1,200 57
Mirage Resorts, Inc.* 2,500 57
Johnson Controls, Inc. 1,200 57
Raychem Corp. 1,300 56
Dillard, Inc., Class A 1,600 56
Whirlpool Corp. 1,000 55
Sonat, Inc. 1,200 55
Tandy Corp. 1,400 54
Hasbro, Inc. 1,700 54
Ashland, Inc. 1,000 54
Frontier Corp. 2,200 53
Sigma-Aldrich Corp. 1,300 52
Rubbermaid, Inc. 2,100 52
PP & L Resources, Inc. 2,200 52
National Semiconductor Corp.* 2,000 52
Willamette Industries, Inc. 1,600 51
Ikon Office Solutions, Inc. 1,800 51
Black & Decker Corp. 1,300 51
Phelps Dodge Corp. 800 50
ITT Industries, Inc. 1,600 50
Green Tree Financial Corp. 1,900 50
Ecolab, Inc. 900 50
Ceridian Corp.* 1,100 50
Brown-Forman Corporation, Class B 900 50
Harcourt General, Inc. 900 49
Anadarko Petroleum Corp. 800 49
Union Camp Corp. 900 48
Maytag Corp. 1,300 48
Pennzoil Co. 700 47
KLA Tencor Corp.* 1,200 46
Humana, Inc.* 2,200 46
Circuit City Stores, Inc. 1,300 46
Pacific Enterprises 1,200 45
Fluor Corp. 1,200 45
Westvaco Corp. 1,400 44
Kerr-McGee Corp. 700 44
Wendy's International, Inc. 1,800 43
Perkin-Elmer Corp. 600 43
Freeport McMoRan Copper & Gold, Inc.,
Class B 2,700 43
Temple-Inland, Inc. 800 42
Sun Company, Inc. 1,000 42
MARKET
NUMBER OF VALUE
SHARES (000)
- ---------------------------------------------------------------
Placer Dome, Inc. 3,300 $ 42
Apache Corp. 1,200 42
Deluxe Corp. 1,200 41
Biomet, Inc. 1,600 41
Adobe Systems, Inc. 1,000 41
St. Jude Medical, Inc. 1,300 40
LSI Logic Corp.* 2,000 40
Inco Ltd. 2,300 39
Brunswick Corp. 1,300 39
American Greetings Corp., Class A 1,000 39
Thomas & Betts Corp. 800 38
Mallinckrodt Group, Inc. 1,000 38
Liz Claiborne, Inc. 900 38
DSC Communications Corp.* 1,600 38
ALZA Corp.* 1,200 38
USX-U.S. Steel Group 1,200 37
Rowan Companies, Inc.* 1,200 37
- ---------------------------------------------------------------
TOTAL 400-LARGEST STOCKS 101,293
- ---------------------------------------------------------------
Armstrong World Industries, Inc. 500 37
Woolworth Corp. 1,800 36
Whitman Corp. 1,400 36
Ryder System, Inc. 1,100 36
Oryx Energy Co. 1,400 36
Novell, Inc.* 4,800 36
Nextlevel System, Inc.* 2,000 36
Nalco Chemical Co. 900 36
Mead Corp. 1,300 36
Great Lakes Chemical Corp. 800 36
Advanced Micro Devices, Inc.* 2,000 36
USF&G Corp. 1,600 35
Snap-On, Inc. 800 35
Pall Corp. 1,700 35
Engelhard Corp. 2,000 35
Bemis Company, Inc. 800 35
FMC Corp.* 500 34
Unisys Corp.* 2,400 33
SuperValu, Inc. 800 33
Goodrich (B.F.) Co. 800 33
Echlin, Inc. 900 33
United States Surgical Corp. 1,100 32
Manor Care, Inc. 900 32
Cabletron Systems, Inc.* 2,100 32
Bausch & Lomb, Inc. 800 32
Timken Co. 900 31
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- ------------------------------------------------------------------
Silicon Graphics, Inc.* 2,400 $ 30
NICOR, Inc. 700 30
National Service Industries, Inc. 600 30
Mercantile Stores Co., Inc. 500 30
General Signal Corp. 700 30
Cummins Engine Co., Inc. 500 30
Crane Co. 700 30
Allergan, Inc. 900 30
Polaroid Corp. 600 29
Meredith Corp. 800 29
McDermott International, Inc. 800 29
Louisiana-Pacific Corp. 1,500 29
King World Productions, Inc.* 500 29
Andrew Corp.* 1,200 29
Owens-Corning Fiberglas Corp. 800 27
Helmerich & Payne, Inc. 400 27
Giant Foods, Inc., Class A 800 27
Cooper Tire & Rubber Co. 1,100 27
Tektronix, Inc. 650 26
Shared Medical Systems Corp. 400 26
Harrah's Entertainment, Inc.* 1,400 26
Fruit of the Loom, Inc., Class A* 1,000 26
Darden Restaurants, Inc. 2,100 26
Autodesk, Inc. 700 26
Alberto-Culver Co., Class B 800 26
Navistar International Corp.* 1,000 25
Harnischfeger Industries, Inc. 700 25
Centex Corp. 400 25
Bard (C. R.), Inc. 800 25
Caliber System, Inc. 500 24
Boise Cascade Corp. 800 24
Reebok International Ltd. 800 23
Tupperware Corp. 800 22
Safety-Kleen Corp. 800 22
Apple Computer, Inc. 1,700 22
Worthington Industries, Inc. 1,300 21
Pep Boys-Manny, Moe & Jack 900 21
Niagara Mohawk Power Co. 2,000 21
Fleetwood Enterprises, Inc. 500 21
Peoples Energy Corp. 500 20
Millipore Corp. 600 20
Cyprus Amax Minerals Co. 1,300 20
Aeroquip-Vickers, Inc. 400 20
Briggs & Stratton Corp. 400 19
MARKET
NUMBER OF VALUE
SHARES (000)
- ---------------------------------------------------------------
Battle Mountain Gold Co. 3,200 $ 19
Jostens, Inc. 1,100 18
Moore Corporation Ltd. 1,200 18
Homestake Mining Co. 2,000 18
Potlatch Corp. 400 17
Coors (Adolph) Co., Class B 500 17
Springs Industries, Inc., Class A 300 16
ONEOK, Inc. 400 16
Longs Drug Stores Corp. 500 16
Great Atlantic & Pacific Tea Co., Inc. 500 15
Stone Container Corp. 1,300 14
Foster Wheeler Corp. 500 14
Eastern Enterprises 300 14
Bethlehem Steel Corp.* 1,600 14
Ball Corp. 400 14
Russell Corp. 500 13
Pulte Corp. 300 13
Cincinnati Milacron, Inc. 500 13
Jostens, Inc. 500 12
Inland Steel Industries, Inc. 700 12
EG & G, Inc. 600 12
Data General Corp.* 700 12
NACCO Industries, Inc., Class A 100 11
Kaufman & Broad Home Corp. 500 11
Asarco, Inc. 500 11
Harland (J.H.) Co. 400 8
Charming Shoppes, Inc. 1,500 7
Armco, Inc. 1,500 7
Echo Bay Mines Ltd. 2,000 5
ChoicePoint, Inc.* 110 5
CommScope, Inc.* 333 4
General Semiconductor, Inc.* 250 3
Crescendo Pharmaceuticals, Inc. 45 1
TOTAL COMMON STOCKS - 98.0%
(Cost $98,592,364) 103,714
----------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1997 (Continued)
MARKET
VALUE
PRINCIPAL (000)
- ------------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 1.9%
COMMERCIAL PAPER - 1.8%
General Electric Capital Corp.
5.65%, 1/2/98 $ 1,964 $ 1,964
U.S. GOVERNMENT AND AGENCIES - 0.1%
U. S. Treasury Bills,
4.975%, 1/29/98** 100 100
-----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $2,063,613) 2,064
-----------
TOTAL INVESTMENT IN SECURITIES - 99.9%
(Total Cost $100,655,977) 105,778
Cash and Other Assets Less Liabilities - 0.1% 67
-----------
NET ASSETS - 100.0% $ 105,845
===========
(equivalent to $10.95 per share based on
9,670,139 shares outstanding)
* Non-income producing securities.
** Pledged as initial margin for Stock Index Futures Contracts. At December 31,
1997, the Fund was long 9 S&P 500 Futures Contracts expiring in March 1998.
Unrealized gain amounted to $11,325.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INCOME FUND
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
MARKET
PRINCIPAL VALUE
(000) (000)
- ------------------------------------------------------------------------------
BONDS AND NOTES - 94.8%
FOREIGN GOVERNMENTS - 8.2%
Israel (The State of), 5.75%, 2000 $ 100 $ 100
--------------
U.S. GOVERNMENT & AGENCIES - 86.6%
Federal Home Loan Banks, 7.37%, 2002 100 105
Federal Home Loan Mortgage Corp., 7.75%, 2001 100 106
Federal National Mortgage Assoc., 7.4%, 2004 100 108
Student Loan Marketing Assoc., 6.6%, 1999 100 101
Tennessee Valley Authority, 6.375%, 2005 100 102
United States Treasury Bonds,
8.125%, 2019 35 44
6.5%, 2026 150 160
United States Treasury Notes,
5.875%, 1998 20 20
6.5%, 2005 300 313
--------------
1,059
--------------
Total Bonds and Notes
(Cost - $1,144,179) 1,159
--------------
TOTAL INVESTMENTS IN SECURITIES
(Total Cost - $1,144,179) 1,159
Cash and Other Assets, Less Liabilities - 5.2% 63
--------------
NET ASSETS - 100.0%
(equivalent to $.98 per share based on
1,253,012 shares outstanding) $ 1,222
==============
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
(IN THOUSANDS)
MONEY S&P 500
MARKET INDEX INCOME
------------- ------------- -----------
<S> <C> <C> <C>
ASSETS:
Investments in securities at value (Cost - $171,147,696,
$100,655,977, and $1,144,179, respectively) $ 171,148 $ 105,778 $ 1,159
Cash 1 - 50
Receivable for Fund shares sold - 25,000 -
Interest and dividends receivable 653 109 19
Investment for Trustees' deferred compensation plan (Cost - $15,207,
$263 and $9,858, respectively) 21 - 15
Receivable from advisor 29 54 7
Other - 6 -
------------- ------------- -----------
Total assets 171,852 130,947 1,250
------------- ------------- -----------
LIABILITIES:
Payable for investments purchased - 25,022 -
Dividends payable 688 - -
Payable for Trustees' deferred compensation plan 21 - 15
Other accrued expenses 78 80 13
------------- ------------- -----------
Total liabilities 787 25,102 28
------------- ------------- -----------
NET ASSETS $ 171,065 $ 105,845 $ 1,222
============= ============= ===========
Shares outstanding 171,065 9,670 1,253
============= ============= ===========
NET ASSET VALUE PER SHARE $ 1.00 $ 10.95 $ 0.98
============= ============= ===========
COMPONENTS OF NET ASSETS:
Paid in capital $ 171,065 $ 100,583 $ 1,208
Undistributed (overdistributed) net investment income - 10 (7)
Accumulated net realized gain on investments - 119 -
Unrealized appreciation of investments - 5,133 21
------------- ------------- -----------
NET ASSETS $ 171,065 $ 105,845 $ 1,222
============= ============= ===========
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
(IN THOUSANDS)
MONEY S&P 500
MARKET INDEX INCOME
------------ -------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 7,198 $ 100 $ 74
Dividends (net of foreign taxes withheld of $0, $2,743,
and $0, respectively) - 536 -
------------ -------------- ------------
7,198 636 74
EXPENSES:
Investment advisory fees 446 83 6
Administrative services 82 28 14
Custodian fees and expenses 77 79 19
Auditing and legal fees 21 12 11
Registration fees 13 30 -
Trustees' fees 11 - 6
Shareholder reports 5 5 -
Transfer agent fees and expenses 3 - 3
Other 5 - 2
------------ -------------- ------------
Total expenses 663 237 61
Less expenses waived by advisor (89) (121) (50)
------------ -------------- ------------
Net expenses 574 116 11
------------ -------------- ------------
NET INVESTMENT INCOME 6,624 520 63
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 16 30 3
Net realized gain from futures contracts - 97 -
Net unrealized gain from futures contracts - 11 -
Unrealized appreciation of investments - 5,122 35
------------ -------------- ------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 16 5,260 38
------------ -------------- ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 6,640 $ 5,780 $ 101
============ ============== ============
</TABLE>
* From January 1, 1997, except for S&P 500 Index Fund which commenced operations
on July 1, 1997.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIODS ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
(IN THOUSANDS)
MONEY S&P 500
MARKET INDEX INCOME
--------------- --------------- ------------
<S> <C> <C> <C>
OPERATIONS:
Net investment income $ 6,624 $ 520 $ 63
Net realized gain from securities transactions 16 30 3
Net realized gain from futures contracts - 97 -
Unrealized gain from futures contracts - 11 -
Unrealized appreciation of investments - 5,122 35
--------------- --------------- ------------
Net increase in net assets from operations 6,640 5,780 101
--------------- --------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (6,624) (510) (61)
From net realized capital gains (16) (8) (3)
--------------- --------------- ------------
Total distributions to shareholders (6,640) (518) (64)
--------------- --------------- ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 1,108,538 100,065 -
Net asset value of shares issued to shareholders
In reinvestment of dividends and distributions 6,482 518 64
--------------- --------------- ------------
1,115,020 100,583 64
Cost of shares redeemed (1,064,460) - -
--------------- --------------- ------------
Net increase from Fund share transactions 50,560 100,583 64
--------------- --------------- ------------
NET INCREASE IN NET ASSETS 50,560 105,845 101
NET ASSETS:
Beginning of period 120,505 - 1,121
--------------- --------------- ------------
End of period (including undistributed net investment
Income of $0 and $10,089 and overdistributed net
Investment income of $6,744, respectively) $ 171,065 $ 105,845 $ 1,222
=============== =============== ============
TRANSACTIONS IN CAPITAL STOCK:
Shares sold 1,108,538 9,621 -
Shares issued in reinvestment of dividends and distributions 6,482 49 66
--------------- --------------- ------------
1,115,020 9,670 66
Shares redeemed (1,064,460) - -
--------------- --------------- ------------
Net increase in shares outstanding 50,560 9,670 66
=============== =============== ============
</TABLE>
* From January 1, 1997, except for S&P 500 Index Fund which commenced operations
on July 1, 1997.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(IN THOUSANDS)
MONEY
MARKET INCOME
---------------- ---------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,593 $ 58
Net realized gain from securities transactions 14 -
Unrealized depreciation of investments - (42)
---------------- ---------------
Net increase in net assets from operations 1,607 16
---------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (1,593) (57)
From net realized capital gains (14) (38)
---------------- ---------------
Total distributions to shareholders (1,607) (95)
---------------- ---------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 283,028 -
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 1,078 95
---------------- ---------------
284,106 95
Cost of shares redeemed (164,635) -
---------------- ---------------
Net increase from Fund share transactions 119,471 95
---------------- ---------------
NET INCREASE IN NET ASSETS 119,471 16
NET ASSETS:
Beginning of period 1,034 1,105
---------------- ---------------
End of period (including overdistributed net investment
income of $0 and $9,875, respectively) $ 120,505 $ 1,121
================ ===============
TRANSACTIONS IN CAPITAL STOCK:
Shares sold 283,028 -
Shares issued in reinvestment of dividends and distributions 1,078 95
---------------- ---------------
284,106 95
Shares redeemed (164,635) -
---------------- ---------------
Net increase 119,471 95
================ ===============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES. CIGNA Money Market Fund, CIGNA S&P 500 Index
Fund and CIGNA Income Fund are separate series of CIGNA Funds Group, 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 S&P 500 Index Fund is to achieve long-term growth of capital by investing
principally in common stocks of companies in the Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), an index emphasizing large-capitalization stocks.
The 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 - Equity securities, including warrants, that are listed
on a national securities exchange or part of the NASDAQ National Market System
are valued at the last sale price or, if there has been no sale that day, at the
last bid price. Debt securities traded in the over-the-counter market, including
listed securities whose primary markets are believed to be over-the-counter, are
valued on the basis of valuations furnished 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.
The S&P 500 Index Fund may purchase Standard & Poor's 500 futures contracts with
the objective of earning returns on its short-term investments equivalent to
returns on the Standard & Poor's 500 Composite Stock Price 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 difference between the value of the contract
at the time it was opened and the value at the time it was closed. Futures
contracts include the risk that a change in the value of the contract may not
correlate with the value of the underlying securities.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for on the trade date (date the order to buy or sell is executed).
Interest income is recorded on the accrual basis. Securities gains and losses
are determined on the basis of identified cost.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
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. For the S&P
500 Index Fund and 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.
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 annual rates of 0.35%, 0.25% and 0.50% applied
to the average daily net assets of the Money Market Fund, S&P 500 Index Fund and
Income Fund, respectively. 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 0.45%, 0.35% and 1.00% of average daily net assets of the Money Market
Fund, S&P 500 Index Fund and Income Fund, respectively. Prior to July 1, 1996,
the expenses of Money Market Fund were limited to 0.7% of average daily net
assets.
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 year ended December
31, 1997, the Money Market Fund, S&P 500 Index Fund and Income Fund paid or
accrued $81,725, $28,167 and $14,267, 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 its affiliates.
Trustees may elect to defer all or a portion of their fees which are invested in
mutual fund shares in accordance with a deferred compensation plan.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
4. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities,
excluding short-term obligations, for the year ended December 31, 1997 were as
follows (shown in thousands):
FUND PURCHASES SALES
- ------------------------------------ ------------------- ------------------
Money Market Fund $ - $ -
S&P 500 Index Fund 99,885 1,301
Income Fund 152 75
There were $152,168 of purchases and $75,172 of sales of U.S. Government
obligations for the Income Fund in 1997. There were $158,587 of purchases of
U.S. Government obligations for the S&P 500 Index Fund in 1997.
5. AGGREGATE GROSS UNREALIZED APPRECIATION/DEPRECIATION. The Funds had aggregate
gross and net unrealized appreciation and depreciation for Federal income tax
purposes as follows (shown in thousands):
<TABLE>
<CAPTION>
UNREALIZED UNREALIZED NET UNREALIZED
FUND APPRECIATION DEPRECIATION DEPRECIATION
- --------------------------------------------------- ------------------- ------------------ ---------------------
<S> <C> <C> <C>
Money Market Fund $ - - -
S&P 500 Index Fund 7,330 $ 2,208 $ 5,122
Income Fund 20 5 15
</TABLE>
As of December 31, 1997, the Money Market, S&P 500 Index and Income Funds' cost
of securities for Federal income tax purposes was $171,147,696, $100,655,977,
and $1,144,179, 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. At
December 31, 1997, affiliates of CIGNA Corporation were the only shareholders of
the Funds.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
7. FINANCIAL HIGHLIGHTS. The following 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
YEAR BEGINNING INVESTMENT ON INVESTMENT INVESTMENT FROM REALIZED TOTAL
ENDED OF PERIOD INCOME INVESTMENTS OPERATIONS INCOME CAPITAL GAINS DISTRIBUTIONS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
1993 g $1.00 $.0237 - $.0237 $.0237 - $.0237
1994 g 1.00 .0337 - .0337 .0337 - .0337
1995 h 1.00 .0516 - .0516 .0516 $.0003 .0519
1996 1.00 .0479 $.0001 .0480 .0479 .0001 .0480
1997 i 1.00 .0513 $.0001 .0514 .0513 .0001 .0514
S&P 500 INDEX FUND
1997 i* $10.00 $.07 $.95 $1.02 $.07 $.00 $.07
INCOME FUND
1993 g $1.02 $.06 $.07 $.13 $.06 $.08 $.14
1994 g 1.01 .06 (.09) (.03) .06 - .06
1995 h 0.92 .06 .09 .15 .05 - .05
1996 g 1.02 .05 (.05) - .05 .03 .08
1997 i 0.94 .05 .04 .09 .05 - .05
<CAPTION>
RATIO OF
NET NET RATIO OF NET
ASSET ASSETS AT EXPENSES INVESTMENT
VALUE, END OF TO INCOME PORTFOLIO
YEAR END TOTAL PERIOD AVERAGE TO AVERAGE TURNOVER
ENDED OF PERIOD RETURN (000) NET ASSETS NET ASSETS RATE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET FUND
1993 g $1.00 2.39 % $20,508 1.00 %a 2.39 %b -
1994 g 1.00 3.43 16,673 1.00 a 3.32 b -
1995 h 1.00 5.33 1,034 0.80 a 5.38 b -
1996 1.00 4.91 120,505 0.45 a 4.95 b -
1997 i 1.00 5.27 171,065 0.44 a 5.14 b
S&P 500 INDEX FUND
1997 i* $10.95 10.23 % $105,845 0.18 %c 0.79 %d 4 %
INCOME FUND
1993 g $1.01 13.36 % $19,910 1.00 %e 6.06 %f 116 %
1994 g .92 -3.12 15,210 1.00 e 6.37 f 8
1995 h 1.02 16.21 1,105 0.95 e 6.50 f 45
1996 g .94 1.36 1,121 1.00 e 5.33 f -
1997 i .98 9.10 1,222 1.00 e 5.42 f 7
</TABLE>
* From commencement of operations, July 1, 1997.
a. Ratios of expenses to average net assets prior to the reduction of
advisory fee were 0.51%, 0.69%, 1.21% and 1.11%, a. respectively, for the
periods ended December 31, 1997, 1996, 1995 and 1994.
b. Ratios of net investment income to average net assets prior to the
reduction of advisory fee were 5.07%, 4.71%, 4.91% and b. 3.22%,
respectively, for the periods ended December 31, 1997, 1996, 1995 and
1994.
c. Ratio of expenses to average net assets prior to the reduction of
advisory fee was 0.36% for the period ended December 31, 1997.
d. Ratio of net investment income to average net assets prior to the
reduction of advisory fee was 0.61% for the period ended December 31,
1997.
e. Ratios of expenses to average net assets prior to the reduction of
advisory fee were 5.31%, 5.62%, 1.37% and 1.15%, e. respectively, for the
periods ended December 31, 1997, 1996, 1995 and 1994.
f. Ratios of net investment income to average net assets prior to the
reduction of advisory fee were 1.11%, 0.72%, 6.08 and f. 6.22%,
respectively, for the periods ended December 31, 1997, 1996, 1995 and
1994.
g. 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.
h. Per share amounts have been calculated using the average shares method,
which more appropriately presents the per share data h. for the period
since the use of the undistributed income method did not accord with the
results of operations.
i. Beginning in 1996, each Fund is required to disclose the average
commission paid per transaction. This amount may vary from period to
period and fund to fund depending on the mix of trades executed in
various markets where trading practices and commission rule structures
may differ. CIGNA S&P 500 Index Fund's average commission rate per share
of $0.022 for 1997. Neither the CIGNA Money Market Fund nor the CIGNA
Income Fund has paid any commissions in 1997 and 1996.
<PAGE>
REPORTS OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of CIGNA Money Market Fund and CIGNA Income
Fund
In our opinion, the accompanying statements of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CIGNA Money Market Fund and CIGNA
Income Fund ("the Funds") (each a series of CIGNA Funds Group) at December 31,
1997, the results of their operations for the year then ended, the changes in
their net assets and the financial highlights for each of the years indicated,
in conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Funds' management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 20, 1998
To the Trustees and Shareholders of CIGNA S&P 500 Index Fund
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CIGNA S&P 500 Index Fund (the
"Fund") (a series of CIGNA Funds Group) at December 31, 1997, the results of its
operations, the changes in its net assets and the financial highlights for the
period July 1, 1997 (commencement of operations) through December 31, 1997, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audit. We
conducted our audit of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 20, 1998
