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As filed with the Securities and Exchange Commission on December 23, 1999.
Securities Act File No. 2-29020
Investment Company Act File No. 811-1646
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OMB Number: U.S. SECURITIES AND EXCHANGE COMMISSION
3235-0307 WASHINGTON, D.C. 20549
Expires: 05/31/00 _______________
Estimated average
Burden hours per FORM N-1A
response 212.80
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
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Pre-Effective Amendment No. __ | |
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Post-Effective Amendment No. 63 |X|
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and
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
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Amendment No. 63 |X|
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(CHECK APPROPRIATE BOX OR BOXES.)
CIGNA FUNDS GROUP
(Exact Name of Registrant as Specified in Charter)
100 FRONT STREET, SUITE 300, WORCESTER, MASSACHUSETTS 01601
(Address of Principal Executive Offices) (Zip Code)
(860) 726-3700
Registrant's Telephone Number, including Area Code
BRIAN D. WELLS, 100 FRONT STREET, SUITE 300
WORCESTER, MASSACHUSETTS 01601
(Name and Address of Agent for Service)
CONTINUOUS
(Approximate Date of Proposed Public Offering)
_______________
It is proposed that this filing will become effective (check appropriate box):
_
|X| Immediately upon filing pursuant to paragraph (b)
-
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| | on (date) pursuant to paragraph (b)
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| | 60 days after filing pursuant to paragraph (a)(1)
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| | on (date) pursuant to paragraph (a)(1)
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| | 75 days after filing pursuant to paragraph (a)(2)
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| | on (date) pursuant to paragraph (a)(2) of rule 485.
-
If appropriate, check the following box:
_
| | This post-effective amendment designates a new effective date for a
- previously filed post-effective amendment.
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PLEASE SEND COMMUNICATIONS TO: JEFFREY S. WINER, ESQ.
c/o CIGNA INVESTMENTS, INC.
900 COTTAGE GROVE ROAD, S-215, HARTFORD CT 06152-2215
(860) 726-5576
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CIGNA FUNDS GROUP
________________________________________________________________________________
CHARTER FUNDS /SM/
PROSPECTUS
FEBRUARY 1, 2000 MONEY MARKET FUND
FIXED INCOME FUNDS
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INVESTMENT GRADE FIXED INCOME FUND
CORE PLUS FIXED INCOME FUND
ULTRA CORE PLUS FIXED INCOME FUND
EMERGING MARKETS DEBT FUND
BALANCED FUND
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EQUITY FUNDS
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LARGE COMPANY STOCK GROWTH FUND
LARGE COMPANY STOCK VALUE FUND
LARGE COMPANY STOCK INDEX FUND
SMALL COMPANY STOCK GROWTH FUND
SMALL COMPANY STOCK VALUE FUND
FOREIGN STOCK FUND
The Securities and Exchange
Commission has not approved or
disapproved these securities or
determined if this prospectus is accurate
or complete. Anyone who tells you
otherwise is committing a crime.
<PAGE>
INTRODUCTION
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CHARTER FUNDS ARE SERIES OF CIGNA FUNDS
GROUP, A FAMILY OF MUTUAL FUNDS. EACH
SERIES, OR PORTFOLIO, HAS ITS OWN INVESTMENT
STRATEGY AND RISK/RETURN PROFILE. THIS
PROSPECTUS DESCRIBES ALL OF THE CLASSES OF
EACH FUND.
TABLE OF CONTENTS
PAGE NUMBER
Summary.......................................................................3
Bar Charts and Performance Tables............................................24
Fees and Expenses of the Funds...............................................26
Investment Information.......................................................30
Management of the Funds......................................................40
Pricing of Shares............................................................46
Purchase and Redemption of Shares............................................46
Dividends and Distributions..................................................52
Tax Matters..................................................................52
Financial Highlights.........................................................53
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FUND SUMMARY
INVESTMENT SUMMARY
MONEY MARKET FUND INVESTMENT OBJECTIVE:
o 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.
PRINCIPAL INVESTMENT STRATEGIES:
o The fund invests exclusively in U.S. dollar denominated
high-quality short-term money market instruments.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o A major change in interest rates or a default
on the fund's investments could cause the value of your
investment in the fund to change.
o The fund is also subject to manager risk, which is the
chance that poor security selection will cause the fund
to underperform other funds with similar investment
objectives
o An investment in the fund is not insured or guaranteed
by the Federal Deposit Insurance Corporation or any
other government agency. Although the fund seeks to
preserve the value of your investment at $1.00 per
share, it is possible to lose money by investing in the
fund.
INVESTMENT GRADE FIXED INCOME
FUND INVESTMENT OBJECTIVE:
o Seeks a high level of total return.
PRINCIPAL INVESTMENT STRATEGIES:
o The fund invests in fixed income securities that, at
the time of purchase, are rated investment grade by
either Moody's Investor Service, Inc. (Moody's) or
Standard and Poor's or a similar rating agency or, if
unrated, are judged by CIGNA Investments to be of
comparable quality. If a security is downgraded to a
below investment grade rating, the fund may, in CIGNA
Investments' discretion, continue to hold the
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security. The fund will normally invest at least 65%
of its assets in investment grade fixed income
securities.
o While seeking high total return, CIGNA Investments will
also seek to maintain an average portfolio yield
consistent with the Lehman Brothers Aggregate Bond
Index. CIGNA Investments will seek capital appreciation
by identifying securities (primarily fixed income
securities) through its sector allocation and security
selection process which, in its opinion, may increase
in value.
o When purchasing or selling portfolio securities, CIGNA
Investments will analyze market themes, individual
security structural features, pricing, trading
opportunities and issuer credit quality.
o CIGNA Investments may allocate fund assets across
different market sectors and maturities. The average
portfolio duration of this fund normally varies between
85% and 115% of the duration of the Lehman Brothers
Aggregate Bond Index. As of November 30, 1999, the
duration of the index was 4.94 years. Duration is a
measure of the expected life of a fixed income security
that is used to determine the sensitivity of the
security's price to changes in interest rates.
o The fund may invest up to 20% of fund assets in foreign
debt securities of private and governmental issuers
denominated in foreign currencies. Dollar denominated
foreign securities do not count against this
limitation.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
The fund is subject to the following principal
investment
risks:
o This fund's principal risk factor is market risk.
o Market risk associated with bonds is related to the
level of interest rates. Generally, as interest rates
rise, the market price of a bond falls. (A 7% bond is
less valuable once interest rates have risen to 8% and
an investor can get a higher return elsewhere.) As
interest rates fall, however, the market price of a
bond rises. This "inverse" relationship is magnified
for bonds with longer maturities. (A bond's maturity is
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the length of time remaining before the borrower must
pay the bondholder the face amount of the bond.)
o There are additional risks with investing in foreign
countries, such as economic, currency, information,
political and transaction risks. As a result of these
additional risks, the fund may be more volatile than a
fund that invested in domestic fixed-income securities
only.
o Credit risk, which is the risk that the issuer or
guarantor of a fixed income security is unable or
unwilling to meeting its obligations to pay principal
and interest.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
o Investment style risk, which is the risk that returns
from investment grade fixed income securities will
trail returns from other asset classes or the overall
securities markets.
o Sector allocation risk, which is the risk that returns
from certain sectors of fixed income securities will
trail the returns from other sectors.
o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
CORE PLUS FIXED INCOME
FUND INVESTMENT OBJECTIVE:
o Seeks a high level of total return.
PRINCIPAL INVESTMENT STRATEGIES:
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o The fund invests primarily in fixed income securities
that, at the time of purchase, are rated investment
grade by either Moody's or Standard and Poor's or a
similar rating agency or, if unrated, are judged by
CIGNA Investments to be of comparable quality.
Normally, the fund will invest at least 65% of its
assets in these securities.
o While seeking high total return, CIGNA Investments will
also seek to maintain an average portfolio yield
consistent with the Lehman Brothers Aggregate Bond
Index. CIGNA Investments will seek capital appreciation
by identifying securities (primarily fixed income
securities) through its sector allocation and security
selection process which, in its opinion, may increase
in value.
o The fund may invest up to 25% of its assets in high
yield, below investment-grade bonds (which may include
securities in default). These securities are commonly
called "junk bonds."
o When purchasing or selling securities, CIGNA
Investments will analyze market themes, individual
security structural features, pricing, trading
opportunities and issuer credit quality.
o CIGNA Investments may allocate fund assets across
different market sectors and maturities. The average
portfolio duration of this fund normally varies between
85% and 115% of the duration of the Lehman Brothers
Aggregate Bond Index. As of November 30, 1999, the
duration of the index was 4.94 years. Duration is a
measure of the expected life of a fixed income security
that is used to determine the sensitivity of the
security's price to changes in interest rates.
o Up to 20% of fund assets may be invested in foreign
debt securities of private and governmental issuers
denominated in foreign currencies. Dollar denominated
foreign securities do not count against this
limitation.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
The fund is subject to the following principal investment
risks:
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<PAGE>
o This fund's principal risk factor is market risk.
o Market risk associated with bonds is related to the
level of interest rates. Generally, as interest rates
rise, the market price of a bond falls. (A 7% bond is
less valuable once interest rates have risen to 8% and
an investor can get a higher return elsewhere.) As
interest rates fall, however, the market price of a
bond rises. This "inverse" relationship is magnified
for bonds with longer maturities. (A bond's maturity is
the length of time remaining before the borrower must
pay the bondholder the face amount of the bond.)
o There are additional risks with investing in foreign
countries, such as economic, currency, information,
political and transaction risks. As a result of these
additional risks, the fund may be more volatile than a
fund that invested in domestic fixed-income securities
only.
o Compared to higher-quality debt securities, below
investment-grade bonds involve greater risk of default
or price changes due to changes in the credit quality
of the issuer. The value of below investment-grade
bonds often fluctuates in response to company,
political or economic developments and can decline
significantly over short periods of time or during
periods of general or regional economic difficulty.
During those times, the bonds could be difficult to
value or sell. These risks are greater for securities
in default.
o Credit risk, which is the risk that the issuer or
guarantor of a fixed income security is unable or
unwilling to meet its obligations to pay principal and
interest.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
o Investment style risk, which is the risk that returns
from investment grade and below investment-grade fixed
income securities will trail returns from other asset
classes or the overall securities markets.
o Sector allocation risk, which is the risk that returns
from certain sectors of fixed income securities will
trail the returns from other sectors.
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o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
ULTRA CORE PLUS FIXED
INCOME FUND INVESTMENT OBJECTIVE:
o Seeks a high level of total return.
PRINCIPAL INVESTMENT STRATEGIES:
o The fund invests primarily in fixed income securities
that, at the time of purchase, are rated investment
grade by either Moody's or Standard and Poor's or a
similar rating agency or, if unrated, are judged by
CIGNA Investments to be of comparable quality.
Normally, the fund will invest at least 65% of its
assets in these securities.
o While seeking high total return, CIGNA Investments will
also seek to maintain an average portfolio yield
consistent with a broad fixed income index such as the
Lehman Brothers Aggregate Bond Index. CIGNA Investments
will seek capital appreciation by identifying
securities (primarily fixed income securities) through
its sector allocation and security selection process
which, in its opinion, may increase in value.
o The fund may invest up to 35% of its assets in below
investment-grade bonds (which may include securities in
default). These securities are commonly called "junk
bonds."
o When purchasing or selling securities, CIGNA
Investments will analyze market themes, individual
security structural features, pricing, trading
opportunities and issuer credit quality.
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o CIGNA Investments may allocate fund assets across
different market sectors and maturities. The average
portfolio duration of this fund normally varies between
85% and 115% of the duration of the Lehman Brothers
Aggregate Bond Index. As of November 30, 1999, the
duration of the index was 4.94%. Duration is a measure
of the expected life of a fixed income security that is
used to determine the sensitivity of the security's
price to changes in interest rates.
o Up to 25% of fund assets may be invested in foreign
debt securities of private and governmental issuers
denominated in foreign currencies. Dollar denominated
foreign securities do not count against this
limitation.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
The fund is subject to the following principal investment
risks:
o This fund's principal risk factor is market risk.
o Market risk associated with bonds is related to the
level of interest rates. Generally, as interest rates
rise, the market price of a bond falls. (A 7% bond is
less valuable once interest rates have risen to 8% and
an investor can get a higher return elsewhere.) As
interest rates fall, however, the market price of a
bond rises. This "inverse" relationship is magnified
for bonds with longer maturities. (A bond's maturity is
the length of time remaining before the borrower must
pay the bondholder the face amount of the bond.)
o There are additional risks with investing in foreign
countries, such as economic, currency, information,
political and transaction risks. As a result of these
additional risks, the fund may be more volatile than a
fund that invested in domestic fixed-income securities
only.
o Compared to higher-quality debt securities, below
investment-grade bonds involve greater risk of default
or price changes due to changes in the credit quality
of the issuer. The value of below investment-grade
bonds often fluctuates in response to company,
political or economic developments and can decline
significantly over short periods of time or during
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periods of general or regional economic difficulty.
During those times, the bonds could be difficult to
value or sell. . These risks are greater for securities
in default. The Ultra Core Plus Fixed Income Fund
carries more of these risks than the Core Plus Fixed
Income Fund, since the Ultra Core Plus Fixed Income
Fund may invest a greater percentage of its assets in
below investment-grade bonds
o Credit risk, which is the risk that the issuer or
guarantor of a fixed income security is unable or
unwilling to meeting its obligations to pay principal
and interest.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
o Investment style risk, which is the risk that returns
from investment grade and below investment-grade fixed
income securities will trail returns from other asset
classes or the overall securities markets.
o Sector allocation risk, which is the risk that returns
from certain sectors of fixed income securities will
trail the returns from other sectors.
o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
You can lose money by investing in the fund. The fund may not achieve its
investment objectives.
EMERGING MARKETS DEBT
FUND INVESTMENT OBJECTIVE:
o Seeks a high level of total return.
PRINCIPAL INVESTMENT STRATEGIES:
o The fund invests primarily in government bonds of
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countries with emerging economies, which generally are
those countries included in the J.P. Morgan Emerging
Markets Bond Index Plus (EMBI+). Normally, the fund
will invest at least 65% of its assets in these
securities.
o While seeking high total return, CIGNA Investments will
also seek to maintain an average portfolio yield
consistent with the EMBI+. CIGNA Investments will seek
capital appreciation by identifying securities through
its sector allocation and security selection process
which, in its opinion, may increase in value.
o The fund may invest up to 35% of its assets in emerging
market corporate bonds, which are bonds issued by
companies domiciled or organized in countries included
in the EMBI+.
o The fund may invest up to 10% of its assets in U.S.
Government direct obligations, U.S. Government
agencies' securities and U.S. corporate bonds. U.S.
Treasury securities that collateralize Brady Bonds do
not count against this limitation.
o Up to 100% of fund assets may be invested in foreign
debt securities denominated in foreign currencies. Up
to 30% of fund assets may be invested in foreign
securities denominated in either the Euro or in Yen. No
more than 20% of fund assets will be invested in
foreign securities denominated in any other single
foreign currency.
o When purchasing or selling securities, CIGNA
Investments will analyze market themes, economic and
political developments, individual security structural
features, cash flow risk and relative value, trading
opportunities and issuer credit quality.
o CIGNA Investments may allocate fund assets across
different market sectors and maturities. The average
portfolio duration of this fund normally varies between
85% and 115% of the duration of the EMBI+. As of
November 30, 1999, the duration of the index was 4.38
years. Duration is a measure of the expected life of a
fixed income security that is used to determine the
sensitivity of the security's
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price to changes in interest rates.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
The fund is subject to the following principal investment
risks:
o This fund's principal risk factor is market risk.
o Market risk associated with bonds is related to the
level of interest rates. Generally, as interest rates
rise, the market price of a bond falls. (A 7% bond is
less valuable once interest rates have risen to 8% and
an investor can get a higher return elsewhere.) As
interest rates fall, however, the market price of a
bond rises. This "inverse" relationship is magnified
for bonds with longer maturities. (A bond's maturity is
the length of time remaining before the borrower must
pay the bondholder the face amount of the bond.)
o There are additional risks with investing in foreign
countries, such as economic, currency, legal
information, political and transaction risks. As a
result of these additional risks, the fund may be more
volatile than a fund that invested in domestic
fixed-income securities only.
o Compared to U.S. debt securities and foreign developed
market debt securities, emerging market debt securities
often exhibit pronounced price volatility, even in
instances where emerging market securities have the
same rating and maturity as their U.S. counterparts.
The value of emerging market debt securities often
fluctuates in response to political, economic, or
company developments and can decline significantly over
short periods of time or during periods of general or
regional economic difficulty. During those times, the
securities could be difficult to value or sell.
o Credit risk, which is the risk that the issuer or
guarantor of a fixed income security, or the
counterparty to a derivative contract, is unable or
unwilling to meeting its financial obligations.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
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o Investment style risk, which is the risk that returns
from emerging market securities will trail returns from
other asset classes or the overall securities markets.
o Sector allocation risk, which is the risk that returns
from certain emerging markets will trail the returns
from other sectors.
o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
BALANCED FUND INVESTMENT OBJECTIVE:
o Seeks a high total return through capital appreciation
and current income.
PRINCIPAL INVESTMENT STRATEGIES:
o Invests in a combination of equity securities
(primarily common stocks, and to a lesser extent,
securities convertible into common stocks), and fixed
income securities.
o At least 30% of fund assets is invested in each of the
following:
o equities
o fixed and variable income securities
o In selecting common stocks for the fund, the fund
generally chooses stocks with a yield higher than the
overall equity market. The fund uses a value-based
strategy, focusing on a company's dividend history and
current financial situation.
o The income securities the fund will invest in
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primarily will include obligations of the U.S.
government and its agencies and investment grade
corporate bonds.
o The fund may invest up to 25% of its assets in foreign
equity and debt securities. Generally, the foreign debt
securities the fund will invest in will be dollar
denominated bonds issued by foreign governments.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk.
o Market risk associated with equity securities such as
common stocks is related to stock-market movements. In
general, stock values fluctuate in response to
activities specific to a company, as well as general
market, economic and political conditions. Stock prices
can fluctuate widely in response to these factors.
o A value stock may never reach what the manager believes
is its full value, or may even go down in price. In the
long run, the fund may produce more modest returns than
riskier stock funds as a trade-off for this potentially
lower risk. The amount of income you receive from the
fund will also fluctuate.
o Market risk associated with bonds is related to the
level of interest rates. Generally, as interest rates
rise, the market price of a bond falls. (A 7% bond is
less valuable once interest rates have risen to 8% and
an investor can get a higher return elsewhere.) As
interest rates fall, however, the market price of a
bond rises. This "inverse" relationship is magnified
for bonds with longer maturities. (A bond's maturity is
the length of time remaining before the borrower must
pay the bondholder the face amount of the bond.)
o There are additional risks with investing in foreign
countries, specifically economic, currency,
information, political and transaction risks. As a
result of these additional risks, the fund may be more
volatile than a fund that invested in domestic equity
and fixed income securities only.
o Credit risk, which is the risk that the issuer or
guarantor of a fixed income security is unable or
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<PAGE>
unwilling to meeting its obligations to pay principal
and interest.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
o Investment style risk, which is the risk that returns
from value stocks and government and investment grade
bonds in which the fund invests will trail returns from
other asset classes or the overall stock market.
o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
LARGE COMPANY STOCK
GROWTH FUND INVESTMENT OBJECTIVE:
Seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
o Invests primarily in equity securities of U.S. and, to
a limited extent, foreign companies, that exhibit
strong or accelerating earnings growth. Normally, at
least 65% of fund assets will be invested in these
securities. The universe of eligible companies in which
the fund invests generally includes those with market
capitalizations of $1 billion or more.
o The fund focuses on companies with consistent or rising
earnings growth records and compelling business
strategies. When purchasing or selling securities, the
fund's investment manager studies company developments,
including business strategy, management focus and
financial results, to identify
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<PAGE>
companies with earnings growth and business momentum.
o The fund's investment manager emphasizes individual
security selection and may focus the fund's holdings
within the limits permissible for a diversified fund.
o The fund emphasizes securities that, in the investment
manager's opinion, have the potential to rise in price
rather than pay out income.
PRINCIPAL RISK OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk. The
value of your investment will fluctuate in response to
stock market movements. In general, stock values
fluctuate in response to activities specific to a
company, as well as general market, economic and
political conditions. Stock prices can fluctuate widely
in response to these factors.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
o Investment style risk, which is the risk that returns
from large capitalization growth-oriented equity
securities will trail returns from other asset classes
or the overall stock market.
o Risks associated with investing in foreign countries,
such as economic, currency, information, political and
transaction risks. As a result of these additional
risks, the fund may be more volatile than a fund that
invested in domestic securities only.
o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
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<PAGE>
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
LARGE COMPANY
STOCK VALUE FUND INVESTMENT OBJECTIVE:
Seeks long-term capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES
o Invests primarily in common stocks of established,
large U.S. companies with a market capitalization above
$5 billion. Normally, the fund will invest at least 65%
of its assets in the common stocks of these companies.
Generally, the investment manager purchases stocks when
it deems them undervalued relative to their present
and/or future prospects and after the stocks have
declined from recent highs. The fund follows a "bottom
up" research approach, and focuses on identifying
common stocks whose market price is below what it
believes is their present or future value.
o The fund will generally sell a security when a
fundamental weakness or the investment manager's
anticipation of fundamental weakness or some other
negative factor causes the security to fail to meet the
fund's expectation's, or the security rises in price to
a level that the investment manager believes is its
fair value.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk. The
value of your investment will fluctuate in response to
stock-market movements. In general, stock values
fluctuate in response to activities specific to a
company, as well as general market, economic and
political conditions. Stock prices can fluctuate widely
in response to these factors.
o A value stock may never reach what the manager believes
is its full value, or may even go down in price. In the
long run, the fund may produce more modest returns than
riskier stock funds as a trade-off for this potentially
lower risk.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
-17-
<PAGE>
o Investment style risk, which is the risk that returns
from large capitalization value stocks will trail
returns from other asset classes or the overall stock
market.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
LARGE COMPANY STOCK
INDEX FUND INVESTMENT OBJECTIVE:
o 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, an
index emphasizing large-capitalization stocks.
PRINCIPAL INVESTMENT STRATEGIES:
o The fund attempts to replicate the composition and
total return, reduced by fund expenses, of the S&P 500
Index. Normally, the fund will invest at least 80% of
its total assets in common stock of companies which
compose the S&P 500 Index.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk, which
is the possibility that common stock prices will
decline, sometimes substantially, over short or
extended periods. The stock market tends to be
cyclical, with periods when stock prices generally
decline.
o The fund is subject to tracking risk, which is the risk
that the fund's returns will be less than the returns
of the S&P 500 Index.
o The fund is also subject to investment style risk,
which is the risk that returns from large
capitalization stocks will trail returns from other
asset classes or the overall stock market.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
SMALL COMPANY
STOCK GROWTH FUND INVESTMENT OBJECTIVE:
o Seeks long-term capital appreciation.
-18-
<PAGE>
PRINCIPAL INVESTMENT STRATEGIES:
o Invests primarily in the common and preferred stocks of
U.S. companies with market capitalizations between $30
million and $2 billion. Normally, the fund will invest
at least 65% of its assets in these securities. The
fund focuses on growing companies involved in new
product development and technological breakthroughs.
o The fund's investment manager:
o Looks across all sectors of the stock market to
find companies that meet the fund's investment
criteria - including strong, sustainable unit
growth, consistent earnings, proprietary
products and services and minimal institutional
ownership, and
o Looks for stocks that have the potential for
price appreciation of 50% over the following 18
months and price/earnings ratios at a discount
relative to their earnings growth rates.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk. The
value of your investment will fluctuate in response to
stock market movements. In general, stock values
fluctuate in response to activities specific to a
company, as well as general market, economic and
political conditions. Stock prices can fluctuate widely
in response to these factors.
o The fund's share price may fluctuate more than that of
funds primarily invested in stocks of mid-sized and
large companies. Small company securities may
under-perform as compared to the securities of larger
companies. They may also pose greater risk due to
narrow product lines, limited financial resources, less
depth in management or a limited trading market for
their stocks.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
-19-
<PAGE>
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
SMALL COMPANY STOCK
VALUE FUND INVESTMENT OBJECTIVE:
Seeks capital appreciation.
PRINCIPAL INVESTMENT STRATEGIES:
o Invests primarily in common stocks of small U.S.
companies with market capitalizations at the time of
initial purchase of less than $1 billion whose stock
prices are believed to be undervalued. Normally, the
fund will invest at least 65% of its assets in these
securities. The fund will emphasize at time of purchase
companies that have market capitalizations of less than
$800 million.
o The fund's securities selection focuses on companies
that are out of favor with markets or have not yet been
discovered by the broader investment community.
o The fund generally looks for companies with:
o A low price relative to their assets, earnings,
cash flow or business franchise;
o Products and services that give them a competitive
advantage; and
o Strong balance sheets and strong management.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk. The
value of your investment will fluctuate in response to
stock-market movements. In general, stock values
fluctuate in response to activities specific to a
company, as well as general market, economic and
political conditions. Stock prices can fluctuate widely
in response to these factors.
o The fund's share price may fluctuate more than that of
funds primarily invested in stocks of mid-sized and
large companies. Small company securities may
under-perform as compared to the securities of larger
-20-
<PAGE>
companies. They may also pose greater risk due to
narrow product lines, limited financial resources, less
depth in management or a limited trading market for
their stocks.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
FOREIGN STOCK
FUND INVESTMENT OBJECTIVE:
Seeks long-term capital appreciation
PRINCIPAL INVESTMENT STRATEGIES:
o The fund invests primarily in common stocks of
well-established companies located outside the U.S.
o The fund considers a company to be located outside the
U.S. if:
o It is organized under the laws of another country;
o The principal trading market for the company's
securities is in another country; or
o The company derives at least 50% of its revenues
or profits from operations in another country or
has at least 50% of its assets in another country.
o The fund emphasizes medium to large market
capitalization companies (market capitalizations above
$1 billion at time of purchase) that the investment
manager believes are best positioned to take advantage
of global change. Normally, the fund will invest at
least 65% of its assets in companies located outside of
the U.S. Normally, the fund will not invest in the
stocks of companies located within the U.S. The fund
will typically hold stocks from 70 to 100 issuers.
o The investment manager focuses on companies with
equity securities (primarily common stock) it considers
fundamentally undervalued relative to their long-term
prospective earnings growth rate, their historic
valuation levels and their competitors.
o Normally, up to 15% of fund assets may be invested
-21-
<PAGE>
in companies located in emerging markets. Emerging
market countries are countries that are included in the
Morgan Stanley Capital International Emerging Markets
Index.
PRINCIPAL RISKS OF INVESTING IN THE FUND:
o This fund's principal risk factor is market risk. The
value of your investment will fluctuate in response to
stock market movements. In general, stock values
fluctuate in response to activities specific to a
company, as well as general market, economic and
political conditions. Stock prices can fluctuate widely
in response to these factors.
o There are additional risks with investing in foreign
countries, especially in developing countries
-specifically, economic, currency, information,
political and transaction risks. As a result of these
additional risks, the fund may be more volatile than a
domestic stock fund.
o Investing in emerging market countries poses risks in
addition to those of foreign investing. Emerging
markets may be more likely to experience volatility
than more developed countries.
o Manager risk, which is the chance that poor security
selection will cause the fund to underperform other
funds with similar investment objectives.
o Investment style risk, which is the risk that returns
from foreign stocks will trail returns from other asset
classes or the overall stock market. Foreign stocks may
not move in concert with the U.S. markets.
o Currency risk, which is the risk that when the fund
invests in securities denominated in foreign
currencies, those currencies will decline in value
relative to the U.S. dollar, or in the case of hedging
positions, that the U.S. dollar will decline in value
relative to the currency being hedged. Currency rates
in foreign countries may fluctuate significantly over
short periods of time for reasons such as changes in
interest rates, government intervention or political
developments. As a result, the fund's investments in
foreign currency-denominated securities may reduce the
returns of the fund.
-22-
<PAGE>
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
-23-
<PAGE>
BAR CHARTS AND PERFORMANCE TABLES
The bar charts and tables shown below provide some indication of the risks of
investing in the funds. The bar charts show changes in the performance of the
funds' shares from year to year over a ten-year period, or life of the fund,
whichever is shorter.
The tables show how the average annual returns of the funds' institutional class
shares, for one, five and ten years (or life of the fund, whichever is shorter)
compare to those of a broad measure of market performance. The returns for the
other classes will be lower than the institutional class returns shown in the
bar chart, due to higher expenses of the other classes.
A fund's past performance does not necessarily indicate how the fund will
perform in the future.
There are bar charts and tables only for the Money Market Fund and the Large
Company Stock Index Fund (formerly known as the S&P 500 Index Fund), since the
other funds offered by this prospectus did not commence operations until
February 2000.
[THE FOLLOWING INFORMATION APPEARS AS A BAR CHART GRAPHIC]
Money Market Fund - Annual Total Return
8.96% 7.82% 5.75% 3.36% 2.39% 3.43% 5.33% 4.91% 5.27% 5.18%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
During the ten-year period shown in the bar chart, the highest quarterly return
for the Money Market Fund was 2.35% (for the quarter ended 6/30/89) and the
lowest quarterly return was 0.55% (for the quarter ended 12/31/93). The
quarterly return for the quarter ended 9/30/99 was 1.21%.
MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 1998 (COMMENCED OPERATIONS 12/21/81)
Past 1 year Past 5 years Past 10 years
Money Market Fund 5.18% 4.82% 5.22%
3-Month U.S. Treasury bills 5.33% 5.31% 5.57%
The Money Market Fund's 7-day annualized yield as of November 30, 1999 was
5.17%.
-24-
<PAGE>
[THE INFORMATION SET FORTH BELOW APPEARS AS A BAR CHART GRAPHIC AND IS
EXPRESSED AS TOTAL RETURN]
LARGE COMPANY STOCK INDEX
The Money Market Fund's 7-
28.28% day annualized yield as of
1998 November 30, 1999 was
5.17%
During the period shown in the bar chart, the highest quarterly return for the
Large Company Stock Index Fund was 23.31% (for the quarter ended 12/31/98) and
the lowest quarterly return was -10.03% (for the quarter ended 9/30/98). The
quarterly return for the quarter ended 9/30/99 was 6.28%.
LARGE COMPANY STOCK INDEX FUND AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 1998 (COMMENCED OPERATIONS JULY 1, 1997)
Past 1 year Life of Fund
Large Company Stock Index Fund 28.28% 25.95%
S&P 500 Index 28.57% 26.22%
-25-
<PAGE>
FEES AND EXPENSES OF THE FUNDS
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUNDS.
SHAREHOLDER FEES (ALL FUNDS AND CLASSES)
(FEES PAID DIRECTLY FROM YOUR
INVESTMENT)
________________________________________________________________________________
Maximum sales charge (load) imposed on
Purchases (as a percentage of offering
price) None
Maximum deferred sales charge (load) None
Redemption fee (as a percentage of
Amount redeemed) None
Exchange fee None
<TABLE>
<CAPTION>
INVESTMENT CORE
ANNUAL FUND OPERATING EXPENSES GRADE PLUS ULTRA CORE
(EXPENSES THAT ARE DEDUCTED FROM MONEY FIXED FIXED PLUS EMERGING
FUND ASSETS) MARKET INCOME INCOME FIXED INCOME MARKETS BALANCED
INSTITUTIONAL CLASS: FUND FUND FUND FUND DEBT FUND FUND
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Management Fees .35% .60% .60% .60% 1.00% .75%
Distribution & Service (12b-1) Fees None None None None None None
Other Expenses/1/ .16% .20% .20% .20% .20% .26%
Total Annual Fund Operating Expenses .51% .80% .80% .80% 1.20% 1.01%
Waiver of Fund Expenses /2/ ( .06%) ( .35%) ( .35%) ( .30%) ( .55%) ( .21%)
Total Actual Fund Operating Expenses .45% .45% .45% .50% .65% .80%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES LARGE LARGE LARGE SMALL SMALL
(EXPENSES THAT ARE DEDUCTED FROM COMPANY COMPANY COMPANY COMPANY COMPANY FOREIGN
FUND ASSETS) STOCK STOCK STOCK STOCK STOCK STOCK
INSTITUTIONAL CLASS: GROWTH FUND VALUE FUND INDEX FUND GROWTH FUND VALUE FUND FUND
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Management Fees .80% .75% .25% 1.00% 1.00% 1.00%
Distribution & Service (12b-1) Fees None None None None None None
Other Expenses/1/ .24% .24% .14% .26% .26% .30%
Total Annual Fund Operating Expenses 1.04% .99% .39% 1.26% 1.26% 1.30%
Waiver of Fund Expenses/2/ ( .24%) ( .19%) ( .14%) ( .21%) ( .21%) ( .25%)
Total Actual Fund Operating Expenses .80% .80% .25% 1.05% 1.05% 1.05%
</TABLE>
-26-
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM MONEY
FUND ASSETS) MARKET BALANCED
PREMIER CLASS FUND FUND
__________________________________________________________________________
Management Fees .35% .75%
Distribution & Service (12b-1) Fees None None
Other Expenses/1/ .41% .46%
Total Annual Fund Operating Expenses .76% 1.21%
Waiver of Fund Expenses/2/ ( .06%) ( .21%)
Total Actual Fund Operating Expenses .70% 1.00%
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES LARGE LARGE LARGE SMALL SMALL
(EXPENSES THAT ARE DEDUCTED FROM COMPANY COMPANY COMPANY COMPANY COMPANY FOREIGN
FUND ASSETS) STOCK STOCK STOCK STOCK STOCK STOCK
PREMIER CLASS GROWTH FUND VALUE FUND INDEX FUND GROWTH FUND VALUE FUND FUND
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Management Fees .80% .75% .25% 1.00% 1.00% 1.00%
Distribution & Service (12b-1) Fees None None None None None None
Other Expenses/1/ .44% .44% .34% .46% .46% .55%
Total Annual Fund Operating Expenses 1.24% 1.19% .59% 1.46% 1.46% 1.55%
Waiver of Fund Expenses/2/ ( .24%) ( .19%) ( .24%) ( .21%) ( .21%) ( .30%)
Total Actual Fund Operating Expenses 1.00% 1.00% .35% 1.25% 1.25% 1.25%
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT CORE
ANNUAL FUND OPERATING EXPENSES GRADE PLUS
(EXPENSES THAT ARE DEDUCTED FROM FIXED FIXED ULTRA CORE PLUS EMERGING
FUND ASSETS) INCOME INCOME FIXED INCOME MARKETS
PREMIER CLASS - FIXED INCOME FUND FUND FUND DEBT FUND
_____________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C>
Management Fees .60% .60% .60% 1.00%
Distribution & Service (12b-1) Fees .15% .15% .15% .15%
Other Expenses/1/ .45% .45% .45% .45%
Total Annual Fund Operating Expenses 1.20% 1.20% 1.20% 1.60%
Waiver of Fund Expenses/2/ ( .35%) ( .35%) ( .30%) (.55%)
Total Actual Fund Operating Expenses .85% .85% .90% 1.05%
</TABLE>
-27-
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT CORE
ANNUAL FUND OPERATING EXPENSES GRADE PLUS
(EXPENSES THAT ARE DEDUCTED FROM MONEY FIXED FIXED ULTRA CORE PLUS EMERGING
FUND ASSETS) MARKET INCOME INCOME FIXED INCOME MARKETS BALANCED
RETAIL CLASS: FUND FUND FUND FUND DEBT FUND FUND
______________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Management Fees .35% .60% .60% .60% 1.00% .75%
Distribution & Service (12b-1) Fees .25% .25% .25% .25% .25% .25%
Other Expenses/1/ .41% .45% .45% .45% .45% .46%
Total Annual Fund Operating Expenses 1.01% 1.30% 1.35% 1.30% 1.70% 1.46%
Waiver of Fund Expenses/2/ ( .06%) ( .35%) ( .35%) ( .30%) ( .55%) ( .21%)
Total Actual Fund Operating Expenses .95% .95% .95% 1.00% 1.15% 1.25%
</TABLE>
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING EXPENSES LARGE LARGE LARGE SMALL SMALL
(EXPENSES THAT ARE DEDUCTED FROM COMPANY COMPANY COMPANY COMPANY COMPANY FOREIGN
FUND ASSETS) STOCK STOCK STOCK STOCK STOCK STOCK
RETAIL CLASS: GROWTH FUND VALUE FUND INDEX FUND GROWTH FUND VALUE FUND FUND
__________________________________________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
Management Fees .80% .75% .25% 1.00% 1.00% 1.00%
Distribution & Service (12b-1) Fees .25% .25% .25% .25% .25% .25%
Other Expenses/1/ .44% .44% .34% .46% .46% .55%
Total Annual Fund Operating Expenses 1.49% 1.44% .84% 1.71% 1.71% 1.80%
Waiver of Fund Expenses/2/ ( .24%) ( .19%) ( .24%) ( .21%) ( .21%) ( .30%)
Total Actual Fund Operating Expenses 1.25% 1.25% .60% 1.50% 1.50% 1.50%
</TABLE>
(1) Other expenses for all funds except Money Market and S&P 500 Index
Funds are based on estimated amounts for the current fiscal year.
(2) CIGNA Investments has contractually agreed, until April 30, 2001, to
waive management fees and reimburse the funds if and to the extent
total fund operating expenses exceed the following percentages of
average daily net assets for each fund:
<TABLE>
<S> <C> <C> <C>
INSTITUTIONAL PREMIER RETAIL
Money Market Fund .45% .70% .95%
Investment Grade Fixed Income Fund .45% .85% .95%
Core Plus Fixed Income Fund .45% .85% .95%
Ultra Core Plus Fixed Income Fund .50% .90% 1.00%
Emerging Markets Debt Fund .65% 1.05% 1.15%
Balanced Fund .80% 1.00% 1.25%
Large Company Stock Growth Fund .80% 1.00% 1.25%
Large Company Stock Value Fund .80% 1.00% 1.25%
Large Company Stock Index Fund .25% .35% .60%
Small Company Stock Growth Fund 1.05% 1.25% 1.50%
Small Company Stock Value Fund 1.05% 1.25% 1.50%
Foreign Stock Fund 1.05% 1.25% 1.50%
</TABLE>
Reimbursement arrangements can decrease a fund's expenses and boost its
performance.
-28-
<PAGE>
CIGNA Investments retains the ability to be repaid by a fund if a fund's
expenses fall below the specified limit prior to the end of the fiscal year or
within three years after CIGNA Investments waives management fees or reimburses
fund operating expenses.
EXAMPLE
These Examples are intended to help you compare the cost of investing in the
funds with the cost of investing in other mutual funds.
The example assumes that:
o You invest $10,000 in the fund for the time periods indicated;
o Your investment has a 5% return each year; and
o Each fund's operating expenses reflect contractual expense
limitations only for the first year. After the first year, the
example does not take into consideration CIGNA Investment's
agreement to reduce fund expenses, and assumes that a fund's
operating expenses remain the same in each year of the
applicable period.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
<TABLE>
<CAPTION>
INSTITUTIONAL CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund $ 46 $157 $279 $636
Investment Grade Fixed Income Fund $ 46 $221
Core Plus Fixed Income Fund $ 46 $221
Ultra Core Plus Fixed Income Fund $ 51 $226
Emerging Markets Debt Fund $ 66 $327
Balanced Fund $ 82 $301
Large Company Stock Growth Fund $ 82 $307
Large Company Stock Value Fund $ 82 $297
Large Company Stock Index Fund $ 26 $111 $205 $482
Small Company Stock Growth Fund $ 107 $379
Small Company Stock Value Fund $ 107 $379
Foreign Stock Fund $ 107 $388
</TABLE>
<TABLE>
<CAPTION>
PREMIER CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund $ 72 $237 $417 $939
Investment Grade Fixed Income Fund $ 87 $347
Core Plus Fixed Income Fund $ 87 $347
Ultra Core Plus Fixed income Fund $ 92 $352
Emerging Markets Debt Fund $ 107 $453
Balanced Fund $ 102 $364
Large Company Stock Growth Fund $ 102 $370
Large Company Stock Value Fund $ 102 $360
Large Company Stock Index Fund $ 36 $165 $307 $723
Small Company Stock Growth Fund $ 127 $442
Small Company Stock Value Fund $ 127 $442
Foreign Stock Fund $127 $461
</TABLE>
-29-
<PAGE>
<TABLE>
<CAPTION>
RETAIL CLASS 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund $ 97 $316 $553 $1,234
Investment Grade Fixed Income Fund $ 97 $379
Core Plus Fixed Income Fund $ 97 $379
Ultra Core Plus Fixed Income Fund $ 102 $383
Emerging Markets Debt Fund $ 117 $484
Balanced Fund $ 127 $442
Large Company Stock Growth Fund $ 127 $448
Large Company Stock Value Fund $ 127 $437
Large Company Stock Index Fund $ 61 $245 $444 $1,025
Small Company Stock Growth Fund $ 153 $519
Small Company Stock Value Fund $ 153 $519
Foreign Stock Fund $ 153 $538
</TABLE>
INVESTMENT INFORMATION - OBJECTIVES, STRATEGIES AND RELATED RISKS
- --------------------------------------------------------------------------------
MONEY MARKET FUND
The fund's objective 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 high quality
money market instruments. The fund invests in money market instruments such as
U.S. Government direct obligations and U.S. Government agencies' securities. In
addition, the fund may invest in other money market instruments such as
asset-backed securities, bankers' acceptances, certificates of deposit,
commercial loan participations, repurchase agreements, time deposits and
commercial paper, all of which will be denominated in U.S. dollars. Bankers'
acceptances, certificates of deposit and time deposits may be purchased from
U.S. or foreign banks. The fund purchases commercial paper primarily from U.S.
issuers but may purchase this type of security from foreign issuers so long as
it is denominated in U.S. dollars.
The fund may invest 25% or more of its total assets in commercial paper issued
by finance companies. The finance companies in which the fund intends to invest
can be divided into two categories, commercial finance companies and consumer
finance companies. Commercial finance companies are principally engaged in
lending to corporations or other businesses. Consumer finance companies are
primarily engaged in lending to individuals. The fund classifies captive finance
companies or finance subsidiaries which exist to facilitate the marketing and
financial activities of their parent in the industry of their parent's
corporation.
In addition, the fund may invest 25% or more of the value of its total assets in
instruments issued by a U.S. branch of a domestic bank or savings and loan
having capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment.
-30-
INVESTMENT POLICIES
The fund may follow operational policies that are more restrictive than the
investment limitations as set forth in this prospectus and the Statement of
Additional Information in order to comply with applicable laws and regulations
governing money market funds, including the provisions of and regulations under
the Investment Company Act of 1940 (the 1940 Act). In particular, the fund
intends to comply with the various requirements of Rule 2a-7 of the 1940 Act,
which regulates portfolio maturity, quality and diversification. For example,
the fund will limit its investments to securities with effective remaining
maturities of 397 days or less and will maintain a dollar-weighted average
maturity of 90 days or less. The fund will determine the effective remaining
maturity of its investments according to Rule 2a-7.
Pursuant to procedures adopted by the fund's Board of Trustees, the fund may
purchase only high quality securities that CIGNA Investments, Inc., the fund's
adviser (CIGNA Investments) believes present minimal credit risks. To be
considered high quality, a security must be a U.S. Government security or must
be rated in accordance with applicable rules in one of the two highest
categories for short-term securities by at least two nationally recognized
rating services (or by one, if only one rating service has rated the security)
or, if unrated, judged to be of equivalent quality by CIGNA Investments.
High quality securities are divided into "first tier" and "second tier"
securities. First tier securities have received the highest rating (e.g.
Standard & Poor's Corporation's ("S&P") A-1 rating) from at least two rating
services (or one, if only one has rated the security). Second tier securities
have received ratings within the two highest categories (e.g., S&P's A-1 or A-2)
from at least two rating services (or one, if only one has rated the security),
but do not qualify as first tier securities. If a security has been assigned
different ratings by different rating services, at least two rating services
must have assigned the highest of the ratings in order for CIGNA Investments to
determine eligibility on the basis of that highest rating. Based on procedures
adopted by the Board of Trustees, CIGNA Investments may determine that an
unrated security is of equivalent quality to a rated first or second tier
security.
The fund may not invest more than 5% of its total assets in second tier
securities. In addition, the fund may not invest more than 1% of its total
assets or $1 million (whichever is greater) in the second tier securities of a
single issuer.
The fund may change these operational policies to reflect changes in the laws
and regulations without the approval of shareholders.
INVESTMENT GRADE FIXED INCOME FUND, CORE PLUS FIXED INCOME FUND, ULTRA CORE PLUS
FIXED INCOME FUND AND EMERGING MARKETS DEBT FUND
STRATEGY/PHILOSOPHY
- -------------------
CIGNA Investments' fixed income investment philosophy is based on our belief
that market inefficiencies exist due to varying investor objectives and time
horizons. The funds capitalize on market inefficiencies by identifying market
cycles, making tactical and decisive sector allocations, and selecting
securities through a disciplined process.
The Investment Grade Fixed Income, Core Plus Fixed Income and Ultra Core Plus
Fixed Income Funds will invest in a broad array of fixed income sectors
including government
-31-
<PAGE>
and agency securities, corporate bonds, and securitized bonds such as mortgage
backed and asset backed securities, and may also invest in other instruments
such as convertible bonds and preferred stock. Investing in mortgage related
securities carries prepayment risk, which is the risk that the issuer of the
security repays principal prior to a security's maturity. When interest rates
decline, borrowers may pay off their mortgages sooner than expected. This can
reduce the returns of a fund because the fund will have to reinvest that money
at the lower prevailing interest rates.
The Investment Grade Fixed Income, Core Plus Fixed Income and Ultra Core Plus
Fixed Income Funds invest primarily in investment grade bonds, which include
obligations of the U.S. government and its agencies, and corporate bonds rated
Baa3 or higher by Moody's Investor Services, Inc. or BBB- by Standard & Poor's
or, if not rated, in CIGNA Investment's opinion, having similar investment
characteristics to bonds rated Baa3 or BBB- or higher. The Core Plus Fixed
Income Fund may invest up to 25% of its assets in below investment grade
securities, and the Ultra Core Plus Fixed Income Fund may invest up to 35% of
its assets in below investment grade securities.
The Investment Grade Fixed Income Fund and the Core Plus Fixed Income Fund may
each invest up to 20% of their assets in foreign debt securities denominated in
foreign currency, while the Ultra Core Plus Fixed Income Fund may invest 25% of
its assets in these securities.
The Emerging Markets Debt Fund may invest in loans, preferred shares,
convertible bonds, and other instruments that rank low in the issuer's capital
structure, and may invest in defaulted and restructured securities.
The funds may invest in derivative instruments, such as options, futures
contracts or swap agreements. The funds typically uses derivatives as a
substitute for taking a position in the underlying asset and/or as a part of a
strategy designed to reduce exposure to other risks, such as interest rate or
currency risk.
Investing in derivatives carries the risk that a fund could lose more than the
principal amount invested in the derivative instrument. Derivatives are subject
to a number of risks, such as interest rate, credit and liquidity risk, which is
the risk that a particular investment may be difficult to purchase or sell. They
also involve the risk of improper valuation. Changes in the value of a
derivative may not correlate perfectly with the underlying asset, rate, currency
or index.
DECISION MAKING PROCESS
- -----------------------
Investment decisions for the funds follow a three-stage process.
First, the portfolio managers and the strategy team identify key global and
macroeconomic themes they anticipate will drive the fixed income markets. For
example, the team analyzes liquidity trends, monetary and fiscal policy, capital
flows, business cycles, and global indicators such as yield curves and currency
dynamics.
Next, the market themes are translated into portfolio strategies and sector
allocations that are designed to add value and diversify risk. Various
strategies are analyzed and the investment team selects the appropriate
allocation within the risk/reward tolerances for the fund.
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Finally, sector specialists buy or sell securities to implement the sector
allocations. The specific investment choices are based on fundamental industry
analysis (such as company business prospects, earnings, credit risk and
evaluation of management), independent research, and assessment of credit
spreads, liquidity and risk associated with ratings changes.
In managing the Investment Grade Fixed Income Fund, Core Plus Fixed Income Fund,
Ultra Core Plus Fixed Income Fund and the Emerging Markets Debt Fund CIGNA
Investments uses a consistent strategy and decision making process. In addition,
the portfolio construction of the Emerging Markets Debt Fund will also reflect
CIGNA Investments' analysis of relative value across countries, regions,
security structure and market sector.
BALANCED FUND
The fund strives for reasonably consistent total returns over "up" and "down"
market cycles.
o At least 30% of fund assets is invested in each of the following:
o equities; and
o fixed- and variable-income securities.
o Up to 40% of fund assets is allocated according to the portfolio
manager's assessment of business, economic and market conditions. The
manager analyzes the return available from stocks and bonds in deciding how
to invest the fund's assets.
o May invest in:
o equity securities which usually pay dividends and are
traded on a national securities exchange, although the
fund may also invest in securities traded on regional
stock exchanges on the over-the-counter market;
o investment-grade corporate debt obligations; and
o obligations of the U.S. Government and its Agencies
o May invest up to 25% of total assets in foreign equity and debt securities.
With respect to the fund's investments in common stocks, the fund focuses on
stocks with a yield higher than the overall equity market. This may result in
the fund purchasing the stocks of smaller companies. The market risk for
investments in smaller companies is higher than for larger companies. Stock
prices for smaller companies may change more, and more quickly, over short time
periods.
The income securities the fund will acquire will be obligations of the U.S.
government and its agencies, and corporate bonds rated in one of the four
highest ratings of corporate obligations by Moody's Investor Services, Inc. or
Standard & Poor's or, if not rated, in the manager's opinion, having similar
investment characteristics to those in the top four ratings. Typically, these
income securities will have long or intermediate-term maturities.
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LARGE COMPANY STOCK GROWTH FUND
The fund seeks long-term capital appreciation by investing primarily in
growth-oriented equity securities of large capitalization companies. The
investment manager seeks to maximize long-term capital appreciation by investing
primarily in the equity securities of U.S. and, to a limited extent, foreign
companies that exhibit strong or accelerating earnings growth. The investment
manager emphasizes individual security selection and may focus the fund's
holdings within the limits permissible for a diversified fund.
The fund's investment manager follows a flexible investment program in looking
for companies with above average capital appreciation potential. The fund's
investment manager focuses on companies with consistent or rising earnings
growth records and compelling business strategies. The investment manager
continually and rigorously studies company developments, including business
strategy, management focus and financial results, to identify companies with
earnings growth and business momentum. In addition, the portfolio manager
closely monitors analysts' expectations to identify issuers that have the
potential for positive earnings surprises versus consensus expectations.
Valuation is of secondary importance and is viewed in the context of prospects
for sustainable earnings growth and the potential for positive earnings
surprises in relation to consensus expectations. The fund considers selling
securities of issuers that no longer meet the investment manager's criteria.
o The fund is predominantly invested in equity securities traded on U.S.
exchanges or over-the-counter. These include U.S. common stock, securities
convertible into common stock, rights, warrants and preferred stock.
o Up to 15% of fund assets may be held in cash or cash equivalents.
o Up to 25% of fund assets may be invested in foreign securities and
American and Global Depositary Receipts. Typically, such holdings represent
less than 5% of the portfolio.
LARGE COMPANY STOCK VALUE FUND
The fund's primary strategy is to investment mainly in common stocks of
established, large U.S. companies. Stocks are generally purchased when the
investment manager deems them undervalued relative to their present and/or
future value and after the stocks have declined from recent highs. The
investment manager purchases stocks it believes have potential for long-term
capital appreciation. The fund may also invest in securities that are
convertible to common stocks.
The portfolio manager selects stocks with one or more of the following
attributes; a strong proprietary product or service; a low share price in
relation to cash flow or asset values; a new product or development or some
other unique situation that offers attractive prospects for long-term returns
and limited risk.
o Normally invests:
o 80% to 100% of assets in highly liquid equity
securities, with an emphasis on New York Stock Exchange
issues; and
o Up to 15% of assets in cash and cash equivalents.
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o May invest up to 15% of fund assets in convertible securities. These
securities are purchased as a means of managing the risk inherent in the
underlying common stocks.
o Although the fund does not make significant investments in securities of
companies based outside the United States, it reserves the right to invest
up to 20% of its assets in foreign securities.
o Holds between 45 and 70 securities, which may include American Depository
Receipts.
o Generally does not invest more than 5% of fund assets in any single
investment.
LARGE COMPANY STOCK INDEX FUND
The primary objective of the fund is long-term growth of capital by investing
principally in common stocks. The fund will seek to fulfill this objective by
attempting to replicate the composition and total return, reduced by fund
expenses, of the S&P 500. Under normal conditions, the fund will invest at least
80% of its total assets in equity securities of companies which compose the S&P
500.
The S&P 500 includes 500 selected common stocks, most of which are listed on the
New York Stock Exchange. Each stock in the Index has a unique weighting,
depending on the number of shares outstanding and its current prices. The 500
stocks in the S&P 500 are chosen by Standard & Poor's based on industry
representation, liquidity and stability. The stocks in the S&P 500 are not the
500 largest companies. Rather, the index is designed to capture the returns of
many different sectors of the U.S. economy.
While the fund seeks to match the performance of the S&P 500, its stock
portfolio performance may not match that of the S&P 500 exactly. For example,
the fund's performance will reflect deductions for advisory fees and other
expenses that are not deducted from the performance figures reported for the S&P
500. In addition, while CIGNA Investments generally will seek to match the
composition of the S&P 500 as closely as possible, it may not always invest the
fund's stock portfolio to mirror the S&P 500 exactly. For instance, the fund may
at times have its portfolio weighted differently from the S&P 500 because of the
difficulty and expense of executing relatively small stock transactions. Under
normal conditions, the fund anticipates holding at least 480 of the S&P 500
issues.
The fund may also invest in stock index futures contracts and related options
and in certain short-term fixed income securities (including variable and
floating rate instruments or demand instruments) such as U.S. Government
obligations and repurchase agreements, pending investment in common stocks of
companies in the S&P 500 or to meet anticipated short-term cash needs such as
dividend payments or redemptions of shares. The percentage of the fund's assets
invested in various types of securities will vary in light of existing economic
conditions and other factors as determined by the portfolio manager
The fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
Corporation ("S&P"). S&P makes no representation or warranty, express or
implied, to the record or beneficial owners of shares of the fund or any member
of the public regarding the advisability of investing in securities generally,
or in the fund particularly, or the ability of the S&P 500 to track general
stock market performance. S&P's only relationship to CIGNA Investments or the
fund is the licensing of certain trademarks and trade names of S&P and
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of the S&P 500 which is determined, composed and calculated by S&P without
regard to CIGNA Investments or the fund. S&P has no obligation to take the needs
of CIGNA Investments or the fund or the records or beneficial owners of the fund
into consideration in determining, composing or calculating the S&P 500. S&P is
not responsible for and has not participated in the valuation of the fund or the
pricing of the fund's shares or in the determination or calculation of the
equation by which the fund's portfolio investments are to be converted into
cash. S&P has no obligation or liability in connection with the administration,
marketing or trading of the fund.
S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500 OR
ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED,
AS TO RESULTS TO BE OBTAINED BY CIGNA INVESTMENTS, RECORD OR BENEFICIAL OWNERS
OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 OR ANY
DATA INCLUDED THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
OR USE WITH RESPECT TO THE S&P 500 OR ANY DATA INCLUDED THEREIN. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY
SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS),
EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
SMALL COMPANY STOCK GROWTH FUND
The fund seeks long-term capital appreciation by investing primarily in the
common and preferred stock of U.S. companies with market capitalizations, at
time of purchase, of between $30 million and $2 billion. Focus is placed on
growing companies involved in new product development and technological
breakthroughs.
o The investment manager:
o Evaluates all sectors of the stock market to find
companies that meet growth, consistent earnings,
proprietary products and services and minimal
institutional ownership; and
o Looks for stocks that have the potential for price
appreciation of 50% over the following 18 months and
price/earnings rations at a discount relative to their
earnings growth rates.
o May also invest in American Depository Receipts listed and traded on a
registered U.S. stock exchange.
o Diversification is built into the portfolio through the use of sector and
security weighting limitations, with a maximum allocation to any one
security of 5%.
o The portfolio is continuously monitored for progress and change against
well-defined expectations of factors such as stock price, earnings, and
price to earnings valuations, and to ensure that a strict "sell"
discipline is maintained. In selling portfolio securities, the investment
manager will analyze factors such as whether these expectations have been
met, whether it believes the security is overvalued, anticipated
deterioration in the fundamentals of the security, and whether the company
that issued the security is able to sustain a competitive advantage.
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o Cash and cash equivalents may range from 0% to 10% of fund assets.
SMALL COMPANY STOCK VALUE FUND
The fund's securities selection focuses on companies that are out of favor with
markets or have not yet been discovered by the broader investment community.
The fund's investment manager generally looks for companies with:
o A low price relative to their assets, earnings, cash flow or business
franchise
o Products and services that give them a competitive advantage
o Quality balance sheets and strong management. In determining the strength
of a company's balance sheet, the portfolio manager will consider factors
such as debt to equity ratios and the nature and quality of a company's
assets.
The investment manager's philosophy is to weigh a security's downside risk
before considering its upside potential. While the fund's investment objective
is capital appreciation, this philosophy may help provide an element of capital
preservation. Under normal circumstances, the fund invests at least 65% of its
assets in equity securities of small companies whose market capitalization at
the time of initial purchase is less than $1 billion.
The fund will generally sell a security when it no longer meets the manager's
investment criteria or when it has met the manager's expectations for
appreciation.
o The fund is invested primarily in the common stock of small companies with
market capitalizations of less than $1 billion; however, up to 20% of fund
assets may be invested in the stock of companies with market
capitalizations between $1 billion and $3 billion. Emphasis at the time of
purchase will be given to those firms whose market capitalizations are less
than $800 million. Permitted investments also include preferred and
convertible stock and American Depository Receipts and stock of foreign
issuers listed and traded on registered U.S. stock exchanges.
o The fund will typically be comprised of 55 to 66 holdings.
As a result of its principal investment strategies, the fund's investments are
often focused in a small number of business sectors. This carries the risk
associated with the performance of those sectors, which may fluctuate and reduce
the investment's value. In addition, the fund may invest in certain securities
with unique risks, such as special situations, an example of which is a company
that is about to undergo a structural, financial or management change which may
significantly affect the value of its securities.
FOREIGN STOCK FUND
The fund's investment manager first identifies economic and business themes that
it believes provide a favorable framework for selecting stocks. Using
fundamental analysis, the investment manager then selects individual companies
it believes best positioned to take advantage of opportunities presented by
these themes.
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In purchasing securities for the fund, the investment manager generally looks
for companies with:
o Securities that it believes are fundamentally undervalued relative to their
long-term prospective earnings growth rates, their historic valuation
levels and their competitors
o Business operations that it believes to be in predominantly well-regulated
and more stable foreign markets
o Substantial size and liquidity, strong balance sheets, proven management
and diversified earnings. The investment manager focuses the fund's
investments on mid-sized to large capitalization companies.
The fund's investment manager will generally sell a security when it no longer
meets the manager's investment criteria or when it has met the manager's
expectations for appreciation.
o The fund will typically be comprised of 70 to 100 holdings.
o Up to a maximum of 15% of assets may be invested in emerging
markets.
o Up to 10% of the fund's assets may be held in cash or cash
equivalents. Cash equivalents may be dollar or non-dollar
denominated.
o The fund may invest in forward foreign currency contracts to
hedge currency risks. Normally, the fund will invest no more than
25% of its assets in these contracts. See "Derivative Strategies"
below.
Investments in securities of companies located outside of the U.S. can be more
volatile than investments in U.S. companies. Diplomatic, political or economic
developments, including nationalization or appropriation, could affect
investments in foreign countries. Foreign securities markets may have less
trading volume and less liquidity than U.S. markets. Foreign companies generally
are not subject to uniform accounting and financial reporting standards like
those in the U.S. Transaction costs are generally higher than those in the U.S.
Custodial expenses for foreign securities may be greater than those for U.S.
securities. Some foreign governments levy withholding taxes against dividend and
interest income. Although a portion of these taxes may be recoverable, the taxes
will reduce the income received by the fund in such countries.
Investments in emerging markets countries can be considered speculative and may
offer higher potential for gains and losses than investments in developed
markets of the world. With respect to emerging markets countries, the risks
associated with foreign investing are greater. The economies of emerging market
countries generally are heavily dependent on international trade and may be
adversely affected by trade barriers, exchange or currency controls, managed
adjustments in currency values and other measures imposed or negotiated by the
countries with which they trade. Emerging markets may be more likely to
experience political turmoil or rapid changes in market or economic conditions
than more developed countries. In addition, the financial stability of issuers
in emerging market countries maybe more precarious than in other countries.
There is usually more price volatility in emerging markets countries, which may
be magnified by currency fluctuations.
OTHER INVESTMENT INFORMATION-COMMON POLICIES APPLICABLE TO THE FUNDS
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DERIVATIVE STRATEGIES. The funds (except for the Money Market Fund) may use
derivatives such as forward foreign currency contracts, swaps, futures contracts
and options to try to reduce risk or for speculative purposes to increase return
consistent with each particular fund's overall investment objective and
policies. All of the funds except the Money Market Fund and the Large Company
Stock Index fund may hedge currency risk (risk associated with rises in the
value of the U.S. dollar versus foreign currencies) through the use of forward
foreign currency contracts and options. A derivative is a financial contract
whose value is based on (or "derived" from) a traditional security (such as a
stock or bond), an asset (such as a commodity like gold), a foreign currency or
a market index (such as the S&P 500). Funds may also use futures contracts and
options to hedge price risk (risk associated with price changes in current or
intended investments in securities) of fund holdings, to keep cash on hand to
meet shareholder redemptions or other needs while simulating full investment in
securities, and to reduce fund transaction costs by buying futures instead of
actual securities when futures are favorably priced.
There is no guarantee that the funds' derivative strategies will work, or that a
fund may not lose money as a result of using these strategies. A fund may lose
more than the principal amount invested in a derivative instrument. Derivatives
are subject to a number of risks, such as the risk that the derivative
instrument may be difficult to purchase or sell, and that it might not correlate
perfectly with the underlying asset, rate, index or currency.
TEMPORARY, DEFENSIVE POSITIONS. The funds (except for the Money Market Fund) may
from time to time, take temporary defensive positions that are inconsistent with
their principal investment strategies by investing in cash and short-and
medium-term fixed income securities and, as described below, in the Money Market
Fund, in attempting to respond to adverse market, economic, political or other
conditions. If a fund takes a temporary defensive position it may not achieve
its investment objective. The Large Company Stock Index Fund will take
temporary, defensive positions only in extraordinary circumstances.
SHORT-TERM INVESTMENTS. The funds (except the Money Market Fund) may, pursuant
to an order obtained by CIGNA Funds Group from the Securities and Exchange
Commission, invest their cash balances that have not been invested in portfolio
securities in the Money Market Fund. To avoid double advisory fees, CIGNA
Investments will waive or credit its advisory fee for each fund investing in the
Money Market Fund by the amount of the advisory fee incurred by the fund in
connection with its investment in the Money Market Fund.
PORTFOLIO TURNOVER. Consistent with its investment policies, a fund will
purchase and sell securities without regard to the effect on portfolio turnover.
Higher portfolio turnover (e.g. over 100% per year) will cause a fund to incur
additional transaction costs and may result in taxable gains being passed
through to shareholders.
CHANGES IN POLICIES. The funds' Trustees may change the funds' investment
strategies and other policies without shareholder approval. A fund may not
change its investment objective or certain restrictions identified as
fundamental in the statement of additional information without shareholder
approval.
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MANAGEMENT OF THE FUNDS
The investment adviser to the funds is CIGNA Investments, Inc. ("CIGNA
Investments")an indirect, wholly-owned subsidiary of CIGNA Corporation. CIGNA
Investments also serves as investment adviser for other investment companies,
and for a number of pension, advisory, corporate and other accounts. CIGNA
Investments and other affiliates of CIGNA Corporation manage combined assets of
approximately $64 billion. CIGNA Investments' mailing address is 900 Cottage
Grove Road, Hartford, Connecticut 06152.
CIGNA Investments determines what investments shall be purchased, held, sold or
exchanged by the Money Market Fund, the Fixed Income Funds and the Large Company
Stock Index Fund.
The Balanced Fund and the Equity Funds use sub-advisers. Each sub-adviser has
the responsibility for determining what investments shall be purchased, held,
sold or exchanged for its particular fund. CIGNA Investments is responsible for
selecting and monitoring the performance of the sub-advisers, and for overall
management of the business affairs of all of the funds. CIGNA Investments has
ultimate responsibility to oversee the sub-advisers and recommend their hiring,
termination, and replacement.
SUB-ADVISERS
CIGNA Investments hires investment sub-advisers who independently manage the
investment operations of the Balanced Fund and the Equity Funds, and determine
what investments those funds will purchase and sell. These sub-advisers, and the
funds they manage, are:
<TABLE>
<S> <C>
BALANCED FUND INVESCO Capital Management, Inc., One Midtown Plaza, 1360 Peachtree
Street, N.E., Suite 100, Atlanta, GA 30309. INVESCO and its
affiliated asset management companies currently manage in excess of
$55 billion of assets as of June 30, 1999 on behalf of tax-exempt
accounts (such as pension and profit-sharing funds for corporations
and state and local governments) and investment companies.
LARGE COMPANY STOCK GROWTH FUND Morgan Stanley Dean Witter Investment Management, Inc. ("MSDW
Investment Management"), with principal offices at 1221 Avenue of the
Americas, New York, New York 10020, conducts a worldwide portfolio
management business and provides a broad range of portfolio
management services to customers in the United States and abroad. At
September 30, 1999, MSDW Investment Management, together with its
affiliated institutional asset management companies, managed assets
of approximately $173.5 billion, including assets under fiduciary
advice.
LARGE COMPANY STOCK VALUE FUND John A. Levin & Co, One Rockefeller Plaza, 19th Floor, New York, New
York 10020, is an advisory firm
</TABLE>
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<TABLE>
<S> <C>
founded in 1982. As of September 30, 1999, Levin managed approximately
$7.9 billion in assets.
SMALL COMPANY STOCK GROWTH FUND Fiduciary International, Inc., (Fiduciary), Two World Trade Center,
New York, New York 10048, is an indirect subsidiary of Fiduciary
Trust Company International (FTCI). FTCI is a New York State
chartered bank specializing in investment and administration of
assets for pensions and other institutional accounts. FTCI began
investing globally in the 1960s. Total assets under management as
of September 30, 1999 of Fiduciary, FTCI and its other subsidiaries,
on behalf of all clients, were over $46 billion.
SMALL COMPANY STOCK VALUE FUND Berger LLC, 210 University Boulevard, Suite 900, Denver, Colorado
80206 serves as investment adviser, sub-adviser, administrator or
sub-administrator to mutual funds and institutional investors.
Berger LLC has been in the investment advisory business for over
20 years. At September 1, 1999, Berger LLC managed approximately $5
billion in assets. Berger Associates has in turn hired Perkins,
Wolf, McDonnell & Company ("PWM"), 53 West Jackson Boulevard, Suite
818, Chicago, Illinois, 60604 to manage the investment operation of
the fund. PWM was organized in 1980 under the name Mac-Per-Wolf Co.
to operate as a securities broker-dealer. In September 1983, it
changed its name to Perkins, Wolf, McDonnell & Company. PWM
sub-advises the Berger Small Cap Value Fund.
FOREIGN STOCK FUND Bank of Ireland Asset Management (U.S.) Limited ("BIAM"), 20
Horseneck Lane, Greenwich, CT 06830 (North American office); 26
Fitzwilliam Place, Dublin 2, Ireland (Ireland office). BIAM serves
as investment advisor or sub-advisor to pension and profit-sharing
plans and other institutional investors and mutual funds. Bank of
Ireland's investment management group was founded in 1966.
</TABLE>
As full compensation for the investment management and all other services
rendered by CIGNA Investments, the funds pay CIGNA Investments based on a
percentage of each fund's average net assets, as follows:
FUND ADVISORY FEE RATE
- ---- -----------------
Money Market Fund 0.35%
Investment Grade Bond Fund 0.60%
Core Plus Fixed Income Fund 0.60%
Ultra Core Plus Fixed Income Fund 0.60%
Emerging Markets Debt Fund 1.00%
Balanced Fund 0.75%
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Large Company Stock Growth Fund 0.80%
Large Company Stock Value Fund 0.75%
Large Company Stock Index Fund 0.25%
Small Company Stock Growth Fund 1.00%
Small Company Stock Value Fund 1.00%
Foreign Stock Fund 1.00%
CIGNA Investments (not the funds) pays each sub-adviser its respective
sub-advisory fee.
CIGNA Funds Group has requested an order from the Securities and Exchange
Commission that will permit the funds, without prior shareholder approval, to
change the terms of any advisory agreement with a sub-adviser or hire a new
sub-adviser, either as a replacement for an existing sub-adviser or as an
additional sub-adviser. However, if the funds hire a new sub-adviser, they will
provide written information concerning the new sub-adviser to shareholders of
the fund concerned. There is no guarantee that CIGNA Funds Group will obtain
this order from the Securities and Exchange Commission.
PORTFOLIO MANAGERS:
These are the individuals primarily responsible for management of the funds.
They have had this responsibility since inception of each of their respective
funds.
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<TABLE>
<S> <C>
Investment Grade Fixed Income Fund
Core Plus Fixed Income Fund
Ultra Core Plus Fixed Income Fund
Emerging Markets Debt Fund
ROBERT J. MOORE, ROBERT W. JUSTICH, PH.D., IRA EDELBLUM AND KEVIN
BARRY.
ROBERT J. MOORE. Mr. Moore is Chief Investment Officer of CIGNA
Investments. He previously had been co-head of global fixed income
at Credit Suisse Asset Management where he oversaw the U.S. fixed
income team and chaired its sector allocation committees. Prior to
joining Credit Suisse in 1987, he was head of a fixed income sales
research group at Salomon Brothers. Mr. Moore holds a B.S. in
Finance from Lehigh University and is a member of the Advisory
Council for the Lehigh University Business School.
ROBERT W. JUSTICH. Mr. Justich is Managing Director and senior
member of the Global Fixed Income portfolio management team of CIGNA
Investments. Previously, Mr. Justich was a Managing Director at
Credit Suisse Asset Management, where he led the organization's
global fixed income credit function and was directly responsible for
approximately $6 billion in fixed income assets. Prior to joining
Credit Suisse in 1995, he spent seven years as Director, Corporate
Bond Trading at Merrill Lynch, focusing on credit research and
leading the development of Merrill's first proprietary corporate bond
trading desk. Mr. Justich holds a B.A. degree and M.B.A. in Finance
from Rutgers University.
IRA EDELBLUM. Mr. Edelblum is Managing Director and Core Fixed
Income Portfolio Manager of CIGNA Investments. Previously,
Mr. Edelblum was with Credit Suisse Asset Management where he was a
portfolio manager specializing in corporate bonds. Mr. Edelblum is a
graduate of the State University of New York (Albany) and holds an
M.B.A. from New York University.
KEVIN D. BARRY, CFA. Mr. Barry is Managing Director and Core Fixed
Income Portfolio Manager of CIGNA Investments. His responsibilities
include managing public mortgage and asset-backed securities.
Previously, Mr. Barry was with 1838 Investment Advisers. Mr. Barry
received his bachelor's degree in Finance, Summa Cum Laude, from
LaSalle College in 11981.
</TABLE>
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<TABLE>
<S> <C>
Messrs. Moore, Justich and Edelblum joined CIGNA Investments in 1999.
Mr. Barry joined CIGNA Investments in 1997.
Balanced Fund EDWARD C. MITCHELL JR., JAMES O. BAKER, MARGARET W. DURKES and DAVID
S. GRIFFIN. They also manage the INVESCO Total Return Fund. Mr.
Mitchell, CFA, president of INVESCO Capital Management, has managed
the INVESCO Total Return Fund since its inception in 1987. Mr.
Mitchell, who began his investment career in 1969, received his B.A.
from the University of Virginia and his M.B.A. from the University of
Colorado. He is also a Chartered Investment Counselor. Mr. Baker,
CFA, has been portfolio manager of the INVESCO Total Return Fund
since 1997, and a portfolio manager with INVESCO Capital Management
since 1992. An investment professional since 1977, he holds a B.A.
from Mercer University. Ms. Durkes, CFA, has been assistant
portfolio manager of the INVESCO Total Return Fund since 1997, and an
assistant portfolio manager with INVESCO Capital Management since
1993. She earned a B.A. from the Colorado College. Mr. Griffin,
CFA, has been the assistant portfolio manager of the INVESCO Total
Return Fund since 1993. An investment professional since 1983, he
received his B.A. from Ohio Wesleyan University and his M.B.A. from
the College of William and Mary.
Large Company Stock Growth Fund PHILIP W. FRIEDMAN, MARGARET K. JOHNSON and WILLIAM S. AUSLANDER.
Philip W. Friedman is a Managing Director of MSDW Investment
Management and Morgan Stanley & Co. Incorporated ("Morgan Stanley")
and is head of the Institutional Equity Group of MSDW Investment
Management. Prior to joining MSDW Investment Management in 1997, he
was the North American Director of Equity Research at Morgan
Stanley. From 1990 to 1995, he was a member of Morgan Stanley's
Equity Research team. Mr. Friedman received a B.A. from Rutgers
University in Economics and a Masters of Management from the J.L.
Kellogg School of Management at Northwestern University. Margaret K.
Johnson is a Managing Director of MSDW Investment Management and
Morgan Stanley and a Portfolio Manager in the Institutional Equity
Group. She joined MSDW Investment Management in 1984. She holds a
B.A. degree from Yale College and is a Chartered Financial Analyst.
William S. Auslander is a Principal of MSDW Investment Management and
</TABLE>
-44-
<PAGE>
<TABLE>
<S> <C>
Morgan Stanley and a Portfolio Manager in the Institutional Equity
Group. He joined MSDW Investment Management in 1995 as an equity
analyst in the Institutional Equity Group. Prior to joining MSDW
Investment Management, he worked at Icahn & Co. for nine years as an
equity analyst. He received a B.A. in Economics from the University
of Wisconsin at Madison and an M.B.A. from Columbia University.
Large Company Stock Value Fund JOHN A. LEVIN and JEFFREY A. KIGNER. Mr. Levin is chairman and chief
executive officer of John A. Levin & Co., Inc. A securities analyst,
he has been in the investment industry since 1964. He holds B.S. and
L.L.B. degrees from Yale University. Mr. Kigner is co-chairman and
chief investment officer of John A. Levin & Co., Inc. He has been a
securities analyst since 1983. Mr. Kigner holds a B.S. from New York
University and an M.B.A. from the New York University School of
Business.
Small Company Stock Growth Fund GRANT R. BABYAK AND YVETTE C. BOCKSTEIN. Mr. Babyak, Senior Vice
President, joined Fiduciary Trust Company International in 1996. An
investment professional since 1988, he is responsible for managing
institutional portfolios in the small capitalization sector.
Previously, he was employed as an institutional portfolio manager at
Avatar Associates and as a securities analyst at U.S. Trust Company
of New York, Mr. Babyak received a B.A. from Yale College and an
M.B.A. from New York University - Stern School of Business. Ms.
Bockstein, Senior Vice President, is responsible for managing
institutional and individual portfolios and the special situations
commingled funds. She joined Fiduciary Trust Company International
in 1978. Ms. Bockstein holds a B.A. from UCLA and a Certificate en
Sciences Economiques from the Universite de Bruxelles.
Small Company Stock Value Fund ROBERT H. PERKINS. Mr. Perkins has managed the Berger Small Cap
Value Fund (formerly the Omni Investment Fund) since 1985. Mr.
Perkins has been employed by Perkins, Wolf, McDonnell & Company (PWM)
since 1980 and owns 49% of its outstanding common stock. He also
serves as president and a director of PWM.
Foreign Stock Fund All investment decisions are made by a team of Bank of Ireland Asset
Management (U.S.) Ltd. Investment professionals.
</TABLE>
-45-
<PAGE>
PRICING OF SHARES
The price of fund shares is based on each fund's net asset value. The funds'
custodian, State Street Bank and Trust Company ("State Street") calculates the
net asset value of each class of a fund by dividing the number of outstanding
shares of each class into the net assets of a fund attributable to that class.
Net assets are the excess of a fund's assets over its liabilities. Net asset
value is determined as of the close of regular trading (normally, 4:00 p.m.
Eastern Time) on each day the New York Stock Exchange ("NYSE") is open for
trading, and on Good Friday if banks are open.
The funds value their investments for which market quotations are readily
available at market value. They value short-term investments that will mature
within 60 days at amortized cost, which approximates market value. They value
all other investments and assets at their fair values. The funds translate
prices for their investments quoted in foreign currencies into U.S. dollars at
current exchange rates. As a result, changes in the value of those currencies in
relation to the U.S. dollar may affect a fund's NAV. Because foreign markets may
be open at different times than the New York Stock Exchange, the value of a
fund's shares may change on days when shareholders are not able to buy or sell
them. If events materially affecting the values of a fund's foreign investments
occur between the close of foreign markets and the close of regular trading on
the New York Stock Exchange, these investments will be valued at their fair
value.
VALUATION OF MONEY MARKET FUND INVESTMENTS
The Money Market Fund's investments are valued at amortized cost, which
approximates market value, in accordance with rules adopted by the Securities
and Exchange Commission. Using the amortized cost valuation method allows the
fund to maintain its net asset value at $1.00 per share. There is no assurance
that this method will always be used, or if used, that the net asset value under
certain conditions will not deviate from $1.00 per share. If the Board of
Trustees deems it inadvisable to continue the practice of maintaining the net
asset value of $1.00 per share it may alter this procedure. The fund will notify
shareholders prior to any change, unless the change is only temporary, in which
case the shareholders will be notified after the change.
PURCHASE AND REDEMPTION OF SHARES
GENERAL INFORMATION
The funds presently offer various methods of purchasing shares (institutional
class, premier class and retail class), enabling the funds to respond to service
needs of different classes of investors. This structure has been developed to
attract large institutions, retirement plans and individual investors as fund
shareholders so that certain expenses (such as custodian fees, administrative
services, audit fees, legal fees, fees of trustees unaffiliated with the funds,
regulatory fees and certain printing expenses) can be shared rather than
duplicated, in an effort to achieve economies of scale.
The institutional and premier classes are offered primarily to institutional
investors such as retirement plans, corporations, endowments and foundations.
The differences in the fee structures among classes are the result of their
separate fee arrangements for record-keeping and distribution services.
Different fees and expenses will affect performance.
-46-
<PAGE>
INSTITUTIONAL CLASS SHARES
The institutional class does not impose any distribution or service fees, and is
generally offered to institutional investors such as employer-sponsored
retirement or savings plans that maintain an omnibus or pooled account with one
or more funds. The institutional class does not provide individualized record
keeping services for beneficial shareholders such as retirement plan
participants.
PREMIER CLASS SHARES
The premier class imposes a fee to cover the expenses associated with providing
individualized record keeping and related services for each fund shareholder and
beneficial owner of fund shares.
12B-1 PLAN FOR PREMIER CLASS - FIXED INCOME FUNDS
In addition, the Fixed Income Funds have adopted a plan under Rule 12b-1
of the 1940 Act that allows the premier class of this fund to pay CIGNA
Financial Services, Inc. ("CIGNA Financial Services"), the funds'
distributor, for services provided to premier class shareholders and to
cover expenses primarily intended to result in sale of this class of
shares of the Fixed Income Funds. The premier class of the Core Fixed
Income Fund will pay CIGNA Financial Services .15% annually of its
average daily net assets for providing shareholder services to premier
class shareholders, such as receiving and processing orders, answering
questions and handling correspondence from shareholders about their
accounts and similar account administrative services, and for
distribution related expenses. Because these fees are paid out of the
Fixed Income Funds' premier class assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you
more than paying other types of sales charges.
RETAIL CLASS SHARES
The retail class imposes a fee to cover the expenses associated with providing
individualized record keeping and related services for each fund shareholder and
beneficial owner of fund shares.
12B-1 PLAN FOR RETAIL CLASS SHARES
In addition, the funds have adopted a plan under Rule 12b-1 of the 1940
Act that allows the retail class of each fund to pay for services
provided to retail class shareholders and expenses primarily intended to
result in sale of this class of shares of the funds. The retail class or
each fund will pay CIGNA Financial Services .25% annually of its average
daily net assets for providing shareholder services to retail class
shareholders, such as receiving and processing orders, answering
questions and handling correspondence from shareholders about their
accounts and similar account administrative services, and for
distribution related expenses. Because these fees are paid out of each
fund's retail class assets on an on-going basis, over time these fees
will increase the cost of your investment and may cost you more than
paying other types of sales charges.
-47-
<PAGE>
HOW TO PURCHASE SHARES
Shares of each fund are sold on a continuous basis without any initial sales
charge or contingent deferred charge at the net asset value per share of each
class of each fund next determined after we receive your purchase order (see
"Pricing of Shares"). The funds do not issue share certificates.
ELIGIBLE PURCHASERS
INSTITUTIONAL CLASS
o Institutional class shares are available to separate accounts of
Connecticut General Life Insurance Company ("CG Life") or other insurance
companies that are offered to qualified employer-sponsored retirement
plans, and to other employer-sponsored plans. To be eligible for the
institutional class, the employer's plans must invest over $100 million in
Charter Funds and other CIGNA managed assets with record keeping provided
by CG Life or its affiliate. For the purpose of determining the amount of
CIGNA managed assets, life insurance and annuity products offered by CG
Life may be included. CIGNA managed assets do not include investments in
separate accounts that purchase mutual fund shares other than Charter
Funds. Also, these plans are eligible to purchase institutional class
shares if the plan sponsor confirms a good faith expectation that
investments in CIGNA managed assets by the sponsor and its plans will
attain $100 million (using the higher of purchase price or current market
value) within one year of initial purchase and if the plan sponsor agrees
that institutional class shares may be redeemed and administrative class
shares purchased if that level is not attained.
o Other institutional investors investing over $25 million ($5 million for a
Fixed Income Fund) in the specific Charter Fund in which the investor
wishes to invest and who do not receive record keeping services from CG
Life or its affiliate. o Subsidiaries and affiliates of CIGNA Corporation.
PREMIER CLASS
o Premier class shares are available to separate accounts of CG Life or other
insurance companies that are offered to qualified employer-sponsored
retirement plans, and to other employer-sponsored plans. To be eligible for
the premier class, the employer's plans must invest over $20 million in
Charter Funds and other CIGNA managed assets with record keeping provided
by CG Life or its affiliate. For the purpose of determining the amount of
CIGNA managed assets, life insurance and annuity products offered by CG
Life may be included. CIGNA managed assets do not include investments in
separate accounts that purchase mutual fund shares other than Charter
Funds. Also, these plans are eligible to purchase premier class shares if
the plan sponsor confirms a good faith expectation that investments in
CIGNA managed assets by the sponsor and its plans will attain $20 million
(using the higher of purchase price or current market value) within one
year of initial purchase and if the plan sponsor agrees that premier class
shares may be redeemed and retail class shares purchased if that level is
not attained.
-48-
<PAGE>
o Other institutional investors investing over $1 million in the specific
Charter Fund in which the investor wishes to invest and who do not receive
record keeping services from CG Life or its affiliate.
o Individual retirement accounts investing over $200 thousand in Charter
Funds.
RETAIL CLASS
o Retail class shares are available to individual investors, employer-
sponsored retirement plans, and other accounts.
In addition to the asset requirements described above, financial intermediaries
or plan record-keepers, including CG Life and other CIGNA affiliates, may
require retirement plans to meet certain additional requirements, such as
allocation of plan assets or a minimum level of assets per participant, in order
to purchase shares of any class of the funds. Such intermediaries or
record-keepers may also require plans to pay additional charges for services
provided.
MAINTENANCE OF CLASS ELIGIBILITY
In the event an investor does not maintain the minimum investment amounts for
the institutional or premier class, (as a result of shareholder redemption, not
loss in market value changes of fund shares) the funds may redeem the investor's
shares and purchase shares of the appropriate class of the same funds. This
transfer will have tax consequences unless the shares are owned in a
tax-advantaged retirement account.
RETIREMENT AND SAVINGS PLANS AND PLAN PARTICIPANTS
One or more of the funds may be available as investment options in
employer-sponsored or other types of retirement or savings plans. All orders to
purchase shares must be made through and in accordance with procedures
established by the participant's employer or plan administrator. The plan
administrator can provide participants with detailed information on how to
participate in the plan and how to select a Charter Fund as an investment
option.
BROKERAGE ACCOUNT PURCHASES
All other investors (except for institutional investors eligible to invest in
the institutional class) must purchase shares through CIGNA Financial Services.
Orders placed through your brokerage representative are priced as of the close
of business on the day the order is received by CIGNA Financial Services,
provided CIGNA Financial Services receives the order by 4:00 p.m. Eastern Time.
Brokerage representatives are responsible for the prompt transmission of
purchase and redemption orders placed through them by shareholders. A completed
application is required to establish a new brokerage account. Purchase orders
must be accepted by CIGNA Financial Services. CIGNA Financial Services reserves
the right to reject any purchase order. Additional information regarding
establishing a brokerage account and purchasing shares may be obtained by
calling CIGNA Financial Services at 1-888-CIGNA -FS (244-6237)
INSTITUTIONAL INVESTORS
-49-
<PAGE>
Institutional investors investing in the institutional class of the funds (other
than retirement or savings plan participants) should call CIGNA Funds Services
at 1-800-528-6718 to place orders. Purchase orders are priced as of the close of
business on the day the order is received by CIGNA Funds Services, provided it
receives the order by 4:00 p.m. Eastern Time.
ADDITIONAL INFORMATION:
Each fund reserves the right to limit purchases of shares, or may refuse to sell
shares (including purchases by exchange) of a fund to any person, if in the
judgment of fund management, this is in the best interest of the fund.
Each fund may convert from a portfolio directly holding investment securities to
a "feeder" fund of a "master" fund having substantially the same objectives,
policies and strategies as described in this prospectus if the Board of Trustees
of the funds determines it is in the best interests of the fund and its
shareholders to do so. If this were to happen, each fund would seek to achieve
its investment objective by owning shares of a corresponding master fund, which
in turn would own the types of securities and employ the types of policies and
strategies described in this prospectus.
HOW TO REDEEM SHARES
RETIREMENT AND SAVINGS PLAN PARTICIPANTS.
Plan participants should contact their plan administrator for information on how
to redeem fund shares.
BROKERAGE ACCOUNT REDEMPTIONS.
All other investors (except for institutional investors eligible to invest in
the institutional class) must redeem shares through their brokerage account with
CIGNA Financial Services. Shares will be redeemed at the net asset value next
determined after CIGNA Financial Services receives the redemption request. A
signature guarantee may be required before payment can be made on redemption
orders. For additional information regarding redeeming shares from your
brokerage account, call CIGNA Financial Services at 1-888-CIGNA-FS (244-6237).
INSTITUTIONAL INVESTORS
Institutional investors in the institutional class (other than retirement or
savings plan participants) should call CIGNA Funds Services at 1-800-528-6718.
Shares will be redeemed at the net asset value next determined after CIGNA Funds
Services receives the redemption request.
-50-
<PAGE>
FURTHER REDEMPTION INFORMATION.
Redemptions from the funds may not be processed if a redemption request is not
submitted in proper form. To be in proper form, the investor must furnish a
taxpayer identification number and address. The funds may be required to impose
"back-up" withholding of federal income tax on dividends, distributions and
redemption of proceeds when non-corporate investors have not provided a
certified taxpayer identification number. In addition, if an investor sends a
check for the purchase of fund shares and shares are issued before the
investor's check has cleared, the transmittal of any proceeds from the
redemption of the shares will occur upon clearance of the check, which may take
up to 15 days.
Each of the funds reserves the right to suspend the right of redemption and to
postpone the date of payment upon redemption for up to seven days and for such
other periods as the 1940 Act or Securities and Exchange Commission may permit.
If the sale of fund shares you make during a 90-day period reach the lesser of
$250,000 or 1% of fund assets, we can give you liquid securities from the fund's
portfolio instead of cash. If you want to sell the securities for cash, you
would have to pay the costs charged by a broker.
TELEPHONE SERVICES
If you are a retirement or savings plan participant and have questions or want
information about your plan account, contact your plan administrator.
Investors with CIGNA Financial Services brokerage accounts should call
1-888-CIGNA-FS (244-6237) for account information or to speak to their dealer
representative.
Institutional investors in the institutional class should call 1-800-528-6718.
HOW TO EXCHANGE SHARES.
If you want to switch your investment from one fund to another, you can exchange
your fund shares for shares of the same class of another fund at the respective
net asset values of the funds involved.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. In order to limit excessive exchange
activity and otherwise promote the best interests of the funds, the funds
reserve the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. The fund into which you
would like to exchange may also reject your exchange.
Retirement or savings plans may allow participants to exchange monies from one
investment option to another. Plan participants should check with their employer
or plan administrator for details on the rules governing exchanges in their
plan. Exchanges are accepted by the funds only as permitted by the applicable
retirement or savings plan. Participants' plan administrators or employers can
explain how frequently exchanges are allowed.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Money Market Fund declares dividends daily and distributes dividends
monthly. The Fixed Income Funds declare and distribute income dividends monthly
and capital gain dividends, if any, annually. The equity funds and the Balanced
Fund declare and distribute income and capital gain dividends, if any, annually.
All distributions will be automatically reinvested for you in shares of the fund
making the distribution at the net asset value determined on the record date.
TAX MATTERS
TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS
As with any investment, your investment in a fund could have tax consequences
for you. If you are not investing through a tax-advantaged retirement account,
you should consider these tax consequences.
TAXES ON DISTRIBUTIONS. Distributions you receive from each fund are subject to
federal income tax, and may also be subject to state or local taxes.
For federal tax purposes, each fund's dividends and distributions of income and
short-term capital gains are taxable to you as ordinary income. Each fund's
distributions of long-term capital gains are taxable to you generally as capital
gains. The rates that you will pay on any capital gains distributions will
depend on how long a fund holds its portfolio securities. This is true no matter
how long you have owned your shares in the fund and even though your
distributions are reinvested in shares of the fund.
If you buy shares when a fund has realized but not yet distributed income or
capital gains, you will be "buying a dividend" by paying the full price for the
shares and then receiving a portion of the price back in the form of a taxable
distribution.
Any taxable distributions you receive from a fund will normally be taxable to
you when you receive them, even though your dividends will be reinvested into
the fund issuing the dividend.
TAXES ON TRANSACTIONS. Your redemptions, including exchanges, may result in a
capital gain or loss for federal tax purposes. A capital gain or loss on your
investment in a fund is the difference between the cost of your shares and the
price you receive when you sell them. The Money Market Fund seeks to maintain a
constant net asset value of $1.00 per share, so a sale of shares of this fund
generally will not result in a gain or loss.
-52-
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights tables are intended to help you understand the funds'
financial performance for the past 5 years, or life of the fund, whichever is
shorter. Certain information reflects financial results for a single fund share.
The total returns in the table represent the rate that an investor would have
earned on an investment in the fund (assuming reinvestment of all dividends and
distributions). This information (except for the periods ended June 30, 1999)
has been audited by PricewaterhouseCoopers LLP, whose report, along with the
funds' financial statements, are included in the annual report which is
available upon request.
<TABLE>
<CAPTION>
MONEY MARKET FUND
RETAIL
SERVICE INSTITUTIONAL
CLASS CLASS
UNAUDITED UNAUDITED
APRIL 29, 1999+ SIX MONTHS
TO ENDED INSTITUTIONAL CLASS
JUNE 30, 1999 JUNE 30, 1999 YEARS ENDED DECEMBER 31,
1999 1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.01 0.02 0.05 0.05 0.05 0.05 0.03
TOTAL FROM INVESTMENT OPERATIONS 0.01 0.02 0.05 0.05 0.05 0.05 0.03
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.01) (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
TOTAL DISTRIBUTIONS (0.01) (0.02) (0.05) (0.05) (0.05) (0.05) (0.03)
------- ------- ------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== ======== ======== ======= =======
TOTAL RETURN * 0.70%a 2.30%a 5.18% 5.27% 4.91% 5.33% 3.43%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000
omitted) $2,590 $164,128 $ 229,619 $ 171,065 $ 120,505 $ 1,034 $ 16,673
Ratio of operating expenses to
average net assets** 0.93% ++ 0.45% ++ 0.45% 0.44% 0.45% 0.80% 1.00%
Ratio of net investment income to
average net assets*** 4.05% ++ 4.60% ++ 5.06% 5.14% 4.95% 5.38% 3.32%
</TABLE>
* Total return would have been lower if certain expenses had not been
reimbursed by the Adviser.
** Ratios of expenses to average net assets prior to reimbursement of
expenses for the Retail Service Class was 1.00% (annualized) for the 1999
period. Ratios of expenses to average net assets prior to reimbursement
of expenses for the Institutional Class were 0.52% (annualized) for the
six months ended June 30, 1999, and 0.47%, 0.51%, 0.69%, 1.21% and 1.11%
respectively, for the 1998, 1997, 1996, 1995 and 1994 periods.
*** Ratios of net investment income to average net assets prior to
reimbursement of expenses for the Retail Service Class was 3.98%
(annualized) for the 1999 period. Ratios of net investment income to
average net assets prior to reimbursement of expenses for the
Institutional Class were 4.53% (annualized) for the six months ended
June 30, 1999 and 5.03%, 5.07%, 4.71%, 4.91%, and 3.22% respectively, for
the 1998, 1997, 1996, 1995 and 1994 periods.
+ Retail Service Class shares initially offered on April 29, 1999
++ Annualized
a Not annualized
<PAGE>
<TABLE>
<CAPTION>
LARGE COMPANY STOCK INDEX FUND
(F/K/A S&P 500 INDEX FUND)
(UNAUDITED)
SIX MONTHS
ENDED
JUNE 30, 1999 YEARS ENDED DECEMBER 31,
1999 1998 1997*
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 13.84 $ 10.95 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income + 0.08 0.13 0.07
Net realized and unrealized gain on securities 1.61 2.97 0.95
----- ----- -----
TOTAL FROM INVESTMENT OPERATIONS 1.69 3.10 1.02
----- ----- -----
LESS DISTRIBUTIONS:
Dividends from net investment income - (0.16) (0.07)
Distributions from capital gains - (0.05) -
----- ----- -----
TOTAL DISTRIBUTIONS - (0.21) (0.07)
----- ----- -----
NET ASSET VALUE, END OF PERIOD $ 15.53 $ 13.84 $ 10.95
======== ======== =======
TOTAL RETURN/1/ 12.21% ** 28.28% 10.23% **
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 327,211 $ 291,265 $ 105,845
Ratio of operating expenses to average net assets/2/ 0.35% ++ 0.35% 0.18% **
Ratio of net investment income to average net assets/3/ 1.17% ++ 1.27% 0.79% **
Portfolio turnover 2% 3% 4%
</TABLE>
* For the period from July 1, 1997 (commencement of operations) through
December 31, 1997.
** Not annualized.
1. Total return would have been lower if certain expenses had not been
reimbursed by the Adviser. Total investment return based on per share net
asset value reflects the effects of changes in net asset value on the
performance of the Fund during each period, and assumes distributions were
reinvested at net asset value.
2. Ratio of expenses to average net assets prior to the reduction of advisory
fee was 0.37% (annualized), 0.43% and 0.36%, respectively, for the six
months ended June 30, 1999, the period ended December 31, 1998 and for the
six months ended December 31, 1997.
3. Ratio of net investment income to average net assets prior to the reduction
of advisory fee was 1.15% (annualized), 1.18% and 0.61%, respectively, for
the six months ended June 30, 1999, the period ended December 31, 1998 and
the six months ended December 31, 1997.
+ 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.
++ Annualized.
<PAGE>
For investors who want more information about the funds the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the funds' investments
is available in the funds' annual and semi-annual reports to shareholders. In
the funds' annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the funds' performance
during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the funds and is incorporated into this prospectus by
reference.
Information about the funds (including the SAI) can be reviewed and copied at
the Commission's Public Reference Room in Washington, D.C. You can get free
copies of reports and SAIs, request other information and discuss your questions
about the funds by contacting the funds at:
CIGNA Financial Services
P.O. Box 150476
Hartford, CT 06115-0476
Telephone: 1-888-CIGNA-FS (244-6237)
Reports and other information about the funds are available on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. Copies of this
------------------
information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
------------------
Commission's Public Reference Section, Washington, D.C. 20549-0102.
Information on the operation of the public reference room may be obtained by
calling the Commission at:
1-202-942-8090.
CIGNA FUNDS GROUP
CHARTER FUNDS /SM/
MONEY MARKET FUND
INVESTMENT GRADE BOND FUND
CORE PLUS FIXED INCOME FUND
ULTRA CORE PLUS FIXED INCOME FUND
EMERGING MARKETS DEBT FUND
BALANCED FUND
LARGE COMPANY STOCK GROWTH FUND
LARGE COMPANY STOCK VALUE FUND
LARGE COMPANY STOCK INDEX FUND
SMALL COMPANY STOCK GROWTH FUND
SMALL COMPANY STOCK VALUE FUND
FOREIGN STOCK FUND
(Investment
Company Act
File No. 811-1646)
<PAGE>
C I G N A F U N D S G R O U P
________________________________________________________________________________
CHARTER FUNDS/SM/
MONEY MARKET FUND
-----------------
FIXED INCOME FUNDS
------------------
Investment Grade Fixed Income Fund
Core Plus Fixed Income Fund
Ultra Core Fixed Income Fund
Emerging Markets Debt Fund
BALANCED FUND
-------------
EQUITY FUNDS
------------
Large Company Stock Growth Fund
Large Company Stock Value Fund
Large Company Stock Index Fund
Small Company Stock Growth Fund
Small Company Stock Value Fund
Foreign Stock Fund
S T A T E M E N T O F A D D I T I O N A L I N F O R M A T I O N
J A N U A R Y 1, 2 0 0 0
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectuses for the funds listed above (the "Funds"),
series of CIGNA Funds Group ("CFG" or the "Trust") dated January 1, 2000 and
February 1, 2000, as may be amended from time to time. Much of the information
contained in this document expands upon subjects discussed in the prospectus. No
investment in shares of the funds should be made without first reading the
prospectus. A copy of the prospectus of the Funds may be obtained by writing to
CIGNA Funds Shareholder Services, 900 Cottage Grove Road, Hartford, Connecticut
06152-2210.
The financial statements for CIGNA Funds Group for the year ended December 31,
1998, as contained in the Annual Reports to Shareholders, and for the six months
ended June 30, 1999, as contained in the semi-annual report to shareholders
dated June 30, 1999, are hereby incorporated by reference into this Statement of
Additional Information. The financial statements for the year ended December 31,
1998 have been examined by PricewaterhouseCoopers LLP, independent accountants,
whose reports thereon also are incorporated herein by reference. The Funds'
shareholder reports are available, without charge, upon request, by calling
1-800-528-6718. The shareholder reports contain a more complete discussion of
the Funds' performance.
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TABLE OF CONTENTS
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PAGE
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GENERAL INFORMATION ABOUT THE TRUST............................................3
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THE FUNDS, THEIR INVESTMENT OBJECTIVES AND POLICIES............................3
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CLASSIFICATION.................................................................3
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INVESTMENT STRATEGIES AND RISKS................................................3
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FUNDAMENTAL FUND POLICIES ....................................................25
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MANAGEMENT OF THE TRUST.......................................................26
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES...........................29
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INVESTMENT ADVISORY AND OTHER SERVICES........................................30
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UNDERWRITER...................................................................33
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CUSTODIAN AND TRANSFER AGENT..................................................34
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SUB-ACCOUNTING SERVICES.......................................................34
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INDEPENDENT ACCOUNTANTS.......................................................35
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BROKERAGE ALLOCATION AND OTHER PRACTICES......................................35
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CAPITAL STOCK.................................................................36
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PURCHASE, REDEMPTION AND PRICING OF SECURITIES................................36
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TAX MATTERS...................................................................38
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PERFORMANCE INFORMATION.......................................................39
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REDEMPTIONS PAID IN CASH......................................................42
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FINANCIAL STATEMENTS..........................................................42
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APPENDIX - DESCRIPTION OF BOND RATINGS................................Appendix A
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GENERAL INFORMATION ABOUT THE TRUST
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The Trust is a Massachusetts business trust organized pursuant to a Master Trust
Agreement dated April 10, 1985, as amended and restated by the First Amended and
Restated Master Trust Agreement dated as of March 1, 1996, and as further
amended on October 29, 1999. The Funds are series or separate portfolios of the
Trust. The Board of Trustees of the Trust is authorized to create new series of
shares without the necessity of a vote of shareholders of the Trust.
The assets received by the Trust from the issue or sale of shares of each of its
series of shares, and all income, earnings, profits and proceeds thereof,
subject only to the rights of creditors, are specifically allocated to the
appropriate series. They constitute the underlying assets of each series, are
required to be segregated on the books of account, and are to be charged with
the expenses with respect to such series. Any general expenses of the Trust not
readily identifiable as belonging to a particular series shall be allocated by
or under the direction of the Board of Trustees, primarily on the basis of
relative net assets.
Each share of each series represents an equal proportionate interest in that
series with each other share and is entitled to such dividends and distributions
out of the income belonging to such series as are declared by the Board. Upon
any liquidation of the Trust, shareholders of each series of the Trust are
entitled to share pro rata in the net assets belonging to that series available
for distribution.
THE FUNDS, THEIR INVESTMENT OBJECTIVES AND POLICIES
- ---------------------------------------------------
This Statement of Additional Information provides additional information about
the investment policies and operations of the Funds. References in this
Statement of Additional Information to the Adviser or investment adviser
includes reference to the Funds' sub-advisers, as applicable.
CLASSIFICATION
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The Funds are diversified, open-end management investment companies.
INVESTMENT STRATEGIES AND RISKS
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MONEY MARKET FUND
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The primary types of money market instruments in which the Money Market Fund may
invest are as follows:
U.S. GOVERNMENT DIRECT OBLIGATIONS. Obligations issued by the U.S. Treasury.
U.S. GOVERNMENT AGENCY SECURITIES. The U.S. Government has established certain
Federal agencies such as the Government National Mortgage Association as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
ASSET-BACKED SECURITIES. include interests in pools of mortgages, loans,
receivables, or other assets. Payment of principal and interest may be largely
dependent on the cash flows generated by the assets backing the securities.
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CERTIFICATES OF DEPOSIT. A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
COMMERCIAL PAPER. The term used to designate unsecured short-term promissory
notes issued by corporations and other entities. Maturities on these issues vary
from a few days to nine months.
COMMERCIAL LOAN PARTICIPATIONS. Participating interests in loans made by a bank,
or a syndicate of banks represented by an agent bank, to corporate borrowers.
Loan participations may extend for the entire term of the loan or may extend
only for short "strips" that correspond to stated payments on the underlying
loan. The loans underlying such participations may be secured or unsecured, and
the fund may invest in loans collateralized by mortgages on real property.
REPURCHASE AGREEMENTS. A repurchase agreement is a contract where the seller of
securities (limited to U.S. Government securities, including securities issued
or guaranteed by the U.S. Treasury or the various agencies and instrumentalities
of the U.S. Government) agrees to repurchase the securities at a specified price
on a future date determined by negotiations. The repurchase agreement may be
considered a loan by a fund to the issuer of the agreement, a bank or securities
dealer, with the U.S. Government securities serving as collateral for the loan.
VARIABLE AND FLOATING RATE INSTRUMENTS. Certain instruments issued, guaranteed
or sponsored by the U.S. Government or its agencies, state and local government
issuers, and certain debt instruments issued by domestic banks or corporations,
may carry variable or floating rates of interest. These instruments bear
interest at rates which are not fixed, but which vary with changes in specified
market rates or indices, such as a Federal Reserve composite index.
If CIGNA Investments determines that it may be advantageous to invest in other
types of money market instruments, the Money Market Fund may invest in such
instruments, if it is permitted to do so by its investment objective, policies
and restrictions.
OBLIGATIONS OF DEPOSITORY INSTITUTIONS AND COMMERCIAL PAPER OF FOREIGN ISSUERS.
As discussed in the Prospectus, the Money Market Fund may invest in U.S.
dollar-denominated obligations of U.S. and foreign depository institutions,
including commercial and savings banks and savings and loan associations. The
obligations may be issued by U.S. or foreign depository institutions, foreign
branches or subsidiaries of U.S. depository institutions ("Eurodollar"
obligations), U.S. branches or subsidiaries of foreign depository institutions
("Yankeedollar" obligations) or foreign branches or subsidiaries of foreign
depository institutions. Obligations of foreign depository institutions, their
branches and subsidiaries, and Eurodollar and Yankeedollar obligations may
involve additional investment risks compared to the risks of obligations of U.S.
institutions. Such investment risks include adverse political and economic
developments, the possible imposition of withholding taxes on interest income
payable on such obligations, the possible seizure or nationalization of foreign
deposits and the possible establishment of exchange controls or other foreign
governmental laws or restrictions which might adversely affect the payment of
principal and interest. Generally, the issuers of such obligations are subject
to fewer regulatory requirements than are applicable to U.S. banks. Foreign
depository institutions, their branches or subsidiaries, and foreign branches or
subsidiaries of U.S. banks may be subject to less stringent reserve requirements
than U.S. banks. U.S. branches or subsidiaries of foreign banks are subject to
the reserve requirements of the state in which they are located. There may be
less publicly available information about a foreign bank or a branch or
subsidiary of a foreign bank than about a U.S. institution, and such branches or
subsidiaries may not be subject to the same accounting, auditing and financial
record keeping standards and requirements as U.S. banks. Evidence of ownership
of foreign
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depository and Eurodollar obligations may be held outside of the United States
and the Fund may be subject to the risks associated with the holding of such
property overseas. Foreign depository and Eurodollar obligations of the Fund
held overseas will be held by foreign branches of the custodian for the Fund's
portfolio securities or by other U.S. or foreign banks under subcustodian
arrangements complying with the requirements of the Investment Company Act of
1940, as amended (the "1940 Act"). CIGNA Investments will consider the above
factors in making investments in foreign depository, Eurodollar and Yankeedollar
obligations and will not knowingly purchase obligations which, at the time of
purchase, are subject to exchange controls or withholding taxes. Generally, the
Fund will limit its foreign depository and Yankeedollar investments to
obligations of banks organized in Canada, France, Germany, Japan, the
Netherlands, Switzerland, the United Kingdom and other western industrialized
nations. As discussed in the prospectus, the Fund may also invest in U.S.
dollar-denominated commercial paper and other short-term obligations issued by
foreign entities. These investments are subject to quality standards similar to
those applicable to investments in comparable obligations of domestic issuers.
Investments in foreign entities in general involve the same risks as those
described above in connection with investments in Eurodollar and Yankeedollar
obligations and obligations of foreign depository institutions and their foreign
branches and subsidiaries.
RATING AGENCIES. The Money Market Fund's investments in short-term corporate
debt and bank money instruments will be rated, or will be issued by issuers who
have been rated, in one of the two highest rating categories for short-term debt
obligations by a nationally recognized statistical rating organization (an
"NRSRO") or, if not rated, will be of comparable quality as determined by the
Trustees of the Trust. The Money Market Fund's investments in corporate bonds
and debentures (which must have maturities at the date of purchase of 397 days
(13 months) or less) will be in issuers who have received from an NRSRO a rating
with respect to a class of short-term debt obligations that is comparable in
priority and security with the investment in one of the two highest rating
categories for short-term obligations or if not rated, will be of comparable
quality as determined by the Trustees of the Trust. Currently, there are six
NRSROs: Duff and Phelps Inc., Fitch Investors Services, Inc., IBCA Limited and
its affiliate IBCA Inc., Thompson BankWatch, Inc., Moody's Investors Service
Inc. and Standard & Poor's Rating Group.
The rating applied to a security at the time the security is purchased by the
Fund may be changed while the Fund holds such security in its portfolio. This
change may affect, but will not necessarily compel, a decision to dispose of a
security. If the major rating services used by the Fund were to alter their
standards or systems for rating, the Fund would then employ ratings under the
revised standards or systems that would be comparable to those specified in its
current investment objective, policies and restrictions.
RULE 2A-7. The Board of Trustees has established procedures in compliance with
Rule 2a-7 under the 1940 Act that include reviews of portfolio holdings by the
Trustees at such intervals as they may deem appropriate to determine whether net
asset value of the Money Market Funds, calculated by using available market
quotations, deviates from $1.00 per share and, if so, whether this deviation may
result in material dilution or is otherwise unfair to existing shareholders. In
the event the Trustees determine that a deviation having this result exists,
they intend to take such corrective action as they deem necessary and
appropriate, including the sale of portfolio instruments prior to maturity in
order to realize capital gains or losses or to shorten average portfolio
maturity; withholding dividends; or establishing a net asset value per share by
using available market quotations; in which case, the net asset value could
possibly be greater or less than $1.00 per share. If the Trustees deem it
inadvisable to continue the practice of maintaining the net asset value at $1.00
per share, they may alter this procedure. The shareholders of the Fund will be
notified promptly after any such change.
Any increase in the value of a shareholder's investment in the Money Market Fund
resulting from the reinvestment of dividend income is reflected by an increase
in the number of shares in the shareholder's account.
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FIXED INCOME FUNDS AND BALANCED FUND
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In pursuing their investment objectives, the Investment Grade Fixed Income Fund,
Core Plus Fixed Income Fund, Ultra Core Plus Fixed Income Fund, Emerging Markets
Debt Fund (the "Fixed Income Funds"), and Balanced Fund may invest in the
following types of interest-bearing securities:
(1) Marketable debt securities that are rated "investment-grade" at
the time of purchase, i.e., within the four highest grades
assigned by Moody's Investors Service, Inc. (Aaa, Aa, A or Baa) or
Standard & Poor's Corporation (AAA, AA, A or BBB).
(2) U.S. Government securities, as described below.
(3) Obligations of, or guaranteed by, U.S. banks or bank holding
companies, which obligations are considered by CIGNA Investments
to have investment qualities comparable to securities which may be
purchased under Item (1) above, although there can be no assurance
that these obligations shall have such qualities.
(4) Money market instruments eligible for purchase by the Money Market
Fund, which instruments are considered by CIGNA Investments to
have investment qualities comparable to securities which may be
purchased under Item (1) above, although there can be no assurance
that said obligations shall have such qualities.
(5) Marketable securities (payable in U.S. dollars) of, or guaranteed
by, the Government of Canada or of a Province of Canada or any
instrumentality or political subdivision thereof.
The Fixed Income Funds' assets may also be invested in other fixed-income
securities, including straight debt and convertible debt securities and
preferred stock. Investment positions may be held in common stock and similar
equity securities (including warrants or rights to purchase equity investments
as described below) when they are acquired as parts of units with fixed-income
securities or upon exercise of such warrants or rights or upon the conversion of
such securities. The Fixed Income Funds also may purchase and sell interest rate
futures contracts and purchase options on futures contracts, foreign currency
contracts and swap agreements, as described later in this Statement of
Additional Information.
U.S. Government securities include a variety of securities that are issued or
guaranteed by the U.S. Treasury, by various agencies of the U.S. Treasury, by
various agencies of the U.S. Government or by various instrumentalities that
have been established or sponsored by the U.S. Government. Treasury securities
include Treasury bills, Treasury notes and Treasury bonds. Treasury bills have a
maturity of one year or less; Treasury notes have maturities of one to ten
years; Treasury bonds generally have a maturity of greater than ten years. The
Federal agencies established as instrumentalities of the U.S. Government to
supervise and finance certain types of activities include the Federal Home Loan
Banks, the Government National Mortgage Association, the Federal National
Mortgage Association, the Federal Land Banks, the Small Business Administration,
the Export-Import Bank, the Federal Intermediate Credit Banks and the Bank for
Cooperatives.
U.S. Government securities may take the form of participation interests in, and
may be evidenced by, deposit or safekeeping receipts. Participation interests
are pro rata interests in U.S. Government securities such as interests in pools
of mortgages sold by the Government National Mortgage Association; instruments
evidencing deposit or safekeeping are documentary receipts for such original
securities held in custody by others.
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U.S. Government obligations, including those that are guaranteed by Federal
agencies or instrumentalities, may or may not be backed by the "full faith and
credit" of the United States. Some securities issued by Federal agencies or
instrumentalities are only supported by the credit of the agency or
instrumentality (such as the Federal Home Loan Banks) while others have an
additional line of credit with the U.S. Treasury (such as the Federal National
Mortgage Association). Certain securities issued by Federal agencies or
instrumentalities backed by the full faith and credit of the U.S. Government
include those issued by the Government National Mortgage Association and the
Small Business Administration. In the case of securities not backed by the full
faith and credit of the United States, the Fund must look principally to the
agency issuing or guaranteeing the obligation for ultimate repayment and may not
be able to assert a claim against the United States itself in the event the
agency or instrumentality does not meet its commitments.
The Fixed Income Funds may also invest in:
FOREIGN DEBT SECURITIES. The returns on foreign debt securities reflect interest
rates and other market conditions prevailing in those countries and the effect
of gains and losses in the denominated currencies against the U.S. dollar, which
have had a substantial impact on investment in foreign fixed-income securities.
The relative performance of various countries' fixed-income markets historically
has reflected wide variations relating to the unique characteristics of each
country's economy. Year-to-year fluctuations in certain markets have been
significant, and negative returns have been experienced in various markets from
time to time.
The foreign government securities in which the Funds may invest generally
consist of obligations issued or backed by national, state or provincial
governments or similar political subdivisions or central banks in foreign
countries. Foreign government securities also include debt obligations of
supranational entities, which include international organizations designated, or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.
Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies.
BRADY BONDS. The Fixed Income Funds may invest in so-called "Brady Bonds," which
are securities created through the exchange of existing commercial bank loans to
Latin American public and private entities for new bonds in connection with debt
restructurings under a debt restructuring plan announced by former U.S.
Secretary of the Treasury Nicholas F. Brady (the "Brady Plan"). Brady Bonds may
be collateralized or uncollateralized, are issued in various currencies
(primarily the U.S. dollar) and are currently actively traded in the
over-the-counter secondary market for Latin American debt instruments.
Dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on these Brady Bonds generally are collateralized by
cash or securities in an amount that, in the case of fixed rate bonds, is equal
to at least one year of rolling interest payments or, in the case of floating
rate
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bonds, initially is equal to at least one year's rolling interest payments based
on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
All Mexican Brady Bonds issued to date, except New Money Bonds, have principal
repayments at final maturity fully collateralized by U.S. Treasury zero coupon
bonds (or comparable collateral in other currencies) and interest coupon
payments collateralized on an 18-month rolling-forward basis by funds held in
escrow by an agent for the bondholders. Approximately half of the Venezuelan
Brady Bonds issued to date have principal repayments at final maturity
collateralized by U.S. Treasury zero coupon bonds (or comparable collateral in
other currencies), while slightly more than half have interest coupon payments
collateralized on a 14-month rolling-forward basis by securities held by the
Federal Reserve Bank of New York as collateral agent.
Brady Bonds are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk").
LOAN PARTICIPATIONS AND ASSIGNMENTS. The Fixed Income Funds may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government and one or more financial institutions ("Lenders"). The
majority of the Funds' investments in Loans in Latin America are expected to be
in the form of participations in Loans ("Participations") and assignments of
portions of Loans from third parties ("Assignments"). Participations typically
will result in a Fund having a contractual relationship only with the Lender,
not with the borrower. A participating fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by the Lender of the
payments from the borrower. In connection with purchasing Participations, a Fund
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan ("Loan Agreement"), nor any
rights of set-off against the borrower, and a Fund may not directly benefit from
any collateral supporting the Loan in which it has purchased the Participation.
As a result, participating Funds will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, a Fund may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Funds will acquire Participations only if the
Lender interpositioned between the Funds and the borrower is determined by the
Adviser to be creditworthy. Each Fund currently anticipates that it will not
invest more than 5% of its net assets in Loan Participations and Assignments.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. Convertible securities
rank senior to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. While no securities
investment is completely without risk, investments in convertible securities
generally entail less risk than the corporation's common stock, although the
extent to which such risk is reduced depends in large measure upon the degree to
which the convertible security sells above its value as a fixed-income security.
Convertible securities have unique investment characteristics in that they
generally (1) have higher yields than common stocks, but lower yields than
comparable non-convertible securities, (2) are less subject to fluctuation in
value than the underlying stock since they have fixed-income characteristics and
(3) provide the potential for capital appreciation if the market price of the
underlying common stock increases. Most convertible securities currently are
issued by U.S. companies,
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although a substantial Eurodollar convertible securities market has developed,
and the markets for convertible securities denominated in local currencies are
increasing.
The value of a convertible security is a function of its "investment value"
(determined by its yield in comparison with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege) and its
"conversion value" (the security's worth, at market value, if converted into the
underlying common stock). The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may have an effect on the
convertible security's investment value. The conversion value of a convertible
security is determined by the market price of the underlying common stock. If
the conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. Generally
the conversion value decreases as the convertible security approaches maturity.
To the extent the market price of the underlying common stock approaches or
exceeds the conversion price, the price of the convertible security will be
increasingly influenced by its conversion value. A convertible security
generally will sell at a premium over its conversion value by the extent to
which investors place value on the right to acquire the underlying common stock
while holding a fixed-income security.
The Fixed Income Funds have no current intention of converting any convertible
securities they may own into equity securities or holding them as equity
securities upon conversion, although they may do so for temporary purposes. A
convertible security might be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by a fund is called for redemption, the fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party. The Fixed Income Funds will
invest in convertible securities without regard to their credit rating.
MORTGAGE-BACKED SECURITIES. The Fixed Income Funds may invest in mortgage-backed
securities, such as those issued by the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC") or certain foreign issuers, as well as by
private issuers such as commercial investment banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property. The
mortgages backing these securities include, among other mortgage instruments,
conventional 30-year fixed rate mortgages, 15-year fixed rate mortgages,
graduated payment mortgages and adjustable rate mortgages. The government or the
issuing agency typically guarantees the payment of interest and principal of
these securities. However, the guarantees do not extend to the securities' yield
or value, which are likely to vary inversely with fluctuations in interest
rates, nor do the guarantees extend to the yield or value of the Fund's shares.
These securities generally are "pass-through" instruments, through which the
holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees.
Yields on pass-through securities are typically quoted by investment dealers and
vendors based on the maturity of the underlying instruments and the associated
average life assumption. The average life of pass-through pools varies with the
maturities of the underlying mortgage loans. A pool's term may be shortened by
unscheduled or early payments of principal on the underlying mortgages. The
occurrence of mortgage prepayments is affected by various factors, including the
level of interest rates, general economic conditions, the location, scheduled
maturity and age of the mortgage and other social and demographic conditions.
Because prepayment rates of individual pools vary widely, it is not possible to
predict accurately the average life of a particular pool. For pools of fixed
rate 30-year mortgages, a common industry practice in the U.S. has been to
assume that prepayments will result in a 12-year average life. At present,
pools, particularly those with loans with other maturities or different
characteristics, are priced on an assumption of average life determined for each
pool.
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Although certain mortgage-related securities are guaranteed by a third party or
are otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If a Fund purchases a mortgage-related security at
a premium, that portion may be lost if there is a decline in the market value of
the security whether resulting from increases in interest rates or prepayment of
the underlying mortgage collateral. As with other interest-bearing securities,
the prices of such securities are inversely affected by changes in interest
rates. However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true because in periods of
declining interest rates mortgages underlying securities are prone to
prepayment. In periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of a pool of
mortgage-related securities. Conversely, in periods of rising rates the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. However, these effects may not be present, or may differ in degree, if the
mortgage loans in the pools have adjustable interest rates or other special
payment terms, such as a prepayment charge. Actual prepayment experience may
cause the yield of mortgage-backed securities to differ from the assumed average
life yield. Reinvestment of prepayments may occur at higher or lower interest
rates than the original investment, thus affecting a Fund's yield. For this and
other reasons, a mortgage-related security's stated maturity may be shortened by
an unscheduled prepayment on underlying mortgages and, therefore, it is not
possible to predict accurately the security's return to a Fund. Mortgage-
related securities provide regular payments consisting of interest and
principal. No assurance can be given as to the return a Fund will receive when
these amounts are reinvested.
The rate of interest on mortgage-backed securities is lower than the interest
rates paid on the mortgages included in the underlying pool due to the annual
fees paid to the servicer of the mortgage pool for passing through monthly
payments to certificate holders and to any guarantor, such as GNMA, and due to
any yield retained by the issuer. Actual yield to the holder may vary from the
coupon rate, even if adjustable, if the mortgage-backed securities are purchased
or traded in the secondary market at a premium or discount. In addition, there
is normally some delay between the time the issuer receives mortgage payments
from the servicer and the time the issuer makes the payments on the
mortgage-backed securities, and this delay reduces the effective yield to the
holder of such securities.
COLLATERALIZED MORTGAGE OBLIGATIONS. The Fixed Income Funds may also purchase
collateralized mortgage obligations ("CMOs") issued by a U.S. Government
instrumentality which are backed by a portfolio of mortgages or mortgage-backed
securities. The issuer's obligations to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
Generally, CMOs are partitioned into several classes with a ranked priority by
which the classes of obligations are redeemed. These securities may be
considered mortgage derivatives. The Funds may only invest in CMOs issued by
FHLMC, FNMA or other agencies of the U.S. Government or instrumentalities
established or sponsored by the U.S. Government.
CMOs provide an investor with a specified interest in the cash flow of a pool of
underlying mortgages or other mortgage-related securities. Issuers of CMOs
frequently elect to be taxed as pass-through entities known as real estate
mortgage investment conduits ("REMICs"). CMOs are issued in multiple classes,
each with a specified fixed or floating interest rate and a final distribution
date. Coupons can be fixed or variable. If variable, they can move with or in
the reverse direction of interest rates. The coupon changes could be a multiple
of the actual rate change and there may be limitations on what the coupon can
be. Cash flows of pools can also be divided into a principal only class and an
interest only class. In this case the principal only class will only receive
principal cash flows from the pool. All interest cash flows go to the interest
only class. The relative payment rights of the various CMO classes may be
structured in many ways, either sequentially or by other rules of priority.
Generally, payments of principal are applied to the CMO classes in the order of
their respective stated maturities, so that no principal payments will be made
on a CMO class until all other classes having an earlier stated maturity date
are paid in full. Sometimes,
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however, CMO classes are "parallel pay," i.e. payments of principal are made to
two or more classes concurrently. CMOs may exhibit more or less price volatility
and interest rate risk than other types of mortgage-related obligations.
The CMO structure returns principal to investors sequentially, rather than
according to the pro rata method of a pass-through. In the traditional CMO
structure, all classes (called tranches) receive interest at a stated rate, but
only one class at a time receives principal. All principal payments received on
the underlying mortgages or securities are first paid to the "fastest pay"
tranche. After this tranche is retired, the next tranche in the sequence becomes
the exclusive recipient of principal payments. This sequential process continues
until the last tranche is retired. In the event of sufficient early repayments
on the underlying mortgages, the "fastest-pay" tranche generally will be retired
prior to its maturity. Thus the early retirement of a particular tranche of a
CMO held by a Fund would have the same effect as the prepayment of mortgages
underlying a mortgage-backed pass-through security as described above.
ASSET-BACKED SECURITIES. The Fixed Income Funds may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and receivables
from revolving credit (credit card) agreements. The Funds may also invest in
other types of asset-backed securities that may be available in the future. Such
assets are securitized through the use of trusts and special purpose
corporations. Payments or distributions of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution unaffiliated
with the trust or corporation. The estimated life of an asset-backed security
varies with the prepayment experience with respect to the underlying debt
instruments. The rate of such prepayments, and hence the life of the
asset-backed security, will be primarily a function of c current market rates,
although other economic and demographic factors will be involved. In certain
circumstances, asset-backed securities may be considered illiquid securities
subject to the percentage limitations described above. Asset-backed securities
are considered an industry for industry concentration purposes, and a Fund will
therefore not purchase any asset-backed securities which would cause 25% or more
of a Fund's net assets at the time of purchase to be invested in asset-backed
securities.
Asset-backed securities present certain risks that are not presented by other
securities in which a Fund may invest. Automobile receivables generally are
secured by automobiles. Most issuers of automobile receivables permit the loan
servicers to retain possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
asset-backed securities. In addition, because of the large number of vehicles
involved in a typical issuance and technical requirements under state laws, the
trustee for the holders of the automobile receivables may not have a proper
security interest in the underlying automobiles. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities. Credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due.
ZERO COUPONS, PAY-IN-KIND SECURITIES AND DEFERRED PAYMENT SECURITIES. The Fixed
Income Funds may invest in Zero Coupon, Pay-In-Kind and Deferred Payment
Securities. These securities are all types of fixed income securities on which
the holder does not receive periodic cash payments of interest or principal.
Generally, these securities are subject to greater price volatility and lesser
liquidity in the event of adverse market conditions than comparably rated
securities paying cash interest at regular intervals. Although a Fund will not
receive cash periodic coupon payments on these securities, the Fund may be
deemed to have received interest income, or "phantom income" during the life of
the obligation. The Fund may have to pay taxes on this phantom income, although
it has not received any cash payment.
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ZERO COUPONS. Zero Coupons are fixed income securities that do not make regular
interest payments. Instead, Zero Coupons are sold at a discount from their face
value. The difference between a Zero Coupon's issue or purchase price and its
face value represents the imputed interest an investor will earn if the
obligation is held until maturity. Zero Coupons may offer investors the
opportunity to earn a higher yield than that available on ordinary
interest-paying obligations of similar credit quality and maturity.
PAY-IN-KIND SECURITIES. Pay-In-Kind Securities are securities that have interest
payable by delivery of additional securities. Upon maturity, the holder is
entitled to receive the aggregate par value of the securities.
DEFERRED PAYMENT SECURITIES. Deferred Payment Securities are securities that
remain Zero Coupons until a predetermined date, at which time the stated coupon
rate becomes effective and interest becomes payable at regular intervals.
STRUCTURED NOTES. The Fixed Income Funds may invest in Structured Notes.
Structured Notes are derivative securities for which the amount of principal
repayment and/or interest payments is based upon the movement of one or more
"factors." These factors include, but are not limited to, currency exchange
rates, interest rates (such as the prime lending rate and LIBOR) and stock
indices, such as the S&P 500. In some cases, the impact of the movements of
these factors may increase or decrease through the use of multipliers or
deflators. Structured Notes may be designed to have particular quality and
maturity characteristics and may vary from money market quality to below
investment grade. Depending on the factor used and the use of multipliers or
deflators, however, changes in interest rates and movement of the factor may
cause significant price fluctuations or may cause particular Structured Notes to
be come illiquid. The Fund will use Structured notes to tailor their investments
to the specific risks and returns the Adviser wishes to accept while avoiding or
reducing certain other risks.
PREFERRED STOCKS, COMMON STOCKS, WARRANTS. The Fixed Income Funds may also
invest in referred stocks with yields that are attractive, provided that such
investments are otherwise consistent with the investment objectives and policies
of the Fund. A preferred stock is an equity security that entitles the holders
to a priority in liquidation over holders of the issuer's common stock. In
liquidation, the holders of preferred stock are subordinate to the holders of
the issuer's debt obligations. Typically, preferred stocks include the right to
receive regular dividend payments and may also include conversion rights, put
and call obligations and other features. In determining whether to invest in any
particular stock, CIGNA Investments will consider all relevant factors,
including the dividend yield, its conversion features, if any, its liquidity,
and the overall financial condition of the issuer. Under normal circumstances, a
Fund will not invest more than 10% of its assets in preferred stock.
A Fixed Income Fund will not acquire common stocks, except when (i) attached to
or included in a unit with income-generating securities that otherwise would be
attractive to the Fund; (ii) acquired through the exercise of equity features
accompanying convertible securities held by the Fund, such as conversion or
exchange privileges or warrants for the acquisition of stock or equity interest
of the same or different issuer; or (iii) in the case of an exchange offering
whereby the equity security would be acquired with the intention of exchanging
it for a debt security issued on a "when-issued" basis.
Warrants are, in effect, longer term call options. They give the holder the
right to purchase a given number of shares of a particular company at specified
prices within certain periods of time. The purchaser of a warrant expects that
the market price of the security will exceed the purchase price of the warrant
plus its exercise price, thus resulting in a profit. However, since the market
price may never exceed the exercise price before the expiration date of the
warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant.
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Warrants generally trade in the open market and may be sold rather than
exercised. Warrants are sometimes sold in unit form with other securities of an
issuer. Units of warrants and common stock may be employed in financing
unseasoned companies. The purchase price varies with the security, the life of
the warrant and various other investment factors. Investments in warrants,
valued at the lower of cost or market, may not exceed 5% of the value of the
Fund's net assets.
Considerations of liquidity and preservation of capital mean that these Funds
may not necessarily invest in instruments paying the highest available yield at
a particular time. These Funds may, consistent with their investment objective,
attempt to maximize yields by buying and selling portfolio investments in
anticipation of or in response to changing economic and money market conditions
and trends. These Funds may also invest to take advantage of what are believed
to be temporary disparities in the yields of the different segments of the
market or among particular instruments within the same segment of the market.
These policies, as well as the relatively short maturity of obligations which
may be held by these Funds, may result in frequent changes in portfolio
holdings. There usually are no brokerage commissions as such paid in connection
with the purchase of fixed income securities of the type in which these Funds
may invest. See "Brokerage Allocation" for a discussion of underwriters'
commissions and dealers' spreads involved in the purchase and sale of portfolio
securities.
JUNK BONDS. As noted in the prospectus, the Core Plus, Ultra Core Plus and
Emerging Market Debt Funds may purchase debt securities rated below investment
grade, i.e., securities that are rated Ba or lower by Moody's Investors
Services, Inc. or BB or lower by Standard & Poor's Corporation.
Included among the below investment-grade, high risk securities in which the
Funds may invest are securities issued in connection with corporate
restructurings such as takeovers or leveraged buyouts. Securities issued to
finance corporate restructurings may have special credit risks due to the highly
leveraged conditions of the issuer. In addition, such issuers may lose
experienced management as a result of the restructuring. Also, the market price
of such securities may be more volatile to the extent that expected benefits
from the restructuring do not materialize.
Because investors generally perceive that there are greater risks associated
with the medium to lower rated securities of the type constituting high-yield,
high risk securities, the yields and prices of these securities may tend to
fluctuate more than those for higher rated securities. In the lower quality
segments of the fixed income securities market, changes in perceptions of an
issuer's creditworthiness tend to occur more frequently and in a more pronounced
manner than do such changes with respect to higher quality segments of the fixed
income securities market, causing greater yield and price volatility.
Commissions and underwriting spreads associated with the purchase of below
investment-grade bonds are typically higher than those associated with the
purchase of high grade bonds.
Below investment-grade securities are often referred to as high yield or junk
bonds and are typically considered "high risk" securities. High yield bonds may
be subject to certain risk factors to which other securities are not subject to
the same degree. An economic downturn tends to disrupt the market for below
investment-grade bonds and adversely effect their values. Such an economic
downturn may be expected to result in increased price volatility of below
investment-grade bonds and of the value of the Fund's shares, and an increase in
issuers' defaults on such bonds.
Also, issuers of below investment-grade bonds are substantially leveraged, which
may impair their ability to meet their obligations. In some cases, the high
yield securities in which a Fund invests are subordinated to the prior payment
of senior indebtedness, thus potentially limiting the Fund's ability to recover
full principal or to receive payments when senior securities are in default.
When the secondary market for below investment-grade bonds becomes increasingly
illiquid, or in the absence of readily available market quotations for high
yield bonds, the relative lack of reliable, objective data makes the
responsibility of the Trustees to value the Fund's securities more
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difficult, and judgement plays a greater role in the valuation of portfolio
securities. Also, increased illiquidity of the below investment-grade bond
market may affect the Fund's ability to dispose of portfolio securities at a
desirable price.
The credit rating of a security does not necessarily address its market value
risk. Also, ratings may from time to time, be changed to reflect developments in
the issuer's financial condition. Below investment-grade bonds have speculative
characteristics which are apt to increase in number and significance with each
lower rating category. Also, prices of below investment-grade bonds have been
found to be less sensitive to interest rate changes and more sensitive to
adverse economic changes and individual corporate developments than more highly
rated investments.
Certain laws or regulations may have a material effect on the Fund's net asset
value and investment practices. For example, legislation requiring
federally-insured savings and loan associations to divest their investments in
below investment-grade bonds may further adversely affect the market for such
bonds.
EQUITY FUNDS AND BALANCED FUND
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The following Funds are referred to as the "Equity Funds."
Large Company Stock Growth Fund
Large Company Stock Value Fund
Large Company Stock Index Fund
Small Company Stock Growth Fund
Small Company Stock Value Fund
Foreign Stock Fund
In pursuing their investment objectives, the Equity Funds and the Balanced Fund
may invest in the following types of securities, as well as in the types of
securities identified above under "Fixed Income Funds and Balanced Fund":
EQUITY SECURITIES. Equity securities generally represent an ownership interest
in an issuer, or may be convertible into or represent a right to acquire an
ownership interest in an issuer. While there are many types of equity
securities, prices of all equity securities will fluctuate. Economic, political
and other events may affect the prices of broad equity markets. For example,
changes in inflation or consumer demand may affect the prices of all equity
securities in the United States. Similar events also may affect the prices of
particular equity securities. For example, news about the success or failure of
a new product may affect the price of a particular issuer's equity securities.
Common Stocks. Common stocks represent an ownership interest in a corporation,
entitling the stockholder to voting rights and receipt of dividends paid based
on proportionate ownership.
Depositary Receipts. Depositary Receipts represent an ownership interest in
securities of foreign companies (an "underlying issuer") that are deposited with
a depositary. Depositary Receipts are not necessarily denominated in the same
currency as the underlying securities. Depositary Receipts include American
Depositary Receipts ("ADRs"), Global Depositary Receipts ("GDRs") and other
types of Depositary Receipts (which, together with ADRs and GDRs, are
hereinafter collectively referred to as "Depositary Receipts"). ADRs are
dollar-denominated Depositary Receipts typically issued by a U.S. financial
institution which evidence an ownership interest in a security or pool of
securities issued by a foreign issuer. ADRs are listed and traded in the United
States. GDRs and other types of Depositary Receipts are typically issued by
foreign banks or trust companies, although they also may be issued by U.S.
financial institutions, and evidence ownership interests in a security or pool
of securities issued by either a
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foreign or a U.S. corporation. Generally, Depositary Receipts in registered form
are designed for use in the U.S. securities market and Depositary Receipts in
bearer form are designed for use in securities markets outside the United
States.
Depositary Receipts may be "sponsored" or "unsponsored." Sponsored Depositary
Receipts are established jointly by a depositary and the underlying issuer,
whereas unsponsored Depositary Receipts may be established by a depositary
without participation by the underlying issuer. Holders of unsponsored
Depositary Receipts generally bear all the costs associated with establishing
unsponsored Depositary Receipts. In addition, the issuers of the securities
underlying unsponsored Depository Receipts are not obligated to disclose
material information in the United States and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the Depositary Receipts. For
purposes of a Fund's investment policies, the Fund's investments in Depositary
Receipts will be deemed to be an investment in the underlying securities, except
that ADRs may be deemed to be issued by a U.S. issuer.
Preferred Stocks. Preferred Stocks are securities that evidence ownership in a
corporation and pay a fixed or variable stream of dividends. Preferred Stocks
have a preference over Common Stocks in the event of the liquidation of an
issuer and usually do not carry voting rights. Because Preferred Stocks pay a
fixed or variable stream of dividends they have many of the characteristics of a
Fixed Income Security and are, therefore, included in both the definition of
Equity Security and Fixed Income Security. Rights. Rights represent the right,
but not the obligation, for a fixed period of time to purchase additional shares
of an issuer's Common Stock at the time of a new issuance, usually at a price
below the initial offering price of the Common Stock and before the Common Stock
is offered to the general public. Rights are usually freely transferable. The
risk of investing in a Right is that the Right may expire prior to the market
value of the Common Stock exceeding the price fixed by the Right.
Warrants. Warrants give holders the right, but not the obligation, to buy Common
Stock of an issuer at a given price, usually higher than the market price at the
time of issuance, during a specified period. Warrants are usually freely
transferable. The risk of investing in a Warrant is that the Warrant may expire
prior to the market value of the Common Stock exceeding the price fixed by the
Warrant.
Convertible Securities. Convertible Securities are securities that may be
exchanged under certain circumstances for a fixed number of shares of Common
Stock or other Equity Securities. Convertible Securities generally represent a
feature of some other type of security, such as a Fixed Income Security or
Preferred Stock, so that, for example, a Convertible Fixed Income Security would
be a Fixed Income Security that is convertible into Common Stock. Convertible
Securities may be viewed as an investment in the current security or the
security into which the Convertible Securities may be exchanged and, therefore,
are included in both the definition of Equity Security and Fixed Income
Security.
FOREIGN EQUITY SECURITIES. Foreign equity securities are equity securities of
an issuer in a foreign country.
FOREIGN BONDS. Foreign bonds are fixed income securities issued by a foreign
government, government-related or a private issuer in a foreign country.
RUSSIAN EQUITY SECURITIES. The registration, clearing and settlement of
securities transactions involving Russian issuers are subject to significant
risks not normally associated with securities transactions in the United States
and other more developed markets. Ownership of Equity Securities in Russian
companies is evidenced by entries in a company's share register (except where
shares are held through depositories that meet the requirements
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of the 1940 Act) and the issuance of extracts from the register or, in certain
limited cases, by formal share certificates. However, Russian share registers
are frequently unreliable and a Fund could possibly lose its registration
through oversight, negligence or fraud. Moreover, Russia lacks a centralized
registry to record securities transactions and registrars located throughout
Russia or the companies themselves maintain share registers. Registrars are
under no obligation to provide extracts to potential purchasers in a timely
manner or at all and are not necessarily subject to effective state supervision.
In addition, while registrars are liable under law for losses resulting from
their errors, it may be difficult for a Fund to enforce any rights it may have
against the registrar or issuer of the securities in the event of loss of share
registration. Although Russian companies with more than 1,000 shareholders are
required by Russian law to employ an independent registrar, in practice, such
companies have not always followed this law. Because of this lack of
independence of registrars, management of a Russian company may be able to exert
considerable influence over who can purchase and sell the company's shares by
illegally instructing the registrar to refuse to record transactions on the
share register. Furthermore, these practices may prevent a Fund from investing
in the securities of certain Russian companies deemed suitable by its Adviser
and could cause a delay in the sale of Russian Securities by the Fund if the
company deems a purchaser unsuitable, which may expose the Fund to potential
loss on its investment.
FOREIGN INVESTMENT.
Additional Risks - Investing in foreign securities involves certain special
considerations which are not typically associated with investing in the equity
securities or fixed income securities of U.S. issuers. Foreign issuers are not
generally subject to uniform accounting, auditing and financial reporting
standards and may have policies that are not comparable to those of domestic
issuers. As a result, there may be less information available about foreign
issuers than about domestic issuers. Securities of some foreign issuers are
generally less liquid and more volatile than securities of comparable domestic
issuers. There is generally less government supervision and regulation of stock
exchanges, brokers and listed issuers than in the United States. In addition,
with respect to certain foreign countries, there is a possibility of
expropriation or confiscatory taxation, political and social instability, or
diplomatic developments which could affect U.S. investments in those countries.
The costs of investing in foreign countries frequently is higher than the costs
of investing in the United States. Although the Funds' Advisers endeavor to
achieve the most favorable execution costs in portfolio transactions, fixed
commissions on many foreign stock exchanges are generally higher than negotiated
commissions on U.S. exchanges.
Investments in securities of foreign issuers generally are denominated in
foreign currencies. Accordingly, the value of a Fund's assets, as measured in
U.S. dollars may be affected favorably or unfavorably by changes in currency
exchange rates and in exchange control regulations. A Fund may incur costs in
connection with conversions between various currencies.
Certain foreign governments levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. The Funds may be able to
claim a credit for U.S. tax purposes with respect to any such foreign taxes.
MATTERS RELATING TO ALL FUNDS
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The foregoing investment policies are not fundamental and the Board of Trustees
may change such policies without shareholder approval. The Board will not change
a Fund's investment objective without the required shareholder vote as set forth
in "Fundamental Fund Policies" below. There is risk inherent in any investment,
and there is no assurance that any of the strategies and methods of investment
available to any Fund will result in the achievement of its objectives.
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Each Fund's investments must be consistent with its investment objective and
policies. Accordingly, not all of the security types and investment techniques
discussed in this Statement of Additional Information are eligible investments
for each of the Funds.
SECURITIES ISSUED ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS. Each Fund may
purchase securities on a "when-issued" basis, that is, delivery of and placement
for the securities is not fixed at the date of purchase, but is set after the
securities are issued (normally within forty-five days after the date of the
transaction). A Fund also may purchase or sell securities on a delayed delivery
basis. The payment obligation and the interest rate that will be received on the
delayed delivery securities are fixed at the time the buyer enters into the
commitment. A Fund will only make commitments to purchase when-issued or delayed
delivery securities with the intention of actually acquiring such securities,
but a Fund may sell these securities before the settlement date if it is deemed
advisable.
Investment in securities on a when-issued or delayed delivery basis may increase
a Fund's exposure to market fluctuation and may increase the possibility that
the Fund will incur short-term gains subject to Federal taxation or short-term
losses if the Fund must engage in portfolio transactions in order to honor a
when-issued or delayed delivery commitment. In a delayed delivery transaction,
the Fund relies on the other party to complete the transaction. If the
transaction is not completed, the Fund may miss a price or yield considered to
be advantageous. A Fund will employ techniques designed to reduce such risks. If
the Fund purchases a when-issued security, the Fund's custodian bank will
segregate cash or liquid securities in an amount equal to the when-issued or
delayed delivery commitment. If the market value of the segregated securities
declines, additional cash or securities will be segregated on a daily basis so
that the market value of the segregated assets will equal the amount of the
Fund's commitments. To the extent cash and securities are segregated, they will
not be available for new investments or to meet redemptions. A Fund will not
receive interest on a delayed delivery security until the security is delivered
to the Fund.
ILLIQUID SECURITIES. Each Fund may invest up to 15% (10% for the Money Market
Fund) of its net assets in securities that are illiquid. Illiquid securities
include securities that have no readily available market quotations and cannot
be disposed of promptly (within seven days) in the normal course of business at
approximately the price at which they are valued. Illiquid securities may
include securities that are subject to restrictions on resale because they have
not been registered under the Securities Act of 1933 (the "1933 Act").
Restricted securities may, in certain circumstances, be resold pursuant to Rule
144A under the 1933 Act, and thus may or may not constitute illiquid securities.
To the extent that qualified institutional buyers become uninterested in
purchasing these restricted securities the level of illiquidity in a Fund may
increase. The Fund's investment adviser determines the liquidity of the Fund's
investments. Limitations on the resale of restricted securities may have an
adverse effect on their marketability, which may prevent the Fund from disposing
of them promptly at reasonable prices. The Fund may have to bear the expense of
registering such securities for resale, and the risk of substantial delays in
effecting such registrations.
BORROWING. Each Fund may borrow from banks or through reverse repurchase
agreements in an amount up to 10% of its total assets. If a Fund borrows money,
its share price may be subject to greater fluctuation until the borrowing is
paid off. A Fund will not purchase additional securities at any time that its
outstanding borrowings exceed 5% of its total assets.
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FUTURES CONTRACTS. Each Fund may purchase and sell futures contracts, including
futures on securities indices, baskets of securities, interest rates and foreign
currencies. A stock index assigns relative values to the common stocks included
in the index and the index fluctuates with changes in the market values of the
common stocks so included. A stock index futures contract is a bilateral
agreement pursuant to which two parties agree to take or make delivery of an
amount of cash equal to a specified dollar amount times the difference between
the stock index value at the close of the last trading day of the contract and
the price at which the futures contract is originally struck. There is no
physical delivery of the underlying stocks in the index.
Generally, a Fund will only enter into stock index futures contracts as a hedge
against changes resulting from market conditions in the values of the securities
held or which the Fund intends to purchase. When the fund anticipates a
significant market or market sector advance, the purchase of a stock index
futures contract affords a hedge against not participating in such advance.
Conversely, in anticipation of or in a general market or market sector decline
that adversely affects the market values of the fund's portfolio of securities,
the Fund may sell stock index futures contracts. The Large Company Stock Index
Fund's use of stock index futures includes purchasing S&P 500 futures contracts
pending investment in the S&P 500. The Large Company Stock Growth Fund may also
purchase stock index futures contracts or related options in order to gain
market exposure, but will limit its use of derivative products, including
futures contracts and related options, for non-hedging purposes to 33 1/3% of
its total assets (measured by the aggregate notational amount of outstanding
derivative products).
An interest rate futures contract is an agreement between two parties to buy and
sell a debt security for a set price on a future date. A Fund generally may
enter into interest rate futures contracts for the purpose of hedging debt
securities in their portfolios or the value of debt securities which the Funds
intend to purchase. For example, if a fund owned long-term debt securities and
interest rates were expected to increase, it might sell interest rate futures
contracts. If, on the other hand, a fund held cash reserves and interest rates
were expected to decline, it might purchase interest rate futures contracts.
In cases of purchases of futures contracts, an amount of cash or liquid assets,
equal to the market value of the futures contracts (less any related margin
deposits), will be deposited in a segregated account with the Fund's custodian
to collateralize the position and ensure that the use of such futures contracts
is unleveraged. Unlike when a Fund purchases or sells a security, no price is
paid or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the custodian for the Fund
for the account of the broker a stated amount, as called for by a particular
contract, of cash or U.S. Treasury bills. This amount is known as "initial
margin." The nature of initial margin in futures transactions is different from
that of margin in securities transactions in that futures contract margin does
not involve the borrowing of funds by the customer to finance the transactions.
Rather, the initial margin is in the nature of a performance bond or good faith
deposit on the contract which is returned to the applicable Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied. Subsequent payments, called "variation margin," to and from the
broker will be made on a daily basis as the price of the futures contract
fluctuates making the long and short positions in the futures contract more or
less valuable, a process known as "marking-to-market." For example, when a Fund
has purchased a stock index futures contract and the price of the underlying
stock index has risen, that position will have increased in value and the Fund
will receive from the broker a variation margin payment with respect to that
increase in value. Conversely, where a Fund purchases a stock index futures
contract and the price of the underlying stock index has declined, the position
would be less valuable and the Fund would be required to make a variation margin
payment to the broker. Variation margin payments would be made in a similar
fashion when a Fund purchases an interest rate futures contract. At any time
prior to expiration of the futures contract, a Fund may elect to close the
position by taking an opposite position which will operate to terminate the
Fund's position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid by or released to
the Fund and the Fund realizes a loss or a gain.
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OPTIONS ON FUTURES CONTRACTS. Each Fund may purchase and sell options on futures
contracts. An option on a futures contract gives the purchaser (the Fund) the
right, in return for the premium paid, to assume a position in a futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the option
exercise period. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a long
position if the option is a put) at a specified exercise price at any time
during the period of the option. Upon exercise of the option, the assumption of
offsetting futures positions by the writer and holder of the option will be
accompanied by delivery of the accumulated cash balance in the writer's futures
margin account which represents the amount by which the market price of the
futures contract, at exercise, exceeds, in the case of a call, or is less than,
in the case of a put, the exercise price of the option on the futures contract.
If an option on a futures contract is exercised on the last trading date prior
to the expiration date of the option, the settlement will be made entirely in
cash equal to the difference between the exercise price of the option and the
closing price of the futures contract on the expiration date.
The Funds may purchase put options on futures contracts to hedge against the
risk of falling prices for their portfolio securities, may purchase call options
on futures contracts as a hedge against a rise in the price of securities which
they intend to purchase and, for the Large Company Stock Index Fund, may
purchase call options on S&P 500 futures contracts pending investment in the S&P
500 or to maintain liquidity. Options on futures contracts may also be used to
hedge the risks of changes in the exchange rate of foreign currencies. The Funds
may also seek to increase returns through options transactions (subject to the
Large Company Stock Growth Fund's 33 1/3% limitation for non-hedging purposes
discussed previously under "Futures Contracts"). The purchase of a put option on
a futures contract is similar to the purchase of protective put options on
portfolio securities or a foreign currency. The purchase of a call option on a
futures contract is similar in some respects to the purchase of a call option on
an individual security or a foreign currency. Depending on the pricing of the
option compared to either the price of the futures contract upon which it is
based or the price of the underlying securities or currency, it may or may not
be less risky than ownership of the futures contract or underlying securities or
currency.
Where applicable, each Fund intends to comply with guidelines of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
CFTC and the National Futures Association, which regulate trading in the futures
markets. Accordingly, a Fund will not enter into any futures contract or option
on a futures contract for non-bona fide hedging activities if, as a result, the
aggregate initial margin and premiums required to establish such positions would
exceed 5% of the Fund's net assets.
RISKS AS TO FUTURES CONTRACTS AND RELATED OPTIONS. There are several risks in
connection with the use of futures contracts and related options as hedging
devices and for speculative purposes. One risk arises because of the imperfect
correlation between movements in the price of hedging instruments and movements
in the price of the stock, debt securities or foreign currency which are the
subject of the hedge. If the price of a hedging instrument moves less than the
price of the stocks, debt securities or foreign currency which are the subject
of the hedge, the hedge will not be fully effective. If the price of a hedging
instrument moves more than the price of the stock, debt securities or foreign
currency, a Fund will experience either a loss or a gain on the hedging
instrument which will not be completely offset by movements in the price of the
stock, debt securities or foreign currency which are the subject of the hedge.
The use of options on futures contracts involves the additional risk that
changes in the value of the underlying futures contract will not be fully
reflected in the value of the option.
Successful use of hedging instruments by a Fund is also subject to a Fund's
investment adviser's ability to predict correctly movements in the direction of
the stock market, of interest rates or of foreign exchange rates (foreign
currencies). Because of possible price distortions in the futures and options
markets and because of the imperfect correlation between movements in the prices
of hedging instruments and the investments being hedged, even a
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correct forecast by the Funds' investment adviser's of general market trends may
not result in a completely successful hedging transaction.
It is also possible that where a Fund has sold futures contracts to hedge its
portfolio against a decline in the market, the market may advance and the value
of stocks or debt securities held in a Fund's portfolio may decline. If this
occurred, a Fund would lose money on the futures contracts and also experience a
decline in the value of its portfolio securities. Similar risks exist with
respect to foreign currency hedges.
Positions in futures contracts or options may be closed out only on an exchange
on which such contracts are traded. Although the Funds intend to purchase or
sell futures contracts or purchase options only on exchanges or boards of trade
where there appears to be an active market, there is no assurance that a liquid
market on an exchange or board of trade will exist for any particular contract
or at any particular time. If there is not a liquid market at a particular time,
it may not be possible to close a futures position or purchase an option at such
time. In the event of adverse price movements under those circumstances, a Fund
would continue to be required to make daily cash payments of maintenance margin
on its futures positions. The extent to which the Fund may engage in futures
contracts or related options will be limited by Internal Revenue Code
requirements for qualification as a regulated investment company and the Fund's
intent to continue to qualify as such. The result of a using futures contracts
and related options cannot be foreseen and may cause the portfolio of a Fund to
suffer losses which it would not otherwise sustain.
OPTIONS. The Funds may seek to increase their returns or may hedge their
portfolio investments through options transactions with respect to individual
securities, indices or baskets in which such Funds may invest; other financial
instruments; and foreign currency. The Large Company Stock Growth Fund will
limit its use of derivative products including options transactions for
non-hedging purposes to 33 1/3% of total assets. Various options may be
purchased and sold on exchange or over-the-counter markets.
Each Fund may purchase put and call options. Purchasing a put option gives a
Fund the right, but not the obligation, to sell the underlying (such as a
securities index or a particular foreign currency) at the exercise price either
on a specific date or during a specified exercise period. The purchaser pays a
premium to the seller (also known as the writer) of the option.
Each Fund also may write put and call options on investments held in its
portfolio, as well as foreign currency options. A Fund that has written an
option receives a premium that increases the Fund's return on the underlying in
the event the option expires unexercised or is closed out at a profit. However,
by writing a call option, a Fund will limit its opportunity to profit from an
increase in the market value of the underlying above the exercise price of the
option. By writing a put option, a Fund will be exposed to the amount by which
the price of the underlying is less than the strike price.
By writing an option, a Fund incurs an obligation either to buy (in the case of
a put option) or sell (in the case of a call option) the underlying from the
purchaser of the option at the option's exercise price, upon exercise by the
purchaser. The Funds may only write options that are "covered." A covered call
option means that until the expiration of the option, the Fund will either
earmark or segregate sufficient liquid assets to cover its obligations under the
option or will continue to own (i) the underlying; (ii) securities or
instruments convertible or exchangeable without the payment of any consideration
into the underlying; or (iii) a call option on the same underlying with a strike
price no higher than the price at which the underlying was sold pursuant to a
short option position. In the case of a put option, the Fund will either earmark
or segregate sufficient liquid assets to cover its obligations under the option
or will own another put option on the same underlying with an equal or higher
strike price.
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There currently are limited options markets in many countries, particularly
emerging market countries, and the nature of the strategies adopted by a Fund's
adviser, and the extent to which those strategies are used will depend on the
development of these options markets. The primary risks associated with the
Fund's use of options as described include (i) imperfect correlation between the
change in market value of investments held, purchased or sold by a Fund and the
prices of options relating to such investments, and (ii ) possible lack of a
liquid secondary market for an option.
FOREIGN CURRENCY TRANSACTIONS. A Fund holding securities denominated in
currency other than U.S. dollars may engage in currency exchange transactions to
protect against uncertainty in the level of future currency exchange rates.
Generally, Funds may engage in both "transaction hedging" and "position
hedging". When a Fund engages in transaction hedging, the Fund enters into
foreign currency transactions with respect to specific receivables or payables,
generally arising in connection with the purchase or sale of portfolio
securities. A Fund will engage in transaction hedging when it desires to "lock
in" the U.S. dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a foreign
currency. By transaction hedging, a Fund will attempt to protect itself against
a possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period between the
date on which the security is purchased or sold or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
A Fund may purchase or sell a foreign currency on a spot (or cash) basis at the
prevailing spot rate in connection with the settlement of transactions in
portfolio securities denominated in that foreign currency. A Fund may also enter
into contracts to purchase or sell foreign currencies at a future date ("forward
contracts") and purchase and sell foreign currency futures contracts.
For transaction hedging purposes a Fund may also purchase exchange-listed call
and put options on foreign currencies. A put option on currency gives the Fund
the right to sell a currency at a specific exercise price. A call option on
currency gives a Fund the right to purchase a currency at a specific exercise
price. The time when call and put options are exercisable depends on whether the
options are American options or European options. American options are
exercisable at anytime during the option period. European options are
exercisable only on a designated date.
When it engages in position hedging, a Fund enters into foreign currency
exchange transactions to protect against a decline in the values of the foreign
currencies in which its portfolio securities are denominated or an increase in
the value of currency for securities which the Fund expects to purchase, when
the Fund holds cash or short-term investments. In connection with position
hedging, a Fund may purchase put or call options on foreign currency and foreign
currency futures contracts and buy or sell forward contracts and foreign
currency futures contracts. The Funds may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange transactions
and the value of the portfolio securities involved will not generally be
possible since the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered into and the
dates they mature. For example, it may be necessary for a Fund to purchase
additional foreign currency on the spot market (and bear the expense of such
purchase) if the market value of the security or securities being hedged is less
than the amount of foreign currency a Fund is obligated to deliver and a
decision is made to sell the security or securities and make delivery of the
foreign currency. Conversely, it may be necessary to sell on the spot market
some of the foreign currency received upon the sale of the portfolio
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security or securities if the market value of such security or securities
exceeds the amount of foreign currency a Fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the underlying
prices of the securities which a Fund owns or intends to purchase or sell. They
simply establish a rate of exchange which one can achieve at some future point
in time. Additionally, although these techniques tend to minimize the risk of
loss due to a decline in the value of the hedged currency, they tend to limit
any potential gain which might result from the increase in value of such
currency.
Regardless of whether a Fund's investment adviser determines that it is
advisable to hedge a Fund's currency risk, the Funds will have to convert their
holdings of foreign currencies into U.S. dollars from time to time. Although
foreign exchange dealers generally do not charge a fee for conversion, they do
realize a profit based on the difference (the "spread") between the prices at
which they are buying and selling various currencies.
FORWARD CURRENCY CONTRACTS. The Funds may invest in forward currency contracts.
A forward currency contract is an agreement between two parties to purchase and
sell a specific quantity of a currency at a price specified at the time of the
contract, with delivery and settlement at a specified future date. In the case
of purchases of forward currency contracts, an amount of cash and cash
equivalents, equal to the market value of the portfolio security sold, will be
deposited in a segregated account with the Trust's Custodian to collateralize
the position and ensure that the use of such contracts is unleveraged.
In the case of a cancelable forward contract, the holder has the unilateral
right to cancel the contract at maturity by paying a specified fee. The
contracts are traded in the interbank market conducted directly between currency
traders (usually large commercial banks and their customers). A forward contract
generally has no deposit requirements, and no commissions are charged at any
stage for trades.
Forward currency contracts are less liquid than currency futures contracts, and
there is an increased risk of default by the counterparty as compared to futures
contracts. Forward currency contracts differ from currency futures contracts in
certain other respects as well. For example, the maturity date of a forward
contract may be any fixed number of days from the date in a given month. Forward
contracts may be in any amounts agreed upon by the parties rather than
predetermined amounts. Also, forward currency contracts are traded directly
between currency traders so no intermediary is required. A forward contract
generally requires no margin or other deposit.
At the maturity of a forward contract, a Fund may either accept or make delivery
of the currency specified in the contract, or at or prior to maturity enter into
a closing transaction involving the purchase or sale of an offsetting contract.
Closing transactions with respect to forward contracts are usually effected with
the currency trader who is a party to the original forward contract. There is no
assurance that the Fund will be able to close a forward contract prior to
maturity and, under such circumstances, the Fund may have exposure to adverse
changes in exchange rates.
EUROPEAN CURRENCY TRANSITION. On January 1, 1999, the European Monetary Union
(EMU) implemented a new currency unit, the Euro, which is expected to reshape
financial markets, banking systems and monetary policies in Europe and other
parts of the world. Implementation of this plan will mean that financial
transactions and market information, including share quotations and company
accounts, in participating countries will be denominated in Euros. Monetary
policy for participating countries will be uniformly managed by a new central
bank, the European Central Bank (ECB).
The transition to the Euro may change the economic environment and behavior of
investors, particularly in European markets. For example, the process of
implementing the Euro may adversely affect financial markets world-wide and
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may result in changes in the relative strength and value of the U.S. dollar or
other major currencies, as well as possible adverse tax consequences. The
transition to the Euro is likely to have a significant impact on fiscal and
monetary policy in the participating countries and may produce unpredictable
effects on trade and commerce generally. These resulting uncertainties could
create increased volatility in financial markets world-wide.
LOANS AND OTHER DIRECT DEBT INSTRUMENTS. The Funds may invest in loans and other
direct debt instruments. Direct debt instruments are interests in amounts owed
by a corporate, governmental, or other borrower to lenders or lending syndicates
(loans and loan participations), to suppliers of goods or services (trade claims
or other receivables), or to other parties. Direct debt instruments are subject
to each Fund's policies regarding the quality of debt securities.
Purchaser of loans and other forms of direct indebtedness depend primarily upon
the creditworthiness of the borrower for payment of principal and interest.
Direct debt instruments may not be rated by any NRSRO. If a Fund does not
receive scheduled interest or principal payments on such indebtedness, the
Fund's share price and yield could be adversely affected. Loans that are fully
secured offer a Fund more protections than an unsecured loan in the event of
non-payment of scheduled interest or principal. However, there is no assurance
that the liquidation of collateral from a secured loan would satisfy the
borrower's obligation, or that the collateral could be liquidated. Indebtedness
of borrowers whose creditworthiness is poor involves substantially greater risks
and may be highly speculative. Borrowers that are in bankruptcy or restructuring
may never pay off their indebtedness, or may pay only a small fraction of the
amount owed. Direct indebtedness of developing countries also involves a risk
that the government entities responsible for the repayment of the debt may be
unable, or unwilling, to pay interest and repay principal when due.
Investments in loans through direct assignment of a financial institution's
interests with respect to a loan may involve additional risks to a Fund. For
example, if a loan is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associates with owing and
disposing of the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, the Fund could be held liable as a
co-lender. Direct debt instruments may also involve a risk of insolvency of the
lending bank or other intermediary. Direct debt instruments that are not in the
form of securities may offer less legal protection to a Fund in the event of
fraud or misrepresentation. In the absence of definitive regulatory guidance,
each Fund relies on CIGNA Investments' research in an attempt to avoid
situations where fraud or misrepresentation could adversely affect the Fund.
A loan is often administered by a bank or other financial institution that acts
as agent for all holders. The agent administers the terms of the loan, as
specified in the loan agreement. Unless, under the terms of the loan or other
indebtedness, each Fund has direct recourse against the borrower, it may have to
rely on the agent to apply appropriate credit remedies against a borrower. If
assets held by the agent for the benefit of a Fund were determined to be subject
to the claims of the agent's general creditors, the Fund might incur certain
costs and delays in realizing payment on the loan or loan participation and
could suffer a loss of principal or interest.
Each Fund (except the Money Market Fund, to a limited degree) limits the amount
of total assets that it will invest in any one issuer or in issues within the
same industry. For purposes of these limitations, each Fund generally will treat
the borrower as the "issuer" of indebtedness held by the Fund. In the case of
loan participations where a bank or other lending institution serves as
financial intermediary between each Fund and the borrower, if the participation
does not shift to the Fund the direct debtor-creditor relationship with the
borrower, SEC interpretations requires the Fund, in appropriate circumstances,
to treat both the lending bank or other lending institution and the borrower as
"issuers" for these purposes. Treating a financial intermediary as an issuer of
indebtedness may restrict a Fund's ability to invest in indebtedness related to
a single financial intermediary, or a group of intermediaries engaged in the
same industry, even if the underlying borrowers represent many different
companies and industries.
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SECURITIES LENDING. A Fund may lend securities to parties such as
broker-dealers or institutional investors.
Securities lending allows a Fund to retain ownership of the securities loaned
and, at the same time, to earn additional income. Since there may be delays in
the recovery of loaned securities, or even a loss of rights in collateral
supplied should the borrower fail financially, loans will be made only to
parties deemed by the Fund's investment adviser to be of good standing.
Furthermore, they will only be made if, in the Fund's investment adviser's
judgment, the consideration to be earned from such loans would justify the risk.
The Funds' investment advisers understand that it is the current view of the SEC
Staff that a fund may engage in loan transactions only under the following
conditions: (1) the fund must receive 100% collateral in the form of cash or
cash equivalents (e.g. U.S. Treasury bills or notes) from the borrower; (2) the
borrower must increase the collateral whenever the market value of the
securities loaned (determined on a daily basis) rises above the value of the
collateral; (3) after giving notice, the fund must be able to terminate the loan
at any time; (4) the fund must receive reasonable interest on the loan or a flat
fee from the borrower, as well as amounts equivalent to any dividends, interest,
or other distributions on the securities loaned and to any increase in market
value; (5) the fund may pay only reasonable custodian fees in connection with
the loan; and (6) the Board of Trustees must be able to vote proxies on the
securities loaned, either by terminating the loan or by entering into an
alternative arrangement with the borrower.
Cash received through loan transactions may be invested in any security in which
a Fund is authorized to invest. Investing this cash subjects that investment, as
well as the security loaned, to market forces (i.e., capital appreciation or
depreciation).
SOVEREIGN DEBT OBLIGATIONS. A Fund may purchase sovereign debt instruments
issued or guaranteed by foreign governments or their agencies, including debt of
Latin American nations or other developing countries. Sovereign debt may be in
the form of conventional securities or other types of debt instruments such as
loans or loan participations. Sovereign debt of developing countries may involve
a high degree of risk, and may be in default or present the risk of default.
Governmental entities responsible for repayment of the debt may be unable or
unwilling to repay principal and interest when due, and may require
renegotiation or rescheduling of debt payments. In addition, prospects for
repayment of principal and interest may depend on political as well as economic
factors.
SWAP AGREEMENTS. The Funds may enter into swap agreements such as interest rate,
index and currency exchange rate swaps. These transactions would be entered into
in an attempt to obtain a particular return when it is considered desirable to
do so, possibly at a lower cost to the Fund than if the Fund had invested
directly in the asset that yielded the desired return. Swap agreements are
two-party contracts entered into primarily by institutional investors for
periods ranging from a few weeks to more than one year. In a standard swap
transaction, two parties agree to exchange the returns (or differentials in
rates of return) earned or realized on particular predetermined investments or
instruments, which may be adjusted for an interest factor. The gross returns to
be exchanged or "swapped" between the parties are generally calculated with
respect to a "notional amount," i.e. the return on or increase in value of a
particular dollar amount invested at a particular interest rate, in a particular
foreign currency, or in a "basket" of securities representing a particular
index.
Most swap agreements entered into by a Fund calculate the obligations of the
parties to the agreement on a "net basis." Consequently, a Fund's current
obligations (or rights) under a swap agreement will generally be equal only to
the net amount to be paid or received under the agreement based on the relative
values of the positions held by each party to the agreement (the "net amount").
A Fund's current obligations under a swap agreement will be accrued daily
(offset against amounts owed to the Fund), and any accrued but unpaid net
amounts owed to a swap
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counterparty will be covered by the segregation of assets determined to be
liquid by the fund's investment adviser, to limit any potential leveraging of
the Fund's portfolio. Obligations under swap agreements so covered will not be
construed to be "senior securities" for purposes of the Funds' investment
restriction concerning senior securities. A Fund will not enter into a swap
agreement with any single party if the net amount owed or to be received under
existing contracts with that party would exceed 5% of the Fund's assets.
Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on the Fund's investment adviser's ability to
predict correctly whether certain types of investments are likely to produce
greater returns than other investments. Because they are two-party contracts and
because they may have terms of greater than seven days, swap agreements may be
considered to be illiquid investments. Moreover, a Fund bears the risk of loss
of the amount expected to be received under a swap agreement in the event of the
default or bankruptcy of a swap agreement counterparty. A Fund will enter into
swap agreements only with counterparties that meet certain standards for
creditworthiness (generally, such counterparties would have to be eligible
counterparties under the terms of the Funds' repurchase agreement guidelines).
Certain restrictions imposed on the Funds by the Internal Revenue Code may limit
a Fund's ability to use swap agreements. The swaps market is a relatively new
market and is largely unregulated. It is possible that developments in the swaps
market, including potential government regulation, could adversely affect a
Fund's ability to terminate existing swap agreements or to realize amounts to be
received under such agreements.
MONEY MARKET INSTRUMENTS. Each Fund may invest in U.S. Government Direct
Obligations, U.S. Government Agency Securities, Certificates of Deposit,
Commercial Paper and Repurchase Agreements. See "Money Market Fund" earlier in
this Statement of Additional Information for a description of these instruments.
TEMPORARY INVESTMENTS. When a Fund's investment adviser believes that a change
in economic, financial, or political conditions make it advisable, the Fund may
invest up to 100% of its assets in cash and certain short- and medium-term fixed
income securities for temporary defensive purposes.
FUNDAMENTAL FUND POLICIES
- -------------------------
The Funds are subject to the following restrictions which may not be changed
without approval of the lesser of (i) 67% or more of that Fund's shares present
at a meeting if the holders of more than 50% of the outstanding shares are
present in person or represented by proxy, or (ii) more than 50% of that Fund's
outstanding shares. Any investment restriction that involves a maximum or
minimum percentage of securities or assets shall not be considered to be
violated unless an excess over or a deficiency under the percentage occurs
immediately after, and is caused by, an acquisition or disposition of securities
or utilization of assets by the Fund.
A Fund may not:
1. Borrow money or issue senior securities, except that the Money Market
Fund and Large Company Stock Index Fund may borrow to the extent
permitted by the 1940 Act for temporary or emergency purposes or to
satisfy redemption requests, and each other Fund may also borrow to the
extent permitted by the 1940 Act for temporary or emergency purposes or
to satisfy redemption requests, and may borrow from banks in an amount
not in excess of 33-1/3% of its total assets (including the amount
borrowed) less liabilities in accordance with its investment objective
and policies.
2. Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may
be deemed to be an underwriter under Federal securities laws.
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3. Concentrate 25% or more of its total assets in a particular industry,
except the Money Market Fund may invest up to 100% of its assets in the
financial services industry or in instruments issued by U.S. banks. This
restriction does not apply to securities issued by the U.S. Government
or its agencies or instrumentalities (or repurchase agreements with
respect thereto).
4. Purchase or sell mortgages or real estate, or invest in real estate
limited partnerships, although a Fund may purchase securities of issuers
that deal in real estate, including real estate investment trusts, and
may purchase securities that are secured by interests in real estate.
5. Lend any funds or other assets, except that a Fund may, consistent with
its investment objective and policies: (a) invest in debt obligations,
including bonds, debentures or other debt securities, bankers'
acceptances and commercial paper, even though the purchase of such
obligations may be deemed to be the making of loans, (b) enter into
repurchase agreements, and (c) lend its portfolio securities in an
amount not to exceed one-third of the value of its total assets,
provided such loans are made in accordance with applicable guidelines
established by the Securities and Exchange Commission.
6. With respect to 75% of its assets, purchase the securities of any issuer
if such purchase would cause more than 5% of the value of its total
assets (taken at market value at the time of such investment) to be
invested in the securities of such issuer except U.S. Government
securities, including securities issued by its agencies and
instrumentalities (or repurchase agreements with respect thereto).
7. For the Money Market Fund and the Large Company Stock Index Fund, with
respect to 75% of its assets, purchase the securities of any issuer if
such purchase would cause more than 5% of the voting securities, or more
than 10% of the securities of any class of such issuer (taken at the
time of such investment), to be held by a Fund, and for all other Funds,
purchase the securities of any issuer if such purchase would cause more
than 10% of any class of the outstanding voting securities of such
issuer (taken at the time of such investment) to be held by a Fund.
8. Purchase or sell commodities or commodities contracts or oil, gas or
mineral programs. This restriction shall not prohibit a Fund, subject to
restrictions described in the Prospectuses and elsewhere in this
Statement of Additional Information, from purchasing, selling or
entering into futures contracts, options on futures contracts, foreign
currency forward contracts, foreign currency options, or any interest
rate, securities-related or foreign currency-related hedging instrument,
including swap agreements and other derivative instruments, subject to
compliance with any applicable provisions of the federal securities or
commodities laws.
In applying the industry concentration restriction (number 3 above) the Small
Company Stock Value Fund uses the industry groups used in the Data Monitor
Portfolio Monitoring System of William O'Neil & Co. Incorporated.
MANAGEMENT OF THE TRUST
- -----------------------
The Trust is managed by a Board of Trustees. The Trustees are responsible for
managing the Trust's business affairs and for exercising all of the Trust's
powers except those reserved for the shareholders.
The Trustees and the executive officers of the Trust are listed below, together
with information as to their principal occupations during the past five years
and other principal business affiliations. Each currently holds the equivalent
position as Trustee and/or officer of CIGNA High Income Shares, CIGNA
Institutional Funds Group and CIGNA Variable Products Group (except for Mr.
Forde, who is not a Trustee of CIGNA Variable Products Group), and holds a
similar position as Director and/or executive officer of CIGNA Investment
Securities, Inc. (f/k/a INA
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Investment Securities, Inc.) Correspondence with any Trustee or officer may be
addressed to the Trust, c/o CIGNA Investments, S-210, 900 Cottage Grove Road,
Hartford, CT 06152-2210.
HUGH R. BEATH, 67, Trustee; Advisory Director, AdMedia Corporate Advisors, Inc.
(investment banking); previously Managing Director, AdMedia Corporate Advisors,
Inc.; Chairman of the Board of Directors, Beath Advisors, Inc. (investment
adviser).
RICHARD H. FORDE*, 45, Trustee; Senior Managing Director and President of CIGNA
International Investment Advisors, Ltd.; Chairman of the Board and President,
CIGNA Funds Group and other investment companies in CIGNA Funds' complex. Mr.
Forde is also an officer or director of various other entities which are
subsidiaries or affiliates of CIGNA.
RUSSELL H. JONES, 54, Trustee; Vice President and Treasurer, Kaman Corporation
(helicopters and aircraft components, industrial products and services);
Trustee, Connecticut Policy and Economic Counsel; Corporator, Hartford Seminary;
Secretary, Bloomfield Chamber of Commerce.
THOMAS C. JONES*, 51, Trustee; President, CIGNA Investment Management; President
and Director, CIGNA Investment Group, Inc. and CII; Director, CIGNA
International Investment Advisors, Ltd. Mr. Jones is also an officer or director
of various other entities which are subsidiaries or affiliates of CIGNA.
Previously President, CIGNA Individual Insurance, a division of CIGNA;
President, CIGNA Reinsurance--Property & Casualty, a division of CIGNA;
Executive Vice President and Director, NAC RE Corporation (property and casualty
reinsurance).
PAUL J. MCDONALD, 54, Trustee; Senior Executive Vice President and Chief
Administrative Officer, Friendly Ice Cream Corporation (family restaurants/dairy
products); Chairman, Dean's Advisory Council, University of Massachusetts School
of Management; Director, Springfield YMCA; Trustee, Basketball Hall of Fame;
Regional Director-Western Massachusetts, Bank of Boston. Previously, Executive
Vice President, Finance and Chief Financial Officer, Friendly Ice Cream
Corporation.
ALFRED A. BINGHAM III, 53, Vice President and Treasurer, CIGNA Funds Group,
CIGNA Institutional Funds Group, CIGNA Variable Products Group, CIGNA High
Income Shares and CIGNA Investment Securities, Inc. (f/k/a INA Investment
Securities, Inc.); Assistant Vice President, CII.
JEFFREY S. WINER, 42, Senior Counsel, CIGNA; Vice President and Secretary, CIGNA
Funds Group, CIGNA Institutional Funds Group, CIGNA Variable Products Group,
CIGNA High Income Shares and CIGNA Investment Securities, Inc. (f/k/a INA
Investment Securities, Inc.); previously Counsel, CIGNA.
*Trustees identified with an asterisk are considered interested persons of the
Funds within the meaning of the 1940 Act because of their affiliation with CIGNA
Corporation or its affiliates.
The Board has created an Audit Committee from among its members which meets
periodically with representatives of PricewaterhouseCoopers LLP, independent
accountants for the Trust, a Contracts Committee which, as part of its duties,
considers the terms and the renewal of the Master Investment Advisory Agreement
with CIGNA Investments, and a Nominating Committee which considers the
identification of new members of the Board and the compensation of Trustees. The
Nominating Committee, Audit Committee and Contracts Committee consist of
Trustees who are not affiliated with CIGNA Corporation or any of its
subsidiaries.
Page 27
<PAGE>
The Trust pays no compensation to any of its officers, other than the
reimbursement of the costs of the Office of the Treasurer and the Office of the
Secretary, or to any of their Trustees who are officers or employees of CIGNA
Corporation or its affiliates. The following table shows compensation paid by
the Trusts and other investment companies in the CIGNA fund complex to Trust
Trustees in 1998:
<TABLE>
<CAPTION>
Pension or Total
Retirement Compensation from
Aggregate Benefits Accrued Trust and CIGNA
Name of Person, Compensation from As Part of Trust Estimated Annual Fund Complex Paid
Position with Trust Trust Expense Benefits Upon Retirement to Trustees(d)
- ------------------- ----- ------- ------------------------ --------------
<S> <C> <C> <C> <C>
R. Bruce Albro (a) $ -0 $ -0- $ -0- $ -0-
Hugh R. Beath, Trustee (b) $ 1,800 -0- -0- $25,400
Richard H. Forde, Trustee, Chairman and
President -0- -0- -0- -0-
Russell H. Jones, Trustee $ 1,800 -0- -0- $25,400
Thomas C. Jones, Trustee -0- -0- -0- -0-
Paul J. McDonald, Trustee (c) $ 1,800 -0- -0- $25,400
------------ ----------- ------------ -------
$ 5,400 $ -0- $ -0- $76,200
============ =========== ============ =======
</TABLE>
________________________
(a) Mr. Albro retired from CIGNA Corporation and resigned from the Trust in
1998.
(b) All but $1,525 of Mr. Beath's 1998 compensation was deferred under a plan
for all CIGNA funds in which he had an aggregate balance of $213,647 as of
December 31, 1998.
(c) All but $1,525 of Mr. McDonald's 1998 compensation was deferred under a plan
for all CIGNA funds in which he had an aggregate balance of $135,397 as of
December 31, 1998.
(d) There were four (4) investment companies besides the Trust in the CIGNA fund
complex.
Page 28
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ---------------------------------------------------
As of November 30, 1999, record and beneficial owners of five percent or more of
the shares of the Institutional Class of the Money Market Fund were as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
SHAREHOLDER ADDRESS OWNERSHIP
<S> <C> <C>
CIGNA HealthCare of California, Inc. 505 North Brand Blvd. 21.4%
Glendale CA 91205
CIGNA HealthCare of Texas, Inc. 600 Las Colinas Blvd., Suite 1100 12.0%
Irving, TX 85029
CIGNA HealthCare of Virginia, Inc. 4050 Innslake Drive 6.3%
Glen Allen, VA 23060
CIGNA HealthCare of North Carolina, Inc. 11121 Carmel Commons Blvd., #300 6.5%
Charlotte, NC 28226
Healthsource North Carolina, Inc. 701 Corporate Center Drive 9.3%
Raleigh, NC 27607
Healthsource Insurance Services, Inc. 146 Fairchild Street 5.1%
Charleston, SC 29492
</TABLE>
As of November 30, 1999, all of the Retail Service Class shares of the Money
Market Fund were owned by Fiserve, 2005 Market Street, Philadelphia, PA 19103 on
behalf of brokerage account customers. The Fund is not aware of any brokerage
account customers owning more than 5% of the shares of this class of the Fund.
As of November 30, 1999, owners of five percent or more of the shares of the
Large Company Stock Index Fund were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER ADDRESS PERCENTAGE OF OWNERSHIP
<S> <C> <C>
Insurance Company of North America Two Liberty Place
1601 Chestnut St.
Philadelphia PA 19192 19.0%
CIGNA Property And Casualty Insurance Company Two Liberty Place
1601 Chestnut St.
Philadelphia PA 19192 51.0%
CIGNA Insurance Company Two Liberty Place
1601 Chestnut St.
Philadelphia PA 19192 19.0%
</TABLE>
Page 29
<PAGE>
<TABLE>
<S> <C> <C>
Pacific Employers Insurance Company Two Liberty Place
1601 Chestnut St.
Philadelphia PA 19192 11.0%
</TABLE>
The Trustees and officers do not own any Fund shares.
CIGNA advises that Sanford C. Bernstein & Co., Inc. ("Sanford Bernstein"), 767
Fifth Avenue, New York, NY 10153, reported that as of December 31, 1998 it held
18,836,626 shares, or 9.1%, of the outstanding common stock of CIGNA. Sanford
Bernstein also reported sole voting power as to 10,300,452, shared voting power
as to 2,248,782, and sole dispositive power as to 18,836,626 of these shares.
Wellington Management Company, LLP ("Wellington"), 75 State Street, Boston, MA
02109, reported that as of December 31, 1998 it held 11,704,980 shares, or
5.67%, of the outstanding common stock of CIGNA. Wellington also reported sole
voting power as to none, shared voting power as to 1,492,130, and shared
dispositive power as to all of these shares.
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------
The investment adviser to the Funds is CIGNA Investments, an indirect,
wholly-owned subsidiary of CIGNA Corporation. CIGNA Investments also serves as
investment adviser for other investment companies sponsored by affiliates of
CIGNA Corporation, and for a number of pension, advisory, corporate and other
accounts. CIGNA Investments and other affiliates of CIGNA Corporation manage
combined assets of approximately $64 billion. CIGNA Investments' mailing address
is 900 Cottage Grove Road, Hartford, Connecticut 06152.
SUB-ADVISERS
CIGNA Investments hires investment sub-advisers who (subject to the control of
the Board of Trustees) independently manage the investment operations of certain
of the funds and determine what investments that fund will purchase and sell.
These sub-advisers, and the funds they manage, are:
BALANCED FUND INVESCO Capital Management, Inc.,
One Midtown Plaza, 1360 Peachtree
Street, N.E., Suite 100, Atlanta, GA
30309. INVESCO and its affiliated
asset management companies currently
manage in excess of $55 billion of
assets as of June 30, 1999 on behalf
of tax-exempt accounts (such as
pension and profit-sharing funds for
corporations and state and local
governments) and investment
companies.
LARGE COMPANY STOCK GROWTH FUND Morgan Stanley Dean Witter
Investment Management Inc. ("MSDW
Investment Management"), with
principal offices at 1221 Avenue of
the Americas, New York, New York
10020, conducts a worldwide
portfolio management business and
provides a broad range of portfolio
management services to customers in
the United States and abroad. At
September 30, 1999, MSDW Investment
Management, together with its
affiliated institutional asset
management companies, managed assets
of approximately $173.5 billion,
including assets under fiduciary
advice.
Page 30
<PAGE>
SMALL COMPANY STOCK GROWTH FUND Fiduciary International, Inc., Two
World Trade Center, New York, New
York 10048, a New York corporation
organized in 1982 as Fir Tree
Advisers, Inc. and a wholly owned
subsidiary of Fiduciary Trust
Company International, a New York
state chartered bank. Total assets
under management as of September 30,
1999 were about $780 million.
SMALL COMPANY STOCK VALUE FUND Berger LLC, 210 University
Boulevard, Suite 900, Denver,
Colorado 80206 serves as investment
adviser, sub-adviser, administrator
or sub-administrator to mutual funds
and institutional investors. Berger
LLC has been in the investment
advisory business for over 20 years.
At September 1, 1999, Berger
Associates managed about $5 billion
in assets. Berger LLC has in turn
hired Perkins, Wolf, McDonnell &
Company ("PWM"), 53 West Jackson
Boulevard, Suite 818, Chicago,
Illinois, 60604 to manage the
investment operation of the fund.
PWM was organized in 1980 under the
name Mac-Per-Wolf Co. to operate as
a securities broker-dealer. In
September 1983, it changed its name
to Perkins, Wolf, McDonnell &
Company. PWM sub-advises the Berger
Small Cap Value Fund.
FOREIGN STOCK FUND Bank of Ireland Asset Management
(U.S.) Limited ("BIAM"), 20
Horseneck Lane, Greenwich, CT 06830
(North American office); 26
Fitzwilliam Place, Dublin 3, Ireland
(Ireland office). BIAM serves as
investment advisor or sub-advisor to
pension and profit-sharing plans and
other institutional investors and
mutual funds. Bank of Ireland's
investment management group was
founded in 1966.
Pursuant to the Master Investment Advisory Agreement between the Trust and CIGNA
Investments, CIGNA Investments manages the investment and reinvestment of the
assets of the Funds that do not have sub-advisers. Each sub-adviser has this
responsibility for its particular fund. CIGNA Investments is also responsible
for evaluating and monitoring the performance of the sub-advisers.
Subject to the control and periodic review of the Board of Trustees of the
Trust, CIGNA Investments and the sub-advisers determine what investments shall
be purchased, held, sold or exchanged for the account of the Funds. Accordingly,
the role of the Trustees is not to approve specific investments, but rather to
exercise a control and review function.
The Trust pays all expenses not specifically assumed by CIGNA Investments,
including compensation and expenses of Trustees who are not Directors, officers
or employees of CIGNA Investments or any other affiliates of CIGNA Corporation;
investment management fees; registration, filing and other fees in connection
with filings with regulatory authorities; the fees and expenses of independent
accountants; costs of printing and mailing registration statements,
prospectuses, proxy statements, and annual and periodic reports to shareholders;
custodian and transfer agent fees; brokerage commissions and securities
transactions costs incurred by the Trust; taxes and corporate fees; legal fees
incurred in connection with the affairs of the Trust; expenses of meetings of
the shareholders and Trustees; and any expenses allocated or allocable to a
specific class of shares.
CIGNA Investments, at its own expense, furnishes to the Trust office space and
facilities and, except with respect to the Office of the Treasurer and Office of
the Secretary as provided in the Master Investment Advisory Agreement, all
personnel for managing the affairs of the Trust and the Fund. The Trust and
other registered investment companies advised by CIGNA Investments have agreed
to reimburse CIGNA Investments for its costs of maintaining the Office of the
Treasurer and the cost of the Office of the Secretary as provided in their
respective
Page 31
<PAGE>
investment advisory agreements. CIGNA Investments has estimated that in 1999 the
total expenses of the Office of the Treasurer for all funds in the CIGNA fund
complex will not exceed $466,000 and the expenses of the Office of the Secretary
are not expected to exceed $149,000. The portion of these expenses allocated to
each Fund for calendar year 1999 are not expected to exceed the following
amounts:
Office of Office of
the Treasurer the Secretary
------------- -------------
Money Market Fund $78,513 $25,104
S&P 500 Index Fund $96,116 $30,732
In 1998 the costs reimbursed by the Funds for the Office of the Treasurer and
the Office of the Secretary totaled $180,131($138,454 Office of the Treasurer;
$41,677 - Office of the Secretary). The Board of Trustees of the Trust has
approved the method under which this cost will be allocated to the Trust, and
then to each Fund.
As full compensation for the investment management and all other services
rendered by CIGNA Investments, each Fund pays CIGNA Investments a separate fee
computed daily and paid monthly at annual rates based on a percentage of the
value of the applicable Fund's average daily net assets as follows:
Money Market Fund 0.35%
Investment Grade Bond Fund 0.60%
Core Plus Fixed Income Fund 0.60%
Ultra Core Plus Fixed Income Fund 0.60%
Emerging Markets Debt Fund 1.00%
Balanced Fund 0.75%
Large Company Stock Growth Fund 0.80%
Large Company Stock Value Fund 0.75%
Large Company Stock Index Fund 0.25%
Small Company Stock Growth Fund 1.00%
Small Company Stock Value Fund 1.00%
Foreign Stock Fund 1.00%
Trust-wide expenses not identifiable to any particular series of the Trust will
be allocated among the series. CIGNA Investments has voluntarily agreed, until
April 30, 2001, to reimburse the Funds to the extent that the annual operating
expenses in any one year (excluding interest, taxes, amortized organizational
expense, transaction costs in acquiring and disposing of portfolio securities
and extraordinary expenses) of the Fund exceed a percentage of the value of the
Fund's average daily net assets, as follows:
<TABLE>
<CAPTION>
Institutional Premier Retail
Class Class Class
----- ----- -----
<S> <C> <C> <C>
Money Market Fund 0.45% 0.70% 0.95%
Investment Grade Bond Fund 0.45% 0.85% 0.95%
Core Plus Fixed Income Fund 0.45% 0.85% 0.95%
Ultra Core Plus Fixed Income Fund 0.50% 0.90% 1.00%
Emerging Markets Debt Fund 0.65% 1.05% 1.15%
Balanced Fund 0.80% 1.00% 1.25%
</TABLE>
Page 32
<PAGE>
<TABLE>
<S> <C> <C> <C>
Large Company Stock Growth Fund 0.80% 1.00% 1.25%
Large Company Stock Value Fund 0.80% 1.00% 1.25%
Large Company Stock Index Fund 0.25% 0.35% 0.60%
Small Company Stock Growth Fund 1.05% 1.25% 1.50%
Small Company Stock Value Fund 1.05% 1.25% 1.50%
Foreign Stock Fund 1.05% 1.25% 1.50%
</TABLE>
The Money Market Fund (Institutional Class) incurred a management fee of
$882,061, $446,085, and $111,530 in 1998, 1997 and 1996, respectively. However,
due to the expense limitation, CIGNA Investments waived $64,440, $81,881 and
$78,697 of this fee in 1998, 1997 and 1996, respectively.
The Large Company Stock Index Fund (Institutional Class) incurred a management
fee of $431,355 and $82,658 in 1998 and 1997, respectively. However, due to the
expense limitation, CII waived $144,534 of this fee for 1998 and waived all of
its fee and reimbursed $43,969 to the Fund in 1997.
The Master Investment Advisory Agreement provides that it will continue from
year to year as to the Fund provided that such continuance is specifically
approved at least annually: (a) by a vote of the "majority of the outstanding
voting securities" (as such term is defined in the 1940 Act) of that Fund or by
the Board of Trustees of the Trust, and (b) by a vote of a majority of the
Trustees who are not parties to the agreement or "interested persons" (as
defined in the 1940 Act) of any party thereto, cast in person at a meeting
called for the purpose of voting on such approval. The Master Investment
Advisory Agreement provides that it (i) may be terminated at any time without
penalty (a) upon 60 days' written notice by vote of the Trustees of the Trust,
or with respect to any series of the Trust, by vote of a majority of the
outstanding voting securities of that series, or (b) by CIGNA Investments upon
90 days' written notice to the Trust in the case of the Master Investment
Advisory Agreement and (ii) will automatically terminate in the event of its
"assignment" (as such term is defined in the 1940 Act).
Each Master Trust Agreement acknowledges CIGNA Corporation's control over the
name "CIGNA". The Trust the would be obliged to change its name to eliminate the
word "CIGNA" (to the extent it could lawfully do so) in the event CIGNA
Corporation were to withdraw its permission for use of such name. CIGNA
Corporation has agreed not to withdraw such permission from the Trust or a
series of the Trust so long as an affiliate of CIGNA Corporation shall be the
investment adviser for such series.
UNDERWRITER
- -----------
CIGNA Financial Services, Inc. ("CFS") serves as the Trusts' distributor
pursuant to a distribution contract which is subject to annual approval by the
Board of Trustees. CFS is an indirect, wholly-owned subsidiary of CIGNA
Corporation and, along with CIGNA Investments, is under the control of CIGNA
Corporation. CFS' address is One Commercial Plaza, Hartford, CT 06103. The
distribution contract is terminable without penalty, at any time, by the Trust
upon 60 days' written notice to CFS or by CFS upon 60 days' notice, to the
Trust. CFS is not obligated to sell any specific amount of Trust shares.
Pursuant to the distribution contract, CFS continuously offers Fund shares. CFS
received no compensation for distributing Fund shares in 1998.
Each Fund has adopted a plan under Rule 12b-1 of the 1940 Act that allows the
Retail Class of each Fund to pay for services provided to Retail Class
shareholders. Each Retail Class will pay CIGNA Financial Services, Inc. (CFS)
.25% annually of its average daily net assets for providing shareholder services
to retail class shareholders, such as receiving and processing orders, answering
questions and handling correspondence from shareholders about their accounts,
and similar account administrative services, and for activities intended to
result in distribution of Fund shares.
Page 33
<PAGE>
The principal types of shareholder service activities that providers will
furnish under the plan include receiving, aggregating, and processing
shareholder or beneficial owner orders; providing and maintaining retirement
account and other records; communicating periodically with shareholders; acting
as the sole shareholder of record and nominee for shareholders; answering
questions and handling correspondence from shareholders about their accounts;
and performing similar account administration services.
The principal types of distribution activities that providers will furnish under
the plan are formulating and implementing marketing and promotional activities;
printing and distributing prospectuses to prospective shareholders, and other
activities primarily intended to result in the sale of shares.
The Fixed Income Fund has adopted a plan under Rule 12b-1 of the 1940 Act that
allows its Premier Class to pay CFS 0.15% annually of its average daily net
assets for providing shareholder services to premier class shareholders and
activities intended to result in distribution of Fixed Income Fund shares, as
described above.
The Funds anticipate that the plans will result in increased sales of Fund
shares and an increase in the amount of assets in the Funds, permitting various
Fund expenses (such as custodian fees, audit and legal fees, trustee fees) to be
spread across a larger shareholder base and amount of assets, permitting greater
economies of scale.
Continuance of a plan is subject to annual approval by a vote of the Trustees,
including a majority of the Trustees who are not interested persons of the Funds
and who have do direct or indirect interest in the plan or related arrangements
(the "Qualified Trustees"), cast in person at a meeting called for that purpose.
All material amendments to a plan must be likewise approved by the Trustees and
the Qualified Trustees. No plan may be amended in order to increase materially
the costs which the Funds may bear for distribution pursuant to such plan
without also being approved by a majority of the outstanding voting securities
of the fund or the relevant class of the fund, as the case may be. A plan
terminates automatically in the event of its assignment and may be terminated
without penalty, at any time, by a vote of a majority of the Qualified Trustees
or by a vote of a majority of the outstanding voting securities of the Funds or
the relevant class of the Funds, as the case may be.
CUSTODIAN AND TRANSFER AGENT
- ----------------------------
The Trust's Custodian and Transfer Agent is State Street Bank and Trust Company
("State Street"), Boston, Massachusetts 02107. Under its Custodian Agreement,
State Street maintains the portfolio securities of each Fund, administers the
purchases and sales of portfolio securities, collects interest and dividends and
other distributions made on the securities held in the portfolio, determines the
net asset value of shares of each Fund on a daily basis and performs such other
ministerial duties as are included in the Custodian Agreement and Agency
Agreement, copies of which are on file with the Securities and Exchange
Commission.
SUB-ACCOUNTING SERVICES
- -----------------------
The Funds have entered into a Sub-Accounting Agreement with CFS where CFS will
provide, or arrange for others to provide, sub-accounting services to Premier
and Retail Class shareholders of each Fund. These services include:
Maintaining books and records for each beneficial owner of Premier and
Retail Class shares; Preparing and mailing summary monthly statements;
Generating and mailing confirmations of each purchase and sale; and
Other customary sub-accounting services.
For providing these services, the Premier and Retail Class of each Fund shall
pay CFS 0.20% of its average daily net assets per annum, except the Money
Market, Core Plus and Foreign Stock Funds shall pay 0.25%.
Page 34
<PAGE>
INDEPENDENT ACCOUNTANTS
- -----------------------
PricewaterhouseCoopers LLP acts as independent accountant for the Trust. Its
offices are at 160 Federal Street, Boston, Massachusetts 02110.
PricewaterhouseCoopers LLP representatives annually perform an audit of the
financial statements of the Trust's series and provide accounting advice and
services throughout the year. PricewaterhouseCoopers LLP reports its activities
and the results of its audit to the Audit Committee of the Board of Trustees.
PricewaterhouseCoopers LLP also provides certain tax advice to the Trust.
BROKERAGE ALLOCATION AND OTHER PRACTICES
- ----------------------------------------
With respect to Fund transactions, it is the policy of CIGNA Investments and the
sub-advisers (the "Advisers") on behalf of their clients, including the Funds,
to have purchases and sales of portfolio securities executed at the most
favorable prices, considering all costs of the transaction, including brokerage
commissions and spreads, and research services, consistent with obtaining best
execution.
In seeking best execution, the Advisers will select brokers/dealers on the basis
of their professional capability and the value and quality of their brokerage
services. Brokerage services include the ability to execute most effectively
large orders without adversely affecting markets and the positioning of
securities in order to effect orderly sales for clients.
The Advisers will determine, generally without limitation, the brokers/dealers
through whom, and the omission rates or spreads at which, securities
transactions for client accounts are executed. The officers of the Advisers may
select a broker/dealer who may receive a commission for portfolio transactions
exceeding the amount another broker/dealer would have charged for the same
transaction if they determine that such amount of commission is reasonable in
relation to the value of the brokerage and research services performed or
provided by the executing broker/dealer, viewed in terms of either that
particular transaction or the Advisers' overall responsibilities to the client
for whose account such portfolio transaction is executed and other accounts
advised by the Advisers. Research services include market information, analysis
of specific issues, presentation of special situations and trading opportunities
on a timely basis, advice concerning industries, economic factors and trends,
portfolio strategy and performance of accounts. Research services are used in
advising all accounts advised by the Advisers, and not all such services are
necessarily used by an Adviser in connection with the specific account that paid
commissions to the broker/dealer providing such services.
Portfolio transactions placed through dealers serving as primary market makers
are effected at net prices, without commissions as such, but which include
compensation in the form of mark up or mark down.
In addition, the Advisers may, if permitted by applicable law, use brokerage
commissions to pay for products or services (other than brokerage and research
services) obtained from broker/dealers and third parties in accordance with SEC
Release 34-23170 dated April 23, 1986. Pursuant to that Release, products and
services which provide lawful and appropriate assistance to an Adviser's
investment decision-making process may be paid for with brokerage commissions to
the extent such products and services are used in that process. Where the
research service product has a mixed use, that is, the product may serve a
number of functions certain of which are not related to the making of investment
decisions, the Advisers allocates the cost of the product on a basis which they
deem reasonable, according to the various uses of the product, and maintains
records documenting the allocation process followed. Only that portion of the
cost of the product allocable to research services is paid through credit earned
from the Fund's brokerage business.
Page 35
<PAGE>
The Money Market Fund paid no brokerage commissions in 1998, 1997 or 1996.
During 1998 and 1997, the Large Company Stock Index fund (f/k/a the S&P 500
Index Fund) paid $53,151 and $37,741 in commissions, substantially all of which
was paid to firms which provide research services to CIGNA Investments.
Neither the Trust nor any Adviser presently allocate brokerage commissions to,
or place orders for portfolio transactions with, either directly or indirectly,
brokers or dealers based on their sales of Fund shares. Except as noted, neither
the Trust nor CIGNA Investments utilize an affiliated broker or dealer in
effecting Fund portfolio transactions and do not recapture commissions paid in
such transactions.
CAPITAL STOCK
- -------------
The capitalization of the Trust consists solely of an unlimited number of shares
of beneficial interest with a par value of $0.001 each.
The Institutional, Premier and Retail classes of the Funds represent interests
in each Fund's assets and have identical voting, dividend, liquidation and other
rights on the same terms and conditions, except that each class of shares bears
differing class-specific expenses and exchange privileges, and the Premier and
Retail classes have exclusive voting rights on matters relating to their record
keeping arrangements and distribution plans.
Under Massachusetts law, the Trust's shareholders could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Trust's Master Trust Agreement disclaims liability of the
shareholders, Trustees or officers of the Trust for acts or obligations of the
Trust, which are binding only on the assets and property of the Trust, and
requires that notice of the disclaimer be given in each contract or obligation
entered into or executed by the Trust or the Trustees. The Master Trust
Agreement provides for indemnification out of Trust property for all loss and
expense of any shareholder held personally liable for the obligations of the
Trust. The risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations and thus should be considered remote.
Shares of each Fund will entitle their holders to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the shares of any other series of the Trust. On any matter
submitted to a vote of shareholders of the Trust, all shares of the Trust then
issued and outstanding shall be voted in the aggregate. However, on matters
affecting an individual series or class of shares, a separate vote of
shareholders of that series or class would be required. Shareholders of a series
or class would not be entitled to vote on any matter which does not affect that
series or class but which would require a separate vote of another series or
class.
When issued, shares of the Funds are fully paid and nonassessable, and have no
preemptive or subscription rights. There are no conversion rights. Shares do not
have cumulative voting rights, which means that in situations in which
shareholders elect Trustees, holders of more than 50% of the shares voting for
the election of Trustees can elect 100% of the Trustees of the Trust and the
holders of less than 50% of the shares voting for the election of Trustees will
not be able to elect any Trustees.
PURCHASE, REDEMPTION AND PRICING OF SECURITIES
- ----------------------------------------------
Shares of the Funds are sold on a continuous basis without any initial sales
charge at the Fund's net asset value per share
Page 36
<PAGE>
RETIREMENT AND SAVINGS PLAN PARTICIPANTS. The Funds may be available as an
investment option in employer-sponsored or other type of retirement or savings
plans. All orders to purchase shares must be made through and in accordance with
procedures established by the participant's employer or plan administrator. The
plan administrator can provide participants with detailed information on how to
participate in the plan and how to select a Fund as an investment option.
BROKERAGE ACCOUNT PURCHASES. All investors other than affiliates of CIGNA
Corporation or employer sponsored or other type of retirement or savings plan
participants or institutional investors eligible to invest in the Institutional
Class or Premier Class must purchase shares through CFS, the Fund's underwriter,
or a dealer who has entered into a dealer agreement with CFS. Orders placed
through a brokerage representative are priced as of the close of business on the
day the order is received by CIGNA Funds Shareholder Services or the transfer
agent, provided the order is received by 4:00 p.m. Eastern Time. Brokerage
representatives are responsible for the prompt transmission of purchase and
redemption orders placed through them by shareholders.
Institutional investors eligible to purchase Institutional Class or Premier
Class shares must place orders through CIGNA Funds shareholder services.
The Funds reserve the right to revise their redemption procedures on 30-days'
notice. The Funds may suspend redemptions or postpone the date of payment during
any period when: (a) the New York Stock Exchange is closed for other than
customary weekend and holiday closings or trading on such Exchange is
restricted; (b) the Securities and Exchange Commission has by order permitted
such suspension for the protection of the Fund's shareholders; or (c) an
emergency exists as determined by the Securities and Exchange Commission making
disposal of portfolio securities or valuation of net assets of a Fund not
reasonably practicable.
PRICING. Each Fund's net asset value is calculated by dividing the number of
outstanding shares into the net assets of the fund. Net assets are the excess
of a Fund's assets over its liabilities.
The investments of the Money Market Fund are valued at amortized cost. The
amortized cost of an instrument is determined by valuing it at cost originally
and thereafter amortizing any discount or premium from its face value at a
constant rate until maturity, regardless of the effect of fluctuating interest
rates or other factors on the market value of the instrument. The amortized cost
method may result at times in determinations of value that are higher or lower
than the price the Fund would receive if the instruments were sold. During
periods of declining interest rates, use by the Fund of the amortized cost
method of valuing its portfolio may result in a lower value than the market
value of the portfolio, which could be an advantage to new investors relative to
existing shareholders. The converse would apply in a period of rising interest
rates.
The valuation of the investments of the Money Market Fund at amortized cost is
permitted by the Securities and Exchange Commission, and the Fund is required to
adhere to certain conditions so long as they use this valuation method. The
Money Market Fund will maintain a dollar-weighted average portfolio maturity of
90 days or less, will purchase only instruments having remaining maturities of
397 days or less (except as permitted under Rule 2a-7 of the 1940 Act with
respect to variable and floating rate instruments) and will invest only in
securities determined by the Board of Trustees to be of high quality with
minimal credit risks. The Board of Trustees has also established procedures
reasonably designed, taking into account current market conditions and the
Fund's investment objective, to stabilize the Fund's price per share as computed
for the purpose of distribution, redemption and repurchase at $1.00. Such
procedures include a review of the Fund's portfolio holdings by the Board of
Trustees, at such intervals as they may deem appropriate, to determine whether
the Fund's net asset value, calculated by using readily available market
quotations, deviates from $1.00 per share, and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing shareholders.
In the event the Board of Trustees determines that such a deviation
Page 37
<PAGE>
exists, it will take such corrective action as it deems necessary and
appropriate, including selling portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio maturity;
withholding dividends; redeeming shares in kind; or establishing a net asset
value per share by using readily available market quotations in which case, the
net asset value could possibly be greater or less than $1.00 per share.
TAX MATTERS
- -----------
All shareholders should consult a qualified tax adviser regarding their
investment in a Fund.
The series of shares of the Trust is treated as a separate association taxable
as a corporation.
Each Fund intends to qualify and elect to be treated under the Internal Revenue
Code of 1986 (the Code), as amended, as a regulated investment company (RIC) for
each taxable year. As of the date hereof, each Fund must, among other things
meet the following requirements: A. each Fund must generally derive at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities,
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies. B. each Fund must diversify
its holdings so that, at the end of each fiscal quarter: i) at least 50% of the
market value of the Fund's total assets is represented by cash, U.S. Government
securities and other securities, with such other securities limited, with
respect to any one issuer, to an amount not greater than 5% of the Fund's total
assets and not more than 10% of the outstanding voting securities of such
issuer, and ii) not more than 25% of the value of its total assets is invested
in the securities of any one issuer (other than U.S. Government securities).
Each Fund intends to satisfy requirements under the Code relating to the
distribution of its net income so that, in general, the Fund will not be subject
to Federal income tax (FIT) on its investment company taxable income and net
capital gains designated by the Fund as capital gain dividends, if any, that it
distributes to shareholders on a timely basis. The Fund intends to distribute to
its shareholders, at least annually, substantially all of its investment company
taxable income and any net capital gains.
Each Fund is subject to a nondeductible 4% excise tax if it does not meet
certain distribution requirements under the Code. To avoid this excise tax,
during each calendar year, a Fund must distribute: 1) at least 98% of its
ordinary income (not taking into account any capital gains or losses) for the
calendar year, 2) at least 98% of its capital gains in excess of its capital
losses for the twelve month period ending on October 31 of the calendar year,
and 3) all ordinary income and capital gains from previous years that were not
distributed during such years.
Dividends declared to shareholders of record on a date in October, November or
December will be taxable to shareholders in the year declared as long as the
Fund pays the dividends no later than January of the following year.
Section 1092 of the Code affects the taxation of certain transactions involving
futures or options contracts. If a futures or options contract is part of a
"straddle" (which could include another futures or options contract or
underlying stock or securities), as defined in Section 1092 of the Code, then,
generally, losses are deferred first, to the extent that the modified "wash
sale" rules of the Section 1092 regulations apply, and second to the extent of
unrecognized gains on offsetting positions. Further, a fund may be required to
capitalize, rather than deduct currently, any interest expense on indebtedness
incurred or continued to purchase or carry any positions that are part of a
straddle. Sections 1092 and 246 of the Code and the Regulations thereunder also
suspend the holding periods for straddle positions with possible adverse effects
regarding long-term capital gain treatment and the corporate dividends-received
deduction. In certain cases, the "wash sale" rules of Section 1091 of the Code
may operate to defer deductions for losses.
Page 38
<PAGE>
Section 1256 of the Code generally requires that certain futures and options be
"marked-to-market" at the end of each year for FIT purposes. Section 1256
further characterizes 60% of any gain or loss with respect to such futures and
options as long-term capital gain or loss and 40% as short-term capital gain or
loss. If such a future or option is held as an offsetting position and can be
considered a straddle under Section 1092 of the Code such a straddle will
constitute a mixed straddle. A mixed straddle will be subject to both Section
1256 and Section 1092 unless certain elections are made by the Fund.
Upon a sale or redemption of Fund shares, a shareholder who is not a dealer in
securities will realize gain or loss which will be treated as long-term capital
gain or loss if the shares have been held for more than one year, and otherwise
as short-term capital gain or loss. However, if a shareholder disposes of shares
held for six months or less, any loss realized will be characterized as
long-term capital loss to the extent of any capital gain dividends made to such
shareholder prior to such disposition. In addition, shareholders need to
consider the general wash sale rule which may impact shareholders who sell their
shares at a loss and purchase shares within a sixty-one day time frame.
PERFORMANCE INFORMATION
- -----------------------
Total return figures for the Funds are neither fixed nor guaranteed, and a
Fund's principal is not insured. Performance quotations reflect historical
information and should not be considered representative of a Fund's performance
for any period in the future. Performance is a function of a number of factors
which can be expected to fluctuate. Each Fund may provide performance
information in reports, sales literature and advertisements. Each Fund may also,
from time to time, quote information about the Fund published or aired by
publications or other media entities which contain articles or segments relating
to investment results or other data about the Fund. The following is a list of
such publications or media entities:
<TABLE>
<S> <C> <C>
Advertising Age Financial Times Kiplinger
Barron's Financial Weekly Money
Barron's/Nelson's Financial World Mutual Fund Forecaster
Best's Review Forbes Nation's Business
Broker World Fortune New York Times
Business Week Global Investor Pension World
Changing Times Hartford Courant Pensions & Investments
Christian Science Monitor Institutional Investor Personal Investor
Consumer Reports Insurance Forum Philadelphia Inquirer
Economist Insurance Weekly The Times (London)
Equity International International Business USA Today
FACS of the Week Week U.S. News & World Report
Far Eastern Investing Wall Street Journal
Economic Review Investor's Chronicle Washington Post
Financial Adviser Investor's Daily CNN
Financial Planning Journal of the American CNBC
Financial Product News Society of CLu & ChFC PBS
Financial Services Week
</TABLE>
Page 39
<PAGE>
Each Fund may also compare its performance to performance data of similar
mutual funds as published by the following services:
Bank Rate Monitor
Lipper Analytical Services Stanger Report
CDA Investment Technologies, Inc. Weisenberger
Frank Russell Co. Micropal, Ltd.
InterSec Research Donoghues
Mutual Fund Values (Morningstar)
Each Fund's performance may also be compared in advertising to the performance
of comparative benchmarks such as the following:
Standard & Poor's 400 Index
Standard & Poor's 500 Stock Index Bond Buyer Index
Dow Jones Industrial Average NASDAQ
EAFE Index COFI
Consumer Price Index First Boston High Yield Index
Lehman Bond Indices
Each Fund may also compare its performance to rates on Certificates of Deposit
and other fixed rate investments such as the following:
10 year Treasuries
30 year Treasuries
90 day Treasury Bills
Advertising for a Fund may from time to time include discussions of general
economic conditions and interest rates, and may also include references to the
use of those Funds as part of an individual's overall retirement investment
program. From time to time, sales literature and/or advertisements for any of
the Funds may disclose the largest holdings in the Fund's portfolio.
From time to time, the Funds' sales literature and/or advertisements may discuss
generic topics pertaining to the mutual fund industry. This includes, but is not
limited to, literature addressing general information about mutual funds,
variable annuities, dollar-cost averaging, stocks, bonds, money markets,
certificates of deposit, retirement, retirement plans, asset allocation,
tax-free investing, college planning, inflation.
Although performance data may be useful to prospective investors in comparing
with other funds and other potential investments, investors should note that the
methods of computing performance of other potential investments are not
necessarily comparable to the methods employed by the Fund.
Total Return Quotations
- -----------------------
The standard formula for calculating total return, as described in the
prospectus, is as follows:
P(1+T)/n/=ERV
Where P = A hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years.
Page 40
<PAGE>
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the 1, 5, or 10 year periods
(or fractional portion of such period).
Cumulative total return across a stated period may be calculated as follows:
P(1+V)=ERV
Where P = A hypothetical initial payment of $1,000.
V = cumulative total return.
ERV = ending redeemable value of a hypothetical $1,000
payment at the end of the stated period.
The average annual total returns for each of the named Funds (institutional
class), for the 1, 5 and 10 year periods (or since inception, if shorter) ended
December 31, 1998, were as follows:
PERIODS ENDED DECEMBER 31, 1998
-------------------------------
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
Money Market Fund................... 5.18% 4.82% 5.22%
Large Company Stock Index Fund*..... 28.28%
*The inception date of the Large Company Stock Index Fund (f/k/a CIGNA S&P 500
Index Fund) was July 1, 1997.
Over time, the Large Company Stock Index Fund expects the correlation between
the performance of the Fund and the S&P 500 Index to be 0.95 or higher. A
correlation of 1.00 would indicate perfect correlation, which would be achieved
when the Fund's net asset value, including the value of its dividend and capital
gain distributions, increases or decreases in exact proportion to changes in the
index. Because the Fund incurs operating expenses, as opposed to the index, a
perfect correlation of 1.00 is unlikely to be achieved.
YIELD QUOTATIONS
- ----------------
The standard formula for calculating yield for each Fund except the Money Market
Fund, as described in the Prospectus, is as follows:
YIELD = 2[((a-b)/(c x d) + 1)/6/-1]
Where:
a = dividends and interest earned during a stated 30-day
period. For purposes of this calculation, dividends are
accrued rather than recorded on the ex-dividend date. Interest
earned under this formula must generally be calculated based
on the yield to maturity of each obligation (or, if more
appropriate, based on yield to call date).
b = expenses accrued during period (net of reimbursements).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
Page 41
<PAGE>
d = the maximum offering price per share on the last day of the
period.
The standard formula for calculating annualized yield for the Money Market Fund,
as described in the Prospectus, is as follows:
Y = V\1\ - Vo x 365
--------- ---
Vo 7
Where Y = 7 day annualized yield.
Vo = the value of a hypothetical
pre-existing account in the Fund having a balance of
one share at the beginning of a stated seven-day
period.
V1 = the value of such an account at the end of the
stated period.
V1 - Vo = base period return.
-------
Vo
The annualized yield for the CIGNA Money Market Fund for the 7 days ended
December 31, 1998 was 4.69%.
The standard formula for calculating effective annualized yield for the Money
Market Funds, as described in the Prospectus, is as follows:
EY = [(Y+1) / 365/7/] - 1
Where EY = effective annualized yield.
Y = base period return.
The effective annualized yield for CIGNA Money Market Fund for the 7 days ended
December 31, 1998 was 4.80%.
For the purpose of the annualized yield and effective annualized yield, the net
change in the value of the hypothetical Money Market Fund account reflects the
value of additional shares purchased with dividends from the original shares and
any such additional shares, and all fees charged (if any), other than
non-recurring account charges, to all shareholder accounts in proportion to the
length of the base period and the Fund's average account size, but does not
include realized gains and losses or unrealized appreciation and depreciation.
REDEMPTIONS PAID IN CASH
- ------------------------
Pursuant to Rule 18f-1 under the Investment Company Act of 1940, as amended,
each Fund has committed to pay in cash all requests for redemption by any
shareholder of record, limited in amount with respect to each shareholder during
any 90 day period to the lesser of $250,000 or 1% of the net assets of the Fund
at the beginning of such period. This election is irrevocable while such Rule is
in effect unless the Securities and Exchange Commission by order upon
application permits the withdrawal of the Fund's notification of election.
Redemptions by any one shareholder during any 90 day period in excess of
$250,000 or 1% of the net assets of the Fund may be made in readily marketable
securities.
FINANCIAL STATEMENTS
- --------------------
The financial statements for CIGNA Funds Group for the year ended December 31,
1998, as contained in the Annual Reports to Shareholders, and for the six months
ended June 30, 1999 as incorporated in the Semi-
Page 42
<PAGE>
Annual Report to Shareholders dated June 30, 1999, are hereby incorporated by
reference into this Statement of Additional Information. The financial
statements for the year ended December 31, 1998 have been examined by
PricewaterhouseCoopers LLP, independent accountants, whose reports thereon also
are incorporated herein by reference.
Page 43
<PAGE>
APPENDIX - DESCRIPTION OF BOND RATINGS
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be of the
best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edged." Interest
payments are protected by a large or by an exceptionally
stable margin, and principal is secure. While the various
protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally
strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high
quality by all standards. Together with the Aaa group they
comprise what are generally known as high-grade bonds. They
are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable
investment attributes and are to be considered as
upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements
may be present that suggest a susceptibility to impairment
sometime in the future.
Baa: Bonds which are rated Baa are considered as medium
grade obligations (i.e, they are neither highly protected nor
poorly secured). Interest payments and principal security
appear adequate for the present but certain protective
elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have
speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have
speculative elements; their future cannot be considered as
well assured. Often the protection of interest and principal
payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract
over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger
with respect to principal or interest.
Ca: Bonds which are rated Ca represent obligations that are
speculative in a high degree. Such issues are often in
default or have other marked shortcomings.
C: Bonds which are rated C are the lowest-rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
A-1
<PAGE>
STANDARD & POOR'S CORPORATION
AAA: An obligation rated AAA has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment is
EXTREMELY STRONG.
AA: An obligation rated AA differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is VERY STRONG.
A: An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still STRONG.
BBB: An obligation rated BBB exhibits ADEQUATE protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated BB, B, CCC, CC and C are regarded as having significant
speculative characteristics. BB indicates the least degree of speculation and C
the highest. While such obligations will likely have some quality and protective
characteristics, these may be outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB: An obligation rated BB is LESS VULNERABLE to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.
B: An obligation rated B is MORE VULNERABLE to nonpayment than
obligations rated BB but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC: An obligation rated CCC is CURRENTLY VULNERABLE to nonpayment
and is dependent upon favorable business, financial and economic conditions for
the obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.
CC: An obligation rated CC is CURRENTLY HIGHLY VULNERABLE to
nonpayment.
C: The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.
D: An obligation rated D is in payment default. The D rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition or the taking of
similar action if payments on an obligation are jeopardized.
Plus (+) or Minus (-): The ratings from AA to CCC may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
r: This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating. Examples include:
obligations linked or indexed to equities, currencies, or commodities;
obligations exposed to severe prepayment risk - such as interest-only or
principal-only mortgage securities; and obligations with unusually risky
interest terms, such as inverse floaters.
A-2
REGISTRATION STATEMENT
ON
FORM N-1A
PART C: OTHER INFORMATION
ITEM 23. EXHIBITS.
- -----------------
a. Second Amended and Restated Master Trust Agreement of Registrant
dated July 28, 1998, incorporated by reference to Post-Effective
Amendment No. 57 to Registration Statement filed electronically
October 2, 1998.
* a. (i) Amendment No. 1 to Second Amended and Restated Master Trust
Agreement of Registrant dated October 29, 1999.
b. The Amended and Restated By-Laws of Registrant dated April 29,
1997, incorporated by reference to Post-Effective Amendment No. 55
to Registrant's Registration Statement filed electronically April
30, 1997.
c. Relative to the rights of shareholders, Article IV and Article V
of Registrant's Second Amended and Restated Master Trust Agreement
dated July 28, 1998 as hereinbefore incorporated by reference as
Exhibits a and b.
c. (i) Relative to the rights of shareholders, Article 9 of the Amended
and Restated By-Laws of Registrant dated April 29, 1997 as
hereinbefore incorporated by reference as Exhibit b.
d. The First Amended and Restated Master Investment Advisory
Agreement dated as of April 30, 1996 between CIGNA Funds Group and
CIGNA Investments, Inc., incorporated by reference to
Post-Effective Amendment No. 54 to Registrant's Registration
Statement filed electronically June 28, 1996.
* d. (i) Side Letter to the First Amended and Restated Master Investment
Advisory Agreement dated January 3, 2000 between CIGNA Funds Group
and CIGNA Investments, Inc.
* d. (ii) Form of Investment Sub-Advisory Agreement for CIGNA Funds Group
Foreign Stock Fund between CIGNA Investments, Inc. and Bank of
Ireland Asset Management (U.S.) Limited.
* d. (iii) The Investment Sub-Advisory Agreement for CIGNA Funds Group Small
Company Stock Value Fund dated December 7, 1999 between CIGNA
Investments, Inc. and Berger LLC.
* d. (iv) The Investment Sub-Advisory Agreement for CIGNA Funds Group Small
Company Stock Value Fund dated December 7, 1999 between Berger LLC
and Perkins, Wolf, McDonnell & Company.
* d. (v) The Investment Sub-Advisory Agreement for CIGNA Funds Group Small
Company Stock Growth Fund dated November 5, 1999 between CIGNA
Investments, Inc. and Fiduciary International, Inc.
* d. (vi) Form of Investment Sub-Advisory Agreement for CIGNA Funds Group
Balanced Fund between CIGNA Investments, Inc. and INVESCO Capital
Management, Inc.
* d. (vii) The Investment Sub-Advisory Agreement for CIGNA Funds Group Large
Company Stock Value Fund dated November 10, 1999 between CIGNA
Investments, Inc. and John A. Levin & Co., Inc.
* d. (viii) Form of Investment Sub-Advisory Agreement for CIGNA Funds Group
Large Company Stock Growth Fund between CIGNA Investments, Inc.
and Morgan Stanley Dean Witter Investment Management Inc.
C-1
<PAGE>
e. The Distribution Agreement dated as of December 1, 1997 between
CIGNA Funds Group and CIGNA Financial Services, Inc., incorporated
by reference to Post-Effective Amendment No. 56 to Registrant's
Registration Statement filed electronically April 30, 1998.
f. None.
g. The Custodian Contract dated as of October 15, 1987 between CIGNA
Annuity Funds Group (n/k/a CIGNA Funds Group) and State Street
Bank and Trust Company, incorporated by reference to
Post-Effective Amendment No. 59 to Registration Statement filed
electronically January 19, 1999.
g. (i) The Custodian Fee Schedule Effective January 1, 1999 relative to
the Custodian Contract hereinbefore filed as Exhibit g,
incorporated by reference to Post-Effective Amendment No. 59 to
Registration Statement filed electronically January 19, 1999.
g. (ii) Side Letter to the Custodian Contract between CIGNA Funds Group
and State Street Bank and Trust Company dated as of April 30,
1996, incorporated by reference to Post-Effective Amendment No. 54
to Registrant's Registration Statement filed electronically June
28, 1996.
* g. (iii) Side Letter to the Custodian Contract between CIGNA Funds Group
and State Street Bank and Trust Company dated as of January 3,
2000.
g. (iv) The Price Source Authorization Agreement pursuant to the Custodian
Contract among State Street Bank and Trust Company and CIGNA
Funds, incorporated by reference to Post-Effective Amendment No.
60 to Registrant's Registration Statement filed electronically
April 30, 1999.
h. The Transfer Agency and Service Agreement dated as of July 30,
1985 between CIGNA Annuity Funds Group (n/k/a CIGNA Funds Group)
and State Street Bank and Trust Company, incorporated by reference
to Post-Effective Amendment No. 56 to Registrant's Registration
Statement filed electronically April 30, 1998.
h. (i) The Transfer Agent Operations Fee Schedule For CIGNA Money Market
Fund Effective January 1, 1999 relative to the Transfer Agency and
Service Agreement hereinbefore incorporated by reference as
Exhibit h, incorporated by reference to Post-Effective Amendment
No. 59 to Registrant's Registration Statement filed electronically
January 19, 1999.
h. (ii) Side Letter to the Transfer Agency and Service Agreement between
CIGNA Funds Group and State Street Bank and Trust Company dated as
of April 30, 1996, incorporated by reference to Post-Effective
Amendment No. 54 to Registrant's Registration Statement filed
electronically June 28, 1996.
* h. (iii) Side Letter to the Transfer Agency and Service Agreement between
CIGNA Funds Group and State Street Bank and Trust Company dated as
of January 3, 2000.
h. (iv) The Agreement For Use Of The Term "CIGNA" dated April 30, 1985
between CIGNA Annuity Funds Group (n/k/a CIGNA Funds Group) and
CIGNA Corporation, incorporated by reference to Post-Effective
Amendment No. 56 to Registrant's Registration Statement filed
electronically April 30, 1998.
h. (v) Form of Trustees' Deferred Fee Agreement, incorporated by
reference to Post-Effective Amendment No. 53 to Registrant's
Registration Statement filed electronically April 15, 1996.
* h. (vi) Form of Shareholder Services Agreement of the Premier Class-Fixed
Income and the Retail Class of CIGNA Funds Group between CIGNA
Funds Group and CIGNA Financial Services, Inc.
C-2
<PAGE>
h. (vii) Sub-Accounting Services Agreement for the Retail Service Class of
CIGNA Money Market Fund (A Series of CIGNA Funds Group) dated as
of April 1, 1999, incorporated by reference to Post-Effective
Amendment No. 60 to Registrant's Registration Statement filed
electronically April 30, 1999.
* h. (viii) Sub-Accounting Services Agreement for the Premier Class and the
Retail Class of CIGNA Funds Group made as of January 3, 2000.
* h. (ix) Power of Attorney.
* i. Opinion of Counsel.
* j. Consent of PricewaterhouseCoopers LLP.
k. None.
l. None.
* m. Rule 12b-1 Plan of CIGNA Funds Group dated as of January 3, 2000.
m. (i) Rule 12b-1 Plan of CIGNA Money Market Fund (A Series of CIGNA
Funds Group) dated as of October 27, 1998, incorporated by
reference to Post-Effective Amendment No. 58 to Registrant's
Registration Statement filed electronically December 2, 1998.
* m. (ii) Amendment No. 1 to Rule 12b-1 Plan for the Retail Class of Money
Market Fund (A Series of CIGNA Funds Group) dated as of January 3,
2000.
* n. (i) Multi Class Plan Pursuant to Rule 18f-3 for CIGNA Funds Group
dated as of the 3rd day of January, 2000.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.
- --------------------------------------------------------------------
No person is directly or indirectly controlled by or under common control with
CIGNA Funds Group.
ITEM 25. INDEMNIFICATION.
- ------------------------
The Second Amended and Restated Master Trust Agreement, as amended, dated July
28, 1998 (the "Master Trust Agreement"), provides, among other things, for the
indemnification out of Registrant's assets (or the assets of a series of
Registrant where applicable) of the Trustees and officers of Registrant against
all liabilities incurred by them in such capacity, except for liability by
reason of wilful misfeasance, bad faith, gross negligence or reckless disregard
of their duties. Trustees may consult counsel or other experts concerning the
meaning and operation of the Master Trust Agreement, and may rely upon the books
and records of Registrant. Trustees are not liable for errors of judgment,
mistakes of fact or law, or for the negligence of other Trustees or Registrant's
officers or agents.
Trustees are not required to give a bond or other security for the performance
of their duties. Payments in compromise of any action brought against a Trustee
or officer may be paid by Registrant if approved by either a majority of
disinterested Trustees or by independent legal counsel. The right of
indemnification under the Master Trust Agreement is not exclusive of any other
rights to which the Trustees or officers may be entitled.
The Master Trust Agreement also provides that shareholders shall be indemnified
and held harmless by the applicable series of Registrant with respect to actions
brought against them in their capacity as shareholders. Also, the Master Trust
Agreement provides that creditors of a series of Registrant may look only to the
assets of that series for payment; and neither shareholders nor Trustees shall
be personally liable therefor. All instruments executed on behalf of Registrant
are required to contain a statement to the effect of the foregoing.
_____________________
* Filed Herewith.
C-3
<PAGE>
CIGNA Investments, Inc., Registrant and other investment companies managed by
CIGNA Investments, Inc., their officers, trustees, directors and employees (the
"Insured Parties") are insured under an Investment Management Errors and
Omissions Insurance Policy in the amount of $10,000,000 offered by Lloyd's
Insurance Company, an affiliate of Lloyd's of London, on a joint policy basis
with CIGNA Investments, Inc. and CIGNA International Investment Advisors, Ltd.
In addition, Registrant and other investment companies managed by CIGNA
Investments, Inc. and CIGNA International Investment Advisors, Ltd. are insured
under a Lloyd's Insurance Company Investment Company Blanket Bond with a stated
maximum coverage of $10,000,000. Premiums and policy benefits are allocated
among participating companies pursuant to Rule 17g-1(d) under the Investment
Company Act of 1940, as amended.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.
- -----------------------------------------------------------------
As of the date hereof, CIGNA Investments, Inc. ("CII") serves as investment
adviser to CIGNA Funds Group, to CIGNA Institutional Funds Group, to CIGNA
Variable Products Group and their series of shares and to CIGNA High Income
Shares (CIGNA Funds Group, CIGNA High Income Shares, CIGNA Institutional Funds
Group and CIGNA Variable Products Group, collectively known as the "Trusts") and
to CIGNA Investment Securities, Inc. (f/k/a INA Investment Securities, Inc.)
("CIS"), all of which (except for CIS and CIGNA High Income Shares) are open-end
investment companies, and to certain other clients, most of which are affiliated
with CIGNA Corporation. For a description of the business of CII, see its most
recent Form ADV (File No. 801-18094) filed with the Securities and Exchange
Commission. The principal address of each of the foregoing companies is as
follows:
CII - 900 Cottage Grove Road, Bloomfield, Connecticut 06002 and 195 Broadway,
9th Floor, New York, NY 10007
The Trusts and each of their series of shares - 100 Front Street, Suite 300,
Worcester, Massachusetts 01601
CIS - Two Liberty Place, 1601 Chestnut Street, Philadelphia, Pennsylvania 19192
Substantial business and other connections of the Directors and officers during
the past two fiscal years follow:
Names of Officers and Directors Positions with the Adviser and
of the Investment Adviser Other Substantial Business Connections
- ------------------------------- --------------------------------------
Harold W. Albert Director and Counsel, CII; Director,
CIGNA International Investment Advisors,
Ltd.**; Chief Counsel, CIGNA Investment
Management, a division of CIGNA
Corporation*; Counsel, CIGNA Investment
Advisory Company, Inc.*; Director, Senior
Vice President and Chief Counsel, CIGNA
Investment Group, Inc.*; Director, Global
Portfolio Strategies, Inc.* and CIGNA
Financial Futures, Inc.*
Thomas C. Jones President, CIGNA Investment Management, a
division of CIGNA Corporation*; President
and Director, CII and CIGNA Investment
Group, Inc.*; President, CIGNA Investment
Advisory Company, Inc.*; Director, CIGNA
International Investment Advisors,
Ltd.**, CIGNA Financial Futures, Inc.*
and Global Portfolio Strategies, Inc.*;
Trustee, the Trusts; Director, CIGNA
Investment Securities, Inc. (f/k/a INA
Investment Securities, Inc.)
Jean H. Walker Director and Senior Vice President, CII;
Chief Financial Officer, CIGNA Investment
Management, a division of CIGNA
Corporation*; previously Chief Financial
Officer, Group Insurance division, CIGNA
Corporation.*
C-4
<PAGE>
Mary Louise Casey Senior Managing Director, CII; Director
and Senior Managing Director, CIGNA
Investment Advisory Company, Inc.*;
Director Global Portfolio Strategies,
Inc.*
Richard H. Forde Senior Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*;
President, Senior Managing Director and
Director, CIGNA International Investment
Advisors, Ltd.**; Chairman of the Board,
President and Trustee CIGNA Funds Group,
CIGNA High Income Shares, CIGNA
Institutional Funds Group and CIGNA
Investment Securities, Inc. (f/k/a INA
Investment Securities, Inc.); President
CIGNA Variable Products Group.
Robert J. Moore Senior Managing Director, CII, CIGNA
Investment Advisory Company, Inc.* and
CIGNA International Investment Advisors,
Ltd.**; Chief Investment Officer, CIGNA
Investment Management-Retirement
Services, a division of CIGNA
Corporation*; previously Managing
Director, Head of Fixed Income Portfolio
Management and Research, Credit Suisse
Asset Management, NY, NY.
Philip J. Ward Senior Managing Director, CII; Director
and Senior Managing Director, CIGNA
Investment Advisory Company, Inc.*
Kevin D. Barry Managing Director, CII.
Julia B. Bazenas Managing Director, CII.
Marguerite A. Boslaugh Managing Director, CII.
Susan B. Bosworth Managing Director, CII.
William C. Carlson Managing Director, CII; previously Vice
President, CII.
Richard H. Chase Managing Director, CII.
Rosemary C. Clarke Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*
Rosemary S. Cleaves Managing Director, CII; previously
President and Director, Global Portfolio
Strategies, Inc.*
Robert F. DeLucia Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*;
Director, Global Portfolio Strategies,
Inc.*
Mark V. DePucchio Managing Director, CII; previously Vice
President, CII.
Michael Q. Doyle Managing Director, CII; previously Vice
President, CII.
Lawrence A. Drake Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*
Ira Edelblum Managing Director, CII; previously
Portfolio Manager, Credit Suisse Asset
Management, NY, NY.
John G. Eisele Managing Director, CII.
Robert Fair Managing Director, CII.
C-5
<PAGE>
John P. Feeney Managing Director, CII.
Keith A. Gollenberg Managing Director, CII; previously Vice
President, CII.
Maurice A. Gordon Managing Director, CII; previously Vice
President, CII.
William J. Grady Managing Director, CII.
Dennis P. Hannigan Managing Director, CII.
Debra J. Height Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*
William H. Jefferis Managing Director, CII; previously Vice
President, CII.
David R. Johnson Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*
Robert W. Justich Managing Director, CII; previously
Managing Director, Credit Suisse Asset
Management, NY, NY.
Richard H. Kupchunos Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*
James R. Kuzemchak Managing Director, CII.
Edward Lewis Managing Director, CII.
Timothy J. Lord Managing Director, CII; Vice President,
CIGNA Financial Futures, Inc.*
Stephen J. Olstein Managing Director, CII.
Stephen A. Osborn Managing Director, CII.
Alan C. Petersen Managing Director, CII; Vice President,
CIGNA High Income Shares.
Anthony J. Pierson Managing Director, CII.
Leon Pouncy Managing Director, CII.
Donald F. Rieger, Jr. Managing Director, CII.
Peter F. Roby Managing Director, CII; previously Vice
President, CII.
Frank Sataline, Jr. Managing Director, CII; previously Vice
President, CII.
John A. Shaw Managing Director, CII.
Joseph W. Springman Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*
William A. Taylor Managing Director, CII.
George Varga Managing Director, CII.
Victor J. Visockis, Jr. Managing Director, CII; previously Vice
President, CII.
C-6
<PAGE>
Henry C. Wagner, III Managing Director, CII and CIGNA
Investment Advisory Company, Inc.*;
President, CIGNA Financial Futures,
Inc.*; previously Vice President, CII.
Deborah B. Wiacek Managing Director, CII; previously Vice
President, CII.
Stephen H. Wilson Managing Director, CII.
Mary C. LaBelle Senior Vice President, CII; Human
Resources Head, CIGNA Investment
Management, a division of CIGNA
Corporation*; previously Human Resources,
Aeltus Investment Management, a division
of Aetna Corporation, Hartford, CT.
Victor E. Saliterman Senior Vice President, CII; previously
Senior Manager-Strategic Services,
Anderson Consulting, New York, NY
(Consulting Services).
Jean M. Anderson Vice President, CII.
Thomas P. Au Vice President, CII.
Andrew Brown Vice President, CII.
Timothy C. Burns Vice president, CII and Global Portfolio
Strategies, Inc.*
John D. Carey Vice President, CII.
David M. Cass Vice President, CII.
Peter A. Clark Vice President, CII.
Maryanne P. dePreaux Vice President, CII.
Kim L. DiPietro Vice President, CII.
Celia R. Dondes Vice President, CII.
Ronald J. Dupont Vice President, CII and CIGNA Investment
Advisory Company, Inc.*
Robert W. Eccles Vice President, Finance & Risk
Management; previously Vice President.
Mark W. Everette Vice President, CII.
Richard L. Fletcher Vice President, CII.
Jonathan S. Frankel Vice President, CII.
Ivy B. Freedman Vice President, CII.
Susan M. Grayson Vice President, CII and Global Portfolio
Strategies, Inc.*; previously Director,
Global Portfolio Strategies, Inc.*
Amy F. Hatfield Vice President, CII.
John Hurley Vice President, CII.
C-7
<PAGE>
Chuel D. Hwang Vice President, CII.
Steven F. Jacobs Vice President, CII.
Thomas J. Keene Vice President, CII.
Joseph R. Kennedy Vice President, CII.
Mark S. Korinek Vice President, CII.
Daryl R. Krivanec Vice President, CII.
James R. Lagasse Vice President, CII.
Paul T. Martin Vice President, CII.
Daniel McDonough Vice President, CII, CIGNA International
Investment Advisors, Ltd.** and Global
Portfolio Strategies, Inc.*
Dean M. Molinaro Vice President, CII
Linda L. Morel Vice President, CII.
Alpha O. Nicholson, III Vice President, CII; Senior Counsel,
CIGNA companies*.
Ann Marie O'Rourke Vice President, CII.
Elisabeth Piker Vice President, CII.
Thomas J. Podgorski Vice President, CII.
Michael J. Riccio Vice President, CII.
Timothy F. Roberts Vice President and Compliance Officer,
CII; Vice President, International
Finance/Global Compliance, CIGNA
Investment Management, a division of
CIGNA Corporation*; Vice President
Finance and Compliance Officer, CIGNA
International Investment Advisors,
Ltd.**; Compliance Officer, CIGNA
Investment Advisory Company, Inc.*
Kevin W. Schmitt Vice President, CII.
John R. Schumann Vice President, CII.
Philip Spak Vice President, CII.
Marie E. Swartzwelder Vice President, CII and Global Portfolio
Strategies, Inc.*; previously Vice
President, Global Portfolio Strategies,
Inc.*
Carlton C. Taylor Vice President, CII.
Patrick H. Thompson Vice President, CII.
Michael J. Walker Vice President, CII.
C-8
<PAGE>
Carey A. White Vice President, CII.
William S. Woodsome Vice President, CII.
Alfred A. Bingham III Assistant Vice President, CII; Vice
President and Treasurer, the Trusts and
CIGNA Investment Securities, Inc. (f/k/a
INA Investment Securities, Inc.)
Susan L. Cooper Secretary, CII, CIGNA Investment Advisory
Company, Inc.*, CIGNA International
Investment Advisors, Ltd.**, CG Trust
Company*, Global Portfolio Strategies,
Inc.*, CIGNA Financial Services, Inc.***,
Connecticut General Life Insurance
Company*; Assistant Corporate Secretary,
CIGNA Corporation****; previously
Associate, Robinson Donovan Madden &
Barry, P.C., Springfield, MA (Law Firm).
In addition, certain companies not affiliated with CIGNA serve as investment
sub-advisers to the CIGNA Charter Funds /SM/. Following are the names of these
companies, the series they sub-advise, their principal business addresses and
the substantial business and other connections of the Directors and officers of
the companies during the past two fiscal years:
FOREIGN STOCK FUND Bank of Ireland Asset Management (U.S.)
Limited
20 Horseneck Lane
Greenwich, CT 06830
Substantial business and other connections of Bank of Ireland Asset Management
(U.S.) Limited and its officers and Directors is incorporated by reference to
Schedules A and D of its Form ADV as currently on file with the Securities and
Exchange Commission as most recently amended (File No. 801-29606).
SMALL COMPANY STOCK VALUE FUND Berger LLC
210 University Boulevard
Suite 900
Denver, CO 80206
Substantial business and other connections of Berger LLC and its officers and
Directors is incorporated by reference to Schedules C and D of its Form ADV as
currently on file with the Securities and Exchange Commission as most recently
amended (File No. 801-9451).
SMALL COMPANY STOCK GROWTH FUND Fiduciary International, Inc.
Two World Trade Center
New York, NY 10048
Substantial business and other connections of Fiduciary International, Inc. and
its officers and Directors is incorporated by reference to Schedules A and D of
its Form ADV as currently on file with the Securities and Exchange Commission as
most recently amended (File No. 801-18352).
BALANCED FUND INVESCO Capital Management, Inc.
One Midtown Plaza
1360 Peachtree Street, N.E.
Suite 100
Atlanta, GA 30309
____________________________
*900 Cottage Grove Road, Bloomfield, CT
**Park House, 16 Finsbury Circus, London, England
***280 Trumbull Street, One Commercial Plaza, Hartford, CT
****One Liberty Place, 1650 Market Street, Philadelphia, PA
C-9
<PAGE>
Substantial business and other connections of INVESCO Capital Management, Inc.
and its officers and Directors is incorporated by reference to Schedules A and D
of its Form ADV as currently on file with the Securities and Exchange Commission
as most recently amended (File No. 801-33949).
LARGE COMPANY STOCK VALUE FUND John A. Levin & Co., Inc.
One Rockefeller Plaza
19th Floor
New York, NY 10020
Substantial business and other connections of John A. Levin & Co., Inc. and its
officers and Directors is incorporated by reference to Schedules A and D of its
Form ADV as currently on file with the Securities and Exchange Commission as
most recently amended (File No. 801-52602).
LARGE COMPANY STOCK GROWTH FUND Morgan Stanley Dean Witter Investment
Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Substantial business and other connections of Morgan Stanley Dean Witter
Investment Management Inc. and its officers and Directors is incorporated by
reference to Schedules A and D of its Form ADV as currently on file with the
Securities and Exchange Commission as most recently amended (File No.
801-15757).
ITEM 27. PRINCIPAL UNDERWRITERS.
- --------------------------------
(a) CIGNA Financial Services, Inc. is the principal underwriter for CIGNA Funds
Group and for its series.
(b) The officers and Directors of CIGNA Financial Services, Inc. as of December
1, 1999 are:
<TABLE>
<CAPTION>
Name and Principal Positions and Offices Positions and Offices
Business Address*** With Underwriter With Registrant
- ----------------- --------------------- ---------------------
<S> <C> <C>
Willard S. Bashan Member Board of Directors --------
Byron D. Oliver Member Board of Directors --------
Mark A. Parsons Member Board of Directors --------
David C. Scheinerman Member Board of Directors --------
Robin A. Leavitt President --------
Alan F. Monbaron Vice President,
Chief Financial Officer,
Assistant Treasurer --------
Mark A. Parsons Vice President, --------
Chief Counsel
Stephen C. Stachelek Vice President, --------
Treasurer
Daniel E. Wright Vice President,
Assistant Treasurer,
Compliance Officer --------
Julia M. Kozlowski Assistant Vice President --------
Susan L. Cooper Secretary --------
Thomas L. Pierce Assistant Secretary --------
Margaret I. Whiteman Assistant Secretary --------
Pamela S. Williams Assistant Secretary --------
Bruce P. Chapin Assistant Treasurer --------
</TABLE>
__________________
***280 Trumbull Street, One Commercial Plaza, Hartford, CT
C-10
<PAGE>
<TABLE>
<S> <C> <C>
Brian J. Coroso Assistant Treasurer,
Assistant Compliance Officer --------
Joy B. Erickson Assistant Treasurer,
Assistant Compliance Officer --------
</TABLE>
(c) Not Applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
- ------------------------------------------
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940 (15 U.S.C. 80a-30(a)) and the Rules (17 CFR
270.31a-1 to 31a-3) promulgated thereunder and records relating to shareholders
are maintained by State Street Bank and Trust Company, Boston, Massachusetts.
Registrant's corporate records and financial records are maintained c/o CIGNA
Investments, Inc., 900 Cottage Grove Road, Bloomfield, CT 06002.
ITEM 29. MANAGEMENT SERVICES.
- -----------------------------
None.
ITEM 30. UNDERTAKINGS.
- ----------------------
Not Applicable.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, Registrant, CIGNA Funds Group,
certifies that it meets all of the requirements for effectiveness of this
registration statement under rule 485(b) under the Securities Act of 1933, as
amended, and has duly caused this Amendment No. 63 to the Registration Statement
to be signed on its behalf by the undersigned, duly authorized, in the City of
Bloomfield, and State of Connecticut on the 23rd day of December, 1999.
CIGNA Funds Group
Richard H. Forde
Chairman of the Board of Trustees
and President
/s/ Jeffrey S. Winer
By:_______________________________________
Jeffrey S. Winer
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 63 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Richard H. Forde Chairman of December 23, 1999.
the Board of
Trustees and
President (principal
By: /s/ Jeffrey S. Winer executive officer)
------------------------------------
Jeffrey S. Winer
Attorney-in-Fact
/s/ Alfred A. Bingham III Treasurer December 23, 1999.
------------------------------------ (principal
Alfred A. Bingham III financial officer
and principal
accounting officer)
This Amendment to the Registration Statement has also been signed below by
Jeffrey S. Winer, Attorney-in-Fact, on behalf of the following Trustees on the
date indicated, such Trustees being all of the Trustees currently holding the
office of Trustee of Registrant.
Hugh R. Beath Thomas C. Jones
Richard H. Forde Paul J. McDonald
Russell H. Jones
By: /s/ Jeffrey S. Winer December 23, 1999.
-----------------------------------
Jeffrey S. Winer
C-12
</TABLE>
<PAGE>
SECURITIES ACT FILE NO. 2-29020
INVESTMENT COMPANY ACT FILE NO. 811-1646
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
_
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 | |
-
_
Pre-Effective Amendment | |
-
_
Post-Effective Amendment No. 63 |X|
-
and
_
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
-
_
Amendment No. 63 |X|
-
CIGNA FUNDS GROUP
(Exact Name of Registrant as Specified in Charter)
100 FRONT STREET, SUITE 300, WORCESTER, MA 01601
(Address of Principal Executive Office)
EXHIBITS
<PAGE>
EXHIBIT INDEX
a. (i) Amendment No. 1 to Second Amended and Restated Master Trust
Agreement of Registrant dated October 29, 1999.
d. (i) Side Letter to the First Amended and Restated Master Investment
Advisory Agreement dated January 3, 2000 between CIGNA Funds Group
and CIGNA Investments, Inc.
d. (ii) Form of Investment Sub-Advisory Agreement for CIGNA Funds Group
Foreign Stock Fund between CIGNA Investments, Inc. and Bank of
Ireland Asset Management (U.S.) Limited.
d. (iii) The Investment Sub-Advisory Agreement for CIGNA Funds Group Small
Company Stock Value Fund dated December 7, 1999 between CIGNA
Investments, Inc. and Berger LLC.
d. (iv) The Investment Sub-Advisory Agreement for CIGNA Funds Group Small
Company Stock Value Fund dated December 7, 1999 between Berger LLC
and Perkins, Wolf, McDonnell & Company.
d. (v) The Investment Sub-Advisory Agreement for CIGNA Funds Group Small
Company Stock Growth Fund dated November 5, 1999 between CIGNA
Investments, Inc. and Fiduciary International, Inc.
d. (vi) Form of Investment Sub-Advisory Agreement for CIGNA Funds Group
Balanced Fund between CIGNA Investments, Inc. and INVESCO Capital
Management, Inc.
d. (vii) The Investment Sub-Advisory Agreement for CIGNA Funds Group Large
Company Stock Value Fund dated November 10, 1999 between CIGNA
Investments, Inc. and John A. Levin & Co., Inc.
d. (viii) Form of Investment Sub-Advisory Agreement for CIGNA Funds Group
Large Company Stock Growth Fund between CIGNA Investments, Inc. and
Morgan Stanley Dean Witter Investment Management, Inc.
g. (iii) Side Letter to the Custodian Contract between CIGNA Funds Group and
State Street Bank and Trust Company dated as of January 3, 2000.
h. (iii) Side Letter to the Transfer Agency and Service Agreement between
CIGNA Funds Group and State Street Bank and Trust Company dated as
of January 3, 2000.
h. (vi) Form of Shareholder Services Agreement of the Premier Class-Fixed
Income and the Retail Class of CIGNA Funds Group and CIGNA Financial
Services, Inc.
h. (viii) Sub-Accounting Services Agreement For the Premier Class and the
Retail Class of CIGNA Funds Group made as of January 3, 2000.
h. (ix) Power of Attorney.
i. Opinion of Counsel.
j. Consent of PricewaterhouseCoopers LLP.
m. Rule 12b-1 Plan of CIGNA Funds Group dated as of January 3, 2000.
m. (ii) Amendment No. 1 to Rule 12b-1 Plan for the Retail Class of Money
Market Fund (A Series of CIGNA Funds Group) dated as of January 3,
2000.
n. Multi Class Plan Pursuant to Rule 18f-3 for CIGNA Funds Group dated
as of the 3rd day of January, 2000.
<PAGE>
Exhibit a(i)
CIGNA FUNDS GROUP
AMENDMENT NO. 1
TO
SECOND AMENDED AND RESTATED MASTER TRUST AGREEMENT
AMENDMENT NO. 1 to Second Amended and Restated Master Trust Agreement
of CIGNA Funds Group dated July 28, 1998 (the "Master Trust Agreement"), made
this 29th day of October, 1999 by the Trustees hereunder.
W I T N E S S E T H
WHEREAS, the Trustees have the authority, under Article IV, Section 4.1
of the Master Trust Agreement, to establish and designate separate and distinct
Sub-Trusts of the Trust:
WHEREAS, the Trustees desire to redesignate its established Sub-Trusts
known as CIGNA Money Market Fund and CIGNA S&P 500 Index Fund and designate same
as Money Market Fund and Large Company Stock Index Fund, respectively; and
WHEREAS, the Trustees desire to establish and designate new sub-trusts,
namely: Balanced Fund, Core Plus Fixed Income Fund, Emerging Markets Debt Fund,
High Grade Fixed Income Fund, Foreign Stock Fund, Large Company Stock Growth
Fund, Large Company Stock Value Fund, Small Company Stock Growth Fund, Small
Company Stock Value Fund and Ultra Core Plus Fixed Income Fund.
NOW, THEREFORE, the Trustees hereby delete the initial paragraph of
Article IV, Section 4.2 of the Master Trust Agreement and replace it with the
following:
"Section 4.2 ESTABLISHMENT AND DESIGNATION OF
SUB-TRUSTS. Without limiting the authority of the Trustees set forth in
Section 4.1 to establish and designate any further Sub-Trusts, the
Trustees hereby acknowledge the continued existence of the following
Sub-Trusts heretofore established and designated: CIGNA Income Fund,
CIGNA Developed Markets Stock Fund, CIGNA Emerging Markets Stock Fund,
CIGNA Global Bond Fund, CIGNA Government Obligations Cash Fund, CIGNA
Government Securities Fund, CIGNA High Yield Fund and CIGNA Treasury
Obligations Cash Fund; the Trustees hereby redesignate the established
Sub-Trusts known as CIGNA Money Market Fund and CIGNA S&P 500 Index
Fund as Money Market Fund and Large Company Stock Index Fund,
respectively; and establish and designate ten additional Sub-Trusts:
Balanced Fund, Core Plus Fixed Income Fund, Emerging Markets Debt Fund,
High Grade Fixed Income Fund, Foreign Stock Fund, Large Company Stock
Growth Fund, Large Company Stock Value Fund, Small Company Stock Growth
Fund, Small Company Stock Value Fund and Ultra Core Plus Fixed Income
Fund, and the Shares of each such Sub-Trust and any Shares of any
further Sub-Trusts that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise
determine with respect to some further Sub-Trust at the time of
establishing and designating the same) have the following relative
rights and preferences:"
The undersigned hereby certify that the amendment set forth above has been duly
adopted in accordance with the provisions of the Master Trust Agreement.
IN WITNESS WHEREOF, the undersigned have hereunto set their hands and
seals in the City of Springfield, Commonwealth of Massachusetts, for themselves
and their assigns, to this Amendment No. 1 to the Second Amended and Restated
Master Trust Agreement, as of the day and year first above written.
150 Theodore Fremd
Apt. A-11 /s/ Hugh R. Beath
Rye, NY 10580 _______________________________________
Hugh R. Beath
[CIGNA FUNDS GROUP SEAL GRAPHIC APPEARS HERE]
Senior Managing Director
CIGNA Investments, Inc.
S-115
900 Cottage Grove Road /s/ Richard H. Forde
Hartford, CT 06152-2115 _______________________________________
Richard H. Forde
Vice President and Treasurer
Kaman Corporation
1332 Blue Hills Avenue /s/ Russell H. Jones
Bloomfield, CT 06002 _______________________________________
Russell H. Jones
President
CIGNA Investments, Inc.
S-211
900 Cottage Grove Road /s/ Thomas C. Jones
Hartford, CT 06152-2211 _______________________________________
Thomas C. Jones
Senior Executive Vice President and
Chief Financial Officer
Friendly Ice Cream Corporation
1855 Boston Road /s/ Paul J. McDonald
Wilbraham, MA 01095 _______________________________________
Paul J. McDonald
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
HAMPDEN COUNTY, City of Springfield
Then personally appeared the within-named Hugh R. Beath, Richard H.
Forde, Russell H. Jones, Thomas C. Jones and Paul J. McDonald who acknowledged
the execution of the foregoing instrument to be their free act and deed, before
me, this 29th day of October, 1999.
/s/ Geoffrey R.T. Kenyon
_____________________________________________________
Notary Public
[Notarial Seal Graphic Appears Here]
GEOFFREY R.T. KENYON,
NOTARY PUBLIC
MY COMMISSION EXPIRES
APRIL 14, 2000
My commission expires:______________________________
<PAGE>
Exhibit d(i)
CIGNA FUNDS GROUP
100 FRONT STREET
SUITE 300
WORCESTER, MA 01601
January 3, 2000
CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, CT 06152
Re: First Amended and Restated Master Investment Advisory Agreement Dated
as of April 30, 1996 (the "Master Investment Advisory Agreement")
Between CIGNA Investments, Inc. (the "Adviser") and CIGNA Funds Group
(the "Trust")
Dear Madam or Sir:
Please be advised that the Trust has established new series of shares, namely:
Balanced Fund, Core Plus Fixed Income Fund, Foreign Stock Fund, Large Company
Stock Growth Fund, Large Company Stock Value Fund, Small Company Stock Growth
Fund and Small Company Stock Value Fund (the "Series"). The Trust desires to
retain you to render management and investment advisory services pursuant to the
above-captioned Master Investment Advisory Agreement for the Series. The
proposed advisory fees payable with respect to the Series are set forth on
Schedule A-2 attached hereto.
If you are willing to render management and investment advisory services
pursuant to the Master Investment Advisory Agreement and the fee schedule
attached hereto, please so indicate by signing below.
Please be further advised that the trust has renamed two existing series: Money
Market Fund (f/k/a CIGNA Money Market Fund) and Large Company Stock Index Fund
((f/k/a CIGNA S&P 500 Index Fund).
Copies of the Master Trust Agreement establishing the Trust are on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this document is executed on behalf of the Trust by an officer of the Trust and
not individually and that any obligations of or arising out of this document are
not binding upon any of the Trustees, officers, shareholders, employees or
agents of the Trust individually, but are binding only upon the assets and
property of the Trust.
Sincerely,
CIGNA Funds Group
/s/ Richard H. Forde
By:__________________________________________________
By: Richard H. Forde
Its: Chairman of the Board and President
Accepted and Agreed to.
CIGNA Investments, Inc.
/s/ Thomas C. Jones
By:__________________________________________________
By: Thomas C. Jones
Its: President
<PAGE>
SCHEDULE A-2 TO MASTER INVESTMENT ADVISORY AGREEMENT
ATTACHED TO LETTER DATED JANUARY 3, 2000
Compensation Schedule for the following Series:
Balanced Fund
Core Plus Fixed Income Fund
Foreign Stock Fund
Large Company Stock Growth Fund
Large Company Stock Value Fund
Small Company Stock Growth Fund
Small Company Stock Value Fund
The Trust shall pay the Adviser as full compensation for all services rendered
and all facilities furnished hereunder, a management fee for each Series by
applying the following percentages of the average daily net asset value of each
Series for the calendar year, computed in the manner used for the determination
of the offering price of Shares of the Series:
Balanced Fund 0.75
Core Plus Fixed Income Fund 0.60
Foreign Stock Fund 1.00
Large Company Stock Growth Fund 0.80
Large Company Stock Value Fund 0.75
Small Company Stock Growth Fund 1.00
Small Company Stock Value Fund 1.00
The fee accrued as of the end of each month shall be paid no later than the 15th
of the following month.
<PAGE>
Exhibit d(ii)
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA FUNDS GROUP
FOREIGN STOCK FUND
AGREEMENT made this ____ day of ______________, 1999, between CIGNA
Investments, Inc. (the "Adviser") and Bank of Ireland Asset Management (U.S.)
Limited, an Irish Corporation (the "Sub-Adviser").
WHEREAS, CIGNA Funds Group, a Massachusetts business trust (the
"Trust") is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 30, 1996 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the Foreign Stock Fund (the
"Fund"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser and
-------------------------
the Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, in its discretion and without
prior consultation with the Adviser, determine from
time to time what Assets will be purchased, retained
or sold by the Fund, and what portion of the Assets
will be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in
conformity with the Trust's Prospectus and with the
instructions and directions of the Adviser and of the
Board of Trustees of the Trust and will conform to and
comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the
Prospectus or as the Board of Trustees or the Adviser
may direct from time to time, in conformity with
federal securities laws. In executing Fund
transactions and selecting
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<PAGE>
brokers or dealers, the Sub-Adviser will use its best
efforts to seek on behalf of the Fund the best
execution. In assessing the best execution
availability for each transaction, the Sub-Adviser
shall consider all factors that it deems relevant,
including the breadth of the market in the security,
the price of the security, the financial condition and
execution and operational capability of the broker or
dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a
continuing basis. In evaluating the best execution,
and in selecting the broker-dealer to execute a
particular transaction, the Sub-Adviser may also
consider the brokerage and research services provided
(as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934). Consistent with any
guidelines established by the Board of Trustees of the
Trust, the Sub-Adviser is authorized to pay to a
broker or dealer who provides such brokerage and
research services a commission for executing a
portfolio transaction for the Fund which is in excess
of the amount of commission another broker or dealer
would have charged for effecting that transaction if,
but only if, the Sub-Adviser determines in good faith
that such commission was reasonable in relation to the
value of the brokerage and research services provided
by such broker or dealer - - viewed in terms of that
particular transaction or terms of the overall
responsibilities of the Sub-Adviser to the Fund and
its other clients. In no instance, however, will the
Fund's Assets be purchased from or sold to the
Adviser, Sub-Adviser, the Trust's principal
underwriter, or any affiliated person of either the
Trust, Adviser, the Sub-Adviser or the principal
underwriter, acting as principal in the transaction,
except to the extent permitted by the Securities and
Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act, including, without limitation, the
information specified in Schedule A attached hereto
and made a part of this Agreement. The Sub-Adviser
shall provide to the Adviser or the Board of Trustees
such periodic and special reports, balance sheets or
financial information, and such other information with
regard to its affairs as the Adviser or Board of
Trustees may reasonably request.
The Sub-Adviser shall keep the books and records
relating to the Assets required to be maintained by
the Sub-Adviser under this Agreement and shall timely
furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any
other information relating to the Assets that is
required to be filed by the Adviser or the Trust with
the SEC or sent to shareholders under the 1940 Act
(including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the
Trust obtains from the SEC. The Sub-Adviser agrees
that all records that it maintains on behalf of the
Fund are property of the Fund and the Sub-Adviser will
surrender promptly to the Fund any of such records
upon the Fund's request; provided, however, that the
Sub-
Page 2
<PAGE>
Adviser may retain a copy of such records. In
addition, for the duration of this Agreement, the
Sub-Adviser shall preserve for the period prescribed
by Rule 31a-2 under the 1940 Act any such records as
are required to be maintained by it pursuant to this
Agreement, and shall transfer said records to any
successor sub-adviser upon the termination of this
Agreement (or, if there is no successor sub-adviser,
to the Adviser).
(e) The Sub-Adviser shall provide the Fund's custodian on
each business day with information relating to all
transactions concerning the Fund's Assets in
accordance with the requirements set forth on Schedule
B attached hereto and made a part of this Agreement,
and such other information as may reasonably be
requested by Adviser.
(f) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed
exclusive and the Sub-Adviser shall be free to render
similar services to others, as long as such services
do not impair the services rendered to the Adviser or
the Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund. The Adviser shall instruct the custodian and
other parties providing services to the Fund to
promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any
of the Sub-Adviser's partners, officers, or employees.
(j) The sub-adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified by Adviser to Sub-Adviser in
writing.
(k) Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under
the 1940 Act, will provide to the Fund a copy of the
code of ethics and evidence of its adoption, and will
make such reports to the Fund as required by Rule
17j-1 under the Act.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
---------------------
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with its
management of the Assets, nothing herein shall be construed to relieve the
Sub-Adviser of responsibility for compliance with the Prospectus, the
instructions and directions of the Adviser and the Board of Trustees of the
Trust, the requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each is amended
from time to time. No written materials, other than materials provided or
approved by the Sub-Adviser, shall be used by the Adviser, the Fund, the Trust
or their affiliates in offering or marketing shares of the Fund or
Page 3
<PAGE>
Trust, which approval shall not be unreasonably withheld or delayed. Any
materials provided to the Sub-Adviser shall be deemed approved unless
Sub-Adviser otherwise advises Adviser within 3 business days after receipt.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
---------------------
Prospectus(es) of the Fund. The Adviser will promptly furnish to the Sub-Adviser
any and all amendments or other changes to the Prospectus, and the Sub-Adviser
shall not be charged with complying with any such amendment not so delivered to
the Sub-Adviser.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by
-------------------------------
the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. LIMIT OF LIABILITY; INDEMNIFICATION. Unless otherwise required by the
-----------------------------------
1940 Act or other applicable law, (a) in the absence of willful misfeasance, bad
faith, gross negligence, reckless disregard of its obligations or duties
hereunder or a material breach of this Agreement ("Disabling Conduct") on the
part of Sub-Adviser (and its officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with
Sub-Adviser), Sub-Adviser shall not be subject to liability to the Adviser or
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder, including, without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this agreement relates. Except for such Disabling Conduct, the
Adviser shall indemnify and hold harmless Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with Sub-Adviser) (collectively, the "Indemnified
Parties") from and against all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) arising from
Sub-Adviser's conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless Fund and
the Adviser (and their officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Fund or
the Adviser) against any and all losses, claims damages, liabilities or
litigation (including reasonable legal and other expenses), to which the Fund,
the Adviser or their affiliates or such officers, directors, agents, employees,
controlling persons or shareholders may become subject under the 1940 Act, under
other statutes, at common law or otherwise, which may be based upon such
Disabling Conduct by Sub-Adviser; provided, however, that in no case is
Sub-Adviser's indemnity in favor of any person deemed to protect or apply to
such person against any liability to which such person would otherwise be
subject by reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, or her or its duties or by reason of his, her or its
reckless disregard of such person's obligations and duties under this Agreement.
(c) Sub-Adviser shall not be liable to the Adviser or the Fund
for acts of Sub-Adviser which result from acts or omissions of the Adviser or
Fund, including, but not limited to, a failure by the Adviser to provide
accurate and current information with respect to any records maintained by the
Adviser or Fund, which records are not also maintained by Sub-Adviser, and the
Adviser shall indemnify and hold harmless the Indemnified Parties from and
against any and
Page 4
<PAGE>
all losses, claims, damages, liabilities or litigation (including reasonable
legal and other expenses) arising from such acts or omissions.
6. DURATION AND TERMINATION. This Agreement shall become effective upon
------------------------
its approval by the Trust's Board of Trustees and by the vote of a majority of
the outstanding voting securities of the Fund. This Agreement shall continue in
effect for a period of more than two years from the date hereof only so long as
continuance is specifically approved at least annually in conformance with the
1940 Act; provided, however, that this Agreement may be terminated with respect
to the Fund (a) by the Fund at any time, without the payment of any penalty, by
the vote of a majority of Trustees of the Trust or by the vote of a majority of
the outstanding voting securities of the Fund, (b) by the Adviser upon the
concurrence of a majority of the disinterested trustees at any time, without the
payment of any penalty, on not more than 60 days' nor less than 30 days' written
notice to the Sub-Adviser, or (c) by the Sub-Adviser at any time, without the
payment of any penalty, on 90 days' written notice to the Adviser. This
Agreement shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement with the
Trust. As used in this Section 6, the terms "assignment" and "vote of a majority
of the outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to such
exceptions as may be granted by the SEC under the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal laws
-------------
of the Commonwealth of Massachusetts, without regard to conflict
of law principles; provided, however, that nothing herein shall be construed as
being inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid by a
------------ court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors.
9. NOTICE. Any notice, advice or report to be given pursuant to this
------
Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations Department
To the Sub-Adviser at: Bank of Ireland
Asset Management
(U.S.) Limited
20 Horseneck Lane
Greenwich, CT 06830
Attention:
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto, and supersedes all prior agreements
and
Page 5
<PAGE>
understanding relating to this Agreement's subject matter. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together constitute only one
instrument.
Page 6
<PAGE>
A copy of the Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers.
CIGNA INVESTMENTS, INC. BANK OF IRELAND ASSET
MANAGEMENT (U.S.) LIMITED
/s/ Richard H. Forde
By:_______________________________ By:_________________________________
Richard H. Forde
Name:_____________________________ Name:_______________________________
Senior Managing Director
Title:____________________________ Title:______________________________
Page 7
<PAGE>
Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases and
sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification
or cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the
Fund (1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or
dealers to: (a) the Fund, (b) Adviser, (c)
Sub-Adviser, and (d) any person other than the
foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation (1940 Act, Rule
31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying
the person or persons, committees, or groups authorizing the purchase
or sale of Fund securities. Where an authorization is made by a
committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part
of this record any memorandum, recommendation, or instruction
supporting or authorizing the purchase or sale of Fund securities and
such other information as is appropriate to support the
authorization.** (1940 Act, Rule 31a-1(b) (10))
Page 1 of 2
<PAGE>
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
Page 2 of 2
<PAGE>
SCHEDULE B
Communications With Custodian
A Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can
reasonably ensure that each communication received by it though the System
actually originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior
operations office shall be authorized to access the System and enter
information, and Sub-Adviser must employ reasonably procedures to permit
only authorized persons to have access to the System.
o Sub-Adviser will create separate System files containing the
daily executed securities trade information with respect to the Fund
it manages, or Sub-Adviser will transmit separately the trades for such
Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser
prompt certification or acknowledgment of SSB's receipt of each
transmission by Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
o This information can be reported using your forms, if applicable
Page 1 of 2
<PAGE>
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades will not become an
important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1. Sub-Adviser will be required to submit to SSB a daily
trade authorization report, either through a System or, if a facsimile
transmission is used, on a form signed by two authorized individuals prior to
settlement date and a list of authorized persons with specimen signatures must
have previously been sent to SSB (see Schedule 2). The daily trade authorization
report will contain information on which SSB can rely to either accept delivery
or deliver out of the account, securities as per Sub-Adviser trades. If
facsimile transmission is used, Sub-Adviser will use a form acceptable to SSB.
<PAGE>
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attn: Fund Name/Fund Number
For the account of CIGNA Funds Group - FOREIGN STOCK FUND
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
61 Broadway
Main Concourse Level
New York, NY 10006
"VS Payment" (Federal Funds on Commercial Paper Only) For the
account of CIGNA Funds Group - FOREIGN STOCK FUND (FUND NAME)
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Brad Payne, State Street Bank,
(Phone: 617-985-5389) to obtain delivery instructions
of the State Street Global Custody Network
<PAGE>
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attention: CIGNA Charter Mutual Funds
RE: Persons Authorized To Execute Trades For CIGNA Funds Group - FOREIGN
STOCK FUND
The following list of individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
<PAGE>
Schedule C
Fees for Sub-Adviser Services
SUB-ADVISER: BANK OF IRELAND ASSET MANAGEMENT (U.S.) LIMITED
FUND: FOREIGN STOCK FUND
For investment management services provided to the Fund under this
Agreement, Adviser, as a fiduciary for the Fund, shall pay the
Sub-Adviser a fee determined by multiplying the Average Total Net
Assets by the annual rate specified below. All fees shall be calculated
and paid quarterly in arrears. Fees for partial periods shall be
prorated for the portion of the period for which services were
rendered.
50 basis points on the first $375
million 45 basis points on the next
$225 million 40 basis points on all
amounts thereafter
For purposes of this Schedule, "Average Total Net Assets" for any
quarter shall mean the average of the Assets as reported by the
custodian for the last business day of each month ended in the calendar
quarter.
<PAGE>
Exhibit d(iii)
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA FUNDS GROUP
SMALL COMPANY STOCK-VALUE FUND
AGREEMENT made this 7th day of December, 1999, between CIGNA
Investments, Inc. (the "Adviser") and Berger LLC, a Nevada limited liability
company (the "Sub-Adviser").
WHEREAS, CIGNA Funds Group, a Massachusetts business trust (the
"Trust") is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 30, 1996 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the Small Company
Stock-Value Fund (the "Fund"), which is a series of the Trust, and the Advisory
Agreement provides that the Adviser may delegate any or all of its portfolio
management responsibilities under the Advisory Agreement to one or more
subadvisers; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
WHEREAS, this Agreement and the Advisory Agreement have been approved
by the vote of a majority of the trustees who are not interested persons of the
Adviser of Sub-Adviser, cast in person at a meeting of the Board called for the
purpose of voting on such approval, and this Agreement and the Advisory
Agreement have been approved by the vote of a majority of the outstanding voting
securities of the Fund;
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser
-------------------------
and the Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, subject to the direction of the
Adviser, determine from time to time what Assets will
be purchased, retained or sold by the Fund, and what
portion of the Assets will be invested or held
uninvested in cash. Subject to the foregoing, the
Sub-Adviser is authorized, in its discretion and
without prior consultation with the Adviser, to buy,
sell and otherwise trade in any stocks, bonds and other
securities and investment instruments on behalf of the
Fund, without regard to the length of time the
securities have been held and the resulting rate of
portfolio turn-over or any income tax considerations.
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<PAGE>
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity
with the Trust's Prospectus and with the instructions
and directions of the Adviser and of the Board of
Trustees of the Trust that have been furnished in
writing to the Sub-Adviser, and will conform to and
comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, and all other applicable
federal and state laws and regulations, as each is
amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the
Prospectus or as the Board of Trustees or the Adviser
may direct from time to time, in conformity with
federal securities laws. In executing Fund transactions
and selecting brokers or dealers, the Sub-Adviser will
use its best efforts to seek on behalf of the Fund the
best execution. In assessing the best execution
availability for each transaction, the Sub-Adviser
shall consider all factors that it deems relevant,
including the breadth of the market in the security,
the price of the security, the financial condition and
execution and operational capability of the broker or
dealer, and the reasonableness of the commission, if
any, both for the specific transaction and on a
continuing basis. In evaluating the best execution, and
in selecting the broker-dealer to execute a particular
transaction, the Sub-Adviser may also consider the
brokerage and research services provided (as those
terms are defined in Section 28(e) of the Securities
Exchange Act of 1934). Consistent with any guidelines
established by the Board of Trustees of the Trust, the
Sub-Adviser is authorized to pay to a broker or dealer
who provides such brokerage and research services a
commission for executing a portfolio transaction for
the Fund which is in excess of the amount of commission
another broker or dealer would have charged for
effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such
commission was reasonable in relation to the value of
the brokerage and research services provided by such
broker or dealer - - viewed in terms of that particular
transaction or terms of the overall responsibilities of
the Sub-Adviser to the Fund and its other clients. In
no instance, however, will the Fund's Assets be
purchased from or sold to the Adviser, Sub-Adviser, the
Trust's principal underwriter, or any affiliated person
of either the Trust, Adviser, or the principal
underwriter that have been disclosed to the Sub-Adviser
in writing, or any affiliated person of the
Sub-Adviser, acting as principal in the transaction,
except to the extent permitted by the Securities and
Exchange Commission ("SEC") and the 1940 Act.
To the extent consistent with applicable law, Sub-
Adviser may aggregate purchase or sell orders for the
Fund with contemporaneous purchase or sell orders of
other clients of Sub-Adviser or its affiliated persons.
In such event, allocation of the securities so
purchased or sold, as well as the expenses incurred in
the transaction, will be made by Sub-Adviser in the
manner Sub-Adviser considers to be the most equitable
and consistent with its and its affiliates' fiduciary
obligations to the Fund and to such other clients. The
Adviser hereby acknowledges that such aggregation of
orders
Page 2
<PAGE>
may not result in a more favorable price or lower
brokerage commissions in all instances.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act, including, without limitation, the information
specified in Schedule A attached hereto and made a part
of this Agreement, provided however, that Sub-Adviser
shall not be responsible for performing any custodial
or accounting functions for the Fund. The Sub-Adviser
shall provide to the Adviser or the Board of Trustees
such periodic and special reports, balance sheets or
financial information, and such other information with
regard to its affairs as the Adviser or Board of
Trustees may reasonably request.
The Sub-Adviser shall keep the books and records
relating to the Assets required to be maintained by the
Sub-Adviser under this Agreement and shall timely
furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any other
information relating to the Assets that is required to
be filed by the Adviser or the Trust with the SEC or
sent to shareholders under the 1940 Act (including the
rules adopted thereunder) or any exemptive or other
relief that the Adviser or the Trust obtains from the
SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Fund are property of the
Fund and the Sub-Adviser will surrender promptly to the
Fund any of such records upon the Fund's request;
provided, however, that the Sub-Adviser may retain a
copy of such records. In addition, for the duration of
this Agreement, the Sub-Adviser shall preserve for the
period prescribed by Rule 31a-2 under the 1940 Act any
such records as are required to be maintained by it
pursuant to this Agreement, and shall transfer said
records to any successor sub-adviser upon the
termination of this Agreement (or, if there is no
successor sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Fund's custodian on
each business day with information relating to all
transactions concerning the Fund's Assets in accordance
with the requirements set forth on Schedule B attached
hereto and made a part of this Agreement, and such
other information as may reasonably be requested by
Adviser.
(f) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed
exclusive and the Sub-Adviser shall be free to render
similar services to others, as long as such services do
not impair the services rendered to the Adviser or the
Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
Page 3
<PAGE>
(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund. The Adviser shall instruct the custodian and
other parties providing services to the Fund to
promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of
the Sub-Adviser's partners, officers, or employees.
(j) The Sub-Adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified in advance by Adviser to
Sub-Adviser in writing.
(k) Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the
1940 Act, will provide to the Fund a copy of the code
of ethics and evidence of its adoption, and will make
such reports to the Fund as required by Rule 17j-1
under the Act.
(l) Notwithstanding anything to the contrary, the
Sub-Adviser may delegate any or all of its investment
advisory services, duties, and responsibilities under
this Agreement to Perkins, Wolf, McDonnell & Company.
No delegation pursuant to this provision shall relieve
the Sub-Adviser of its duties or responsibilities
hereunder.
(m) The Adviser hereby acknowledges that the Sub-Adviser is
not responsible for pricing portfolio securities, and
that the Adviser, the Trust, the Fund, and Sub-Adviser
will rely on the pricing agent chosen by the Board of
the Trust for prices of securities, for any purposes.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
---------------------
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with its
management of the Assets, nothing herein shall be construed to relieve the
Sub-Adviser of responsibility for compliance with the Prospectus, the
instructions and directions of the Adviser and the Board of Trustees of the
Trust, the requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each is amended
from time to time. The Fund shall provide proper instructions to its custodian
designating the persons specified by Sub-Adviser as "Authorized Persons" under
the Fund's custody agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
---------------------
Prospectus(es) of the Fund. The Adviser will promptly furnish to the Sub-Adviser
any and all amendments or other changes to the Prospectus, and the Sub-Adviser
shall not be charged with complying with any such amendment not so delivered to
the Sub-Adviser. The Adviser shall furnish to Sub-Adviser true and complete
copies of all policies, procedures and guidelines adopted by the Fund relating
to the Sub-Adviser's management of the Fund and will promptly notify Sub-Adviser
of any material change in any of the documents. The Adviser will also provide
Sub-Adviser with a list, to the best of the Adviser's knowledge of all
affiliated persons of Adviser (and any affiliated person of such an affiliated
person) that issue securities eligible for
Page 4
<PAGE>
purchase by the Fund, and will promptly update the list whenever the Adviser
becomes aware of any additional affiliated persons.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by
-------------------------------
the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. LIMIT OF LIABILITY; INDEMNIFICATION. Unless otherwise required by the
-----------------------------------
1940 Act or other applicable law, (a) in the absence of willful misfeasance, bad
faith, gross negligence, reckless disregard of its obligations or duties
hereunder or a material breach of this Agreement ("Disabling Conduct") on the
part of Sub-Adviser (and its officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with
Sub-Adviser), Sub-Adviser shall not be subject to liability to the Adviser or
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder, including, without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this agreement relates. Except for such Disabling Conduct, the
Adviser shall indemnify and hold harmless Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with Sub-Adviser) (collectively, the "Indemnified
Parties") from and against all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) arising from
Sub-Adviser's conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless Fund and
the Adviser (and their officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Fund or
the Adviser) against any and all losses, claims damages, liabilities or
litigation (including reasonable legal and other expenses), to which the Fund,
the Adviser or their affiliates or such officers, directors, agents, employees,
controlling persons or shareholders may become subject under the 1940 Act, under
other statutes, at common law or otherwise, which may be based upon such
Disabling Conduct by Sub-Adviser; provided, however, that in no case is
Sub-Adviser's indemnity in favor of any person deemed to protect or apply to
such person against any liability to which such person would otherwise be
subject by reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, or her or its duties or by reason of his, her or its
reckless disregard of such person's obligations and duties under this Agreement.
(c) Sub-Adviser shall not be liable to the Adviser or the Fund
for acts of Sub-Adviser which result from acts or omissions of the Adviser or
Fund, including, but not limited to, a failure by the Adviser to provide
accurate and current information with respect to any records maintained by the
Adviser or Fund, which records are not also maintained by Sub-Adviser, and the
Adviser shall indemnify and hold harmless the Indemnified Parties from and
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from such acts or
omissions.
6. DURATION AND TERMINATION. This Agreement shall become effective upon
------------------------
its approval by the Trust's Board of Trustees and by the vote of a majority of
the outstanding voting securities of the Fund. This Agreement shall continue in
effect for a period of more than two years from the date hereof only so long as
continuance is specifically approved at least
Page 5
<PAGE>
annually in conformance with the 1940 Act; provided, however, that this
Agreement may be terminated with respect to the Fund (a) by the Fund without the
payment of any penalty on not less than 60 days' written notice to the
Sub-Adviser, either by the vote of a majority of Trustees of the Trust or by the
vote of a majority of the outstanding voting securities of the Fund, (b) by the
Adviser at any time, without the payment of any penalty on not more than 60
days' nor less than 30 days' written notice to the Sub-Adviser, or (c) by the
Sub-Adviser at any time, without the payment of any penalty, on not more than 60
days' nor less than 30 days' written notice to the Adviser. This Agreement shall
terminate automatically and immediately in the event of its assignment, or in
the event of a termination of the Adviser's agreement with the Trust. As used in
this Section 6, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set forth in
the 1940 Act and the rules and regulations thereunder, subject to such
exceptions as may be granted by the SEC under the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal laws
-------------
of the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid by a
------------
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE. Any notice, advice or report to be given pursuant to this
------
Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations Department
To the Sub-Adviser at: Berger Associates, Inc.
210 University Boulevard, Suite 900
Denver, CO 80206
Attention: Kevin Fay
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto, and supersedes all prior agreements
and understanding relating to this Agreement's subject matter. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together constitute only one
instrument.
Page 6
<PAGE>
A copy of the Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers.
CIGNA INVESTMENTS, INC. BERGER LLC
/s/ Richard H. Forde /s/ Jack R. Thompson
By:________________________________ By:__________________________________
Richard H. Forde Jack R. Thompson
Name:______________________________ Name:________________________________
Senior Managing Director President
Title:_____________________________ Title:_______________________________
Page 7
<PAGE>
Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases
and sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days
after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or
dealers to: (a) the Fund, (b) Adviser, (c)
Sub-Adviser, and (d) any person other than the
foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation (1940 Act, Rule
31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying
the person or persons, committees, or groups authorizing the purchase
or sale of Fund securities. Where an authorization is made by a
committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part
of this record any memorandum, recommendation, or instruction
supporting or authorizing the purchase or sale of Fund securities and
such other information as is appropriate to support the
authorization.** (1940 Act, Rule 31a-1(b) (10))
Page 1 of 2
<PAGE>
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
Page 2 of 2
<PAGE>
SCHEDULE B
Communications With Custodian
A Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can reasonably
ensure that each communication received by it though the System actually
originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior operations office
shall be authorized to access the System and enter information, and
Sub-Adviser must employ reasonably procedures to permit only authorized
persons to have access to the System.
o Sub-Adviser will create separate System files containing the daily executed
securities trade information with respect to the Fund it manages, or
Sub-Adviser will transmit separately the trades for such Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser prompt
certification or acknowledgment of SSB's receipt of each transmission by
Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
o This information can be reported using your forms, if applicable
Page 1 of 2
<PAGE>
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades will not become an
important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1. Sub-Adviser will be required to submit to SSB a daily
trade authorization report, either through a System or, if a facsimile
transmission is used, on a form signed by two authorized individuals prior to
settlement date and a list of authorized persons with specimen signatures must
have previously been sent to SSB (see Schedule 2). The daily trade authorization
report will contain information on which SSB can rely to either accept delivery
or deliver out of the account, securities as per Sub-Adviser trades. If
facsimile transmission is used, Sub-Adviser will use a form acceptable to SSB.
Page 2 of 2
<PAGE>
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attn: Fund Name/Fund Number
For the account of CIGNA Funds Group - SMALL COMPANY
STOCK-VALUE FUND
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
61 Broadway
Main Concourse Level
New York, NY 10006
"VS Payment" (Federal Funds on Commercial Paper Only) For the
account of CIGNA Funds Group - SMALL COMPANY STOCK-VALUE FUND
(FUND NAME)
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Brad Payne, State Street Bank,
(Phone: 617-985-5389) to obtain delivery instructions
of the State Street Global Custody Network
<PAGE>
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attention: CIGNA Charter Mutual Funds
RE: Persons Authorized To Execute Trades For CIGNA Funds Group - SMALL COMPANY
STOCK-VALUE FUND
The following list of individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
<PAGE>
Schedule C
Fees for Sub-Adviser Services
SUB-ADVISER: BERGER ASSOCIATES, INC.
FUND: SMALL COMPANY STOCK-VALUE FUND
For investment management services provided to the Fund under this
Agreement, Adviser, as a fiduciary for the Fund, shall pay the
Sub-Adviser a fee determined by multiplying the Average Total Net
Assets by the annual rate specified below. All fees shall be calculated
and paid quarterly in arrears. Fees for partial periods shall be
prorated for the portion of the period for which services were
rendered.
50 basis points
For purposes of this Schedule, "Average Total Net Assets" for any
quarter shall mean the average of the Assets as reported by the
custodian for the last business day of each month ended in the calendar
quarter.
<PAGE>
Exhibit d(iv)
SUB-ADVISORY AGREEMENT
SMALL COMPANY STOCK-VALUE FUND
(A SERIES OF CIGNA FUNDS GROUP)
This SUB-ADVISORY AGREEMENT (the "Agreement") is entered into effective as
of the 7th day of December, 1999 by and between BERGER LLC, a Nevada limited
liability company ("Berger") and PERKINS, WOLF, MCDONNELL & COMPANY, a Delaware
corporation ("PWM").
WHEREAS, Berger has entered into a Sub-Advisory Agreement (the
"Sub-Advisory Agreement") with CIGNA Investments, Inc. ("CIGNA") pursuant to
which Berger will act as Sub-Advisor to the CIGNA Funds Group, a Massachusetts
business trust (the "Trust") and an open-end, management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), with respect to the Small Company Stock-Value Fund, a series of the Trust
(the "Fund").
WHEREAS, PWM is engaged in the business of rendering investment advisory
services and is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act"); and
WHEREAS, Berger desires to retain PWM to furnish investment advisory
services with respect to the Fund, and PWM is willing to furnish such services;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. DUTIES OF PWM. Berger hereby engages the services of PWM as
---------------
subadviser in furtherance of the Advisory Agreement. PWM agrees to perform the
following duties, subject to the oversight of Berger and to the overall control
of the officers and the Board of Trustees (the "Trustees") of the Trust:
(a) PWM shall manage the investment operations of the Fund and the
composition of its investment portfolio, shall determine without prior
consultation with the Trust or Berger, what securities and other assets of the
Fund will be acquired, held, disposed of or loaned, and shall direct Berger with
respect to the execution of trades in connection with such determinations, in
conformity with the investment objectives, policies and restrictions and the
other statements concerning the Fund in the Trust's trust instrument, as amended
from time to time (the "Trust Instrument"), bylaws and registration statements
under the 1940 Act and the Securities Act of 1933, as amended (the "1933 Act"),
the Advisers Act, the rules thereunder and all other applicable federal and
state laws and regulations, and the provisions of the Internal
1
<PAGE>
Revenue Code of 1986, as amended (the "Code"), applicable to the Fund as a
regulated investment company;
(b) PWM shall cause its officers to attend meetings and furnish oral or
written reports, as the Trust or Berger may reasonably require, in order to keep
Berger, the Trustees and appropriate officers of the Trust fully informed as to
the condition of the investment portfolio of the Fund, the investment decisions
of PWM, and the investment considerations which have given rise to those
decisions;
(c) PWM shall maintain all books and records required to be maintained by
PWM pursuant to the 1940 Act, the Advisers Act, and the rules and regulations
promulgated thereunder, as the same may be amended from time to time, with
respect to transactions on behalf of the Fund, and shall furnish the Trustees
and Berger with such periodic and special reports as the Trustees or Berger
reasonably may request. PWM hereby agrees that all records which it maintains
for the Fund or the Trust are the property of the Trust, agrees to permit the
reasonable inspection thereof by the Trust or its designees and agrees to
preserve for the periods prescribed under the 1940 Act and the Advisers Act any
records which it maintains for the Trust and which are required to be maintained
under the 1940 Act and the Advisers Act, and further agrees to surrender
promptly to the Trust or its designees any records which it maintains for the
Trust upon request by the Trust;
(d) At such times as shall be reasonably requested by the Trustees or
Berger, PWM shall provide the Trustees and Berger with economic, operational and
investment data and reports, including without limitation all information and
materials reasonably requested by or requested to be delivered to the Trustees
of the Trust pursuant to Section 15(c) of the 1940 Act, and shall make available
to the Trustees and Berger any economic, statistical and investment services
normally available to similar investment company clients of PWM; and
(e) PWM will provide to Berger for regulatory filings and other
appropriate uses materially accurate and complete information relating to PWM as
may reasonably be requested by Berger from time to time and, notwithstanding
anything herein to the contrary, PWM shall be liable to Berger for all damages,
costs and expenses, including without limitation reasonable attorneys' fees
(hereinafter referred to collectively as "Damages"), incurred by Berger as a
result of any material inaccuracies or omissions in such information provided by
PWM to Berger; provided, however, that PWM shall not be liable to the extent
that any Damages are based upon inaccuracies or omissions made in reliance upon
information furnished to PWM by Berger.
(f) PWM shall, on behalf of the Fund, exercise such voting rights,
subscription rights, rights to consent to corporate action and any other rights
pertaining to the Fund's assets that may be exercised, in accordance with any
policy pertaining to the same that may be adopted or agreed to by the Trustees
of the Trust, or, in the event that the Trust retains the right to
2
<PAGE>
exercise such voting and other rights, to furnish the Trust with advice as may
reasonably be requested as to the manner in which such rights should be
exercised;
2. FURTHER OBLIGATIONS. In all matters relating to the performance of this
-------------------
Agreement, PWM shall act in conformity with the Trust's Trust Instrument, bylaws
and currently effective registration statements under the 1940 Act and the 1933
Act and any amendments or supplements thereto (the "Registration Statements")
and with the written policies, procedures and guidelines of the Fund, and
written instructions and directions of the Trustees and Berger and shall comply
with the requirements of the 1940 Act, the Advisers Act, the rules thereunder,
and all other applicable federal and state laws and regulations. Berger agrees
to provide to PWM copies of the Trust's Trust Instrument, bylaws, Registration
Statement, written policies, procedures and guidelines and written instructions
and directions of the Trustees and Berger, and any amendments or supplements to
any of them at, or, if practicable, before the time such materials become
effective.
3. OBLIGATIONS OF BERGER. Berger shall have the following
-----------------------
obligations under this Agreement:
(a) To keep PWM continuously and fully informed (or cause the custodian of
the Fund's assets to keep PWM so informed) as to the composition of the
investment portfolio of the Fund and the nature of all of the Fund's assets and
liabilities from time to time;
(b) To furnish PWM with a certified copy of any financial statement or
report prepared for the Fund by certified or independent public accountants and
with copies of any financial statements or reports made to the Fund's
shareholders or to any governmental body or securities exchange;
(c) To furnish PWM with any further materials or information which PWM may
reasonably request to enable it to perform its function under this Agreement;
and
(d) To compensate PWM for its services in accordance with the provisions
of Section 4 hereof.
4. COMPENSATION. Berger LLC shall pay to PWM for its services under
------------
this Agreement a fee, payable in United States dollars, at an annual rate of
0.25% of the average daily net asset value of the Fund. This fee shall be
computed and accrued daily and payable monthly as of the last day of each month
during which or part of which this Agreement is in effect. For the month during
which this Agreement becomes effective and the month during which it terminates,
however, there shall be an appropriate proration of the fee payable for such
month based on the number of calendar days of such month during which this
Agreement is effective.
3
<PAGE>
5. EXPENSES AND EXCLUDED EXPENSES. PWM shall pay all its own costs
------------------------------
and expenses incurred in fulfilling its obligations under this Agreement.
6. REPRESENTATIONS OF PWM. PWM hereby represents, warrants and
----------------------
covenants to Berger as follows:
(a) PWM: (i) is registered as an investment adviser under the Advisers Act
and will continue to be so registered for so long as this Agreement remains in
effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
performing the services contemplated by this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory organization necessary to be met in order
to perform the services contemplated by this Agreement; (iv) has the legal and
corporate authority to enter into and perform the services contemplated by this
Agreement; and (v) will immediately notify Berger of the occurrence of any event
that would disqualify PWM from serving as an investment adviser of an investment
company pursuant to Section 9(a) of the 1940 Act or otherwise, and of the
institution of any administrative, regulatory or judicial proceeding against PWM
that could have a material adverse effect upon PWM's ability to fulfill its
obligations under this Agreement.
(b) PWM has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act and will provide Berger with a
copy of such code of ethics, together with evidence of its adoption. Within 45
days after the end of the last calendar quarter of each year that this Agreement
is in effect, the president or a vice president of PWM shall certify to Berger
that PWM has complied with the requirements of Rule 17j-1 during the previous
year and that there has been no violation of PWM's code of ethics or, if such a
violation has occurred, that appropriate action was taken in response to such
violation. Upon the written request of Berger, PWM shall permit Berger, its
employees or its agents to examine the reports required to be made to PWM by
Rule 17j-1(c)(1) and all other records relevant to PWM's code of ethics.
(c) PWM has provided Berger with a copy of its Form ADV as most recently
filed with the U.S. Securities and Exchange Commission ("SEC") and will,
promptly after filing any amendment to its Form ADV with the SEC, furnish a copy
of such amendment to Berger.
(d) PWM will notify Berger of any change in the identity or control of its
shareholders owning a 10% or greater interest in PWM, or any change that would
constitute a change in control of PWM under the 1940 Act, prior to any such
change if PWM is aware, or should be aware, of any such change, but in any event
as soon as any such change becomes known to PWM.
7. REPRESENTATIONS OF BERGER. Berger hereby represents, warrants and
-------------------------
covenants to PWM as follows:
4
<PAGE>
(a) Berger: (i) is registered as an investment adviser under the Advisers
Act and will continue to be so registered for so long as this Agreement remains
in effect; (ii) is not prohibited by the 1940 Act or the Advisers Act from
fulfilling its obligations under this Agreement; (iii) has met, and will
continue to meet for so long as this Agreement remains in effect, any other
applicable federal or state requirements, or the applicable requirements of any
regulatory or industry self-regulatory organization necessary to be met in order
to fulfill its obligations under this Agreement; (iv) has the legal and
corporate authority to enter into and perform this Agreement; and (v) will
immediately notify PWM of the occurrence of any event that would disqualify
Berger from serving as an investment adviser of an investment company pursuant
to Section 9(a) of the 1940 Act or otherwise, and of the institution of any
administrative, regulatory or judicial proceeding against Berger that could have
a material adverse effect upon Berger's ability to fulfill its obligations under
this Agreement.
(b) Berger has adopted a written code of ethics complying with the
requirements of Rule 17j-1 under the 1940 Act.
(c) Berger has provided PWM with a copy of its Form ADV as most recently
filed with the U.S. Securities and Exchange Commission ("SEC") and will,
promptly after filing any amendment to its Form ADV with the SEC, furnish a copy
of such amendment to PWM.
(d) Berger will notify PWM of any change in the identity or control of its
shareholders owning a 10% or greater interest in Berger, or any change that
would constitute a change in control of Berger under the 1940 Act, prior to any
such change if Berger is aware, or should be aware, of any such change, but in
any event as soon as any such change becomes known to Berger.
8. TERM AND TERMINATION. This Agreement shall become effective upon
--------------------
its approval by the Trust's Board of Trustees and by the vote of a majority of
the outstanding voting securities of the Fund. This Agreement shall continue in
effect for a period of more than two years from the date hereof only so long as
continuance is specifically approved at least annually in conformance with the
1940 Act; provided, however, that this Agreement may be terminated with respect
to the Fund (a) by the Fund at any time, without the payment of any penalty, by
the vote of a majority of Trustees of the Trust or by the vote of a majority of
the outstanding voting securities of the Fund, (b) by Berger at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at any time,
without the payment of any penalty, on 90 days' written notice to Berger. This
Agreement shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement with the
Trust. As used in this Section 8, the terms "assignment" and "vote of a majority
of the outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to such
exceptions as may be
5
<PAGE>
granted by the SEC under the 1940 Act.
9. AMENDMENTS. This Agreement may be amended by the parties only in
----------
a written instrument signed by the parties to this Agreement and only if such
amendment is specifically approved (i) by a majority of the Trustees, including
a majority of the Trustees who are not interested persons of the Trust or
Berger, PWM or their affiliates, and (ii) if required by applicable law, by the
affirmative vote of a majority of the outstanding voting securities of the Fund.
10. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN that the
--------------------------------
Trust is a business trust organized under the Commonwealth of Massachusetts. All
parties to this Agreement acknowledge and agree that the Trust is a series trust
and all debts, liabilities, obligations and expenses incurred, contracted for or
otherwise existing with respect to a particular series shall be enforceable
against the assets held with respect to such series only, and not against the
assets of the Trust generally or against the assets held with respect to any
other series and further that no Trustee, officer or holder of shares of
beneficial interest of the Trust shall be personally liable for any of the
foregoing.
11. LIMITATION OF LIABILITY OF PWM. Berger will not seek to hold PWM,
------------------------------
and PWM shall not be, liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission taken with
respect to the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder and except to the extent otherwise
provided by law. As used in this section, "PWM" shall include any affiliate of
PWM performing services for the Fund contemplated hereunder and directors,
officers and employees of PWM and such affiliates.
12. ACTIVITIES OF PWM. The services of PWM hereunder are not to be
-----------------
deemed to be exclusive, and PWM is free to render services to other parties, so
long as its services under this Agreement are not materially adversely affected
or otherwise impaired thereby. Nothing in this Agreement shall limit or restrict
the right of any director, officer or employee of PWM to engage in any other
business or to devote his or her time and attention in part to the management or
other aspects of any other business, whether of a similar or a dissimilar
nature. It is understood that Trustees, officers and shareholders of the Trust
are or may become interested in PWM as directors, officers and shareholders of
PWM, that directors, officers, employees and shareholders of PWM are or may
become similarly interested in the Trust, and that PWM may become interested in
the Trust as a shareholder or otherwise.
13. THIRD PARTY BENEFICIARY. The parties expressly acknowledge and
-----------------------
agree that the Trust is a third party beneficiary of this Agreement and that the
Trust shall have the full right to sue upon and enforce this Agreement in
accordance with its terms as if it were a signatory hereto.
6
<PAGE>
14. NOTICES. Any notice or other communication required to be given
-------
pursuant to this Agreement shall be deemed duly given if delivered personally or
by overnight delivery service or mailed by certified or registered mail, return
receipt requested and postage prepaid, or sent by facsimile addressed to the
parties at their respective addresses set forth below, or at such other address
as shall be designated by any party in a written notice to the other party.
(a) To Berger at:
Berger LLC
210 University Boulevard
Denver, Colorado 80206
Attention: Dave Mertins
Phone: (303) 329-0200
Fax: (303) 394-4397
with a copy to:
Berger LLC
210 University Boulevard
Denver, Colorado 80206
Attention: Anthony Bosch
Phone: (303) 329-4568
Fax: (303) 394-4397
(b) To PWM at:
Perkins, Wolf, McDonnell & Company
53 W. Jackson Boulevard
Suite 722
Chicago, Illinois 60604
Attention: President
Phone: (312) 922-0355
Fax: (312) 922-0418
with a copy to:
Leslie J. Parrette, Jr., Esq.
Blackwell Sanders Peper Martin L.L.P.
2300 Main Street, Suite 1100
Kansas City, Missouri 64108
Phone: (816) 274-6800
Fax: (816) 274-6914
7
<PAGE>
(c) To the Trust at:
c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations
15. CERTAIN DEFINITIONS. As used in this Agreement, the terms "vote
-------------------
of a majority of the outstanding voting securities," "assignment," "approved at
least annually," and "interested persons" shall have the respective meanings
specified in the 1940 Act, as now in effect or hereafter amended, and the rules
and regulations thereunder, subject to such orders, exemptions and
interpretations as may be issued by the SEC under the 1940 Act and as may be
then in effect. Where the effect of a requirement of the federal securities laws
reflected in any provision of this Agreement is made less restrictive by a rule,
regulation, order, interpretation or other authority of the SEC, whether of
special or general application, such provision shall be deemed to incorporate
the effect of such rule, regulation, order, interpretation or other authority.
16. GOVERNING LAW. This Agreement shall be construed in accordance
-------------
with the laws of the State of Colorado (without giving effect to the
conflicts of laws principles thereof) and the 1940 Act. To the extent that the
applicable laws of the State of Colorado conflict with the applicable provisions
of the 1940 Act, the latter shall control.
17. MISCELLANEOUS. The headings in this Agreement are included for
-------------
convenience of reference only and in no way define or limit any of the
provisions thereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors.
8
<PAGE>
18. COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an originally, but all of which
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers designated below as of the day and
year first above written.
BERGER LLC
/s/ Jack R. Thomspon
By:________________________________
Jack R. Thompson
President
PERKINS, WOLF, MCDONNELL & COMPANY
/s/ Gregory E. Wolf
By:________________________________
Gregory E. Wolf
Treasurer
<PAGE>
Exhibit d(v)
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA FUNDS GROUP
SMALL COMPANY STOCK-GROWTH FUND
AGREEMENT made this 5th day of November, 1999, between CIGNA
Investments, Inc. (the "Adviser") and Fiduciary International, Inc., a New York
corporation (the "Sub-Adviser").
WHEREAS, CIGNA Funds Group, a Massachusetts business trust (the
"Trust") is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 30, 1996 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the Small Company
Stock-Growth Fund (the "Fund"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the
-------------------------
Adviser and the Trust's Board of Trustees, the Sub-Adviser shall manage all of
the securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, in its discretion and without
prior consultation with the Adviser, determine from
time to time what Assets will be purchased, retained
or sold by the Fund, and what portion of the Assets
will be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in
conformity with the Trust's Prospectus and with the
instructions and directions of the Adviser and of the
Board of Trustees of the Trust and will conform to and
comply with the requirements of the 1940 Act, the
Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as
each is amended from time to time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the
Prospectus or as the Board of Trustees or the Adviser
may direct from time to time, in conformity with
Page 1
<PAGE>
federal securities laws. In executing Fund
transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on
behalf of the Fund the best execution. In assessing
the best execution availability for each transaction,
the Sub-Adviser shall consider all factors that it
deems relevant, including the breadth of the market in
the security, the price of the security, the financial
condition and execution and operational capability of
the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction
and on a continuing basis. In evaluating the best
execution, and in selecting the broker-dealer to
execute a particular transaction, the Sub-Adviser may
also consider the brokerage and research services
provided (as those terms are defined in Section 28(e)
of the Securities Exchange Act of 1934). Consistent
with any guidelines established by the Board of
Trustees of the Trust, the Sub-Adviser is authorized
to pay to a broker or dealer who provides such
brokerage and research services a commission for
executing a portfolio transaction for the Fund which
is in excess of the amount of commission another
broker or dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser
determines in good faith that such commission was
reasonable in relation to the value of the brokerage
and research services provided by such broker or
dealer - - viewed in terms of that particular
transaction or terms of the overall responsibilities
of the Sub-Adviser to the Fund and its other clients.
In no instance, however, will the Fund's Assets be
purchased from or sold to the Adviser, Sub-Adviser,
the Trust's principal underwriter, or any affiliated
person of either the Trust, Adviser, the Sub-Adviser
or the principal underwriter, acting as principal in
the transaction, except to the extent permitted by the
Securities and Exchange Commission ("SEC") and the
1940 Act.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the
1940 Act, including, without limitation, the
information specified in Schedule A attached hereto
and made a part of this Agreement. The Sub-Adviser
shall provide to the Adviser or the Board of Trustees
such periodic and special reports, balance sheets or
financial information, and such other information with
regard to its affairs as the Adviser or Board of
Trustees may reasonably request.
The Sub-Adviser shall keep the books and records
relating to the Assets required to be maintained by
the Sub-Adviser under this Agreement and shall timely
furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any
other information relating to the Assets that is
required to be filed by the Adviser or the Trust with
the SEC or sent to shareholders under the 1940 Act
(including the rules adopted thereunder) or any
exemptive or other relief that the Adviser or the
Trust obtains from the SEC. The Sub-Adviser agrees
that all records that it maintains on behalf of the
Fund are property of the Fund and the Sub-Adviser will
surrender promptly to the Fund any of
Page 2
<PAGE>
such records upon the Fund's request; provided,
however, that the Sub-Adviser may retain a copy of
such records. In addition, for the duration of this
Agreement, the Sub-Adviser shall preserve for the
period prescribed by Rule 31a-2 under the 1940 Act any
such records as are required to be maintained by it
pursuant to this Agreement, and shall transfer said
records to any successor sub-adviser upon the
termination of this Agreement (or, if there is no
successor sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Fund's custodian on
each business day with information relating to all
transactions concerning the Fund's Assets in
accordance with the requirements set forth on Schedule
B attached hereto and made a part of this Agreement,
and such other information as may reasonably be
requested by Adviser.
(f) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed
exclusive and the Sub-Adviser shall be free to render
similar services to others, as long as such services
do not impair the services rendered to the Adviser or
the Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund, provided Sub-Adviser receives such proxies in a
timely manner. The Adviser shall instruct the
custodian and other parties providing services to the
Fund to promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any
of the Sub-Adviser's partners, officers, or employees.
(j) The sub-adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified by Adviser to Sub-Adviser in
writing.
(k) Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under
the 1940 Act, will provide to the Fund a copy of the
code of ethics and evidence of its adoption, and will
make such reports to the Fund as required by Rule
17j-1 under the Act.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
---------------------
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with its
management of the Assets, nothing herein shall be construed to relieve the Sub-
Adviser of responsibility for compliance with the Prospectus, the instructions
and directions of the Adviser and the Board of Trustees of the Trust, the
requirements of the 1940 Act, the Internal Revenue Code of 1986, and all other
applicable federal and state laws and regulations, as each is amended from time
to time.
Page 3
<PAGE>
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
---------------------
Prospectus(es) of the Fund. The Adviser will promptly furnish to the Sub-Adviser
any and all amendments or other changes to the Prospectus, and the Sub-Adviser
shall not be charged with complying with any such amendment not so delivered to
the Sub-Adviser.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by
-------------------------------
the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. LIMIT OF LIABILITY; INDEMNIFICATION. Unless otherwise required by the
-----------------------------------
1940 Act or other applicable law, (a) in the absence of willful misfeasance, bad
faith, gross negligence, reckless disregard of its obligations or duties
hereunder or a material breach of this Agreement ("Disabling Conduct") on the
part of Sub-Adviser (and its officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with
Sub-Adviser), Sub-Adviser shall not be subject to liability to the Adviser or
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder, including, without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this agreement relates. Except for such Disabling Conduct, the
Adviser shall indemnify and hold harmless Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, and any other person or
entity affiliated with Sub-Adviser) (collectively, the "Indemnified Parties")
from and against all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from Sub-Adviser's
conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless Fund and
its shareholders and the Adviser (and their officers, managers, agents,
employees, controlling persons, and any other person or entity affiliated with
the Fund or the Adviser) against any and all losses, claims damages, liabilities
or litigation (including reasonable legal and other expenses), to which the
Fund, the Adviser or their affiliates or such officers, directors, agents,
employees, controlling persons or shareholders may become subject under the 1940
Act, under any state or federal securities laws, at common law or otherwise,
which may be based upon such Disabling Conduct by Sub-Adviser; provided,
however, that in no case is Sub-Adviser's indemnity in favor of any person
deemed to protect or apply to such person against any liability to which such
person would otherwise be subject by reasons of willful misfeasance, bad faith,
or gross negligence in the performance of his, or her or its duties or by reason
of his, her or its reckless disregard of such person's obligations and duties
under this Agreement.
(c) Sub-Adviser shall not be liable to the Adviser or the Fund
for acts of Sub-Adviser which result from acts or omissions of the Adviser or
Fund, including, but not limited to, a failure by the Adviser to provide
accurate and current information with respect to any records maintained by the
Adviser or Fund, which records are not also maintained by Sub-Adviser, and the
Adviser shall indemnify and hold harmless the Indemnified Parties from and
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from such acts or
omissions.
Page 4
<PAGE>
6. DURATION AND TERMINATION. This Agreement shall become effective
------------------------
upon its approval by the Trust's Board of Trustees and by the vote of a majority
of the outstanding voting securities of the Fund. This Agreement shall continue
in effect for a period of more than two years from the date hereof only so long
as continuance is specifically approved at least annually in conformance with
the 1940 Act; provided, however, that this Agreement may be terminated with
respect to the Fund (a) by the Fund at any time, without the payment of any
penalty, by the vote of a majority of Trustees of the Trust or by the vote of a
majority of the outstanding voting securities of the Fund, (b) by the Adviser at
any time, without the payment of any penalty, on not more than 60 days' nor less
than 30 days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at
any time, without the payment of any penalty, on 90 days' written notice to the
Adviser. This Agreement shall terminate automatically and immediately in the
event of its assignment, or in the event of a termination of the Adviser's
agreement with the Trust. As used in this Section 6, the terms "assignment" and
"vote of a majority of the outstanding voting securities" shall have the
respective meanings set forth in the 1940 Act and the rules and regulations
thereunder, subject to such exceptions as may be granted by the SEC under the
1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal
-------------
laws of the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid
------------
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE. Any notice, advice or report to be given pursuant to
------
this Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations
Department
To the Sub-Adviser at: Fiduciary International, Inc.
Two World Trade Center
New York, NY 10048-0772
Attention: Henry P. Johnson
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto, and supersedes all prior
agreements and understanding relating to this Agreement's subject matter. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but such counterparts shall, together constitute only
one instrument.
Page 5
<PAGE>
A copy of the Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers.
CIGNA INVESTMENTS, INC. FIDUCIARY INTERNATIONAL, INC.
/s/ Richard H. Forde /s/ Anne M. Tatlock
By:______________________________ By:________________________________
Richard H. Forde Anne M. Tatlock
Name:____________________________ Name:______________________________
Senior Managing Director President & CEO
Title:___________________________ Title:_____________________________
Page 6
<PAGE>
Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases and
sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or dealers
to: (a) the Fund, (b) Adviser, (c) Sub-Adviser, and (d) any
person other than the foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of brokerage
commissions or other compensation (1940 Act, Rule 31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying the
person or persons, committees, or groups authorizing the purchase or
sale of Fund securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting
or authorizing the purchase or sale of Fund securities and such other
information as is appropriate to support the authorization.** (1940
Act, Rule 31a-1(b) (10))
Page 1 of 2
<PAGE>
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
<PAGE>
SCHEDULE B
Communications With Custodian
A Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can reasonably
ensure that each communication received by it though the System actually
originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior operations office
shall be authorized to access the System and enter information, and
Sub-Adviser must employ reasonably procedures to permit only authorized
persons to have access to the System.
o Sub-Adviser will create separate System files containing the daily executed
securities trade information with respect to the Fund it manages, or
Sub-Adviser will transmit separately the trades for such Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser prompt
certification or acknowledgment of SSB's receipt of each transmission by
Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
o This information can be reported using your forms, if applicable
Page 1 of 2
<PAGE>
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades will not become an
important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1. Sub-Adviser will be required to submit to SSB a daily
trade authorization report, either through a System or, if a facsimile
transmission is used, on a form signed by two authorized individuals prior to
settlement date and a list of authorized persons with specimen signatures must
have previously been sent to SSB (see Schedule 2). The daily trade authorization
report will contain information on which SSB can rely to either accept delivery
or deliver out of the account, securities as per Sub-Adviser trades. If
facsimile transmission is used, Sub-Adviser will use a form acceptable to SSB.
Page 2 of 2
<PAGE>
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attn: Fund Name/Fund Number
For the account of CIGNA Funds Group - SMALL COMPANY STOCK-
GROWTH FUND
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
61 Broadway
Main Concourse Level
New York, NY 10006
"VS Payment" (Federal Funds on Commercial Paper Only) For the
account of CIGNA Funds Group - SMALL COMPANY STOCK-GROWTH FUND
(FUND NAME)
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Brad Payne, State Street Bank,
(Phone: 617-985-5389) to obtain delivery instructions
of the State Street Global Custody Network
<PAGE>
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attention: CIGNA Charter Mutual Funds
RE: Persons Authorized To Execute Trades For CIGNA Funds Group - SMALL COMPANY
STOCK-GROWTH FUND
The following list of individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
<PAGE>
Schedule C
Fees for Sub-Adviser Services
SUB-ADVISER: FIDUCIARY INTERNATIONAL, INC.
FUND: SMALL COMPANY STOCK-GROWTH FUND
For investment management services provided to the Fund under this
Agreement, Adviser, as a fiduciary for the Fund, shall pay the
Sub-Adviser a fee determined by multiplying the Average Total Net
Assets by the annual rate specified below. All fees shall be calculated
and paid quarterly in arrears. Fees for partial periods shall be
prorated for the portion of the period for which services were
rendered.
90 basis points First $50 million
50 basis points Next $50 million
45 basis points Next $150 million
40 basis points All amounts thereafter
For purposes of this Schedule, "Average Total Net Assets" for any
quarter shall mean the average of the Assets as reported by the
custodian for the last business day of each month ended in the calendar
quarter.
<PAGE>
Exhibit d(vi)
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA FUNDS GROUP
BALANCED FUND
AGREEMENT made this _______ day of ___________, 1999, between CIGNA
Investments, Inc. (the "Adviser") and INVESCO Capital Management, Inc., a
_____________ corporation (the "Sub-Adviser").
WHEREAS, CIGNA Funds Group, a Massachusetts business trust (the
"Trust") is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 30, 1996 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the Balanced Fund (the
"Fund"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser
-------------------------
and the Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, in its discretion and without
prior consultation with the Adviser, determine from
time to time what Assets will be purchased, retained or
sold by the Fund, and what portion of the Assets will
be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity
with the Trust's Prospectus and with the instructions
and directions of the Adviser and of the Board of
Trustees of the Trust and will conform to and comply
with the requirements of the 1940 Act, the Internal
Revenue Code of 1986, and all other applicable federal
and state laws and regulations, as each is amended from
time to time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the
Prospectus or as the Board of Trustees or the Adviser
may direct from time to time, in conformity with
federal securities laws. In executing Fund transactions
and selecting
Page 1
<PAGE>
brokers or dealers, the Sub-Adviser will use its best
efforts to seek on behalf of the Fund the best
execution. In assessing the best execution availability
for each transaction, the Sub-Adviser shall consider
all factors that it deems relevant, including the
breadth of the market in the security, the price of the
security, the financial condition and execution and
operational capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In
evaluating the best execution, and in selecting the
broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and
research services provided (as those terms are defined
in Section 28(e) of the Securities Exchange Act of
1934). Consistent with any guidelines established by
the Board of Trustees of the Trust, the Sub-Adviser is
authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is
in excess of the amount of commission another broker or
dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines
in good faith that such commission was reasonable in
relation to the value of the brokerage and research
services provided by such broker or dealer - - viewed
in terms of that particular transaction or terms of the
overall responsibilities of the Sub-Adviser to the Fund
and its other clients. In no instance, however, will
the Fund's Assets be purchased from or sold to the
Adviser, Sub-Adviser, the Trust's principal
underwriter, or any affiliated person of either the
Trust, Adviser, the Sub-Adviser or the principal
underwriter, acting as principal in the transaction,
except to the extent permitted by the Securities and
Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act, including, without limitation, the information
specified in Schedule A attached hereto and made a part
of this Agreement. The Sub-Adviser shall provide to the
Adviser or the Board of Trustees such periodic and
special reports, balance sheets or financial
information, and such other information with regard to
its affairs as the Adviser or Board of Trustees may
reasonably request.
The Sub-Adviser shall keep the books and records
relating to the Assets required to be maintained by the
Sub-Adviser under this Agreement and shall timely
furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any other
information relating to the Assets that is required to
be filed by the Adviser or the Trust with the SEC or
sent to shareholders under the 1940 Act (including the
rules adopted thereunder) or any exemptive or other
relief that the Adviser or the Trust obtains from the
SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Fund are property of the
Fund and the Sub-Adviser will surrender promptly to the
Fund any of such records upon the Fund's request;
provided, however, that the Sub-
Page 2
<PAGE>
Adviser may retain a copy of such records. In addition,
for the duration of this Agreement, the Sub-Adviser
shall preserve for the period prescribed by Rule 31a-2
under the 1940 Act any such records as are required to
be maintained by it pursuant to this Agreement, and
shall transfer said records to any successor
sub-adviser upon the termination of this Agreement (or,
if there is no successor sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Fund's custodian on
each business day with information relating to all
transactions concerning the Fund's Assets in accordance
with the requirements set forth on Schedule B attached
hereto and made a part of this Agreement, and such
other information as may reasonably be requested by
Adviser.
(f) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed
exclusive and the Sub-Adviser shall be free to render
similar services to others, as long as such services do
not impair the services rendered to the Adviser or the
Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund. The Adviser shall instruct the custodian and
other parties providing services to the Fund to
promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of
the Sub-Adviser's partners, officers, or employees.
(j) The sub-adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified by Adviser to Sub-Adviser in
writing.
(k) Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the
1940 Act, will provide to the Fund a copy of the code
of ethics and evidence of its adoption, and will make
such reports to the Fund as required by Rule 17j-1
under the Act.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
---------------------
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with its
management of the Assets, nothing herein shall be construed to relieve the
Sub-Adviser of responsibility for compliance with the Prospectus, the
instructions and directions of the Adviser and the Board of Trustees of the
Trust, the requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each is amended
from time to time.
Page 3
<PAGE>
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser
---------------------
with Prospectus(es) of the Fund. The Adviser will promptly furnish to the
Sub-Adviser any and all amendments or other changes to the Prospectus, and the
Sub-Adviser shall not be charged with complying with any such amendment not so
delivered to the Sub-Adviser.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided
-------------------------------
by the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. LIMIT OF LIABILITY; INDEMNIFICATION. Unless otherwise required by
-----------------------------------
the 1940 Act or other applicable law, (a) in the absence of willful misfeasance,
bad faith, gross negligence, reckless disregard of its obligations or duties
hereunder or a material breach of this Agreement ("Disabling Conduct") on the
part of Sub-Adviser (and its officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with
Sub-Adviser), Sub-Adviser shall not be subject to liability to the Adviser or
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder, including, without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this agreement relates. Except for such Disabling Conduct, the
Adviser shall indemnify and hold harmless Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with Sub-Adviser) (collectively, the "Indemnified
Parties") from and against all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) arising from
Sub-Adviser's conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless Fund and
the Adviser (and their officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Fund or
the Adviser) against any and all losses, claims damages, liabilities or
litigation (including reasonable legal and other expenses), to which the Fund,
the Adviser or their affiliates or such officers, directors, agents, employees,
controlling persons or shareholders may become subject under the 1940 Act, under
other statutes, at common law or otherwise, which may be based upon such
Disabling Conduct by Sub-Adviser; provided, however, that in no case is
Sub-Adviser's indemnity in favor of any person deemed to protect or apply to
such person against any liability to which such person would otherwise be
subject by reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, or her or its duties or by reason of his, her or its
reckless disregard of such person's obligations and duties under this Agreement.
(c) Sub-Adviser shall not be liable to the Adviser or the Fund
for acts of Sub-Adviser which result from acts or omissions of the Adviser or
Fund, including, but not limited to, a failure by the Adviser to provide
accurate and current information with respect to any records maintained by the
Adviser or Fund, which records are not also maintained by Sub-Adviser, and the
Adviser shall indemnify and hold harmless the Indemnified Parties from and
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from such acts or
omissions.
6. DURATION AND TERMINATION. This Agreement shall become effective
------------------------
upon its approval by the Trust's Board of Trustees and by the vote of a majority
of the outstanding
Page 4
<PAGE>
voting securities of the Fund. This Agreement shall continue in effect for a
period of more than two years from the date hereof only so long as continuance
is specifically approved at least annually in conformance with the 1940 Act;
provided, however, that this Agreement may be terminated with respect to the
Fund (a) by the Fund at any time, without the payment of any penalty, by the
vote of a majority of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Fund, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser.
This Agreement shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement with the
Trust. As used in this Section 6, the terms "assignment" and "vote of a majority
of the outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to such
exceptions as may be granted by the SEC under the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal
-------------
laws of the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid
------------
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE. Any notice, advice or report to be given pursuant to this
------
Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations Department
To the Sub-Adviser at: INVESCO Capital Management, Inc.
1315 Peachtree St., N.E.
Atlanta, GA 30309
Attention: Edward C. Mitchell, Chairman
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto, and supersedes all prior
agreements and understanding relating to this Agreement's subject matter. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but such counterparts shall, together constitute only
one instrument.
Page 5
<PAGE>
A copy of the Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers.
CIGNA INVESTMENTS, INC. INVESCO CAPITAL
MANAGEMENT, INC.
/s/ Richard H. Forde
By:__________________________________ By:__________________________________
Richard H. Forde
Name:________________________________ Name:________________________________
Senior Managing Director
Title:_______________________________ Title:_______________________________
Page 6
<PAGE>
Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases
and sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days
after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or
dealers to: (a) the Fund, (b) Adviser, (c)
Sub-Adviser, and (d) any person other than the
foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation (1940 Act, Rule
31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying the
person or persons, committees, or groups authorizing the purchase or
sale of Fund securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting
or authorizing the purchase or sale of Fund securities and such other
information as is appropriate to support the authorization.** (1940
Act, Rule 31a-1(b) (10))
Page 1 of 2
<PAGE>
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
Page 2 of 2
<PAGE>
SCHEDULE B
Communications With Custodian
A Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can reasonably
ensure that each communication received by it though the System actually
originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior operations office
shall be authorized to access the System and enter information, and
Sub-Adviser must employ reasonably procedures to permit only authorized
persons to have access to the System.
o Sub-Adviser will create separate System files containing the daily executed
securities trade information with respect to the Fund it manages, or
Sub-Adviser will transmit separately the trades for such Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser prompt
certification or acknowledgment of SSB's receipt of each transmission by
Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
o This information can be reported using your forms, if applicable
Page 1 of 2
<PAGE>
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades will not become an
important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1. Sub-Adviser will be required to submit to SSB a daily
trade authorization report, either through a System or, if a facsimile
transmission is used, on a form signed by two authorized individuals prior to
settlement date and a list of authorized persons with specimen signatures must
have previously been sent to SSB (see Schedule 2). The daily trade authorization
report will contain information on which SSB can rely to either accept delivery
or deliver out of the account, securities as per Sub-Adviser trades. If
facsimile transmission is used, Sub-Adviser will use a form acceptable to SSB.
Page 2 of 2
<PAGE>
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attn: Fund Name/Fund Number
For the account of CIGNA Funds Group - BALANCED FUND
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
61 Broadway
Main Concourse Level
New York, NY 10006
"VS Payment" (Federal Funds on Commercial Paper Only) For the
account of CIGNA Funds Group - BALANCED FUND (FUND NAME)
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Brad Payne, State Street Bank,
(Phone: 617-985-5389) to obtain delivery instructions
of the State Street Global Custody Network
<PAGE>
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attention: CIGNA Charter Mutual Funds
RE: Persons Authorized To Execute Trades For CIGNA Funds Group - BALANCED FUND
The following list of individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
<PAGE>
Schedule C
Fees for Sub-Adviser Services
SUB-ADVISER: INVESCO CAPITAL MANAGEMENT, INC.
FUND: BALANCED FUND
For investment management services provided to the Fund under
this Agreement, Adviser, as a fiduciary for the Fund, shall
pay the Sub-Adviser a fee determined by multiplying the
Average Total Net Assets by the annual rate specified below.
All fees shall be calculated and paid quarterly in arrears.
Fees for partial periods shall be prorated for the portion of
the period for which services were rendered.
55 basis points on the first $50 million
45 basis points on the next $50 million
35 basis points on the next $150 million
30 basis points on the next $250 million
25 basis points on all amounts thereafter
For purposes of this Schedule, "Average Total Net Assets" for
any quarter shall mean the average of the Assets as reported
by the custodian for the last business day of each month ended
in the calendar quarter.
<PAGE>
Exhibit d(vii)
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA FUNDS GROUP
LARGE COMPANY STOCK VALUE FUND
AGREEMENT made this 10th day of November, 1999, between CIGNA
Investments, Inc. (the "Adviser") and John A. Levin & Co., Inc., a Delaware
corporation (the "Sub-Adviser").
WHEREAS, CIGNA Funds Group, a Massachusetts business trust (the
"Trust") is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 30, 1996 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the LARGE COMPANY STOCK
VALUE FUND (the "Fund"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser
-------------------------
and the Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and subject to the following:
(a) The Sub-Adviser shall, in Its discretion and without
prior consultation with the Adviser, determine from
time to time what Assets will be purchased, retained or
sold by the Fund, and what portion of the Assets will
be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity
with the Trust's Prospectus and with the instructions
and directions of the Adviser and of the Board of
Trustees of the Trust and will conform to and comply
with the requirements of the 1940 Act, the Internal
Revenue Code of 1986, and all other applicable federal
and state laws and regulations, as each is amended from
time to time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
such persons, brokers or dealers to carry out the
policy with respect to brokerage set forth in the
Prospectus or as the Board of Trustees or the Adviser
may direct from time to time, in conformity with
federal securities laws. In executing Fund transactions
and selecting
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<PAGE>
brokers or dealers, the Sub-Adviser will use its best
efforts to seek on behalf of the Fund the best
execution. In assessing the best execution availability
for each transaction, the Sub-Adviser shall consider
all factors that it deems relevant, including the
breadth of the market in the security, the price of the
security, the financial condition and execution and
operational capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In
evaluating the best execution, and in selecting the
broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and
research services provided (as those terms are defined
in Section 28(e) of the Securities Exchange Act of
1934). Consistent with any guidelines established by
the Board of Trustees of the Trust, the Sub-Adviser is
authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is
in excess of the amount of commission another broker or
dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines
in good faith that such commission was reasonable in
relation to the value of the brokerage and research
services provided by such broker or dealer - - viewed
in terms of that particular transaction or terms of the
overall responsibilities of the Sub-Adviser to the Fund
and its other clients. In no instance, however, will
the Fund's Assets be purchased from or sold to the
Adviser, Sub-Adviser, the Trust's principal
underwriter, or any affiliated person of either the
Trust, Adviser, the Sub-Adviser or the principal
underwriter, acting as principal in the transaction,
except to the extent permitted by the Securities and
Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9), (10)
and (11) and paragraph (f) of Rule 31a-1 under the 1940
Act, including, without limitation, the information
specified in Schedule A attached hereto and made a part
of this Agreement. The Sub-Adviser shall provide to the
Adviser or the Board of Trustees such periodic and
special reports, balance sheets or financial
information, and such other information with regard to
its affairs as the Adviser or Board of Trustees may
reasonably request.
The Sub-Adviser shall keep the books and records
relating to the Assets required to be maintained by the
Sub-Adviser under this Agreement and shall timely
furnish to the Adviser all information relating to the
Sub-Adviser's services under this Agreement needed by
the Adviser to keep the other books and records of the
Fund required by Rule 31a-1 under the 1940 Act. The
Sub-Adviser shall also furnish to the Adviser any other
information relating to the Assets that is required to
be filed by the Adviser or the Trust with the SEC or
sent to shareholders under the 1940 Act (including the
rules adopted thereunder) or any exemptive or other
relief that the Adviser or the Trust obtains from the
SEC. The Sub-Adviser agrees that all records that it
maintains on behalf of the Fund are property of the
Fund and the Sub-Adviser will surrender promptly to the
Fund any of such records upon the Fund's request;
provided, however, that the Sub-
Page 2
<PAGE>
Adviser may retain a copy of such records. In addition,
for the duration of this Agreement, the Sub-Adviser
shall preserve for the period prescribed by Rule 31a-2
under the 1940 Act any such records as are required to
be maintained by it pursuant to this Agreement, and
shall transfer said records to any successor
sub-adviser upon the termination of this Agreement (or,
if there is no successor sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Fund's custodian on
each business day with information relating to all
transactions concerning the Fund's Assets in accordance
with the requirements set forth on Schedule B attached
hereto and made a part of this Agreement, and such
other information as may reasonably be requested by
Adviser.
(f) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed
exclusive and the Sub-Adviser shall be free to render
similar services to others, as long as such services do
not impair the services rendered to the Adviser or the
Trust.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund. The Adviser shall instruct the custodian and
other parties providing services to the Fund to
promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of
the Sub-Adviser's partners, officers, or employees.
(j) The sub-adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified by Adviser to Sub-Adviser in
writing.
(k) Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the
1940 Act, will provide to the Fund a copy of the code
of ethics and evidence of its adoption, and will make
such reports to the Fund as required by Rule 17j-1
under the Act.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
---------------------
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with its
management of the Assets, nothing herein shall be construed to relieve the
Sub-Adviser of responsibility for compliance with the Prospectus, the
instructions and directions of the Adviser and the Board of Trustees of the
Trust, the requirements of the 1940 Act, the Internal Revenue Code of 1986, and
all other applicable federal and state laws and regulations, as each is amended
from time to time.
Page 3
<PAGE>
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
---------------------
Prospectus(es) of the Fund. The Adviser will promptly furnish to the Sub-Adviser
any and all amendments or other changes to the Prospectus, and the Sub-Adviser
shall not be charged with complying with any such amendment not so delivered to
the Sub-Adviser.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by
-------------------------------
the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee.
5. LIMIT OF LIABILITY; INDEMNIFICATION. Unless otherwise required by the
-----------------------------------
1940 Act or other applicable law, (a) in the absence of willful misfeasance, bad
faith, gross negligence, reckless disregard of its obligations or duties
hereunder or a material breach of this Agreement ("Disabling Conduct") on the
part of Sub-Adviser (and its officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with
Sub-Adviser), Sub-Adviser shall not be subject to liability to the Adviser or
the Fund for any act or omission in the course of, or connected with, rendering
services hereunder, including, without limitation, any error of judgment or
mistake of law or for any loss suffered by any of them in connection with the
matters to which this agreement relates. Except for such Disabling Conduct, the
Adviser shall indemnify and hold harmless Sub-Adviser (and its officers,
directors, agents, employees, controlling persons, shareholders and any other
person or entity affiliated with Sub-Adviser) (collectively, the "Indemnified
Parties") from and against all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) arising from
Sub-Adviser's conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless Fund and
the Adviser (and their officers, managers, agents, employees, controlling
persons, shareholders and any other person or entity affiliated with the Fund or
the Adviser) against any and all losses, claims damages, liabilities or
litigation (including reasonable legal and other expenses), to which the Fund,
the Adviser or their affiliates or such officers, directors, agents, employees,
controlling persons or shareholders may become subject under the 1940 Act, under
other statutes, at common law or otherwise, which may be based upon such
Disabling Conduct by Sub-Adviser; provided, however, that in no case is
Sub-Adviser's indemnity in favor of any person deemed to protect or apply to
such person against any liability to which such person would otherwise be
subject by reasons of willful misfeasance, bad faith, or gross negligence in the
performance of his, or her or its duties or by reason of his, her or its
reckless disregard of such person's obligations and duties under this Agreement.
(c) Sub-Adviser shall not be liable to the Adviser or the Fund
for acts of Sub-Adviser which result from acts or omissions of the Adviser or
Fund, including, but not limited to, a failure by the Adviser to provide
accurate and current information with respect to any records maintained by the
Adviser or Fund, which records are not also maintained by Sub-Adviser, and the
Adviser shall indemnify and hold harmless the Indemnified Parties from and
against any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and other expenses) arising from such acts or
omissions.
6. DURATION AND TERMINATION. This Agreement shall become effective
------------------------
upon its approval by the Trust's Board of Trustees and by the vote of a majority
of the outstanding
Page 4
<PAGE>
voting securities of the Fund. This Agreement shall continue in effect for a
period of more than two years from the date hereof only so long as continuance
is specifically approved at least annually in conformance with the 1940 Act;
provided, however, that this Agreement may be terminated with respect to the
Fund (a) by the Fund at any time, without the payment of any penalty, by the
vote of a majority of Trustees of the Trust or by the vote of a majority of the
outstanding voting securities of the Fund, (b) by the Adviser at any time,
without the payment of any penalty, on not more than 60 days' nor less than 30
days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser at any time,
without the payment of any penalty, on 90 days' written notice to the Adviser.
This Agreement shall terminate automatically and immediately in the event of its
assignment, or in the event of a termination of the Adviser's agreement with the
Trust. As used in this Section 6, the terms "assignment" and "vote of a majority
of the outstanding voting securities" shall have the respective meanings set
forth in the 1940 Act and the rules and regulations thereunder, subject to such
exceptions as may be granted by the SEC under the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal
-------------
laws of the Commonwealth of Massachusetts, without regard to conflict of law
principles; provided, however, that nothing herein shall be construed as being
inconsistent with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid
------------
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors.
9. NOTICE. Any notice, advice or report to be given pursuant to
------
this Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations Department
To the Sub-Adviser at: John A. Levin & Co., Inc.
One Rockefeller Plaza
25th Floor
New York, NY 10020
Attn: Glenn A. Aigen
Chief Financial Officer
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement
----------------
and understanding between the parties hereto, and supersedes all prior
agreements and understanding relating to this Agreement's subject matter. This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original, but such counterparts shall, together constitute only
one instrument.
Page 5
<PAGE>
A copy of the Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers.
CIGNA INVESTMENTS, INC. JOHN A. LEVIN & CO., INC.
/s/ Richard H. Forde /s/ Glenn A. Aigen
By:________________________________ By:____________________________________
Richard H. Forde Glenn A. Aigen
Name:______________________________ Name:__________________________________
Senior Managing Director Vice President and CFO
Title:_____________________________ Title:_________________________________
Page 6
<PAGE>
Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases
and sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days
after the end of the quarter, showing specifically the basis or bases
upon which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or
dealers to: (a) the Fund, (b) Adviser, (c)
Sub-Adviser, and (d) any person other than the
foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation (1940 Act, Rule
31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying
the person or persons, committees, or groups authorizing the purchase
or sale of Fund securities. Where an authorization is made by a
committee or group, a record shall be kept of the names of its members
who participate in the authorization. There shall be retained as part
of this record any memorandum, recommendation, or instruction
supporting or authorizing the purchase or sale of Fund securities and
such other information as is appropriate to support the
authorization.** (1940 Act, Rule 31a-1(b) (10))
Page 1 of 2
<PAGE>
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
Page 2 of 2
<PAGE>
SCHEDULE B
Communications With Custodian
A Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can reasonably
ensure that each communication received by it though the System actually
originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior operations office
shall be authorized to access the System and enter information, and
Sub-Adviser must employ reasonably procedures to permit only authorized
persons to have access to the System.
o Sub-Adviser will create separate System files containing the
daily executed securities trade information with respect to the Fund it
manages, or Sub-Adviser will transmit separately the trades for such Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser prompt
certification or acknowledgment of SSB's receipt of each transmission by
Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
o This information can be reported using your forms, if applicable
Page 1 of 2
<PAGE>
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades will not become an
important factor in doing business. Delivery and receipt instructions are
attached as Schedule 1. Sub-Adviser will be required to submit to SSB a daily
trade authorization report, either through a System or, if a facsimile
transmission is used, on a form signed by an authorized individual prior to
settlement date and a list of authorized persons with specimen signatures must
have previously been sent to SSB (see Schedule 2). The daily trade authorization
report will contain information on which SSB can rely to either accept delivery
or deliver out of the account, securities as per Sub-Adviser trades. If
facsimile transmission is used, Sub-Adviser will use a form acceptable to SSB.
Page 2 of 2
<PAGE>
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attn: Fund Name/Fund Number
For the account of CIGNA Funds Group - LARGE COMPANY
STOCK VALUE FUND
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
61 Broadway
Main Concourse Level
New York, NY 10006
"VS Payment" (Federal Funds on Commercial Paper Only)
For the account of CIGNA Funds Group - LARGE COMPANY
STOCK VALUE FUND
(FUND NAME)
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Brad Payne, State Street Bank,
(Phone: 617-985-5389) to obtain delivery instructions
of the State Street Global Custody Network
<PAGE>
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attention: CIGNA Charter Funds
RE: Persons Authorized To Executed Trades For
CIGNA Funds Group - LARGE-COMPANY STOCK VALUE FUND
The following list of individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
<PAGE>
Schedule C
Fees for Sub-Adviser Services
SUB-ADVISER: JOHN A. LEVIN & CO., INC.
FUND: LARGE COMPANY STOCK VALUE FUND
For investment management services provided to the Fund under this
Agreement, Adviser, as a fiduciary for the Fund, shall pay the
Sub-Adviser a fee determined by multiplying the Average Total Net
Assets by the annual rate specified. All fees shall be calculated and
paid quarterly in arrears. Fees for partial periods shall be prorated
for the portion of the period for which services were rendered.
75 basis points - First $10 million
50 basis points - Next $40 million
30 basis points - Next $50 million
25 basis points - All amounts thereafter
For purposes of this Schedule, "Average Total Net Assets" for any
quarter shall mean the average of the Assets as reported by the
custodian for the last business day of each month ended in the calendar
quarter.
<PAGE>
Exhibit d(viii)
INVESTMENT SUB-ADVISORY AGREEMENT
CIGNA FUNDS GROUP
LARGE COMPANY STOCK-GROWTH FUND
AGREEMENT made this ____ day of November, 1999, between CIGNA
Investments, Inc. (the "Adviser") and Morgan Stanley Dean Witter Investment
Management Inc., a Delaware corporation (the "Sub-Adviser").
WHEREAS, CIGNA Funds Group, a Massachusetts business trust (the
"Trust"), is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Adviser has entered into an Investment Advisory Agreement
dated April 30, 1996 (the "Advisory Agreement") with the Trust, pursuant to
which the Adviser will act as investment adviser to the Large Company
Stock-Growth Fund (the "Fund"), which is a series of the Trust; and
WHEREAS, the Adviser, with the approval of the Trust, desires to retain
the Sub-Adviser to provide investment advisory services to the Adviser in
connection with the management of the Fund, and the Sub-Adviser is willing to
render such investment advisory services.
NOW, THEREFORE, the parties hereto agree as follows:
1. DUTIES OF THE SUB-ADVISER. Subject to supervision by the Adviser
-------------------------
and the Trust's Board of Trustees, the Sub-Adviser shall manage all of the
securities and other assets of the Fund entrusted to it hereunder (the
"Assets"), including the purchase, retention and disposition of the Assets, in
accordance with the Fund's investment objectives, policies and restrictions as
stated in the Fund's prospectus and statement of additional information, as
currently in effect and as amended or supplemented from time to time (referred
to collectively as the "Prospectus"), and any additional policies or guidelines
established by the Adviser or the Trust's Board of Trustees that have been
furnished to the Sub-Adviser in writing, and subject to the following:
(a) The Sub-Adviser shall, in its discretion and without
prior consultation with the Adviser, determine from
time to time what Assets will be purchased, retained or
sold by the Fund, and what portion of the Assets will
be invested or held uninvested in cash.
(b) In the performance of its duties and obligations under
this Agreement, the Sub-Adviser shall act in conformity
with the Prospectus and with the instructions and
directions of the Adviser and of the Board of Trustees
of the Trust and will conform to and comply with the
requirements of the 1940 Act, the Internal Revenue Code
of 1986, and all other applicable federal and state
laws and regulations, as each is amended from time to
time.
(c) The Sub-Adviser shall determine the Assets to be
purchased or sold by the Fund as provided in
subparagraph (a) and will place orders with or through
(and negotiate commissions with) such brokers or
dealers selected by the Sub-Adviser (which may include
brokers or dealers affiliated with the Sub-Adviser,
provided such transactions comply with
Page 1
<PAGE>
applicable requirements under the 1940 Act) in
accordance with the Fund's brokerage policy set forth
in the Prospectus or as the Board of Trustees or the
Adviser may direct from time to time, in conformity
with federal securities laws and disclosure in the
Prospectus. In executing Fund transactions and
selecting brokers or dealers, the Sub-Adviser will use
its best efforts to seek on behalf of the Fund the most
favorable execution. In assessing the most favorable
execution availability for each transaction, the
Sub-Adviser shall consider all factors that it deems
relevant, including the breadth of the market in the
security, the price of the security, the financial
condition and execution and operational capability of
the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction
and on a continuing basis. In evaluating the most
favorable execution, and in selecting the broker-dealer
to execute a particular transaction, the Sub-Adviser
may also consider the brokerage and research services
provided by the broker-dealer (as those terms are
defined in Section 28(e) of the Securities Exchange Act
of 1934). Consistent with any guidelines established by
the Board of Trustees of the Trust, the Sub-Adviser is
authorized to pay to a broker or dealer who provides
such brokerage and research services a commission for
executing a portfolio transaction for the Fund which is
in excess of the amount of commission another broker or
dealer would have charged for effecting that
transaction if, but only if, the Sub-Adviser determines
in good faith that such commission was reasonable in
relation to the value of the brokerage and research
services provided by such broker or dealer -- viewed in
terms of that particular transaction or in terms of the
overall responsibilities of the Sub-Adviser to the
Fund and its other clients. In no instance, however,
will the Fund's Assets be purchased from or sold to the
Adviser, Sub-Adviser, the Trust's principal
underwriter, or any affiliated person of either the
Trust, Adviser, the Sub-Adviser or the principal
underwriter, acting as principal in the transaction,
except to the extent permitted by the Securities and
Exchange Commission ("SEC") and the 1940 Act.
(d) The Sub-Adviser shall maintain all books and records
with respect to transactions involving the Assets
required by subparagraphs (b)(5), (6), (7), (9) and
(10) and paragraph (f) of Rule 31a-1 under the 1940
Act, including, without limitation, the information
specified in Schedule A attached hereto and made a part
of this Agreement. The Sub-Adviser shall provide to the
Adviser or the Board of Trustees such periodic and
special reports, balance sheets or financial
information, and such other information with regard to
its affairs that relate to the Sub-Adviser's management
of the Fund's Assets, as the Adviser or Board of
Trustees may reasonably request.
The Sub-Adviser agrees that all records that it
maintains on behalf of the Fund are property of the
Fund and the Sub-Adviser will surrender promptly to the
Fund any of such records upon the Fund's request;
provided, however, that the Sub-Adviser may retain a
copy of such records. In addition, for the duration of
this Agreement, the Sub-Adviser shall preserve for the
period prescribed by Rule 31a-2 under the 1940 Act any
such records as are required to be maintained by it
pursuant to this Agreement,
Page 2
<PAGE>
and shall transfer said records to any successor
sub-adviser upon the termination of this Agreement as
directed by the Adviser (or, if there is no successor
sub-adviser, to the Adviser).
(e) The Sub-Adviser shall provide the Fund's custodian on
each day that the New York Stock Exchange Inc. is open
for business with information relating to all
transactions concerning the Fund's Assets in accordance
with the requirements set forth on Schedule B attached
hereto and made a part of this Agreement, and such
other information as may reasonably be requested by
Adviser.
(f) The investment management services provided by the
Sub-Adviser under this Agreement are not to be deemed
exclusive and the Sub-Adviser shall be free to render
similar services to others, as long as such services do
not impair the Sub-Adviser's performance of its
obligations under this Agreement.
(g) The Sub-Adviser shall promptly notify the Adviser of
any financial condition that is likely to impair the
Sub-Adviser's ability to fulfill its commitment under
this Agreement.
(h) The Sub-Adviser shall review all proxy solicitation
materials and be responsible for voting and handling
all proxies in relation to the securities held in the
Fund, provided Sub-Adviser receives such proxies in a
timely manner. The Adviser shall instruct the custodian
and other parties providing services to the Fund to
promptly forward misdirected proxies to the
Sub-Adviser.
(i) Services to be furnished by the Sub-Adviser under this
Agreement may be furnished through the medium of any of
the Sub-Adviser's partners, affiliates, officers, or
employees.
(j) The Sub-Adviser shall not, on behalf of the Fund,
purchase securities of CIGNA Corporation or of any
other entity identified by Adviser to Sub-Adviser in
writing.
(k) Sub-Adviser will adopt a written code of ethics
complying with the requirements of Rule 17j-1 under the
1940 Act, will provide to the Fund a copy of the code
of ethics and evidence of its adoption, and will make
such reports to the Fund as required by Rule 17j-1
under the Act.
2. DUTIES OF THE ADVISER. The Adviser shall continue to have
---------------------
responsibility for all services to be provided to the Fund pursuant to the
Advisory Agreement and shall oversee and review the Sub-Adviser's performance of
its duties under this Agreement; provided, however, that in connection with its
management of the Assets, nothing herein shall be construed to relieve the
Sub-Adviser of responsibility for compliance with the Prospectus, the written
instructions and directions of the Adviser and the Board of Trustees of the
Trust, and the requirements of the 1940 Act, the Internal Revenue Code of 1986,
and all other applicable federal and state laws and regulations, as each is
amended from time to time. No written materials naming or otherwise identifying
the Sub-Adviser, its employees or its affiliated companies, other than materials
provided or approved by the Sub-Adviser, shall be used by the
Page 3
<PAGE>
Adviser, the Fund, the Trust or their affiliates in offering or marketing shares
of the Fund or Trust. The Sub-Adviser shall use its reasonable best efforts to
review any such materials as soon as practicable after receipt and no later than
seven (7) days after receipt. The Adviser agrees to promptly notify the
Sub-Adviser of any decisions by the Trust's Board of Trustees that may affect
the Sub-Adviser's obligations described herein, and will furnish the Sub-Adviser
with copies of any financial statements or reports made by the Fund to its
shareholders and any other materials or information that the Sub-Adviser may
reasonably request to enable it to perform its responsibilities under this
Agreement.
3. DELIVERY OF DOCUMENTS. The Adviser has furnished the Sub-Adviser with
---------------------
the Prospectus of the Fund and copies of any SEC order or no-action relief
obtained by the Fund relating to the management of the Fund's Assets
(collectively, "SEC Relief'). The Adviser will promptly furnish to the
Sub-Adviser any and all amendments or other changes to the Prospectus or any
form of SEC Relief, and the Sub-Adviser shall not be charged with complying with
any such amendments not so delivered to the Sub-Adviser. No amendments or other
changes to the Prospectus with respect to the description of the Sub-Adviser or
the management of the Assets, including investment policies and restrictions,
shall be made effective without the prior written approval of the Sub-Adviser.
4. COMPENSATION TO THE SUB-ADVISER. For the services to be provided by
-------------------------------
the Sub-Adviser pursuant to this Agreement, the Adviser will pay the
Sub-Adviser, and the Sub-Adviser agrees to accept as full compensation therefor,
a sub-advisory fee at the rate and in the manner specified in Schedule C which
is attached hereto and made part of this Agreement. Except as may otherwise be
prohibited by law or regulation (including any then current SEC staff
interpretation), the Sub-Adviser may, in its discretion and from time to time,
waive a portion of its fee. Although the Adviser, from time to time, may
similarly waive the compensation it is entitled to receive from the Fund, such
waiver will have no effect on the Adviser's obligation to pay the Sub-Adviser
the compensation provided for herein.
5. EXPENSES. Except for expenses specifically assumed or agreed to be
--------
paid by the Sub-Adviser under this Agreement, the Sub-Adviser shall not be
liable for any expenses of the Adviser, the Fund or the Trust, including,
without limitation, (a) interest and taxes, (b) brokerage commissions and other
costs in connection with the purchase or sale of securities or other investment
instruments with respect to the Fund, and (c) custodian fees and expenses. The
Sub-Adviser will pay its own expenses incurred in furnishing the services to be
provided by it hereunder.
6. LIMIT OF LIABILITY; INDEMNIFICATION. (a) Unless otherwise required by
-----------------------------------
the 1940 Act or other applicable law, in the absence of willful misfeasance, bad
faith, gross negligence, reckless disregard of its obligations or duties
hereunder or a material breach of this Agreement ("Disabling Conduct") on the
part of Sub-Adviser (and its officers, managers, employees, controlling persons,
shareholders and any other person or entity affiliated with Sub-Adviser),
Sub-Adviser shall not be subject to liability to the Adviser, the Trust, or the
Fund or any shareholder of the Trust (collectively, "Fund Parties") for any act
omission in the course of, or connected with, rendering services hereunder,
including, without limitation, any error of judgment or mistake of law or for
any loss suffered by any of the Fund Parties in connection with the matters to
which this Agreement relates. Except for such Disabling Conduct, the Adviser
shall indemnify and hold harmless Sub-Adviser (and its officers, directors,
employees, controlling persons, shareholders and any other person or entity
affiliated with Sub-Adviser) (collectively, the "Indemnified Parties") from and
against any and all losses, claims, damages,
Page 4
<PAGE>
liabilities or litigation (including reasonable legal and other expenses)
arising from Sub-Adviser's conduct under this Agreement.
(b) Sub-Adviser agrees to indemnify and hold harmless the Fund
and the Adviser (and their officers, managers, employees, controlling persons,
shareholders and any other person or entity affiliated with the Fund or the
Adviser) against any and all losses, claims damages, liabilities or litigation
(including reasonable legal and other expenses) to which the Fund, the Adviser
or their affiliates or such officers, directors, employees, controlling persons
or shareholders may become subject under the 1940 Act, under other statutes, at
common law or otherwise, that are based upon such Disabling Conduct by
Sub-Adviser; provided, however, that in no case is Sub-Adviser's indemnity in
favor of any person deemed to protect or apply to such person against any
liability to which such person would otherwise be subject by reasons of willful
misfeasance, bad faith, or gross negligence in the performance of his, or her or
its duties or by reason of his, her or its reckless disregard of such person's
obligations and duties under this Agreement.
(c) Without in any way limiting the generality of paragraph
(a) above, Sub-Adviser shall not be liable to the Fund Parties for acts or
omissions of Sub-Adviser which result from acts or omissions of the Adviser,
Trust or Fund, including, but not limited to, a failure by the Adviser or Fund
to provide accurate and current information with respect to any records
maintained by the Adviser or Fund, which records are not also maintained by
Sub-Adviser. The Adviser shall indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and other expenses) arising from such
acts or omissions.
6. DURATION AND TERMINATION. This Agreement shall become effective upon
------------------------
the date first written above and shall continue in effect for a period of more
than two years from the date hereof only so long as such continuance is
specifically approved at least annually in conformance with the 1940 Act;
provided, however, that this Agreement may be terminated with respect to the
Fund, without the payment of any penalty, (a) by the Fund at any time, on 60
days' written notice to the Sub-Adviser, by the vote of a majority of Trustees
of the Trust or by the vote of a majority of the outstanding voting securities
of the Fund, (b) by the Adviser, if approved by the Board of Trustees of the
Trust, on 60 days' written notice to the Sub-Adviser, or (c) by the Sub-Adviser
at any time, on 60 days' written notice to the Adviser. This Agreement shall
terminate automatically and immediately in the event of its assignment, or in
the event of a termination of the Advisory Agreement. As used in this Section 6
and Section 11 below, the terms "assignment" and "vote of a majority of the
outstanding voting securities" shall have the respective meanings set forth in
the 1940 Act and the rules and regulations thereunder, subject to such
exceptions as may be granted by the SEC under the 1940 Act.
7. GOVERNING LAW. This Agreement shall be governed by the internal laws
-------------
of the State of New York, without regard to conflict of law principles;
provided, however, that nothing herein shall be construed as being inconsistent
with the 1940 Act.
8. SEVERABILITY. Should any part of this Agreement be held invalid by a
------------
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors to
the extent permissible under the 1940 Act and any applicable interpretations of
the SEC.
Page 5
<PAGE>
9. NOTICE. Any notice, advice or report to be given pursuant to this
------
Agreement shall be deemed sufficient if delivered or mailed by certified or
overnight mail, postage prepaid, addressed by the party giving notice to the
other party at the last address furnished by the other party:
To the Adviser at: c/o CIGNA Corporation
900 Cottage Grove Road
Hartford, CT 06152-2115
S-115
Attention: Global Client Relations Department
To the Sub-Adviser at: Morgan Stanley Dean Witter Investment
Management Inc.
1221 Avenue of the Americas
New York, NY 10020
Attention: Stefanie Chang Yu
10. ENTIRE AGREEMENT. This Agreement embodies the entire agreement and
----------------
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to this Agreement's subject matter. This Agreement
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but such counterparts shall, together constitute only one
instrument.
11. AMENDMENT. This Agreement may be amended at any time by mutual consent
---------
of the parties, provided that such amendment shall also have been approved by
vote of a majority of the Trustees of the Fund who are not interested persons of
the Fund, the Adviser or the Sub-Adviser.
A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of the Commonwealth of Massachusetts, and notice is hereby
given that the obligations of this instrument are not binding upon any of the
Trustees, officers or shareholders of the Fund or the Trust.
Where the effect of a requirement of the 1940 Act reflected in
any provision of this Agreement is altered by a rule, regulation or order of the
SEC, whether of special or general application, such provision shall be deemed
to incorporate the effect of such rule, regulation or order.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officer.
CIGNA INVESTMENTS, INC. MORGAN STANLEY DEAN WITTER INVESTMENT
MANAGEMENT INC.
/s/ Richard H. Forde
By:___________________________________ By:___________________________________
Richard H. Forde
Name:_________________________________ Name:_________________________________
Senior Managing Director
Title:________________________________ Title:________________________________
Page 6
<PAGE>
Schedule A
Records To Be Maintained By Sub-Adviser
*1. A record of each brokerage order, and all other Fund purchases
and sales, given by Sub-Adviser or on behalf of the Fund for, or in
connection with, the purchase or sale of securities, whether executed
or unexecuted. Such records shall include:
A. The name of the broker,
B. The terms and conditions of the order, and of any modification or
cancellation thereof,
C. The time of entry of cancellation,
D. The price at which executed,
E. The time of receipt of report of execution, and
F. The name of the person who placed the order on behalf of the Fund
(1940 Act Rule, 31a-1(b) (5) and (6)).
*2. A record for each fiscal quarter, completed within ten (10) days after
the end of the quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of Fund
securities to brokers or dealers, and the division of brokerage
commissions or other compensation on such purchase and sale orders were
made. The record:
A. Shall include the consideration given to:
(i) the sale of shares of the Fund
(ii) the supplying of services or benefits by brokers or
dealers to: (a) the Fund, (b) Adviser, (c)
Sub-Adviser, and (d) any person other than the
foregoing
(iii) Any other considerations other than the technical
qualifications of the brokers and dealers as such
B. Shall show the nature of the services or benefits made
available.
C. Shall describe in detail the application of any general or
specific formula or other determinant used in arriving at such
allocation of purchase and sale orders and such division of
brokerage commissions or other compensation.
D. The identities of the persons responsible for making the
determination of such allocation and such division of
brokerage commissions or other compensation (1940 Act, Rule
31a-1(b) (9)).
*3. A record in the form of an appropriate memorandum identifying the
person or persons, committees, or groups authorizing the purchase or
sale of Fund securities. Where an authorization is made by a committee
or group, a record shall be kept of the names of its members who
participate in the authorization. There shall be retained as part of
this record any memorandum, recommendation, or instruction supporting
or authorizing the purchase or sale of Fund securities and such other
information as is appropriate to support the authorization.** (1940
Act, Rule 31a-1(b) (10))
Page 1 of 2
<PAGE>
*4. Such accounts, books and other documents as are required to be
maintained by registered investment advisers by rule adopted under
Section 204 of the Investment Advisers Act of 1940, to the extent such
records are necessary or appropriate to record Sub-Adviser's
transactions with the Fund. (1940 Act, Rule 31a-1(f)).
* Maintained as property of the Fund pursuant to 1940 Act Rule 31a-3(a).
** Such information might include: the current Form 10-K, annual and quarterly
reports, press releases, reports by analysts and from brokerage firms
(including their recommendations, i.e., buy, sell, hold), and any internal
reports or Fund manager reviews.
Page 2 of 2
<PAGE>
SCHEDULE B
Communications With Custodian
A Sub-Adviser should abide by certain rules and procedures in order to minimize
operational problems. Sub-Adviser will be required to have various records and
files (as required by regulatory agencies) at their offices. Sub-Adviser will
have to maintain a certain flow of information to State Street Bank & Trust
Company ("SSB"), the custodial bank for the Fund. Sub-Adviser will be required
to furnish SSB with daily information as to executed trades. SSB should receive
this data no later than the morning following the day of the trade. The
necessary information should be transmitted to SSB (1) via facsimile machine
(the direct line to the facsimile machine is 617-537-5375) or (2) via an
electronic communication system ("System") approved by SSB that meets the
following criteria:
o The System must provide a method by which State Street can reasonably
ensure that each communication received by it though the System actually
originated from the Sub-Adviser.
o Only persons properly authorized by Sub-Adviser's senior operations office
shall be authorized to access the System and enter information, and
Sub-Adviser must employ reasonably procedures to permit only authorized
persons to have access to the System.
o Sub-Adviser will create separate System files containing the daily executed
securities trade information with respect to the Fund it manages, or
Sub-Adviser will transmit separately the trades for such Fund.
o SSB, through System or otherwise, will provide to Sub-Adviser prompt
certification or acknowledgment of SSB's receipt of each transmission by
Sub-Adviser of executed trade information.
o If the System malfunctions, Sub-Adviser will transmit all trade information
via facsimile transmission.
Upon receipt of brokers' confirmations, Sub-Adviser or SSB will be required to
notify the other party if any differences exist. The reporting of trades by the
Sub-Adviser to SSB must include the following:
o Purchase or Sale
o Security name
o Number of Shares or principal amount
o Price per share or bond
o Commission rate per share or bond, or if a net trade
o Executing broker
o Trade date
o Settlement date
o If security is not eligible for DTC
o This information can be reported using your forms, if applicable
When opening accounts with brokers for the Fund, the account should be a cash
account. No margin accounts are to be maintained. The broker should be advised
to use SSB IDC's ID system number (N. 20997) to facilitate the receipt of
information by SSB. If this procedure is followed, DK problems will be held down
to a minimum and additional costs of security trades
Page 1 of 2
<PAGE>
will not become an important factor in doing business. Delivery and receipt
instructions are attached as Schedule 1. Sub-Adviser will be required to submit
to SSB a daily trade authorization report, either through a System or, if a
facsimile transmission is used, on a form signed by two authorized individuals
prior to settlement date and a list of authorized persons with specimen
signatures must have previously been sent to SSB (see Schedule 2). The daily
trade authorization report will contain information on which SSB can rely to
either accept delivery or deliver out of the account, securities as per
Sub-Adviser trades. If facsimile transmission is used, Sub-Adviser will use a
form acceptable to SSB.
Page 2 of 2
<PAGE>
Schedule 1
Mailing Instructions and Delivery Instructions:
Confirmation Instructions (copy of Broker Advice):
State Street Bank and Trust Company
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attn: Fund Name/Fund Number
For the account of CIGNA Funds Group - LARGE COMPANY
STOCK GROWTH FUND
Delivery Instructions:
All DTC Eligible Securities:
Depository Trust Company (DTC) #997 Custodian Services
#20997 Agent Bank
All Ineligible DTC Securities (i.e., Commercial Paper)
State Street Bank and Trust Company
State Street Boston-Securities Corp.
61 Broadway
Main Concourse Level
New York, NY 10006
"VS Payment" (Federal Funds on Commercial Paper Only)
For the account of CIGNA Funds Group - LARGE COMPANY
STOCK GROWTH FUND
All Government Issues:
Delivered through Book Entry of Federal Reserve
Bank to: State St Bos/Spec/Fund Name/Fund #
(VS Payment Federal Funds)
Foreign Holdings:
Please confer with Brad Payne, State Street Bank,
(Phone: 617-985-5389) to obtain delivery instructions
of the State Street Global Custody Network
<PAGE>
Schedule 2
Example of Authorized Signature Letter
(To Be Typed on Your Letterhead)
[DATE]
State Street Bank and Trust
Mutual Fund Services
1776 Heritage Drive (A4E)
North Quincy, MA 02171
Attention: CIGNA Charter Mutual Funds
RE: Persons Authorized To Execute Trades For CIGNA Funds Group - Large Company
Stock Growth Fund
The following list of individuals are authorized to execute and report trade
instructions on behalf of the Fund. Should there be any changes to the
authorized persons listed below, we will notify you immediately of those
changes.
NAME SIGNATURE
Sincerely yours,
<PAGE>
Schedule C
Fees for Sub-Adviser Services
SUB-ADVISER: MORGAN STANLEY DEAN WITTER INVESTMENT MANAGEMENT INC.
FUND: LARGE COMPANY STOCK GROWTH FUND
For investment management services provided to the Fund under this
Agreement, Adviser, as a fiduciary for the Fund, shall pay the
Sub-Adviser a fee determined by multiplying the Average Total Net
Assets by the annual rate specified below. All fees shall be calculated
and paid quarterly in arrears. Fees for partial periods shall be
prorated for the portion of the period for which services were
rendered.
45 basis points on the first $100 million
35 basis points on all amounts thereafter
For purposes of this Schedule, "Average Total Net Assets" for any
quarter shall mean the average of the Assets as reported by the
custodian for the last business day of each month ended in the calendar
quarter.
<PAGE>
Exhibit g(iii)
CIGNA FUNDS GROUP
100 FRONT STREET, SUITE 300
WORCESTER, MA 01601
Dated as of: January 3, 2000
State Street Bank and Trust Company
2 Heritage Drive
Quincy, Massachusetts 02171
Re: Custodian Contract Dated as of October 15, 1987 Between CIGNA ANNUITY
FUNDS GROUP (n/k/a CIGNA Funds Group) (the "Trust") and State Street
Bank and Trust Company (the "Custodian")
Dear Madam or Sir:
Please be advised that the Trust has established ten new series of shares:
Balanced Fund, Core Plus Fixed Income Fund, Emerging Markets Debt Fund, High
Grade Fixed Income Fund, International Stock Fund, Large Company Stock-Growth
Fund, Large Company Stock-Value Fund, Small Company Stock-Growth Fund, Small
Company Stock-Value Fund and Ultra Core Plus Fixed Income Fund (the "Funds").
The Trust desires to retain you as custodian to render custodial services
pursuant to the above-captioned Custodian Contract for these Funds.
If you are willing to act as custodian and render custodial services pursuant to
the Custodian Contract, would you please so indicate by executing the enclosed
copy of this letter and returning it to Alfred A. Bingham III, S-210, 900
Cottage Grove Road, Hartford, CT 06152-2210.
Please note that, effective January 3, 2000, the Trust is also making the
following changes:
1. Changing the name of its series of shares known as CIGNA Money Market
Fund to Money Market Fund;
2. Changing the name of its series of shares known as CIGNA S&P 500 Index
Fund to S&P 500 Index Fund; and
3. Changing the name of the retail service class of CIGNA Money Market
Fund to the retail class.
Copies of the Master Trust Agreement establishing the Trust are on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this document is executed on behalf of the Trust by an officer of the Trust and
not individually and that any obligations of or arising out of this document are
not binding upon any of the Trustees, officers, shareholders, employees or
agents of the Trust individually, but are binding only upon the assets and
property of the Trust.
Sincerely,
CIGNA Funds Group
/s/ Alfred A. Bingham III
By:________________________________________
By: Alfred A. Bingham III
Its: Vice President and Treasurer
Accepted and Agreed to.
State Street Bank and Trust Company
By:________________________________________
By:
Its:
<PAGE>
Exhibit h(iii)
CIGNA FUNDS GROUP
100 FRONT STREET, SUITE 300
WORCESTER, MA 01601
Dated as of: January 3, 2000
State Street Bank and Trust Company
2 Heritage Drive
Quincy, Massachusetts 02171
Re: Transfer Agency and Service Agreement Dated as of July 30, 1985 Between
CIGNA ANNUITY FUNDS GROUP (n/k/a CIGNA Funds Group) (the "Trust") and
State Street Bank and Trust Company (the "Transfer Agent")
Dear Madam or Sir:
Please be advised that the Trust has established ten new series of shares:
Balanced Fund, Core Plus Fixed Income Fund, Emerging Markets Debt Fund, High
Grade Fixed Income Fund, International Stock Fund, Large Company Stock-Growth
Fund, Large Company Stock-Value Fund, Small Company Stock-Growth Fund, Small
Company Stock-Value Fund and Ultra Core Plus Fixed Income Fund (the "Funds").
The Trust desires to retain you as custodian to render custodial services
pursuant to the above-captioned Custodian Contract for these Funds.
If you are willing to act as custodian and render services as transfer agent and
dividend disbursing agent pursuant to the Transfer Agency and Service Agreement,
would you please so indicate by executing the enclosed copy of this letter and
returning it to Alfred A. Bingham III, S-210, 900 Cottage Grove Road, Hartford,
CT 06152-2210.
Please note that, effective January 3, 2000, the Trust is also making the
following changes:
1. Changing the name of its series of shares known as CIGNA Money Market
Fund to Money Market Fund;
2. Changing the name of its series of shares known as CIGNA S&P 500 Index
Mutual Fund to S&P 500 Index Fund; and
3. Changing the name of the retail service class of CIGNA Money Market
Fund to the retail class.
Copies of the Master Trust Agreement establishing the Trust are on file with the
Secretary of the Commonwealth of Massachusetts, and notice is hereby given that
this document is executed on behalf of the Trust by an officer of the Trust and
not individually and that any obligations of or arising out of this document are
not binding upon any of the Trustees, officers, shareholders, employees or
agents of the Trust individually, but are binding only upon the assets and
property of the Trust.
Sincerely,
CIGNA Funds Group
/s/ Alfred A. Bingham III
By:________________________________________
By: Alfred A. Bingham III
Its: Vice President and Treasurer
Accepted and Agreed to.
State Street Bank and Trust Company
By:________________________________________
By:
Its:
<PAGE>
Exhibit h(vi)
SHAREHOLDER SERVICES AGREEMENT OF
THE PREMIER CLASS-FIXED INCOME AND
THE RETAIL CLASS OF
CIGNA FUNDS GROUP
Agreement made as of January 3, 2000 between CIGNA Funds Group (the
"Trust") a Massachusetts business trust engaged in business as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act") on behalf of the series listed on Schedule A
attached hereto and made a part of this agreement (the "Funds") and CIGNA
Financial Services, Inc. ("CFS");
WHEREAS, shares of the Funds are or may be issued in various classes,
designated the institutional class, the premier class, the premier class - fixed
income and the retail class;
WHEREAS, the Trust on behalf of the Funds desires to appoint CFS to
provide certain services to holders of the premier class - fixed income and the
retail class shares of the Funds under the terms and conditions described
herein;
NOW, THEREFORE, the Trust hereby adopts this Shareholder Services
Agreement (the "Agreement"), on behalf of the premier class- fixed income and
the retail class shares of the Funds and CFS hereby agrees to provide or cause
to be provided the shareholder services described herein, subject to the
following terms and conditions:
1. The Funds are authorized to pay to CFS, as compensation for
"service activities" and "distribution related activities" (as defined in
Paragraph 3 hereof) rendered to holders of the premier class fixed income and
the retail class shares of the Funds by CFS, its affiliates or independent
service providers, a periodic fee computed at a rate of the applicable
percentage of the daily net assets of these classes as set forth on Schedule A
attached hereto, during each fiscal year. Such payment shall be calculated daily
and paid monthly. CFS is authorized to pay its affiliates or independent third
party service providers for performing service activities consistent with this
Agreement.
2. This Agreement shall not take effect with respect to a class
of shares of a Fund until it, together with any related agreements, has been
approved by votes of a majority of both (a) the Trustees of the Trust and (b)
those Trustees of the Trust who are not "interested persons" of the Trust (as
defined in the Act) and who have no direct or indirect financial interest in the
operation of the Agreement or any agreements related to it (the "Agreement
Trustees").
3. CFS shall provide to the Board of Trustees of the Trust and
the Trustees shall review, at least quarterly, a written report of the amounts
expended in connection with its performance of "service activities," and
"distribution related activities" as defined in this paragraph 3, and the
purposes for which such expenditures were made. CFS shall submit only
information regarding amounts expended for "service activities" and
"distribution related activities" to the Board of Trustees of the Trust in
support of the amounts payable hereunder.
Page 1
<PAGE>
For purposes of this agreement, "service activities" and "distribution
related activities" may include receiving, aggregating, and processing
shareholder or beneficial owner (collectively, "shareholder") orders (including
opening accounts, arranging wire transfers, transmitting and receiving funds,
and verifying customer signatures); communicating periodically with
shareholders; acting as the sole shareholder of record and nominee for
shareholders; answering questions and handling correspondence from shareholders
about their accounts; transmitting proxy statements, annual reports and other
communications from the Funds; and performing similar account administrative
services. "Distribution related activities" shall include: payments made to and
salaries and expenses of persons (including employees of CFS) who are engaged
in, or provide support services in connection with, the distribution of shares
of the Funds, such as answering routine telephone inquiries and processing
prospective investor requests for information; compensation paid to securities
dealers, financial institutions and other organizations which render
distribution and administrative services in connection with the distribution of
the Funds' shares; costs related to the formulation and implementation of
marketing and promotional activities, including direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; costs
of printing and distributing prospectuses and reports to prospective
shareholders of the Funds; costs involved in preparing, printing and
distributing sales literature for the Funds; costs involved in obtaining
whatever information analyses and reports with respect to market and promotional
activities on behalf of the retail class and premier class - fixed income of the
Funds that CFS deems advisable; and such other costs as may from time to time be
agreed upon by the Funds.
4. Amounts payable to CFS hereunder will be paid by a Fund to
CFS until the Agreement is terminated or not renewed with respect to a Fund. If
the Agreement is terminated or not renewed with respect to a Fund, any expenses
incurred by CFS, its affiliates or independent third party service providers, on
behalf of a Fund in excess of the payments of the amounts specified in Paragraph
1 hereof which CFS has received or accrued through the termination date are the
sole responsibility and liability of CFS and are not obligations of the Fund.
5. This Agreement shall continue in full force and effect for
so long as such continuance is specifically approved at least annually in the
manner provided for approval of the Agreement in Paragraph 2.
6. This Agreement may be terminated at any time, without
payment of any penalty, by vote of a majority of the Trustees or by a vote of a
majority of the outstanding voting securities of the affected class of a Fund on
not more than 30 days' written notice to CFS, or upon 30 day's notice by CFS to
the Trust.
7. The Trust shall preserve copies of this Agreement and any
related agreements and all reports made pursuant to Paragraph 3 hereof, for a
period of not less than six years from the date of this Agreement, any such
agreement or any such report, as the case may be, the first two years of which
shall be in an easily accessible place.
Page 2
<PAGE>
8. The Agreement may be amended at any time provided that any
amendment to increase materially the amount of the payment provided for in
Paragraph 1, for any Fund, is invalid and unenforceable unless such amendment is
approved in the manner provided for initial approval in Paragraph 2 hereof, and
no material amendment to the Agreement shall be made unless approved in the
manner provided for approval in Paragraph 2 hereof.
9. Copies of the Master Trust Agreement establishing the Trust
are on file with the Secretary of the Commonwealth of Massachusetts, and notice
is hereby given that this document is executed on behalf of the Trust by an
officer of the Trust and not individually and that any obligations of or arising
out of this document are not binding upon any of the Trustees, officers,
shareholders, employees or agents of the Trust individually, but are binding
only upon the assets and property of the Trust.
IN WITNESS WHEREOF, the Trust, on behalf of the Funds, and CFS have
executed this Shareholder Services Agreement as of the date first above written.
CIGNA FUNDS GROUP
By:___________________________________________
By: Richard H. Forde
Its: Chairman of the Board and President
CIGNA FINANCIAL SERVICES, INC.
By:___________________________________________
By:
Its:
<PAGE>
SCHEDULE A TO SHAREHOLDER SERVICES AGREEMENT
CLASSES OF SHARES
-----------------
PREMIER - FIXED INCOME RETAIL
---------------------- ------
Balanced Fund n/a 0.25
Core Plus Fixed Income Fund 0.15 0.25
Foreign Stock Fund n/a 0.25
Large Company Stock Growth Fund n/a 0.25
Large Company Stock Value Fund n/a 0.25
Large Company Stock Index fund n/a 0.25
Money Market Fund n/a 0.25
Small Company Stock Growth Fund n/a 0.25
Small Company Stock Value Fund n/a 0.25
<PAGE>
Exhibit h(viii)
SUB-ACCOUNTING SERVICES AGREEMENT
FOR
THE PREMIER CLASS AND RETAIL CLASS
OF
CIGNA FUNDS GROUP
AGREEMENT made as of January 3, 2000 between CIGNA Funds Group (the
"Trust"), a Massachusetts business trust engaged in business as an open-end
management investment company registered under the Investment Company Act of
1940, as amended (the "Act") on behalf of the series listed on Schedule A
attached hereto and made a part of this agreement (the "Funds") and CIGNA
Financial Services, Inc., a Delaware corporation ("CFS");
WHEREAS, shares of the Funds are or may be issued in various classes,
designated the institutional class, the premier class and the retail class;
WHEREAS, the Trust, on behalf of the Funds, desires to appoint CFS to
provide sub-accounting services to holders of the premier class and the retail
class shares of the Funds under the terms and conditions described herein:
NOW, THEREFORE, the Trust hereby adopts this Sub-Accounting Services
Agreement (the "Agreement") for holders of the premier class and the retail
class shares of the Funds and CFS hereby agrees to provide or cause to be
provided the shareholder sub-accounting services described herein, subject to
the following terms and conditions:
1. CFS shall provide or shall arrange to be provided
shareholder sub-accounting services to the premier class and the retail class of
the Funds. The sub-accounting services shall include the following:
a. Maintaining books and records with respect to each beneficial
owner of premier class and retail class shares of the Funds;
b. Preparing and mailing summary monthly statements (or quarterly
statements if no activity occurs in the premier class or
retail class shares of the Funds during any month covered by
the statement) to every beneficial owner;
c. Generating and mailing confirmations of each purchase or sale
of premier class and retail class shares of the Funds for each
beneficial owner; and
d. Such other services normally and customarily provided by
shareholder sub-accounting service providers on behalf of
mutual funds as may be agreed upon by the Funds and CFS.
2. As full compensation for services provided under this
Agreement, the premier class and the retail class of the Funds shall pay CFS, on
a monthly basis, in arrears, a periodic fee computed at an annual rate as set
forth on Schedule A attached hereto of the applicable percentage of average
daily net assets during each fiscal year.
Page1
<PAGE>
3. This Agreement shall not take effect until it has been approved by
votes of a majority of both (a) the Trustees of the Trust, and (b) those
Trustees of the Trust who are not "interested persons" of the Trust (as defined
in the Act) and who have no direct or indirect financial interest in the
operation of the Agreement (the "Independent Trustees").
4. This Agreement shall continue in full force and effect for so long
as such continuance is specifically approved at least annually in the manner
provided for approval of the Agreement in Paragraph 3.
5. This Agreement may be terminated at any time, without payment of any
penalty, by vote of a majority of the independent Trustees or by a vote of a
majority of the outstanding voting securities of the affected class of a Fund on
not more than 30 days' written notice to CFS, or by CFS on 30 day's notice to
the Trust.
6. The Trust shall preserve copies of this Agreement and any related
agreements, for a period of not less than six years from the date of this
Agreement, the first two years of which shall be in an easily accessible place.
7. This Agreement may be amended at any time provided that no material
amendment to the Agreement shall be made unless approved in the manner provided
for approval in Paragraph 3 hereof.
8. Copies of the Master Trust Agreement establishing the Trust are on
file with the Secretary of the Commonwealth of Massachusetts, and notice is
hereby given that this document is executed on behalf of the Trust by an officer
of the Trust and not individually and that any obligations of or arising out of
this document are not binding upon any of the Trustees, officers, shareholders,
employees or agents of the Trust individually, but are binding only upon the
assets and property of the Trust.
IN WITNESS WHEREOF, the Trust, on behalf of the Funds, and CFS have
executed this Sub-Accounting Services Agreement as of the date first above
written.
CIGNA FUNDS GROUP
/s/ Richard H. Forde
By:______________________________________________
By: Richard H. Forde
Its: Chairman of the Board and President
CIGNA FINANCIAL SERVICES, INC.
By:______________________________________________
By:
Its:
Page 2
<PAGE>
SCHEDULE A TO SUB-ACCOUNTING SERVICES AGREEMENT
Balanced Fund 0.20
Core Plus Fixed Income Fund 0.25
Foreign Stock Fund 0.25
Large Company Stock Growth Fund 0.20
Large Company Stock Value Fund 0.20
Large Company Stock Index Fund 0.25
Money Market Fund 0.20
Small Company Stock Growth Fund 0.20
Small Company Stock Value Fund 0.20
<PAGE>
Exhibit h(ix)
CIGNA FUNDS GROUP
CIGNA INSTITUTIONAL FUNDS GROUP
CIGNA VARIABLE PRODUCTS GROUP
POWER OF ATTORNEY
The undersigned hereby appoint Alfred A. Bingham III and Jeffrey S. Winer, each
of them singly and with full power of substitution, attorney-in-fact and agent
for me and in my name and on my behalf in any and all capacities to sign any
Registration Statement under the Securities Act of 1933, as amended, any
Registration Statement under the Investment Company Act of 1940, as amended, or
any filing under the securities laws of any of the states of the United States
of America or of any jurisdiction ("Blue Sky Law") for CIGNA Funds Group, CIGNA
Institutional Funds Group and CIGNA Variable Products Group and any amendment to
any such Registration Statement or any Blue Sky Law filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, and under
the Investment Company Act of 1940, as amended, or with the appropriate state
agency under the applicable Blue Sky Laws, to file such Registration Statements,
amendments and filings and generally to do and perform all things necessary to
be done in that connection, hereby ratifying and confirming my signature as it
may be signed by said attorney-in-fact and agent to any and all Registration
Statements and amendments thereto and to any and all Blue Sky Law filings and
amendments thereto and ratifying and confirming all other acts that said
attorney-in-fact and agent may lawfully do or cause to be done by virtue of this
appointment.
Signed this 27th day of April, 1999. /s/ Richard H. Forde
------------------------------------------
Richard H. Forde
Chairman of the Board, President
and Trustee
CIGNA Funds Group
CIGNA Institutional Funds Group
/s/ Richard H. Forde
------------------------------------------
Richard H. Forde
President
CIGNA Variable Products Group
/s/ Hugh R. Beath
------------------------------------------
Hugh R. Beath, Trustee
/s/ Russell H. Jones
------------------------------------------
Russell H. Jones, Trustee
/s/ Thomas C. Jones
------------------------------------------
Thomas C. Jones, Trustee
/s/ Paul J. McDonald
------------------------------------------
Paul J. McDonald, Trustee
<PAGE>
Exhibit i.
December 23, 1999
CIGNA Funds Group
100 Front Street, Suite 300
Worcester, MA 01601
Ladies and Gentlemen:
As counsel to CIGNA Funds Group, a business trust organized under the
laws of the Commonwealth of Massachusetts (the "Trust"), we have been asked to
render our opinion in connection with the proposed issuance by the Trust of
shares of beneficial interest of Money Market Fund, Large Company Stock Index
Fund, Balanced Fund, Core Plus Fixed Income Fund, Emerging Markets Debt Fund,
High Grade Fixed Income Fund, Foreign Stock Fund, Large Company Stock Growth
Fund, Large Company Stock Value Fund, Small Company Stock Growth Fund, Small
Company Stock Value Fund, and Ultra Core Plus Fixed Income Fund (the "Funds"),
each of which is a series of the Trust and has been established and designated
pursuant to Section 4.2 of Article IV of the Second Amended and Restated Master
Trust Agreement of the Trust dated July 28, 1998, as amended by Amendment No. 1
dated October 29, 1999, certain of which are more fully described in the
Prospectus and Statement of Additional Information contained in Post-Effective
Amendment No. 63 under the Securities Act of 1933 to the Registration Statement
of the Trust on Form N-1A (Registration No. 2-29020) to be filed by the Trust
with the Securities and Exchange Commission (as amended, the "Registration
Statement").
We wish to advise you that we have examined such documents and
questions of law as we have deemed necessary for purposes of this opinion. Based
upon the foregoing, we are of the opinion that:
1. The Trust has been duly organized and is validly existing
pursuant to the laws of The Commonwealth of Massachusetts; and
2. The shares of beneficial interest of the Funds which are
described in the foregoing Registration Statement will, when sold in accordance
with the terms of the Prospectus and Statement of Additional Information in
effect at the time of the sale, be legally issued, fully paid and non-assessable
by the Trust.
<PAGE>
We consent to a copy of this opinion being filed as an exhibit to the
foregoing Registration Statement.
Very truly yours,
/s/ Goodwin, Procter & Hoar LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE>
Exhibit j.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 63 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated February 12, 1999, relating to the financial
statements and financial highlights appearing in the December 31, 1998 Annual
Report to Shareholders of CIGNA S&P 500 Index Fund and CIGNA Money Market Fund,
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the heading "Financial Highlights" in
the Prospectus and on the cover page of, and under the headings "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 21, 1999
<PAGE>
Exhibit m.
RULE 12B-1 PLAN OF
CIGNA FUNDS GROUP
1. THE PLAN. CIGNA Funds Group, a Massachusetts business trust
--------
(the "Trust"), hereby adopts this Rule 12b-1 Plan (the "Plan") pursuant to the
terms of Rule 12b-1 under the Investment Company Act of 1940, as amended (the
"Act"), with respect to the premier class- fixed income and retail class shares
of the Trust's series identified on Schedule A attached hereto (the "Initial
Funds" - such series, together with all other series subsequently established by
the Trust and made subject to this Plan, being referred to herein individually
as a "Fund" and collectively as the "Funds").
2. AUTHORIZED PAYMENTS. With respect to the retail shares and the
-------------------
premier class - fixed income shares of each Initial Fund, the Trust is hereby
authorized to pay a fee to CIGNA Financial Services, Inc. ("CFS") from the
assets of such Fund at the annual rate set forth on Schedule A attached hereto.
These fees are payable to CFS for providing ongoing servicing and/or maintenance
of shareholder accounts for the premier and retail classes of the Funds and for
providing distribution related services to these classes. Shareholder service
and account maintenance activities may include receiving, aggregating, and
processing shareholder or beneficial owner (collectively, "shareholder") orders
(including opening accounts, arranging wire transfers, transmitting and
receiving funds, and verifying customer signatures); communicating periodically
with shareholders; acting as the sole shareholder of record and nominee for
shareholders; answering questions and handling correspondence from shareholders
about their accounts; transmitting proxy statements, annual reports and other
communications from the Funds; and performing similar account administrative
services. Distribution related services include: payments made to and salaries
and expenses of persons (including employees of CFS) who are engaged in, or
provide support services in connection with, the distribution of shares of the
Funds, such as answering routine telephone inquiries and processing prospective
investor requests for information; compensation paid to securities dealers,
financial institutions and other organizations which render distribution and
premier services in connection with the distribution of the Funds' shares; costs
related to the formulation and implementation of marketing and promotional
activities, including direct mail promotions and television, radio, newspaper,
magazine and other mass media advertising; costs of printing and distributing
prospectuses and reports to prospective shareholders of the Funds; costs
involved in preparing, printing and distributing sales literature for the Funds;
costs involved in obtaining whatever information analyses and reports with
respect to market and promotional activities on behalf of the retail and premier
classes of the Funds that CFS deems advisable; and such other costs as may from
time to time be agreed upon by the Funds. Payments of these fees are not tied
exclusively to the expenses incurred by CFS, so that payments may exceed
expenses actually incurred by CFS for providing shareholder and distribution
related services.
With respect to any class of any Fund subsequently established by the
Trust and made subject to this Plan, the Trust shall pay CFS a monthly fee under
this Plan at the annual rate agreed upon and specified in an addendum hereto.
The expenditures to be made pursuant to this Plan shall commence with respect to
each class of Shares of a Fund as of the date on which this Plan becomes
effective with respect to each such class.
-1-
<PAGE>
3. TERM AND TERMINATION.
--------------------
a. INITIAL FUNDS. This Plan shall become effective with
-------------
respect to each class of each Initial Fund as of the later of (i)
the date on which a Registration Statement with respect to such
class of shares becomes effective under the Securities Act of
1933, as amended, or (ii) the date on which such class of the
Initial Fund commences offering its Shares to the public. This
Plan shall continue in effect with respect to each Initial Fund
until one (1) year from the date of such effectiveness, unless
the continuation of this Plan shall have been approved with
respect to the Initial Fund in accordance with the provisions of
Section 3(c) hereof.
b. ADDITIONAL FUNDS. This Plan shall become effective with
----------------
respect to each additional Fund or class established by the Trust
after the date hereof and made subject to this Plan upon
commencement of the initial public offering thereof (PROVIDED,
--------
that this Plan has previously been approved for continuation by
votes of a majority of both (i) the Board of Trustees of the
Trust and (ii) the Trustees who are not interested persons (as
defined in the Act) of the Trust and who have no direct or
indirect financial interest in the operation of this Plan or the
Agreement and any agreements relating to it (the "Qualified
Trustees"), cast in person at a meeting held before the initial
public offering of such additional Fund or classes thereof and
called for the purpose of voting on such approval), and shall
continue in effect with respect to each such additional Fund or
class for one (1) year thereafter, unless the continuation of
this Plan shall have been approved with respect to such
additional Fund or class in accordance with the provisions of
Section 3(c) hereof. The Fund's distributor and the Trust on
behalf of each such additional Fund or class shall each sign an
addendum hereto agreeing to be bound hereby and setting forth
such specific and different terms as the parties may agree upon,
including, without implied limitation, the amount and purpose of
payments to be made hereunder.
c. CONTINUATION. This Plan and the Agreement shall continue
------------
in effect with respect to each Fund or class thereof subsequent
to the initial term specified in Section 3(a) and (b) for so long
as such continuance is specifically approved at least annually by
votes of a majority of both (i) the Board of Trustees of the
Trust and (ii) the Qualified Trustees, cast in person at a
meeting called for the purpose of voting on this Plan, subject to
any shareholder approval requirements existing under applicable
law.
d. TERMINATION. This Plan may be terminated at any time with
-----------
respect to the Trust or any Fund or class thereof, as the case
may be, by vote of a majority of the Qualified Trustees, or by
vote of a majority of the outstanding voting securities of the
Trust or that Fund or class, as the case may be. This Plan may
remain in effect with respect to a Fund or class thereof even if
it has been terminated in accordance with the Section 3(d) with
respect to such Fund or one or more other Fund of the Trust.
-2-
<PAGE>
4. AMENDMENTS. This Plan may be amended with respect to the Trust or a
----------
Fund or class thereof in the manner provided for annual renewal in Section 3(c)
hereof; provided, however, that this Plan may not be amended to increase
materially the amount of distribution expenditures provided for in Section 1
hereof unless such amendment is approved by a vote of a majority of the
outstanding voting securities of each Fund or class thereof with respect to
which a material increase in the amount of distribution expenditures is
proposed.
5. QUARTERLY REPORTS. Any person authorized to direct the
-----------------
disposition of monies paid or payable by the Fund(s) pursuant to this Plan or
any related agreements shall provide to the Trustees of the Trust, and the
Trustees shall review at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
6. SELECTION AND NOMINATION OF TRUSTEES. While this Plan is in effect,
------------------------------------
the selection and nomination of Qualified Trustees shall be committed to the
discretion of the persons already serving as Qualified Trustees who are not
interested persons of the Funds.
7. RECORDS. The Funds shall preserve copies of this Plan and any
-------
related agreements and all reports made pursuant to paragraph 5 hereof for a
period of not less than six years from the date of this Plan, or the agreements
or such reports, as the case may be, and shall preserve the Plan, agreement or
report the first two years in an easily accessible place.
8. LIMITATION ON PERSONAL LIABILITY. NOTICE IS HEREBY GIVEN that the
--------------------------------
Trust is a business trust organized under the Massachusetts Business Trust Act
pursuant to a Declaration of Trust filed in the office of the Secretary of the
Commonwealth of Massachusetts. The Trust is a series trust and all debts,
liabilities, obligations and expenses incurred, contracted for or otherwise
existing with respect to a particular series shall be enforceable against the
assets held with respect to such series only, and not against the assets of the
Trust generally or against the assets held with respect to any other series and
further that no trustee, officer or holder of shares of beneficial interest of
the Trust shall be personally liable for any of the foregoing.
IN WITNESS WHEREOF, the Trust has executed this 12b-1 Plan with respect
to the Initial Funds as of the 3rd day of January, 2000.
ATTEST: CIGNA FUNDS GROUP
/s/ Jeffrey S. Winer /s/ Alfred A. Bingham III
_____________________________________ By:____________________________________
Jeffrey S. Winer Alfred A. Bingham III
Vice President and Secretary Vice President and Treasurer
-3-
<PAGE>
SCHEDULE A
TO 12B-1 PLAN FOR CIGNA FUNDS GROUP
CLASSES OF SHARES
-----------------
PREMIER - FIXED INCOME RETAIL
---------------------- -------
Balanced Fund n/a 0.25
Core Plus Fixed Income Fund 0.15 0.25
Foreign Stock Fund n/a 0.25
Large Company Stock Growth Fund n/a 0.25
Large Company Stock Value Fund n/a 0.25
Large Company Stock Index Fund n/a 0.25
Small Company Stock Growth Fund n/a 0.25
Small Company Stock Value Fund n/a 0.25
<PAGE>
Exhibit m(ii)
AMENDMENT NO. 1 TO RULE 12B-1 PLAN FOR
THE RETAIL CLASS OF
MONEY MARKET FUND
(A SERIES OF CIGNA FUNDS GROUP)
Amendment No. 1 to the Rule 12b-1 Plan by and between CIGNA Funds Group
on behalf of the retail class (f/k/a retail service class) of Money Market Fund
(f/k/a CIGNA Money Market Fund) and CIGNA Financial Services, Inc. dated as of
October 27, 1998 (the "12b-1 Plan").
WHEREAS, CIGNA Funds Group (the "Trust"), on behalf of Money Market
Fund (the "Fund"), and CIGNA Financial Services, Inc. ("CFS") desire to amend
the 12b-1 Plan to eliminate the distribution fee set forth in paragraph 2.b.,
thereby reducing the periodic fee paid by the retail class of the Fund to CFS;
NOW, THEREFORE, the Trust, on behalf of the retail class of the Fund,
and CFS agree to replace paragraph 2 of the 12b-1 Plan with the following:
2. AUTHORIZED PAYMENTS. During each fiscal year of the
Fund, the Trust is hereby authorized to pay out of the assets of the
retail class of the Fund on a monthly basis, a periodic fee computed at
a rate of up to twenty-five one-hundredths of one percent (0.25%) of
the average daily net assets of the retail class of the Fund during
such fiscal year to CIGNA Financial Services, Inc. ("CFS"). The
shareholder servicing fee compensates CFS for providing ongoing
servicing and/or maintenance of shareholder accounts for the retail
class of the Fund and for providing distribution related services to
these classes. Shareholder service and account maintenance activities
may include receiving, aggregating, and processing shareholder or
beneficial owner (collectively, "shareholder") orders (including
opening accounts, arranging wire transfers, transmitting and receiving
funds, and verifying customer signatures); communicating periodically
with shareholders; acting as the sole shareholder of record and nominee
for shareholders; answering questions and handling correspondence from
shareholders about their accounts; transmitting proxy statements,
annual reports and other communications from the Fund; and performing
similar account administrative services. Distribution related services
include: payments made to and expenses of persons (including employees
of CFS) who are engaged in, or provide support services in connection
with, the distribution of shares of the Funds, such as answering
routine telephone inquiries and processing prospective investor
requests for information; compensation paid to securities dealers,
financial institutions and other organizations which render
distribution and administrative services in connection with the
distribution of the Funds' shares; costs related to the formulation and
implementation of marketing and promotional activities, including
direct mail promotions and television, radio, newspaper, magazine and
other mass media advertising; costs of printing and distributing
prospectuses and reports to prospective shareholders of the Funds;
costs involved in preparing, printing and distributing sales literature
for the Funds; costs involved in obtaining whatever information
analyses and reports with respect to market and promotional activities
on behalf of the retail class of the Fund that CFS deems advisable; and
such other costs as may from time to time be agreed upon by the Fund.
Payments of these fees are not tied exclusively to the expenses
incurred by CFS, so that payments may exceed expenses actually incurred
by CFS for providing shareholder and distribution related services.
Copies of the Master Trust Agreement establishing the Trust are on file
with the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this document is executed on behalf of the Trust by an officer of the
Trust and not individually and that any obligations of or arising out of this
document are not binding upon any of the Trustees, officers, shareholders,
employees or agents of the Trust individually, but are binding only upon the
assets and property of the Trust.
IN WITNESS WHEREOF, the Trust, on behalf of the retail class of the
Fund, and CFS have executed this Amendment No. 1 to the 12b-1 Plan as of the 3rd
day of January, 2000.
ATTEST: CIGNA FUNDS GROUP
/s/ Jeffrey S. Winer /s/ Alfred A. Bingham III
_____________________________________ By:____________________________________
Jeffrey S. Winer Alfred A. Bingham III
Vice President and Secretary Vice President and Treasurer
<PAGE>
Exhibit n.
MULTI CLASS PLAN PURSUANT TO RULE 18F-3
FOR
CIGNA FUNDS GROUP
WHEREAS, CIGNA Funds Group (the "Trust") is an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), consisting of various series whose shares are or may be issued in
various classes, currently designated the institutional class, the premier
class, the premier class - fixed income and the retail class;
WHEREAS, the Trust, on behalf of the series of the Trust set forth on
Schedule A attached hereto (such series being referred to collectively herein as
the "Initial Funds" - such series, together with all other series subsequently
established by the Trust and made subject to this Plan, being referred to herein
individually as a "Fund" and collectively as the "Funds"), desires to adopt a
Multi Class Plan pursuant to Rule 18f-3 under the 1940 Act (the "Multi Class
Plan");
NOW THEREFORE, the Trust, on behalf of the Funds, hereby adopts this
Multi Class Plan in accordance with Rule 18f-3 under the 1940 Act, subject to
the following terms and conditions:
1. FEATURES OF THE CLASSES. The Funds issue or shall issue shares of
-----------------------
beneficial interest in four classes: the institutional class, the premier class,
the premier class - fixed income and the retail class. Shares of each class of a
Fund, regardless of class designation, shall represent an equal pro rata
interest (based on relative net asset values) in the portfolio assets of such
Fund, and shall have identical voting, dividend, liquidation and other rights,
preferences, powers, restrictions, limitations, qualifications, and terms and
conditions, except that: (a) each class shall have a different designation; (b)
each class shall have different arrangements for shareholder services or the
distribution of shares, or both, as provided for in sections 2 and 3 of this
Plan; (c) each class shall bear any Class Expenses, as defined in section 3
below; (d) each class shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to its service or distribution arrangement
and each class shall have separate voting rights on any matter submitted to
shareholders in which the interests of one class differ from the interests of
any other class; (e) each class shall have such differences relating to purchase
minimums, sales charges and eligible investors as may be reflected in the
prospectus and Statement of Additional Information pursuant to which it is
offered; and (f) each class shall have such different exchange privileges, as
provided for in Section 4 of this Plan.
2. DIFFERENCES IN DISTRIBUTION AND SHAREHOLDER SERVICES. Each
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class shall have a different arrangement for shareholder services or the
distribution of shares, or both, as follows:
(a) The institutional class shares shall be not be subject to
any distribution, shareholder servicing or sub-accounting charge.
(b) The premier class shares shall pay CIGNA Financial Services,
Inc. ("CFS") a sub-accounting fee at an annual rate of the average daily net
assets of such class as set forth on Schedule B attached hereto.
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<PAGE>
(c) The premier class - fixed income shares shall pay CFS
distribution fees under the Trust's 12b-1 plan at an annual rate of the average
daily net assets of such class as set forth on Schedule A and a sub-accounting
fee at an annual rate of the average daily net assets of such class as set forth
on Schedule B attached hereto.
(d) The retail class shares shall pay CFS distribution fees
under the Trust's 12b-1 plan at an annual rate of the average daily net assets
of such class as set forth on Schedule A and a sub-accounting fee at an annual
rate of the average daily net assets of such class as set forth on Schedule B
attached hereto.
3. ALLOCATION OF EXPENSES. Expenses of the series shall be
----------------------
allocated as follows:
(a) CLASS EXPENSES. Expenses relating to different
arrangements for shareholder services, the distribution of shares, and
shareholder sub-accounting, shall be allocated to and paid by the applicable
class. A class may pay a different share of other expenses, not including
advisory or custodial fees or other expenses related to the management of a
series' assets, if: (1) such expenses are actually incurred in a different
amount by that class, or if the class receives services of a different kind or
to a different degree than other classes and (2) the Trust's Board of Trustees
has approved such allocation. The expense contemplated by this section 3(a) are
sometimes referred to herein as "Class Expenses."
(b) OTHER ALLOCATIONS. All expenses of the series not
allocated to a particular class pursuant to sections 2 and 3(a) of this Plan
shall be allocated to each class on the basis of the net asset value of that
class in relation to the net asset value of the series. Notwithstanding the
foregoing, the underwriter, adviser, or other provider of services to a series
may waive or reimburse the expenses of a specific class or classes to the extent
permitted under Rule 18f-3 under the Act; provided, however, that the Board
shall monitor the use of such waivers or reimbursements intended to differ by
class.
4. EXCHANGE PRIVILEGES. Shareholders may exchange shares of a
-------------------
Fund of the Trust for shares of the identical class of any other Fund based upon
each series' net asset value per share.
5. QUARTERLY AND ANNUAL REPORTS. The Trustees shall receive
----------------------------
quarterly and annual statements concerning servicing and any distribution
expenses pursuant to the 12b-1 Plan. In the statements, only expenditures
properly attributable to the servicing or distribution of premier class or
retail class shares will be used to justify any fee attributable to that class.
The statements, including the allocations upon which they are based, shall be
subject to the review and approval of the independent Trustees in the exercise
of their fiduciary duties.
6. EFFECTIVENESS OF PLAN. This Multi Class Plan shall not take
---------------------
effect until it has been approved by votes of a majority of both (a) the
Trustees of the Trust and (b) those Trustees of the Trust who are not
"interested persons" of the Trust (as defined in the 1940 Act) and who have no
direct or indirect interest in the operation of the plan ("Qualified Trustees").
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This Plan shall become effective with respect to any class of the
Initial Funds other than the four initial classes described above and with
respect to each additional Fund or class thereof established by the Trust after
the date hereof and made subject to this Plan, upon commencement of operations
thereof or as otherwise determined, and shall continue in effect with respect to
each such additional Fund or class (subject to the terms of this Plan) until
terminated in accordance with the provisions of this section 6. An addendum
hereto setting forth such specific and different terms of such additional series
of classes shall be attached to this Plan.
This Plan may be terminated at any time with respect to the Trust or
any Fund or class thereof, as the case may be, by vote of a majority of both the
Trustees of the Trust and the Qualified Trustees. The Plan may remain in effect
with respect to a series or class thereof even if it has been terminated in
accordance with this section 6 with respect to such series or class or one or
more other series of the Trust.
7. MATERIAL MODIFICATION. This Multi Class Plan may not be amended to
---------------------
modify materially its terms unless such amendment is approved in the manner
provided for initial approval in Paragraph 6 hereof.
8. LIMITATION OF LIABILITY. The Trustees of the Trust and the
-----------------------
shareholders of the Funds shall not be liable for any obligations of the Trust
or the Funds under this Multi Class Plan, and any person, in asserting any
rights or claims under this plan, shall look only to the assets and property of
the Trust or the Fund in which they own shares in settlement of such right or
claim, and not to such Trustees or shareholders.
Copies of the Master Trust Agreement establishing the Trust are on file
with the Secretary of the Commonwealth of Massachusetts, and notice is hereby
given that this document is executed on behalf of the Trust by an officer of the
Trust and not individually and that any obligations of or arising out of this
document are not binding upon any of the Trustees, officers, shareholders,
employees or agents of the Trust individually, but are binding only upon the
assets and property of the Trust.
IN WITNESS WHEREOF, the Trust, on behalf of the Funds, has adopted this
Multi Class Plan as of the 3rd day of January, 2000.
ATTEST: CIGNA FUNDS GROUP
/s/ Jeffrey S. Winer /s/ Alfred A. Bingham III
_____________________________________ By:____________________________________
Jeffrey S. Winer Alfred A. Bingham III
Vice President and Secretary Vice President and Treasurer
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SCHEDULE A
TO MULTI CLASS PLAN FOR CIGNA FUNDS GROUP
12B-1 FEES
CLASSES OF SHARES
PREMIER-FIXED INCOME RETAIL
-------------------- ------
Balanced Fund n/a 0.25
Core Plus Fixed Income Fund 0.15 0.25
Foreign Stock Fund n/a 0.25
Large Company Stock Growth Fund n/a 0.25
Large Company Stock Value Fund n/a 0.25
Money Market Fund n/a 0.25
Large Company Stock Index Fund n/a 0.25
Small Company Stock Growth Fund n/a 0.25
Small Company Stock Value Fund n/a 0.25
<PAGE>
SCHEDULE B
TO MULTI CLASS PLAN FOR CIGNA FUNDS GROUP
SUB-ACCOUNTING SERVICES FEES
Balanced Fund 0.20
Core Plus Fixed Income Fund 0.25
Foreign Stock Fund 0.25
Large Company Stock Growth Fund 0.20
Large Company Stock Value Fund 0.20
Money Market Fund 0.25
Large Company Stock Index Fund 0.20
Small Company Stock Growth Fund 0.20
Small Company Stock Value Fund 0.20
