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As filed with the Securities and Exchange Commission on April 30, 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. 60 |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. 60 |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):
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| | Immediately upon filing pursuant to paragraph (b)
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|x| on April 30, 1999 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.
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If appropriate, check the following box:
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| | This post-effective amendment designates a new effective date for a
- previously filed post-effective amendment.
__________________
PLEASE SEND COMMUNICATIONS TO: JEFFREY S. WINER
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
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PROSPECTUS CIGNA MONEY MARKET FUND
MAY 1, 1999 CIGNA INCOME FUND
CIGNA S&P 500 INDEX FUND
INSTITUTIONAL CLASS
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.
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TABLE OF CONTENTS
PAGE NUMBER
Summary......................................................................1
Bar Charts and Performance Tables............................................2
Fees and Expenses of the Funds...............................................3
Investment Information.......................................................5
Management of the Funds.....................................................13
Year 2000 Issues............................................................13
Pricing of Shares...........................................................13
Purchase and Redemption of Shares...........................................14
Distributions and Federal Income............................................14
Tax Considerations..........................................................15
Financial Highlights........................................................16
<PAGE>
INVESTMENT OBJECTIVES:
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MONEY MARKET FUND 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.
INCOME FUND To provide as high a level of
current income as possible
consistent with reasonable concern
for safety of principal by
investing primarily in investment
grade corporate debt securities and
U.S. government securities.
S&P 500 INDEX FUND To achieve long-term growth of
capital by investing principally in
common stocks of companies in the
Standard & Poor's 500 Composite
Stock Price Index ("S&P 500"), an
index emphasizing
large-capitalization stocks.
INVESTMENT STRATEGIES:
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MONEY MARKET FUND The fund invests exclusively in
high-quality short-term money
market instruments.
INCOME FUND The fund purchases primarily
investment grade bonds and U.S.
government securities with
intermediate to long-term
maturities or non-rated bonds if
CIGNA Investments judges them to be
of comparable quality. The fund may
also buy below investment grade
bonds and dollar-denominated bonds
of non-U.S. issuers, subject to
certain limitations.
S&P 500 INDEX FUND The fund attempts to replicate the
composition and total return,
reduced by fund expenses, of the
S&P 500. Normally, the fund will
invest at least 80% of its total
assets in common stock of companies
which compose the S&P 500.
1
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PRINCIPAL RISKS OF INVESTING IN THE FUNDS:
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MONEY MARKET FUND 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.
An investment in the Money Market
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.
INCOME FUND Issuers of debt this fund holds may
not make (or will be perceived as
unlikely to make) timely payments of
interest and principal. This credit
risk is higher for corporate debt
than for U.S. government debt, and is
higher still for junk bonds.
Movements in the securities markets
may adversely affect the value of the
Fund's investments. This risk
includes interest rate risk, which
means that the prices of the Fund's
investments are likely to fall if
interest rates rise. Interest rate
risk is often highest for investments
with long maturities.
The price of one or more of the
investments in the Fund's portfolio
may fall, or may fail to appreciate
as expected by CIGNA Investments.
Many factors can adversely affect an
investments' performance. This risk
is greater for smaller companies,
which tend to be more vulnerable to
adverse developments.
S&P 500 INDEX FUND The fund is subject to 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.
You can lose money by investing in any of the funds. The funds may not achieve
their investment objectives.
2
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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' 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.
A Fund's past performance does not necessarily indicate how the fund will
perform in the future.
[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).
MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 1998
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 December 31, 1998 was
4.69%.
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[THE FOLLOWING INFORMATION APPEARS AS A BAR CHART GRAPHIC]
INCOME FUND - ANNUAL TOTAL RETURN
14.29% 6.15% 17.94% 7.08% 13.36% -3.12% 16.21% 1.36% 9.1% 9.26%
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 Income Fund was 8.57% (for the quarter ended 6/30/89) and the lowest
quarterly return was -2.857% (for the quarter ended 3/31/94).
INCOME FUND AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIODS ENDED DECEMBER 31, 1998
Past 1 year Past 5 years Past 10 years
Income Fund 9.26% 6.38% 8.98%
Lehman Brothers 9.47% 7.30% 9.33%
Government/Corporate Bond Index
[THE FOLLOWING INFORMATION APPEARS AS A BAR CHART GRAPHIC]
S&P 500 INDEX FUND - ANNUAL TOTAL RETURN
28.28%
1998
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S&P 500 INDEX FUND AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 1998 (COMMENCED OPERATIONS JULY 1, 1997)
Past 1 year Life of Fund
S&P 500 Index Fund 28.28% 25.95%
S&P 500 28.57% 26.22%
During the period shown in the bar chart, the highest quarterly return for the
S&P 500 Index Fund was 21.31% (for the quarter ended 12/31/98) and the lowest
quarterly return was -10.03% (for the quarter ended 9/30/98).
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.
<TABLE>
<CAPTION>
Market Income 500 Index
SHAREHOLDER FEES Fund Fund Fund
(FEES PAID DIRECTLY FROM YOUR INVESTMENT) ---- ---- ----
<S> <C> <C> <C>
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) None None None
Maximum deferred sales charge (load) None None None
Redemption fee (as a percentage
of amount redeemed) None None None
Exchange fee None None None
</TABLE>
<TABLE>
<CAPTION>
Money S&P
Market Income 500 Index
ANNUAL FUND OPERATING EXPENSES Fund Fund Fund
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS) ---- ---- ----
<S> <C> <C> <C>
Management fees 0.35% 0.50% 0.25%
Distribution and service (12b-1) fees None None None
Other expenses 0.12% 3.94% 0.18%
Total Annual Fund Operating Expenses (before waivers)/1/ 0.47% 4.44% 0.43%
Waiver of Fund Expenses (0.02%) (3.44%) (0.08%)
Total Actual Fund Operating Expenses (after waivers)/1/ 0.45% 1.00% 0.35%
</TABLE>
(1) CIGNA Investments has contractually agreed, until April 30, 2000, to waive
management fees and reimburse the funds if and to the extent total fund
operating expenses exceed 0.45% of average daily net assets for the Money Market
Fund, 1.00% for the Income Fund and 0.35% for the S&P 500 Index Fund. CIGNA
Investments may agree to continue to waive fees and reimburse expenses after
April 30, 2000.
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.
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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 for the first year, and after that are not limited and
remain the same.
1 year 3 years 5 years 10 years
Money Market Fund $46 $149 $261 $ 590
Income Fund $102 $459 $845 $1,954
S&P 500 Index Fund $36 $130 $233 $ 536
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INVESTMENT INFORMATION
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MONEY MARKET FUND
INVESTMENT OBJECTIVE
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.
DESCRIPTION OF MONEY MARKET INSTRUMENTS
This is a description of the primary types of money market instruments the fund
will own:
U.S. GOVERNMENT DIRECT OBLIGATIONS - Obligations issued by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES 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.
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
7
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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.
CONCENTRATION OF INVESTMENTS.
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. Concentrating investments in any one industry may subject the fund
to more risk than if it did not concentrate investments.
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.
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
8
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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.
INCOME FUND
INVESTMENT STRATEGIES
The Income Fund invests primarily (normally at least 65% of its assets) in a
diversified portfolio of investment grade bonds of U.S. issuers of varying
maturities. Investment grade bonds are fixed income securities that at the time
of purchase either are rated in the four highest (investment grade) categories
by nationally recognized rating services such as Moody's Investors Service and
Standard & Poor's or are unrated but judged investment grade by CIGNA
Investments.
The fund may also invest up to 20% of its assets in preferred stock or
convertible bonds and common stocks and similar equity securities when they are
acquired as parts of units with fixed income securities.
The fund may invest up to 40% of its assets in securities of non-U.S. issuers,
of which up to 25% may be payable in foreign currencies.
The fund may invest up to 20% of its assets in debt securities of less than
investment grade (i.e., securities rated Ba/BB or below by Moody's Investor
Service and Standard & Poor's). These securities are commonly known as junk
bonds.
Moody's Investors Service and Standard & Poor's ratings are described in the
appendix to this prospectus.
PRINCIPAL RISKS
The Income Fund pursues its goals by investing mainly in corporate bonds and
notes, and to a lesser degree, in convertible bonds and preferred stocks. These
investments are commonly known as fixed-income investments.
* FIXED-INCOME INVESTMENTS - RISKS IN GENERAL. The value of a fixed-income
investment may fall as a result of factors directly relating to the company
issuing the investment, such as decisions made by its management or a reduction
in its credit rating. An investment's value may also fall because of factors
affecting many companies, such as increased production costs. The value of an
investment may also be affected by general changes in financial market
conditions, such as changing interest rates or currency exchange rates.
* INTEREST RATE RISK. The values of fixed-income investments usually rise and
fall in response to changes in interest rates. Declining interest rates
generally raise the value of existing fixed-income investments, and rising
interest rates generally lower the value of existing fixed-income investments.
Changes in the values of fixed-income investments usually will not affect the
amount of income a fund
9
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receives from them, but will affect the value of the Fund's shares. Interest
rate risk is often greater for investments with longer maturities.
The Income Fund may buy investments that give the issuing company the option to
"call," or redeem, these investments before their maturity date. If an
investment were to be "called" by a company during a time of declining interest
rates, the fund might have to reinvest the proceeds in an investment offering a
lower yield, and therefore might not benefit from any increase in value as a
result of declining interest rates.
* CREDIT RISK. Investors normally expect to be compensated in proportion to the
risk they assume. Fixed-income investments of companies with poor credit usually
offer higher yields than those of companies with better credit. Higher-rated
investments generally offer lower-credit risk, but not necessarily lower
interest rate risk. The value of a higher-rated investment still fluctuates in
response to changes in interest rates. The funds may at times invest in "zero
coupon" bonds and "payment-in-kind" bonds. Zero coupon bonds are issued at less
than face value and make payments of interest only at maturity rather than at
intervals during the life of the bond. Payment-in-kind bonds give the issuing
company the option to make interest payments in additional bonds rather than in
cash. Both kinds of bonds allow a company to avoid generating cash to make
current interest payments. These bonds therefore involve greater credit risk and
are typically subject to greater price fluctuations than bonds that pay current
interest in cash.
* LOWER-RATED INVESTMENTS. Up to 20% of the Income Fund's investments may be in
below investment grade securities. Fixed-income investments rated BB or lower by
Standard & Poor's (or its equivalent) are considered below investment grade and
are commonly known as "junk bonds." The lower ratings of these investments
reflect a greater possibility that the issuing companies may be unable to make
timely payments of interest and principal and thus default. There may be an
increased risk of default in adverse economic conditions. If this happens, or is
perceived as likely to happen, the values of those investments will usually
drop. A default or expected default could also make it difficult for a fund to
sell the investments at prices approximating the values the fund had previously
placed on them. Because junk bonds are traded mainly by institutions, they
usually have a limited market, which may at times make it difficult for the fund
to establish their fair value. Credit ratings are based largely on the issuing
company's historical financial condition and the rating agencies' investment
analysis at the time of purchase. The rating assigned to any particular
investment does not necessarily reflect the issuing company's current financial
condition and does not reflect an assessment of an investment's volatility or
liquidity.
* NON-U.S. INVESTMENTS. Non-U.S. investments involve certain special risks. For
example, their values may drop in response to changes in currency exchange
rates, unfavorable political and legal developments, unreliable or untimely
information, or economic and financial instability. In addition, the liquidity
of these investments may be more limited than domestic investments, which means
a fund may at times be unable to sell them at desirable prices. Non-U.S.
settlement procedures may also involve additional risks. These risks are
generally greater in the case of "emerging markets" that typically have less
developed legal and financial systems. Certain of these risks may also apply to
some extent to domestic investments that are denominated in foreign currencies
or that are traded in foreign markets, or to investments in U.S. companies that
have significant foreign operations.
* SMALLER COMPANIES. The Income Fund may invest in small and relatively less
well-known companies with market capitalizations of less than $1 billion. These
companies are more likely than larger companies to have limited product lines,
markets or financial resources, or to depend on a small, less experienced
management group. Investments in smaller companies may trade less frequently and
in limited volume, and their prices may fluctuate more than investments in other
companies. These investments may therefore be more vulnerable to adverse
developments.
10
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* ILLIQUID INVESTMENTS. CIGNA Investments believes that opportunities to earn
high yields may exist in investments that are not liquid and that may be
considered speculative. The sale of these investments is usually restricted or
limited by law, which may mean that the fund will not be able to sell them when
CIGNA Investments considers it is desirable to do so or may be able to sell them
only at less than their market value. The Income Fund may invest up to 15% of
its assets in illiquid investments.
* FREQUENT TRADING. The fund may buy and sell investments relatively often,
which involves higher expenses, including brokerage commissions, and may
increase the amount of taxes payable by shareholders.
S&P INDEX FUND
INVESTMENT OBJECTIVE AND RELATED RISKS
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.
The fund is subject to market risk --i.e., the possibility that common stock
prices will decline over short or even extended periods. The U.S. stock market
tends to be cyclical, with periods when stock prices generally rise and periods
when prices generally decline.
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 CIGNA Investments. Except in
extraordinary circumstances, the fund will not invest in short-term fixed income
securities or hold assets in cash for temporary, defensive purposes.
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
11
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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 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.
TEMPORARY, DEFENSIVE POSITIONS. The Income and S&P 500 Index Funds may, from
time to time, take temporary defensive positions that are inconsistent with
their principal investment strategies by investing in short-term fixed income
securities 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.
CHANGES IN POLICIES. The funds' Trustees may change the funds' goals, investment
strategies and other policies without shareholder approval, except as otherwise
indicated.
MANAGEMENT OF THE FUNDS
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, 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.
12
<PAGE>
Pursuant to a Master Investment Advisory Agreement, CIGNA Investments manages
the investment and reinvestment of the assets of the fund.
Subject to the control and periodic review of the Board of Trustees, CIGNA
Investments determines what investments shall be purchased, held, sold or
exchanged by the Fund. CIGNA Investments is also responsible for overall
management of the business affairs of the Fund.
As full compensation for the investment management and all other services
rendered by CIGNA Investments, the funds paid the following amounts to CIGNA
Investments for calendar year 1998.
<TABLE>
<CAPTION>
FUND DOLLAR AMOUNT % OF Fund's AVERAGE DAILY NET ASSETS
- ---- ------------- ------------------------------------
<S> <C> <C>
Money Market Fund $882,061 0.35%
Income Fund $ 6,383 0.50%
S&P 500 Index Fund $431,355 0.25%
</TABLE>
Thomas R. Foley has had primary responsibility for the day-to-day management of
the Income Fund since 1991. Since 1995 he has been a Managing Director of CIGNA
Investments. Before that he was a Vice President of CIGNA Investments.
YEAR 2000 ISSUES.
The funds could be adversely affected if the computer systems used by CIGNA
Investments and the funds' other service providers do not properly process and
calculate date-related information relating to the end of this century and the
beginning of the next. While year 2000-related computer problems could have a
negative effect on the funds, both in their operations and in their investments,
CIGNA Investments is working to avoid such problems and to obtain assurances
from service providers that they are taking similar steps. No assurances,
though, can be provided that the funds will not be adversely impacted by these
matters.
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 Income and S&P 500 Index 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 value. 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.
13
<PAGE>
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
HOW TO PURCHASE SHARES
The funds offer their institutional class to institutional investors such as
financial institutions, endowments, foundations and corporations.
Shares of the funds are sold on a continuous basis at each fund's net asset
value per share (see "Pricing of Shares"). The funds do not issue share
certificates.
All institutional investors must purchase shares through CIGNA Financial
Services, Inc.. ("CFS"). Orders placed through CFS are priced as of the close of
business on the day the order is received by CFS, provided Federal Funds are
received by 4:00 p.m. Eastern Time. A completed application is required to
establish a new brokerage account. CFS must accept all purchase orders. CFS
reserves the right to reject any purchase order. Additional information
regarding establishing a brokerage account and purchasing shares may be obtained
by calling CFS at 1-888-CIGNA-FS (244-6237)
The funds reserve the right to limit purchases of shares for any one account or
related accounts to 2% of the total net asset value of a fund, or may refuse to
sell shares of a fund to any person.
HOW TO REDEEM SHARES
All institutional class investors must redeem shares through their brokerage
account with CFS. Shares will be redeemed at the net asset value next determined
after CFS receives the redemption request. CFS may require a signature guarantee
before it makes payment on redemption orders. For additional information
regarding redeeming shares from your brokerage account, call CFS at
1-888-CIGNA-FS (244-6237).
FURTHER REDEMPTION INFORMATION
Redemptions from a fund may not be processed if a redemption request is not
submitted in proper form. To be in proper form, you must furnish a taxpayer
identification number and address. A fund 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 the fund issues shares before the investor's check
has cleared, the fund may not send redemption proceeds until the check has
cleared, which may take up to 15 days.
14
<PAGE>
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 NAV.
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.
Savings and Retirement 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
savings or retirement plan. Participants' plan administrators or employers can
explain how frequently exchanges are allowed.
DIVIDENDS AND DISTRIBUTIONS
The funds declare dividends daily and distribute dividends monthly, except for
the S&P 500 Index Fund, which declares and distributes dividends 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
In general, any dividends and short-term capital gain distributions you receive
from the funds are taxable as ordinary income. Distributions of other capital
gains, if any, are generally taxable as capital gains. Ordinary income and
capital gains generally are taxed at different rates. 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
funds.
The sale or exchange of shares in your account may produce a gain or loss, and
is a taxable event. 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.
Your investment in the funds could have additional tax consequences. Also, this
discussion relates only to U.S. federal income tax consequences of investing in
the funds; the consequences under other tax laws may differ. Please consult your
tax professional for assistance.
15
<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 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.
CIGNA MONEY MARKET FUND
<TABLE>
<CAPTION>
CIGNA MONEY MARKET FUND
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <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
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.03
Net realized and unrealized gain on securities - - - - -
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.03)
Distributions from capital gains - - - - -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (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
======== ======== ======== ======== ========
TOTAL RETURN * 5.18% 5.27% 4.91% 5.33% 3.43%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 229,619 $ 171,065 $ 120,505 $ 1,034 $ 16,693
Ratio of operating expenses to average net assets ** 0.45% 0.44% 0.45% 0.80% 1.00%
Ratio of net investment income to average net assets *** 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
were 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 were 5.03%, 5.07%, 4.71%, 4.91%, and 3.22%
respectively, for the 1998, 1997, 1996, 1995 and 1994 periods.
<PAGE>
CIGNA S&P 500 INDEX FUND
YEARS ENDED DECEMBER 31,
1998 1997*
- ------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.95 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income + 0.13 0.07
Net realized and unrealized gain on securities 2.97 0.95
----- -----
TOTAL FROM INVESTMENT OPERATIONS 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 $ 13.84 $ 10.95
======== ========
TOTAL RETURN 28.28% 10.23%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 291,265 $ 105,845
Ratio of operating expenses to average net assets 0.35% a 0.18% a**
Ratio of net investment income to average net
assets 1.27% b 0.79% b**
Portfolio turnover 3% 4%
* For the period from July 1, 1997 (commencement of operations) through
December 31, 1997.
** Not annualized.
a. Ratio of expenses to average net assets prior to the reduction of advisory
fee was 0.43% and 0.36%, respectively, for the period ended December 31, 1998
and for the six months ended December 31, 1997.
b. Ratio of net investment income to average net assets prior to the reduction
of advisory fee was 1.18% and 0.61%, respectively, for the year ended
December 31, 1998 and for 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.
17
<PAGE>
<TABLE>
<CAPTION>
CIGNA INCOME FUND
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 0.98 $ 0.94 $ 1.02 $ 0.92 $ 1.01
INCOME FROM INVESTMENT OPERATIONS
Net investment income + 0.05 0.05 0.05 0.06 0.06
Net realized and unrealized gain on securities 0.03 0.04 (0.05) 0.09 (0.09)
------ ------ ------ ------ ------
TOTAL FROM INVESTMENT OPERATIONS 0.08 0.09 - 0.15 (0.03)
------ ------ ------ ------ ------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.06)
Distributions from capital gains - - (0.03) - -
------ ------ ------ ------ ------
TOTAL DISTRIBUTIONS (0.05) (0.05) (0.08) (0.05) (0.06)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $ 1.01 $ 0.98 $ 0.94 $ 1.02 $ 0.92
======== ======== ======== ======== ========
TOTAL RETURN 9.26% 9.10% 1.36% 16.21% -3.12%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 1,331 $ 1,222 $ 1,121 $ 1,105 $ 15,210
Ratio of operating expenses to average net assets 1.00% c 1.00% c 1.00% c 0.95% c 1.00% c
Ratio of net investment income to average net
assets 5.06% d 5.42% d 5.33% d 6.50% d 6.37% d
Portfolio turnover 54% 7% 0% 45% 8%
</TABLE>
c. Ratios of expenses to average net assets prior to the reduction of advisory
fee were 4.44%, 5.31%, 5.62%, 1.37% and 1.15%, respectively, For the years ended
December 31, 1998, 1997, 1996, 1995 and 1994.
d. Ratios of net investment income to average net assets prior to the reduction
of advisory fee were 1.65%, 1.11%, 0.72%, 6.08% and 6.22%, respectively, for the
years ended December 31, 1998, 1997, 1996, 1995 and 1994. + 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.
18
<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.
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)
You can review and copy the funds' reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
For a fee, by writing to or calling the Public Reference Room of the Commission,
Washington, DC 20549-6009;
Free from the Commission's Internet website at:
http://www.sec.gov.
Information on the operation of the public reference room may be obtained by
calling the Commission at: 1-800-SEC-0330.
CIGNA FUNDS GROUP
CIGNA MONEY MARKET FUND
CIGNA INCOME FUND
CIGNA S&P 500 INDEX FUND
INSTITUTIONAL CLASS
(Investment
Company Act
File No. 811-1646)
<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 obligors 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
<PAGE>
CIGNA FUNDS GROUP
- --------------------------------------------------------------------------------
PROSPECTUS
MAY 1, 1999 CIGNA MONEY MARKET FUND
RETAIL SERVICE CLASS
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>
TABLE OF CONTENTS
PAGE NUMBER
Summary........................................................................1
Bar Chart and Performance Table................................................2
Fees and Expenses of the Fund..................................................3
Investment Information.........................................................4
Management of the Fund.........................................................6
Year 2000 Issues...............................................................6
Pricing of Shares..............................................................6
Purchase and Redemption of Shares..............................................7
Tax Considerations.............................................................7
Distributions and Federal Income...............................................8
Financial Highlights...........................................................9
<PAGE>
<TABLE>
<S> <C>
CIGNA Money Market Fund's investment objective 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 strategy The Fund invests exclusively in high-quality short-term money
market instruments.
Principal risks of investing in the Fund A major change in interest rates or a default on the Fund's
investments could cause the value of your investment at $1.00 per share,
it is possible to lose money by investing in the Fund.
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.
</TABLE>
1
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide some indication of the risks of
investing in the Fund. The bar chart shows changes in the performance of the
Fund's institutional class shares from year to year over a ten year period.
The table shows how the Fund's institutional class average annual returns for
one, five and ten years compare to those of 3 month U.S. Treasury bills.
The Fund's past performance does not necessarily indicate how the Fund will
perform in the future.
The return for the retail service class of shares of the Fund will be lower than
the institutional class returns shown in the bar chart, due to the expenses of
the retail service class.
[THE INFORMATION SET FORTH BELOW APPEARS AS A BAR CHART GRAPHIC]
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
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).
AVERAGE ANNUAL TOTAL RETURNS*
FOR THE PERIODS ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
Past 1 year Past 5 years Past 10 years
<S> <C> <C> <C>
Money Market Fund 5.18% 4.82% 5.22%
3-Month U.S. Treasury bills 5.33% 5.31% 5.57%
</TABLE>
The Fund's 7-day annualized yield as of December 31, 1998 was 4.69%.
*Returns shown are for the Fund's institutional class, which is not
offered in this prospectus. The retail service class would have similar
annual returns because the shares are invested in the same portfolio of
securities and the annual returns would differ only to the extent that
the classes do not have the same expenses. The retail service class
carries 12b-1 and sub-accounting fees while the institutional class
does not, so the annual returns for the retail service class will be
lower than institutional class returns.
2
<PAGE>
FEES AND EXPENSES OF THE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
RETAIL SERVICE CLASS SHARES OF THE FUND.
SHAREHOLDER FEES
(FEES PAID DIRECTLY FROM YOUR INVESTMENTS)
Maximum sales charge (load) imposed on
purchases (as a percentage of offering price) None
Maximum deferred sales charge (load)
(as a percentage of offering price) None
Redemption fee (as a percentage
of amount redeemed) None
Exchange fee None
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management fees 0.35%
Distribution and service (12b-1) fees 0.35%
Other expenses 0.30%
Total annual Fund operating expenses 1.00%
EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE FUND
WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS.
The Example assumes that you invest $10,000 in the retail service class of the
Fund for the time periods indicated and then redeem all of your shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
1 year 3 years 5 years 10 years
$102 $319 $554 $1,228
3
<PAGE>
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
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.
DESCRIPTION OF MONEY MARKET INSTRUMENTS
This is a description of the primary types of money market instruments the Fund
will own:
U.S. GOVERNMENT DIRECT OBLIGATIONS - Obligations issued by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES 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.
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.
4
<PAGE>
CONCENTRATION OF INVESTMENTS.
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. Concentrating investments in any one industry may subject the Fund
to more risk than if it did not concentrate investments.
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.
INVESTMENT POLICIES
The Fund may follow operational policies that are more restrictive than its
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.
5
<PAGE>
MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
The investment adviser to the Fund is 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.
Pursuant to a Master Investment Advisory Agreement, CIGNA Investments manages
the investment and reinvestment of the assets of the Fund.
Subject to the control and periodic review of the Board of Trustees, CIGNA
Investments determines what investments shall be purchased, held, sold or
exchanged by the Fund. CIGNA Investments is also responsible for overall
management of the business affairs of the Fund.
As full compensation for the investment management and all other services
rendered by CIGNA Investments, the Fund paid CIGNA Investments $882,061 for
calendar year 1998. This represented 0.35% of the Fund's average daily net
assets.
YEAR 2000 ISSUES.
- --------------------------------------------------------------------------------
The fund could be adversely affected if the computer systems used by CIGNA
Investments and the fund's other service providers do not properly process and
calculate date-related information relating to the end of this century and the
beginning of the next. While year 2000-related computer problems could have a
negative effect on the fund, both in its operations and in its investments,
CIGNA Investments is working to avoid such problems and to obtain assurances
from service providers that they are taking similar steps. No assurances,
though, can be provided that the fund will not be adversely impacted by these
matters.
PRICING OF SHARES
- --------------------------------------------------------------------------------
The price of Fund shares is based on the 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 the Fund by dividing the number of outstanding
shares of each class into the net assets of the Fund attributable to that class.
Net assets are the excess of the 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 price at which a purchase or
redemption is effected is based on the next calculation of net asset value after
the order is placed. Orders for purchases and redemptions will not be processed
if received when the NYSE is closed, except on Good Friday if banks are open.
VALUATION OF MONEY MARKET INVESTMENTS
The 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. See the Statement of Additional
Information for more information on amortized cost procedures.
6
<PAGE>
PURCHASE AND REDEMPTION OF SHARES
- --------------------------------------------------------------------------------
HOW TO PURCHASE SHARES
The Fund offers its retail service class to customers of financial institutions
such as broker-dealers and banks.
Shares of the Fund are sold on a continuous basis without any initial sales
charge or contingent deferred charge at the Fund's net asset value per share
(see "Pricing of Shares"). The Fund does not issue share certificates.
All retail service class investors must purchase shares through CIGNA Financial
Services, Inc. ("CFS"). Orders placed through CFS are priced as of the close of
business on the day the order is received by CFS, provided Federal funds are
received by 4:00 p.m. Eastern Time. A completed application is required to
establish a new brokerage account. CFS must accept all purchase orders. CFS
reserves the right to reject any purchase order. Additional information
regarding establishing a brokerage account and purchasing shares may be obtained
by calling CFS at 1-888-CIGNAFS (244-6237).
ADDITIONAL INFORMATION:
The Fund reserves the right to limit purchases of shares for any one account or
related accounts to 2% of the total net asset value of the Fund, or may refuse
to sell shares of the Fund to any person.
HOW TO REDEEM SHARES
All retail service class investors must redeem shares through their brokerage
account with CFS. Shares will be redeemed at the net asset value next determined
after CFS receives the redemption request. CFS may require a signature guarantee
before it makes payment on redemption orders. For additional information
regarding redeeming shares from your brokerage account, call CFS at
1-888-CIGNAFS (244-6237).
FURTHER REDEMPTION INFORMATION.
Redemptions from the Fund may not be processed if a redemption request is not
submitted in proper form. To be in proper form, you must furnish a taxpayer
identification number and address. The Fund 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 the Fund issues shares before the investor's check
has cleared, the Fund may not send redemption proceeds until the check has
cleared, which may take up to 15 days.
DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------
The Fund declares dividends daily and distributes dividends monthly.
All distributions will be automatically reinvested for you in shares of the Fund
at the net asset value determined on the record date.
TAX MATTERS
- --------------------------------------------------------------------------------
TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS
In general, any dividends and short-term capital gain distributions you receive
from the Fund are taxable as ordinary income. Distributions of other capital
gains, if any, are generally taxable as capital gains. Ordinary income and
capital gains generally are taxed at different rates. The rates that you will
pay on any capital gains distributions will depend on how long the Fund holds
its portfolio securities. This is true no
7
<PAGE>
matter how long you have owned your shares in the Fund and even though your
distributions are reinvested in shares of the Fund.
Every year, the Fund will send you information detailing the amount of ordinary
income and capital gains distributed to you for the previous year.
The sale or exchange of shares in your account may produce a gain or loss, and
is a taxable event. However, the Fund seeks to maintain a constant net asset
value of $1.00 per share, so a sale or exchange generally will not result in a
gain or loss.
Your investment in the Fund could have additional tax consequences. Please
consult your tax professional for assistance.
BACKUP WITHHOLDING
By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.
DISTRIBUTION ARRANGEMENTS
- --------------------------------------------------------------------------------
CFS acts as the principal underwriter and distributor of the Fund's shares.
DISTRIBUTION PLAN AND SHAREHOLDER SERVICES
The Fund has adopted a plan under rule 12b-1 of the 1940 Act that allows the
Fund to pay distribution fees for the sale and distribution of its shares and
for services provided to shareholders. Because these fees are paid out of the
Fund's 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. Under the 12b-1 plan, the Fund will pay CFS out of the assets of the
retail service class up to 0.35% of the average daily net assets to pay
distribution and shareholder servicing fees.
Under the shareholder servicing component of the 12b-1 plan, the Fund will pay
CFS 0.25% of the average daily net assets of the retail service class for
providing shareholder services to shareholders of this class of the Fund.
Shareholder services include, but are not limited to, receiving, aggregating,
and processing shareholder or beneficial owner orders; providing and maintaining
retirement account 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 administrative services.
Under the distribution component of the 12b-1 plan, the Fund will pay CFS up to
0.10% of the average daily net assets of the retail service class to pay CFS for
expenses of distribution such as preparing and distributing sales and marketing
materials.
MULTIPLE CLASSES
The Fund presently offers two methods of purchasing shares (institutional class
and retail service class), enabling the Fund 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. This prospectus offers
the retail service class only. The retail service class pays a 12b-1 fee, as
described above. The institutional class does not pay a 12b-1 fee.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Fund's financial performance for the past 5 years. 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 institutional class of the Fund (assuming
reinvestment of all dividends and distributions). This information has
been audited by PricewaterhouseCoopers LLP, whose report, along with
the Fund's financial statements, are included in the annual report
which is available upon request.
<TABLE>
<CAPTION>
CIGNA MONEY MARKET FUND
(INSTITUTIONAL CLASS)
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <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
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.03
Net realized and unrealized gain on securities - - - - -
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.03)
Distributions from capital gains - - - - -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (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
======== ======== ======== ======== ========
TOTAL RETURN * 5.18% 5.27% 4.91% 5.33% 3.43%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 229,619 $ 171,065 $ 120,505 $ 1,034 $ 16,693
Ratio of operating expenses to average net assets ** 0.45% 0.44% 0.45% 0.80% 1.00%
Ratio of net investment income to average net assets *** 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 were 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 were 5.03%, 5.07%, 4.71%, 4.91% and 3.22%
respectively, for the 1998, 1997, 1996, 1995 and 1994 periods.
9
<PAGE>
For investors who want more information about the Fund, the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the Fund's investments
is available in the Fund's annual and semi-annual reports to shareholders. In
the Fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Fund and is incorporated into this prospectus by
reference.
You can get free copies of reports and SAIs, request other information and
discuss your questions about the Fund by contacting the Fund at:
CIGNA Financial Services
P.O. Box 150476
Hartford, CT 06115-0476
Telephone: 1-888-CIGNA-FS (244-6237)
You can review and copy the Fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
For a fee, by writing to or calling the Public Reference Room of the Commission,
Washington, DC 20549-6009;
Free from the Commission's Internet website at:
http://www.sec.gov.
Information on the operation of the public reference room may be obtained by
calling the Commission at: 1-800-SEC-0330.
CIGNA Funds Group
CIGNA Money Market Fund
Retail Services Class
(Investment
Company Act
File No. 811-1646)
10
<PAGE>
CIGNA FUNDS GROUP
- --------------------------------------------------------------------------------
PROSPECTUS CIGNA MONEY MARKET FUND
MAY 1, 1999
INSTITUTIONAL CLASS
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>
TABLE OF CONTENTS
PAGE NUMBER
Summary........................................................................1
Bar Chart and Performance Table................................................2
Fees and Expenses of the Fund..................................................3
Investment Information.........................................................4
Management of the Fund.........................................................6
Year 2000 Issues...............................................................6
Pricing of Shares..............................................................6
Purchase and Redemption of Shares..............................................7
Dividends and Distributions....................................................8
Tax Matters....................................................................8
Financial Highlights...........................................................9
<PAGE>
INVESTMENT OBJECTIVE: 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.
INVESTMENT STRATEGY: The fund invests exclusively in high-quality
- -------------------- short-term money market instruments.
PRINCIPAL RISKS OF A major change in interest rates or a default
- ------------------ on the fund's investments could cause the
INVESTING IN THE FUND: value of your investment in the fund to
---------------------- change.
An investment in the Money Market 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.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
1
<PAGE>
BAR CHART AND PERFORMANCE TABLE
The bar chart and table shown below provide some indication of the risks of
investing in the fund. The bar chart shows changes in the performance of the
fund's shares from year to year over a ten-year period.
The table shows how the average annual returns of the fund's shares, for one,
five and ten years compare to those of a broad measure of market performance.
A fund's past performance does not necessarily indicate how the fund will
perform in the future.
[THE INFORMATION SET FORTH BELOW 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).
MONEY MARKET FUND AVERAGE ANNUAL TOTAL RETURNS
FOR THE PERIODS ENDED DECEMBER 31, 1998
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 December 31, 1998 was
4.69%.
2
<PAGE>
FEES AND EXPENSES OF THE FUND
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
SHAREHOLDER FEES
(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
ANNUAL FUND OPERATING EXPENSES
(EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS)
Management fees 0.35%
Distribution and service (12b-1) fees None
Other expenses 0.12%
Total Annual Fund Operating Expenses (before waivers)1 0.47%
Waiver of Fund Expenses (0.02%)
Total Actual Fund Operating Expenses (after waivers)1 0.45%
(1) CIGNA Investments has contractually agreed, until April 30, 2000, to waive
management fees and reimburse the fund if and to the extent total fund operating
expenses exceed 0.45% of average daily net assets. CIGNA Investments may agree
to continue to waive fees and reimburse expenses after April 30, 2000.
EXAMPLE
THIS EXAMPLES IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN THE FUND
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 The fund's operating expenses reflect contractual expense limitations
for the first year, and after that are not limited and remain the
same.
1 year 3 years 5 years 10 years
$46 $149 $261 $ 590
3
<PAGE>
INVESTMENT INFORMATION
MONEY MARKET FUND
INVESTMENT OBJECTIVE
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.
DESCRIPTION OF MONEY MARKET INSTRUMENTS
This is a description of the primary types of money market instruments the fund
will own:
U.S. GOVERNMENT DIRECT OBLIGATIONS - Obligations issued by the U.S. Treasury.
U.S. GOVERNMENT AGENCIES 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.
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
4
<PAGE>
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.
CONCENTRATION OF INVESTMENTS.
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. Concentrating investments in any one industry may subject the fund
to more risk than if it did not concentrate investments.
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.
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
5
<PAGE>
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.
MANAGEMENT OF THE FUND
The investment adviser to the fund is 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.
Pursuant to a Master Investment Advisory Agreement, CIGNA Investments manages
the investment and reinvestment of the assets of the fund.
Subject to the control and periodic review of the Board of Trustees, CIGNA
Investments determines what investments shall be purchased, held, sold or
exchanged by the fund. CIGNA Investments is also responsible for overall
management of the business affairs of the fund.
As full compensation for the investment management and all other services
rendered by CIGNA Investments, the fund paid $882,061 (0.35% of the fund's
average daily net assets) to CIGNA Investments for calendar year 1998.
YEAR 2000 ISSUES.
The fund could be adversely affected if the computer systems used by CIGNA
Investments and the fund's other service providers do not properly process and
calculate date-related information relating to the end of this century and the
beginning of the next. While year 2000-related computer problems could have a
negative effect on the fund, both in its operations and in its investments,
CIGNA Investments is working to avoid such problems and to obtain assurances
from service providers that they are taking similar steps. No assurances,
though, can be provided that the fund will not be adversely impacted by these
matters.
PRICING OF SHARES
The price of fund shares is based on the 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.
6
<PAGE>
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
HOW TO PURCHASE SHARES
The fund offers its institutional class to institutional investors such as
financial institutions, endowments, foundations and corporations.
Shares of the fund are sold on a continuous basis at the fund's net asset value
per share (see "Pricing of Shares"). The fund does not issue share certificates.
All institutional investors must purchase shares through CIGNA Financial
Services, Inc.. ("CFS"). Orders placed through CFS are priced as of the close of
business on the day the order is received by CFS, provided Federal Funds are
received by 4:00 p.m. Eastern Time. A completed application is required to
establish a new brokerage account. CFS must accept all purchase orders. CFS
reserves the right to reject any purchase order. Additional information
regarding establishing a brokerage account and purchasing shares may be obtained
by calling CFS at 1-888-CIGNA-FS (244-6237)
The fund reserves the right to limit purchases of shares for any one account or
related accounts to 2% of the total net asset value of a fund, or may refuse to
sell shares of a fund to any person.
HOW TO REDEEM SHARES
All institutional class investors must redeem shares through their brokerage
account with CFS. Shares will be redeemed at the net asset value next determined
after CFS receives the redemption request. CFS may require a signature guarantee
before it makes payment on redemption orders. For additional information
regarding redeeming shares from your brokerage account, call CFS at
1-888-CIGNA-FS (244-6237).
FURTHER REDEMPTION INFORMATION
Redemptions from a fund may not be processed if a redemption request is not
submitted in proper form. To be in proper form, you must furnish a taxpayer
identification number and address. A fund 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 the fund issues shares before the investor"s check
has cleared, the fund may not send redemption proceeds until the check has
cleared, which may take up to 15 days.
7
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The fund declares dividends daily and distribute dividends monthly.
All distributions will be automatically reinvested for you in shares of the fund
at the net asset value determined on the record date.
TAX MATTERS
TAX EFFECTS OF DISTRIBUTIONS AND TRANSACTIONS
In general, any dividends and short-term capital gain distributions you receive
from the fund are taxable as ordinary income. Distributions of other capital
gains, if any, are generally taxable as capital gains. Ordinary income and
capital gains generally are taxed at different rates. 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.
The sale or exchange of shares in your account may produce a gain or loss, and
is a taxable event. 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.
8
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
fund's financial performance for the past 5 years. 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 has been audited by
PricewaterhouseCoopers LLP, whose report, along with the fund's
financial statements, are included in the annual report which is
available upon request.
<TABLE>
<CAPTION>
CIGNA MONEY MARKET FUND
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <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
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.05 0.05 0.05 0.05 0.03
Net realized and unrealized gain on securities - - - - -
-------- -------- -------- -------- --------
TOTAL FROM INVESTMENT OPERATIONS 0.05 0.05 0.05 0.05 0.03
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.03)
Distributions from capital gains - - - - -
-------- -------- -------- -------- --------
TOTAL DISTRIBUTIONS (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
======== ======== ======== ======== ========
TOTAL RETURN * 5.18% 5.27% 4.91% 5.33% 3.43%
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 229,619 $ 171,065 $ 120,505 $ 1,034 $ 16,693
Ratio of operating expenses to average net assets ** 0.45% 0.44% 0.45% 0.80% 1.00%
Ratio of net investment income to average net assets *** 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
were 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 were 5.03%, 5.07%, 4.71%, 4.91%, and 3.22%
respectively, for the 1998, 1997, 1996, 1995 and 1994 periods.
9
<PAGE>
For investors who want more information about the fund the following documents
are available free upon request:
ANNUAL/SEMI-ANNUAL REPORTS: Additional information about the fund's investments
is available in the fund's annual and semi-annual reports to shareholders. In
the fund's annual report, you will find a discussion of the market conditions
and investment strategies that significantly affected the fund's 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.
You can get free copies of reports and SAIs, request other information and
discuss your questions about the fund by contacting the fund at:
CIGNA Financial Services
P.O. Box 150476
Hartford, CT 06115-0476
Telephone: 1-888-CIGNA-FS (244-6237)
You can review and copy the fund's reports and SAIs at the Public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
For a fee, by writing to or calling the Public Reference Room of the Commission,
Washington, DC 20549-6009;
Free from the Commission's Internet website at:
http://www.sec.gov.
Information on the operation of the public reference room may be obtained by
calling the Commission at: 1-800-SEC-0330.
CIGNA FUNDS GROUP
CIGNA MONEY MARKET FUND
INSTITUTIONAL CLASS
(Investment Company Act
File No. 811-1646)
10
<PAGE>
C I G N A F U N D S G R O U P
---------------------------------
CIGNA Money Market Fund
CIGNA Income Fund
CIGNA High Yield Fund
CIGNA S&P 500 Index 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
M A Y 1, 1 9 9 9
This Statement of Additional Information is not a prospectus, but should be read
in conjunction with the prospectus for CIGNA Money Market Fund, CIGNA Income
Fund, CIGNA High Yield Fund and CIGNA S&P 500 Index Fund (the "Funds"), series
of CIGNA Funds Group ("CFG" or the "Trust") having the same date as the date of
this Statement of Additional Information. 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, 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, 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.
Page 1
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
General Information About the Trust...........................................3
- -----------------------------------
The Funds, Their Investment Objectives and Policies...........................3
- ---------------------------------------------------
Classification................................................................3
- --------------
Investment Strategies and Risks...............................................3
- -------------------------------
Fund Policies ...............................................................21
- -------------
Management of the Trust......................................................22
- -----------------------
Control Persons and Principal Holders of Securities..........................25
- ---------------------------------------------------
Investment Advisory and Other Services.......................................26
- --------------------------------------
Underwriter..................................................................28
- -----------
Custodian and Transfer Agent.................................................30
- ----------------------------
Independent Accountants......................................................30
- -----------------------
Brokerage Allocation and Other Practices.....................................30
- ----------------------------------------
Capital Stock................................................................32
- -------------
Purchase, Redemption and Pricing of Securities...............................33
- ----------------------------------------------
Tax Matters..................................................................35
- -----------
Performance Information......................................................36
- -----------------------
Redemptions Paid In Cash.....................................................40
- ------------------------
Financial Statements.........................................................40
- --------------------
Page 2
<PAGE>
GENERAL INFORMATION ABOUT THE TRUST
- -----------------------------------
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. Prior to March 1996,
CIGNA Money Market Fund and CIGNA Income Fund were known as CIGNA Annuity Money
Market Fund and CIGNA Annuity Income Fund. 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
- ---------------------------------------------------
CLASSIFICATION
- --------------
The Funds are diversified, open-end management investment companies.
INVESTMENT STRATEGIES AND RISKS
- -------------------------------
MONEY MARKET FUND
- -----------------
The types of money market instruments in which the Money Market Fund presently
invests are listed in the prospectus and in this Statement of Additional
Information. If the Trustees determine 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.
Page 3
<PAGE>
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 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
Page 4
<PAGE>
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 Funds 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
Page 5
<PAGE>
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.
INCOME FUND
- -----------
In pursuing its investment objective, the Income Fund will principally invest in
the following types of interest-bearing securities:
(1) Marketable debt securities that are rated at the time of purchase
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 balance of the Income Fund's assets may 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 Income Fund also may purchase and sell interest rate
Page 6
<PAGE>
futures contracts and purchase options on futures contracts as described under
"Futures Contracts" and "Options on Futures Contracts."
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.
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.
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,
Page 7
<PAGE>
the purchaser of the warrant risks the loss of the entire purchase price of the
warrant.
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 the Income
Fund may not necessarily invest in instruments paying the highest available
yield at a particular time. This Fund may, consistent with its 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. This Fund will 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 to be held by this Fund, may result in frequent changes in portfolio
holdings. There usually are no brokerage commissions as such paid in connection
with the purchase of securities of the type in which this Fund may invest. See
"Brokerage Allocation" for a discussion of underwriters' commissions and
dealers' spreads involved in the purchase and sale of portfolio securities.
HIGH YIELD FUND
- ---------------
As noted in the prospectus, the High Yield Fund purchases principally debt
securities that are rated Ba or lower by Moody's or BB or lower by S&P.
Included among the high-yield, high risk securities in which the Fund 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
Page 8
<PAGE>
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 high-yield, high risk bonds
are typically higher than those associated with the purchase of high grade
bonds.
The Fund may also invest in preferred 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, the Fund will not invest more than 10% of
its assets in preferred stock.
The 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.
HIGH YIELD FUND AND INCOME FUND: RISK FACTORS
- ----------------------------------------------
As noted in the prospectus, the High Yield Fund, and, to a lesser extent, the
Income Fund invest in debt securities of less than investment grade (i.e.,
securities rated Ba/BB or below by Moody's and S&P). Such 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 high yield bonds and adversely effect their values.
Such an economic downturn may be expected to result in increased price
volatility of high yield bonds and of the value of the Fund's shares, and an
increase in issuers' defaults on such bonds.
Also, issuers of high yield bonds are substantially leveraged, which may impair
their ability to meet their obligations. In some cases, the high yield
securities in which a Fund invest are subordinated to the prior payment of
senior indebtedness, thus potentially limiting
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the Fund's ability to recover full principal or to receive payments when senior
securities are in default. When the secondary market for high yield 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
difficult, and judgement plays a greater role in the valuation of portfolio
securities. Also, increased illiquidity of the high yield 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. High yield bonds have speculative
characteristics which are apt to increase in number and significance with each
lower rating category. Also, prices of high yield 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
high yield bonds may further adversely affect the market for such bonds.
S&P INDEX FUND
- --------------
The S&P 500 Index Fund seeks long-term growth of capital by investing primarily
in common stocks. Realization of current income is an incidental consideration,
although it is hoped that growth in income will accompany growth in capital. The
portfolio of the Fund normally will consist primarily of equity securities of
companies which compose the S&P 500.
The Fund also may invest in certain short-term fixed income securities, stock
index futures and options on futures, as more fully described in the prospectus.
MATTERS RELATING TO ALL FUNDS
- -----------------------------
Except as described under "Fund Policies," 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 objectives
without the required shareholder vote as set forth in "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 below 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 high grade securities in an amount equal to the when-issued
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
when-issued commitments. To the extent cash and securities are segregated, they
will not be available for new investments or to meet redemptions. Securities
purchased on a delayed delivery basis may require a similar segregation of cash
or other high grade securities. For a more complete description of when-issued
securities and delayed delivery transactions see the Statement of Additional
Information.
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
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institutional buyers become uninterested in purchasing these restricted
securities the level of illiquidity in a Fund may increase. CIGNA Investments
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 to the extent permitted by the 1940 Act. If a Fund borrows money, its
share price may be subject to greater fluctuation until the borrowing is paid
off. Under the 1940 Act as currently in effect, a fund may borrow from any
lender only for temporary purposes in an amount not exceeding 5% of its total
assets, and may borrow from a bank in an amount not exceeding 33 1/3% of its
total assets.
FUTURES CONTRACTS. 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 S&P 500 Index Fund's use of
stock index futures is discussed in the prospectus, and includes purchasing S&P
500 futures contracts pending investment in the S&P 500.
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.
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In cases of purchases of futures contracts, an amount of cash and cash
equivalents, 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.
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
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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 S&P 500 Index Fund's use of options on futures contracts is discussed in the
prospectus. The other Funds may purchase put options on futures contracts to
hedge against the risk of falling prices for their portfolio securities, and may
purchase call options on futures contracts as a hedge against a rise in the
price of securities which they intend to purchase. Options on futures contracts
may also be used to hedge the risks of changes in the exchange rate of foreign
currencies. 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.
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. 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 CIGNA
Investments' 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
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instruments and the investments being hedged, even a correct forecast by CIGNA
Investments 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 hedging program cannot be
foreseen and may cause the portfolio of the Fund to suffer losses which it would
not otherwise sustain.
FOREIGN CURRENCY TRANSACTIONS. Although they generally will not do so, 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.
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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 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
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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 CIGNA Investments 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. 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.
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LOANS AND OTHER DIRECT DEBT INSTRUMENTS.
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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
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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.
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 CIGNA Investments, Inc. to be of good standing. Furthermore,
they will only be made if, in CIGNA Investments, Inc.'s judgment, the
consideration to be earned from such loans would justify the risk.
CIGNA Investments understands 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
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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 Income Fund and High Yield Fund 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 counterparty will be covered by the segregation of assets
determined to be liquid by CIGNA Investments, 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.
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Whether a Fund's use of swap agreements will be successful in furthering its
investment objective will depend on CIGNA Investment'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.
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 a Fund may borrow to
the extent permitted by the 1940 Act for temporary or emergency purposes
to satisfy redemption requests.
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.
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.
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 and may purchase securities that are secured by
interests in real estate.
Page 21
<PAGE>
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. 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 the Fund.
In addition, a Fund may not change its investment objective without shareholder
approval.
TEMPORARY DEFENSIVE POSITION. While assuming a temporary defensive position, a
Fund may invest in the types of short-term fixed income investments number in
which the Money Market Fund may invest, and may also invest in the Money Market
Fund.
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 INA 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.
Page 22
<PAGE>
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 INA Investment Securities, Inc.; Assistant Vice President,
CII.
JEFFREY S. WINER, 41, Senior Counsel, CIGNA; Vice President and Secretary, CIGNA
Funds Group, CIGNA Institutional Funds Group, CIGNA Variable Products Group,
CIGNA High Income Shares and 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.
Page 23
<PAGE>
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.
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 24
<PAGE>
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ---------------------------------------------------
As of April 1, 1999, all of the outstanding shares of the Income fund were owned
by Connecticut General Life Insurance company, 900 Cottage Grove Road,
Bloomfield, CT 06002.
As of April 1, 1999, record and beneficial owners of five percent or more of the
shares 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. 29.8%
Glendale CA 91205
CIGNA Community Choice (Arizona 11001 N. Black Canyon Highway 6.6%
corporation) Phoenix, AZ 85029
CIGNA HealthCare of Texas, Inc. 600 Las Colinas Blvd., Suite 1100 9.8%
Irving, TX 85029
CIGNA HealthCare of Virginia, Inc. 4050 Innslake Drive 6.1%
Glen Allen, VA 23060
Healthsource North Carolina, Inc. 701 Corporate Center Drive 10.2%
Raleigh, NC 27607
</TABLE>
As of April, 1999, owners of five percent or more of the shares of the S&P 500
Index Fund were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER ADDRESS PERCENTAGE OF OWNERSHIP
<S> <C> <C>
Insurance Company of Two Liberty Place
North America 1601 Chestnut St.
Philadelphia PA 19192 19.0%
CIGNA Property and Two Liberty Place
Casualty Insurance 1601 Chestnut St.
Company Philadelphia PA 19192 51.0%
CIGNA Insurance Company Two Liberty Place
1601 Chestnut St.
Philadelphia PA 19192 19.0%
Pacific Employers Two Liberty Place
Insurance Company 1601 Chestnut St.
Philadelphia PA 19192 11.0%
</TABLE>
Page 25
<PAGE>
The Trustees and officers do not own any Fund shares. By virtue of owning more
than 25% of the shares of the Money Market Fund, CIGNA Healthplan of California
is deemed to control the Money Market Fund. This control does not affect the
voting rights of other Fund shareholders. CIGNA Healthplan of California is an
indirect, wholly owned subsidiary of CIGNA Corporation.
INVESTMENT ADVISORY AND OTHER SERVICES
- --------------------------------------
The investment adviser to the Fund 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.
Pursuant to the Master Investment Advisory Agreements between the Trust and
CIGNA Investments, CIGNA Investments manages the investment and reinvestment of
the assets of the Funds.
Subject to the control and periodic review of the Board of Trustees of the
Trust, CIGNA Investments determines what investments shall be purchased, held,
sold or exchanged for the account of the Fund. 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
Page 26
<PAGE>
respective 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
Income Fund $13,326 $ 4,261
High Yield Fund $ -0- $ -0-
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%
Income Fund 0.50%
High Yield Fund 0.75%
S&P 500 Index Fund 0.25%
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, 2000, to reimburse the Fund 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:
Institutional Retail Service
Class Class
------------- --------------
Money Market Fund .45% 1.00%
Income Fund .70% NA
High Yield Fund .90% NA
S&P 500 Index Fund .35% NA
Page 27
<PAGE>
CIGNA 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.
CIGNA Income Fund (Institutional Class) incurred a management fee of $6,383,
$5,773 and $5,465 in 1998, 1997 and 1996, respectively. However, due to the
expense limitation, CIGNA Investments waived these fees and reimbursed $43,224,
$43,969 and $44,851 in 1998, 1997 and 1996, respectively.
CIGNA S&P 500 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 and the Fund would be obliged to change their names to
eliminate the word "CIGNA" (to the extent they 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 ("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's
address is One Commercial Plaza, Hartford, CT 06103. The distribution contract
is terminable without penalty, at any time, by the Trust upon 60
Page 28
<PAGE>
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.
The Money Market Fund, on behalf of its Retail Service class, has adopted a plan
under rule 12b-1 of the 1940 Act. The plan was adopted in October 1998 and
activities for which payment will be made under the plan will begin in 1999.
Under the terms of the 12b-1 plan, the Fund is authorized to pay shareholder
service and distribution expenses at the annual rate of up to 0.35% of the
average daily net assets of the Retail Service class of the Fund during the
period. A portion of the fees payable under the 12b-1 plan (0.25% of Retail
Service class assets per annum) is designated as fees for providing shareholder
services. The balance (up to 0.10% of Retail Service class assets per annum) may
be used to reimburse CFS for expenses and costs associated with activities
primarily intended to result in the sale of Retail Service class shares. These
costs and expenses may include those associated with CFS employees.
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 for the Retail Service Class are answering telephone inquiries and
processing request for information; 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
Retail Service class shares.
The Fund anticipates that the plan will result in increased sales of Fund shares
and an increase in the amount of assets in the Fund, 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
Page 29
<PAGE>
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.
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 on
behalf of its clients, including the Fund, 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, CIGNA Investments 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 officers of CIGNA Investments will determine, generally without limitation,
the brokers/dealers through whom, and the commission rates or spreads at which,
securities transactions for client accounts are executed. The officers of CIGNA
Investments 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
Page 30
<PAGE>
to the value of the brokerage or research services performed or provided by the
executing broker/dealer, viewed in terms of either that particular transaction
or CIGNA Investments' overall responsibilities to the client for whose account
such portfolio transaction is executed and other accounts advised by CIGNA
Investments or accounts advised by other investment advisers which are related
persons of CIGNA Investments.
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.
If two or more brokers/dealers are considered able to offer the same favorable
price with the equivalent likelihood of best execution, the officers of CIGNA
Investments may prefer the broker/dealer who has furnished research services.
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, including accounts advised by related persons of CIGNA Investments,
and not all such services are necessarily used by CIGNA Investments in
connection with the specific account that paid commissions to the broker/dealer
providing such services.
The overall reasonableness of brokerage commissions paid is evaluated
continually. Such evaluation includes review of what competing brokers/dealers
are willing to charge for similar types of services and what discounts are being
granted by brokerage firms. The evaluation also considers the timeliness and
accuracy of the research received.
In addition, CIGNA Investments 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 CIGNA
Investments' 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, CIGNA Investments 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. CIGNA Investments will
not acquire research services through the generation of credits with respect to
the Funds' principal transactions or transactions in financial futures, except
in new issue fixed price underwritings. Neither the Income Fund nor the Money
Market Fund paid brokerage commissions in 1998, 1997 or 1996. During 1998 and
1997, the S&P 500 Index Fund paid $53,151 and $37,741 in commissions,
substantially all of
Page 31
<PAGE>
which was paid to firms which provide research services to CIGNA Investments.
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.
Neither the Trust nor CIGNA Investments 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 and Retail Service class 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 Retail
Service class has exclusive voting rights on matters pertaining to its
distribution plan.
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
Page 32
<PAGE>
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
RETIREMENT AND SAVINGS PLAN PARTICIPANTS. The Funds may be available as an
investment option in employer-sponsored 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 retirement or savings plan participants 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.
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.
Page 33
<PAGE>
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 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.
Page 34
<PAGE>
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.
Page 35
<PAGE>
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.
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>
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
Lehman Bond Indices Index
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
Page 37
<PAGE>
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.
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
Income Fund...................... 9.26% 6.38% 8.98%
Money Market Fund................ 5.18% 4.82% 5.22%
S&P 500 Index Fund**............. 28.28%
*The Inception date of the CIGNA S&P 500 Index Fund was July 1, 1997.
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
Page 38
<PAGE>
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.
d = the maximum offering price per share on the last day of the
period.
The yield for Income Fund was as follows:
30 Days ended December 31, 1998
-------------------------------
Income Fund.........................................4.11%
The standard formula for calculating annualized yield for the Money Market Fund,
as described in the Prospectus, is as follows:
Y = V1 - 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
Page 39
<PAGE>
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.
<PAGE>
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.
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
Exhibit a.
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.
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)The Price Source Authorization Agreement pursuant to the Custodian
Contract among State Street Bank and Trust Company and CIGNA
Funds.
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 Registration Statement filed electronically January 19,
1999.
C-1
<PAGE>
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)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.(iv) 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.(v) Form of Shareholder Services Plan 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.
* h.(vi) 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.
* h.(vii)Power of Attorney.
* i. Consent of Counsel.
* j. Consent of PricewaterhouseCoopers LLP.
k. None.
l. None.
m. 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.
n.(i) Financial Data Schedule for CIGNA Money Market Fund.
n.(ii) Financial Data Schedule for CIGNA Income Fund.
n.(iii)Financial Data Schedule for CIGNA S&P 500 Index Fund.
o. The Dual Class Plan Pursuant to Rule 18f-3 for CIGNA Funds Group
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.
o.(i) Amendment to Dual Class Plan Pursuant to Rule 18f-3 For 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.
o.(ii) Multi Class Plan Pursuant to Rule 18f-3 for CIGNA Money
Market Fund 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.
- -------------------------
* Filed Herewith.
C-2
<PAGE>
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, 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.
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 INA Investment Securities, Inc. ("IIS"), all of which (except for IIS 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
The Trusts and each of their series of shares - 100 Front Street, Suite
300, Worcester, Massachusetts 01601
IIS - Two Liberty Place, 1601 Chestnut Street, Philadelphia, Pennsylvania
19192
C-3
<PAGE>
Substantial business and other connections of the Directors and officers during
the past two fiscal years are listed below:
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.*
Robert W. Burgess Director and Senior Vice President, CII;
Director, CIGNA International Investment
Advisors, Ltd.**; Chief Financial Officer,
CIGNA Investment Management, a division of
CIGNA Corporation*; Director and Senior Vice
President, CIGNA Investment Group, Inc.*;
Director, CIGNA Financial Futures, Inc.* and
Global Portfolio Strategies, Inc.*
Thomas C. Jones President and Chief Investment Officer, 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, IIS.
Mary Louise Casey Senior Managing Director, CII and 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 INA
Investment Securities, Inc.; President CIGNA
Variable Products Group.
Malcolm S. Smith Senior Managing Director, CII; Director and
Senior Managing Director, CIGNA Investment
Advisory Company, Inc.*
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.
Thomas J. Bowen Managing Director, CII and CIGNA Investment
Advisory Company, Inc.*
William C. Carlson Managing Director, CII; previously Vice
President, CII.
C-4
<PAGE>
Antonio M. Caxide Managing Director, CII and CIGNA International
Investment Advisors, Ltd.**; previously Vice
President, CII and CIGNA International
Investment Advisors, Ltd.**
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.*
Denise T. Duffee Managing Director, CII.
John G. Eisele Managing Director, CII.
Robert Fair Managing Director, CII.
John P. Feeney Managing Director, CII.
Thomas R. Foley Managing Director, CII; previously Vice
President, 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.*
David R. Johnson Managing Director, CII and CIGNA Investment
Advisory Company, Inc.*
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.*
Richard B. McGauley Managing Director, CII and CIGNA Investment
Advisory Company, Inc.*
Bret E. Meck Managing Director, CII.
C-5
<PAGE>
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.
James G. Schelling Managing Director, CII.
John A. Shaw Managing Director, CII.
Thomas P. Shea, III Managing Director, CII.
Joseph W. Springman Managing Director, CII and CIGNA Investment
Advisory Company, Inc.*
Susan S. Sullivan Managing Director, CII.
William A. Taylor Managing Director, CII.
George Varga Managing Director, CII.
Victor J. Visockis, Jr. Managing Director, CII; previously Vice
President, CII.
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.
Victor E. Saliterman Senior Vice President, CII.
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.
R. Thomas Clemmenson Vice President, CII.
C-6
<PAGE>
Maryanne P. dePreaux Vice President, CII.
Eric C. DiMiceli 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.*
Mark W. Everette Vice President, CII.
Daniel E. Feder 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.
Chuel D. Hwang Vice President, CII.
Steven F. Jacobs Vice President, CII.
William H. Jefferis Vice President, CII.
Edward B. Johns Vice President, CII.
Thomas W. Johnson Vice President, CII.
Thomas J. Keene Vice President, CII.
Joseph R. Kennedy Vice President, CII.
Peter K. Kofoed Vice President, CII.
Mark S. Korinek Vice President, CII.
Daryl Krivanec Vice President, CII.
James R. Lagasse Vice President, CII.
Mary S. Law Vice President, CII.
Margaret Y. Leong Vice President, CII.
C-7
<PAGE>
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.
Pamela S. Peck Vice President, CII.
Elisabeth A. Perenick Vice President, CII.
Scott S. Piccone 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.*
Alexander Rybchinsky Vice President, CII.
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.
Ruth D. Van Winkle Vice President, CII and CIGNA Investment
Advisory Company, Inc.*
Michael J. Walker Vice President, CII.
Carey A. White Vice President, CII.
William S. Woodsome Vice President, CII.
C-8
<PAGE>
Alfred A. Bingham III Assistant Vice President, CII; Vice President
and Treasurer, the Trusts and IIS.
Susan L. Cooper Secretary, CII, CG Trust Company* and Global
Portfolio Strategies, Inc.*
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 April 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 --------
David J. Castellani Member Board of Directors --------
Byron D. Oliver Member Board of Directors --------
Mark A. Parsons Member Board of Directors --------
Kenneth A. Pouch, Jr. Member Board of Directors --------
David C. Scheinerman Member Board of Directors --------
Willard S. Bashan President --------
David J. Castellani Vice President --------
Alan F. Monbaron Vice President,
Chief Financial Officer,
Compliance Officer, --------
Assistant Treasurer
Stephen C. Stachelek Vice President, --------
Treasurer
Mark A. Parsons Vice President, --------
Chief Counsel
Julia M. Kozlowski Assistant Vice President --------
Robin A. Leavitt Assistant Vice President --------
David C. Kopp Secretary --------
Thomas L. Pierce Assistant Secretary --------
David M. Porcello Assistant Secretary --------
Margaret I. Whiteman Assistant Secretary --------
Pamela S. Williams Assistant Secretary --------
Marie C. Bynum Assistant Treasurer --------
Joy B. Erickson 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.
- -----------------------
*900 Cottage Grove Road, Bloomfield, CT
**Park House, 16 Finsbury Circus, London, England
C-9
<PAGE>
ITEM 29. MANAGEMENT SERVICES.
- -----------------------------
None.
ITEM 30. UNDERTAKINGS.
- ----------------------
Not Applicable.
C-10
<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. 60 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 30th day of April, 1999.
CIGNA Funds Group
Richard H. Forde
Chairman of the Board of Trustees
and President
By: /s/ Jeffrey S. Winer
--------------------------------------
Jeffrey S. Winer
Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 60 to the Registration Statement has been signed below by the
following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
Richard H. Forde Chairman of April 30, 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 April 30, 1999.
Alfred A. Bingham III (principal
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
------------------------------ April 30, 1999.
Jeffrey S. Winer
C-11
<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. 60 |X|
-
and
_
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 | |
-
_
Amendment No. 60 |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
g. (iii) The Price Source Authorization Agreement among State Street
Bank and Trust Company and CIGNA Funds Pursuant to the
Custodian Contract.
h. (vi) 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.
h. (vii) Power of Attorney.
i. Consent of Counsel.
j. Consent of PricewaterhouseCoopers LLP.
n. (i) Financial Data Schedule for CIGNA Money Market Fund.
n. (ii) Financial Data Schedule for CIGNA Income Fund.
n. (iii) Financial Data Schedule for CIGNA S&P 500 Index Fund.
<PAGE>
Exhibit g(iii)
P.O. Box 1713
Boston, MA 02105-1713
[STATE STREET BANK AND TRUST COMPANY LOGO GRAPHIC APPEARS HERE]
STATE STREET
SERVING INSTITUTIONAL INVESTORS WORLDWIDE/TM/
Alfred A. Bingham III
CIGNA Funds
900 Cottage Grove Road, S - 217 Bloomfield, CT 06002
Re: PRICE SOURCE AUTHORIZATION
Reference is made to the Custodian Agreements listed on the attached "Schedule
A" (the Fund") and State Street Bank and Trust Company ("State Street").
Pursuant to the Custodian Agreement, the Fund has directed State Street to
calculate the net asset value of the Fund in accordance with the terms of the
Fund's currently effective prospectus.
The Fund hereby authorizes State Street to use the pricing sources specified on
the attached form(s) as sources for securities' prices in calculating the net
asset value of the Fund. The Fund further agrees that State Street shall have no
liability for the incorrect data provided by the Fund's choice of pricing
sources, except as may arise from State Street's lack of reasonable care in:
o performing agreed upon tolerance checks as to the data furnished,
o calculating the net asset value of the Fund in accordance with the data
furnished to State Street, and
o State Street's performance of the agreed upon tolerance checks.
Kindly acknowledge the Fund's acceptance of the terms of this letter in the
space provided below.
Sincerely,
STATE STREET BANK AND TRUST COMPANY
By: /s/ JAMES M. CAMERON
---------------------------------
Vice President
Date: 2-1-99
-------------------------------
The foregoing terms are hereby
accepted.
Cigna Variable Products Group
Cigna High Income Shares
INA Investment Securities, Inc.
Cigna Institutional Funds Group
Cigna Funds Group
By: /s/ Alfred A. Bingham III
---------------------------------
Title: Vice President And Treasurer
------------------------------
Date: 3/19/99
-------------------------------
<PAGE>
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
--------------------------
<TABLE>
<CAPTION>
FUND: CIGNA SIGNATURE: /S/ ALFRED A. BINGHAM III
--------------------------------- ----------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- ------------
SECURITY BRIDGE BRIDGE OPTIONS PRICE (3) (2) (1) (1)
TYPE NYSE NASDAQ REPORTING AUTHORITY MANUAL BACK-UP TOLERANCE
AMEX BID MEAN LS/BID LS/MEAN BRIDGE LS BID LS/MEAN QUOTES SOURCE INDEX PERCENTAGE
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
I. LISTED Bridge X Client Bloomberg S&P 500 5%
EQUITIES
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- -----------
II. OTC Bridge X Client Bloomberg S&P 500 5%
EQUITIES
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- -----------
III. FOREIGN Bridge X Client Reuters E.A.F.E. 5%
EQUITIES
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- -----------
IV. EQUITY
OPTIONS
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- -----------
V. FUTURES Broker Bloomberg S&P 500 5%
--------- ---------- ---- -------- ------- ------ ---------- --------- ----------- ---------- --------- -----------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INSTRUCTIONS: For each security type, ALLOWED by the Fund prospectus, please
-------
indicate the primary price source and a back-up source to be used in calculating
Net Asset Value for the Fund identified above. Also, please indicate a published
market index and tolerance range (in terms of percent) to be used for
reasonability testing. If you do not wish to use a published index please
indicate N/A but do not leave blank.
(1)*INDEX/TOLERANCE CHECK: The price movement for a particular security is
compared to the index movement. If the security price movement exceeds the index
movement by more than the percentage authorized on this form, then the security
price will be verified using the back-up source authorized. The index and
tolerance information authorized here will be the basis for this reasonability
test.
(2) BACK-UP SOURCE: The following sources are available for back-up, price
verification and historical price and yield information: Bloomberg, Reuters,
and Telerate. Please do not leave blank.
(3) MANUAL QUOTES AND PRIVATE PLACEMENTS: Please specify the source for private
placements or manual quotes as necessary. See page 3 to list additional
information if needed.
Page 1 of 3
<PAGE>
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
--------------------------
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ --------
SECURITY MERRILL
TYPE LYNCH BRIDGE
SECURITIES FIXED MULLER INTERACTIVE FRI (3) (2) (1) (1)
PRICING INCOME DATA DATA CORP. MANUAL BACK-UP TOLERANCE
SERVICE BID MEAN BID CORP MEAN BID QUOTES QUOTES INDEX PERCENTAGE
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
VI. LISTED BONDS Client Bridge Fixed USTB 3%
IS LAST SALE Fixed
REQUIRED Income/
WHEN X X Client
AVAILABLE
YES
-----
NO X
-----
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
VII. CORPORATE Client Bridge Fixed USTB 3%
BONDS X X Income/
Client
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
VIII. U.S. Client Bridge Fixed USTB 3%
GOVERNMENT Income/
OBLIGATIONS X X Client
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
IX. MORTGAGE Client Bridge Fixed USTB 3%
BACKED X Income/
SECURITIES Client
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
X. MUNICIPAL BONDS Client Bridge Fixed USTB 3%
X Income/
Client
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
XI. FIXED INCOME Client Bridge Fixed USTB 3%
OPTIONS X Income/
Client
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
XII. FOREIGN BONDS
----------- ------ ----- ------- ------ ------------ ---- ------ ----- ------- ------------ ------ ----------
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Page 2 of 3
<PAGE>
STATE STREET BANK - MUTUAL FUNDS
PRICE SOURCE AUTHORIZATION
--------------------------
XIII. Private Placements and Other Manual Quotes Information
<TABLE>
<CAPTION>
===================================================================================================================================
SECURITY TYPE ADVISOR BROKER OTHER ADDITIONAL INFORMATION:
CONTACT NAME, TELEPHONE NUMBER
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- ------------------------------ ----------------------- ------------------- ----------------- --------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
INSTRUCTIONS: For all security types which require manual quotes, please list
the source of the quotes and any additional information needed to obtain these
quotes.
Page 3 of 3
<PAGE>
SCHEDULE "A"
CONTRACT DATE
- -------- ----
Cigna Variable Products Group Apr. 15, 1988
Cigna High Income Shares Mar. 31, 1988
INA Investment Securities, Inc. Feb. 22, 1988
Cigna Institutional Funds Group Jan. 5, 1993
Cigna Funds Group Feb. 22, 1988
<PAGE>
Exhibit h(vi)
SUB-ACCOUNTING SERVICES AGREEMENT
FOR
THE RETAIL SERVICE CLASS OF
CIGNA MONEY MARKET FUND
(A SERIES OF CIGNA FUNDS GROUP)
Sub-Accounting Services Agreement made as of April 1, 1999 by and
between CIGNA Funds Group (the "Trust") on behalf of its series CIGNA Money
Market Fund (the "Fund"), and CIGNA Financial Services, Inc. ("CFS"), a
Connecticut corporation engaged in business as a broker/dealer.
WHEREAS, the Fund is a series of 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");
WHEREAS, shares of the Fund are or may be issued in various classes,
including the retail service class.
WHEREAS, beneficial owners of retail services class shares of the Fund
will own their shares through omnibus accounts with the Fund;
WHEREAS, on behalf of the Fund the Trust desires to appoint CFS to
provide shareholder sub-accounting to holders of the retail services class
shares of the Fund under the terms and conditions described herein;
NOW, THEREFORE, the Trust, on behalf of the retail service class of the
Fund, and CFS agree as follows:
1. CFS shall provide or shall arrange to be provided shareholder
sub-accounting services to the retail service class of the Fund. The
sub-accounting services shall include the following:
a. Maintaining books and records with respect to each beneficial
owner of retail service class shares of the Fund having a
beneficial interest through an omnibus account.
b. Preparing and mailing summary monthly statements (or quarterly
statements if no activity in retail service class shares of
the Fund occurs during any month covered by the statement) to
every beneficial owner; and
c. Generating and mailing confirmations of each purchase or sale
of retail service class shares of the Fund for each beneficial
owner;
Page 1
<PAGE>
d. Such other services normally and customarily provided by
shareholder sub- accounting service providers on behalf of
mutual funds as may be agreed on by the Fund and CFS.
2. As full compensation for services provided under this agreement, the
Fund shall pay CFS a periodic fee computed at an annual rate of twelve and one
half one-hundredths of one percent (.125%) of the average daily net assets of
the retail service class of the Fund during each fiscal year.
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 the Fund
on not more than 30 days' written notice to CFS, or by notice upon 30 day's
prior written notice by CFS 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.
Page 2
<PAGE>
IN WITNESS WHEREOF, the Trust, on behalf of the Fund, and CFS have
executed this Sub-Accounting Services Agreement as of the day and year first
above written.
CIGNA FUNDS GROUP
/s/ Alfred A. Bingham III
By:________________________________________
By: Alfred A. Bingham III
Its: Vice President and Treasurer
CIGNA FINANCIAL SERVICES, INC.
/s/ Will Bashan
By:________________________________________
By: Will Bashan
Its: President
Page 3
<PAGE>
Exhibit h(vii)
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
April 26, 1999
CIGNA Funds Group
100 Front Street, Suite 300
Worcester, MA 01601
Ladies and Gentlemen:
Reference is made to Post-Effective Amendment No. 60 to the Registration
Statement of CIGNA Funds Group (the "Trust") on Form N-1A (Registration No.
811-1646) filed with the Securities and Exchange Commission with respect to the
CIGNA Money Market Fund, CIGNA Income Fund, and CIGNA S&P 500 Index Fund, each a
series of the Trust, and specifically to Item 24(b) thereof. We hereby consent
to the incorporation by reference therein of our opinion, dated June 27, 1996
filed as Exhibit (10) to Post-Effective Amendment No. 54 to such 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 Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 60 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 Money Market Fund, CIGNA S&P 500 Index Fund and
CIGNA Income 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 Prospectuses and on the cover page of, and
under the heading "Independent Accountants" in the Statement of Additional
Information.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 29, 1999
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> CIGNA MONEY MARKET FUND [INSTITUTIONAL CLASS]
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 229,683
<INVESTMENTS-AT-VALUE> 229,683
<RECEIVABLES> 992
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 26
<TOTAL-ASSETS> 230,701
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1,082
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 229,619
<PAID-IN-CAPITAL-COMMON> 229,619
<SHARES-COMMON-STOCK> 171,065
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 229,619
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 13,928
<OTHER-INCOME> 0
<EXPENSES-NET> 1,128
<NET-INVESTMENT-INCOME> 12,800
<REALIZED-GAINS-CURRENT> 8
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 12,808
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 12,800
<DISTRIBUTIONS-OF-GAINS> 8
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,314,708
<NUMBER-OF-SHARES-REDEEMED> 2,268,753
<SHARES-REINVESTED> 12,599
<NET-CHANGE-IN-ASSETS> 58,554
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 882
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,193
<AVERAGE-NET-ASSETS> 253,204
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FOR THE PEIOD ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> CIGNA INCOME FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 1,223
<INVESTMENTS-AT-VALUE> 1,275
<RECEIVABLES> 24
<ASSETS-OTHER> 54
<OTHER-ITEMS-ASSETS> 12
<TOTAL-ASSETS> 1,365
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 34
<TOTAL-LIABILITIES> 34
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,279
<SHARES-COMMON-STOCK> 1,322
<SHARES-COMMON-PRIOR> 1,253
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2
<ACCUMULATED-NET-GAINS> (2)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 52
<NET-ASSETS> 1,331
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 77
<OTHER-INCOME> 0
<EXPENSES-NET> 12
<NET-INVESTMENT-INCOME> 65
<REALIZED-GAINS-CURRENT> 10
<APPREC-INCREASE-CURRENT> 34
<NET-CHANGE-FROM-OPS> 109
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 66
<DISTRIBUTIONS-OF-GAINS> 3
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 69
<NET-CHANGE-IN-ASSETS> 109
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 7
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 58
<AVERAGE-NET-ASSETS> 1,277
<PER-SHARE-NAV-BEGIN> 0.98
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.03
<PER-SHARE-DIVIDEND> 0.05
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.01
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> CIGNA S&P 500 INDEX FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 280,387
<INVESTMENTS-AT-VALUE> 325,339
<RECEIVABLES> 1,762
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 78
<TOTAL-ASSETS> 327,217
<PAYABLE-FOR-SECURITIES> 35,792
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160
<TOTAL-LIABILITIES> 35,952
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 244,683
<SHARES-COMMON-STOCK> 21,047
<SHARES-COMMON-PRIOR> 9,670
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 2
<ACCUMULATED-NET-GAINS> 884
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 45,700
<NET-ASSETS> 291,265
<DIVIDEND-INCOME> 2,498
<INTEREST-INCOME> 299
<OTHER-INCOME> 0
<EXPENSES-NET> 603
<NET-INVESTMENT-INCOME> 2,194
<REALIZED-GAINS-CURRENT> 2,260
<APPREC-INCREASE-CURRENT> 40,568
<NET-CHANGE-FROM-OPS> 45,022
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2,809
<DISTRIBUTIONS-OF-GAINS> 893
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 140,398
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 3,702
<NET-CHANGE-IN-ASSETS> 185,420
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 431
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 748
<AVERAGE-NET-ASSETS> 173,052
<PER-SHARE-NAV-BEGIN> 10.95
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 2.97
<PER-SHARE-DIVIDEND> 0.16
<PER-SHARE-DISTRIBUTIONS> 0.05
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 13.84
<EXPENSE-RATIO> 0.35
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.00
</TABLE>
