<PAGE>
Annual Report to Shareholders
CIGNA S&P 500 Index Fund
CIGNA Income Fund
For the Year Ended December 31, 1998
<PAGE>
CIGNA S&P 500 INDEX FUND MANAGEMENT DISCUSSION AND ANALYSIS (UNAUDITED)
We began 1998 unclear as to how the economic turmoil in Asian markets would
impact US economic growth. Anticipating increased foreign competition as a
result of lower world prices and weakening foreign export demand we expected
positive but more normal returns to US equity markets over the year. This
expectation fell far short of actual returns. While unable to match the
incredible returns of 1997, the S&P 500 produced an unprecedented fourth
consecutive year of better than 20% returns. However, the path of US equity
markets in providing these annual results was less than smooth, reflecting wild
swings in investor sentiment in response to notable world events. For the
12-month period ended December 31, 1998, CIGNA S&P 500 Index Fund's return,
after expenses and allowing for the reinvestment of dividends, was 28.28% as
compared with the 28.57% total return of the S&P 500 Index.
For the better part of the year Asian markets had only a minor negative impact
on a US economy which has become less dependent on basic industrial production
for growth. Indeed, conditions of low inflation, decreasing interest rates and
steady corporate profits responsible for strength in US equity market for the
last three years remained intact as US consumers found themselves net
beneficiaries of lower world prices associated with economic duress in Asia.
Conditions were suddenly reversed in the third quarter with the combination of
several events. Russia defaulted on its debt, Latin America experienced
weakening, Japan announced reforms deemed to be trivial, and Long Term Capital,
a major US hedge fund, nearly folded as a result of its exposure to emerging
market debts. The S&P 500, which had reached new highs in July, found itself
under water for the year at the end of August.
At the end of the third quarter, the markets appeared to want some resolution of
global concerns before it could resume its advance. That resolution came in the
form of several rate cuts executed in close succession by the Federal Reserve
meant to reverse the building credit crunch and address impending global
recession. Equity markets suddenly reversed course in the fourth quarter,
staging a dramatic rise in response to these initiatives. The S&P 500 regained
new highs in the final three months of the year posting a 21.29% final quarter,
up 28.57% for the year.
As has been the pattern for several years, returns to S&P 500 Index
significantly outpaced those of the median mutual fund manager as measured by
the Lipper Universe General Equity Average. Small capitalization and mid
capitalization stocks, as represented by the S&P 600 (19.09 %) and S&P 400
(28.18%) respectively, registered sizeable returns in the fourth quarter but
lagged large-cap returns for the full year, providing -1.33% and 17.581% for the
S&P 600 and S&P 400 respectively. The lack of breadth in index results also
continued with the largest returns confined to a limited list of the largest
firms and half the index constituents losing ground for the year.
While economic conditions in the US remain strong, certainly relative to many
parts of the world, there are elements of fragility that will need to be
successfully navigated if our long running expansion is to continue. A nagging
current account deficit, simultaneous contraction in productivity growth and in
availability of new labor, and the frictional costs of the EMU on our oversees
markets would be among these concerns. They would also include the full impact
of the looming Y2K deadline and the fallout of the realized values attached to
technology stocks (particularly internet-related) which have appreciated quickly
as a group but will surely produce both winners and losers.
<PAGE>
CIGNA S&P 500 INDEX FUND MANAGEMENT DISCUSSION AND ANALYSIS (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------
[THE FOLLOWING APPEARS AS A BAR CHART GRAPHIC]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
7/1/97 - 12/31/98
|------------------------------------------------------|
| AVERAGE ANNUAL TOTAL RETURN |
| |
| 1 Year From Inception (7/1/97) |
| 28.28% 25.95% |
|------------------------------------------------------|
CIGNA S&P 500 S&P 500 CIGNA S&P 500 S&P 500
UNIT VALUE UNIT VALUE INVESTMENT INVESTMENT
7/1/97 10.00000 1.0021 $10,000 $10,000
12/31/97 11.02290 1.1056 $11,023 $11,033
12/31/98 14.13996 1.4215 $14,140 $14,185
CIGNA S&P 500 Index Fund
S&P 500 Index - Total Return
CIGNA S&P 500 Index Fund's performance figures are historical and reflect
reinvestment of all dividends and capital gains distributions and changes in net
asset value. The Fund does not charge a sales load. The Fund's investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Past performance
cannot guarantee comparable future results. The Fund's performance has been
compared with the total return performance for the Standard & Poor's Corporation
Composite Index of 500 Stocks (S&P 500). This index is a group of unmanaged
securities widely regarded by investors to be representative of the stock market
in general. An investment cannot be made in the index. Index results do not
reflect brokerage charges or other investment expenses.
<PAGE>
CIGNA INCOME FUND MANAGEMENT DISCUSSION AND ANALYSIS (UNAUDITED)
1998 marked a watershed year for the U.S. economy and financial markets, as well
as many world markets. The U.S. was enjoying its eighth year of economic
expansion, low inflation, declining interest rates, and strong corporate profit
growth. World economic output in the past few years had expanded at a rapid
clip, inflation was under control, and trade flourished. The severe economic and
financial dislocations which hit full-force in 1998, however, and spread though
Asia and to other parts of the world had far-reaching affects which will
continue to shape the course of events for years. The official growth in global
GDP fell from approximately 4% in both 1996 and 1997 to roughly 2% during 1998,
and is likely to weaken further in 1999. Powerful deflationary forces spread
around the globe, with world commodity prices hitting 21-year lows.
For world financial markets, 1998 was a year of extreme volatility. Financial
markets experienced several massive swings in investor psychology and market
sentiment, as bonds and equities alternated between periods of risk-aversion,
and even panic, on one hand, and complacency and greed on the other. It was also
a year of almost unprecedented volatility across the entire spectrum of
investment markets: domestic and foreign, debt and equity, and high-grade and
low-grade quality market sectors.
Some of the excesses experienced in the "flight to quality" in 1998 have already
begun to be reversed. While markets in fixed-income products may remain choppy
in 1999, we are comfortable that the extreme market dislocations of 1998 will
not be repeated. As long as the Asian crisis continues to provide a positive
backdrop for interest rates and fixed-income assets, we will also continue to
maintain a portfolio duration modestly longer than the Index.
After deducting expenses and allowing for the reinvestment of dividends, based
on the net asset value of its underlying assets, CIGNA Income Fund returned
9.26% for the year. The Lehman Brothers Government/Corporate Bond Index, from
which no deduction for expenses is made, returned 9.47% in 1998.
Looking forward, our outlook for the U.S. economy for 1999 is one of moderating
growth from 1998's nearly 4% pace. Should the economy falter, or global economic
strains increase, the Federal Reserve has shown its willingness to intervene.
Volatility will remain in the markets, although we expect nothing like last
year's financial shocks and ensuing panic. Investors are now much better
compensated for bearing risk, and we see 1999 to be a year of unusual
opportunity for non-Treasury or "spread" investors who are able to target the
right sectors and names.
<PAGE>
CIGNA INCOME FUND MANAGEMENT DISCUSSION AND ANALYSIS (UNAUDITED) (CONTINUED)
[THE FOLLOWING APPEARS AS A BAR CHART GRAPHIC]
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT (UNAUDITED)
1/1/89 - 12/31/98
|----------------------------------|
| AVERAGE ANNUAL TOTAL RETURN |
| |
| 1 Year 5 Year 10 Year |
| 9.26%% 6.38% 8.98% |
|----------------------------------|
INCOME FUND LEHMAN GC CIGNA INCOME LEHMAN GC
UNIT VALUE UNIT VALUE INVESTMENT INVESTMENT
12/88 1.28792 4.17023 $10,000 $10,000
12/89 1.47199 4.48439 $11,429 $10,753
12/90 1.56250 5.12300 $12,132 $12,285
12/91 1.84285 5.54826 $14,309 $13,304
12/92 1.97324 6.44357 $15,321 $15,451
12/93 2.23687 6.93006 $17,368 $16,618
12/94 2.16718 7.69490 $16,827 $18,452
12/95 2.51854 7.42572 $19,555 $17,806
12/96 2.55288 8.85480 $19,822 $21,233
12/97 2.78524 9.11079 $21,626 $21,847
12/98 3.04321 10.00000 $23,629 $23,979
CIGNA Income Fund
LEHMAN GC = Lehman Brothers Government/Corporate Bond Index
CIGNA Income Fund's performance figures are historical and reflect reinvestment
of all dividends and capital gains distributions and changes in net asset value.
The Fund does not charge a sales load. The Fund's investment return and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Past performance cannot
guarantee comparable future results. The Fund's performance has been compared
with the total return performance of the Lehman Brothers Government/Corporate
Bond Index. The index is a group of unmanaged securities widely regarded by
investors to be representative of the taxable U.S. government and corporate bond
market in general. Index results do not reflect brokerage charges or other
investment expenses. An investment cannot be made in the index.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
COMMON STOCKS - 95.2%
Microsoft Corp.* 69,300 $ 9,611
General Electric Co. 91,000 9,288
Intel Corp. 46,300 5,489
Wal-Mart Stores, Inc. 62,600 5,098
Exxon Corp. 67,500 4,936
Merck & Co., Inc. 33,100 4,888
International Business Machines Corp. 25,900 4,785
Coca-Cola Co. 68,500 4,581
Pfizer, Inc. 36,000 4,516
Cisco Systems, Inc.* 43,850 4,070
Lucent Technologies, Inc. 36,500 4,015
A T & T Corp. 50,200 3,778
Bristol-Myers Squibb Co. 27,600 3,693
MCI Worldcom Inc. 50,880 3,651
Philip Morris Companies, Inc. 67,600 3,617
Procter & Gamble Co. 36,800 3,360
Johnson & Johnson 37,300 3,128
Citigroup, Inc. 63,064 3,122
SBC Communications, Inc. 54,300 2,912
BankAmerica Corp. 48,016 2,887
Royal Dutch Petroleum Co. 59,600 2,853
American International Group, Inc. 29,200 2,821
Lilly (Eli) & Co. 30,500 2,711
BellSouth Corp. 54,300 2,708
Home Depot, Inc. 43,400 2,656
Dell Computer Corp.* 35,400 2,591
Bell Atlantic Corp. 43,114 2,285
Schering-Plough Corp. 40,800 2,254
Federal National Mortgage Association 28,800 2,131
Time Warner, Inc. 34,100 2,116
Abbott Laboratories 42,100 2,063
American Home Products Corp. 36,600 2,061
America Online, Inc. 12,600 2,016
Compaq Computer Corp.* 47,197 1,979
Ford Motor Co. 33,600 1,972
Hewlett-Packard Co. 28,800 1,967
Ameritech Corp. 30,600 1,939
Mobil Corp. 21,700 1,891
Wells Fargo & Co. 44,900 1,793
GTE Corp. 26,800 1,742
Warner-Lambert Co. 22,800 1,714
First Union Corp. 27,470 1,670
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
PepsiCo, Inc. 40,700 $ 1,666
du Pont (E.I.) de Nemours & Co. 31,300 1,661
Disney ( Walt) Co. 56,900 1,707
BancOne Corp. 32,502 1,660
Chase Manhattan Corp. 23,500 1,599
Chevron Corp. 18,100 1,501
Gillette Co. 30,800 1,488
Unilever NV 17,800 1,476
McDonald's Corp. 18,800 1,441
Tyco International Ltd. 17,844 1,346
General Motors Corp. 18,200 1,302
American Express Company 12,600 1,288
Federal Home Loan Mortgage Corp. 18,800 1,211
EMC Corp.* 13,900 1,181
Oracle Systems Corp.* 26,950 1,162
Airtouch Communications, Inc.* 15,900 1,147
Morgan Stanley, Dean Witter, Discover & Co. 16,000 1,136
Xerox Corp. 9,100 1,074
Motorola, Inc. 16,700 1,020
Medtronic, Inc. 13,600 1,010
Texas Instruments, Inc. 10,800 924
Sun Microsystems, Inc.* 10,600 908
GAP, Inc. 16,100 906
Northern Telecom Ltd. 18,080 906
Boeing Company 27,750 905
U. S. WEST Inc. 13,994 904
Sprint Corp. 10,500 883
Allstate Corp. 22,800 881
Anheuser-Busch Companies, Inc. 13,300 873
Associates First Capital Corp., Class A 20,064 850
Bank of New York, Inc. 21,100 849
Monsanto Company 17,400 827
Tele-Communications, Inc., Class A* 14,900 824
Safeway, Inc. 13,500 823
Kimberly-Clark Corp. 15,000 817
Walgreen Co. 13,900 814
Pharmacia & Upjohn, Inc. 14,100 798
MediaOne Group, Inc. 16,900 794
Carnival Corp. 16,500 792
Minnesota Mining and Manufacturing Co. 11,100 789
Texaco, Inc. 14,800 783
Colgate-Palmolive Co. 8,100 752
Waste Management, Inc. 15,995 746
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Amgen, Inc.* 7,100 $ 742
Emerson Electric Co. 12,200 738
Viacom, Inc., Class B* 9,700 718
U. S. Bancorp, Inc. 20,190 717
Sara Lee Corp. 25,400 716
Fleet Financial Group, Inc. 15,800 706
Schlumberger Ltd. 15,200 701
Allied-Signal, Inc. 15,600 691
Electronics Data Systems Corp. 13,700 688
United Technologies Corp. 6,300 685
Campbell Soup Company 12,400 682
Automatic Data Processing, Inc. 8,400 674
National City Corp. 9,200 667
- -----------------------------------------------------------------
TOTAL 100-LARGEST STOCKS 194,907
- -----------------------------------------------------------------
Dayton Hudson Corp. 12,200 662
Merrill Lynch & Co., Inc. 9,900 661
Eastman Kodak Co. 9,000 648
Duke Energy Co. 10,100 647
CBS Corp. 19,600 642
Computer Associates International, Inc. 14,900 635
Washington Mutual, Inc. 16,440 628
Schwab (Charles) Corp. 11,125 625
Comcast Corp., Class A (Special) 10,300 604
CVS Corp. 10,800 594
Atlantic Richfield Co. 8,900 581
Heinz (H.J.) Co. 10,100 572
Southern Company 19,400 564
Dow Chemical Co. 6,100 555
American General Corp. 7,000 546
Household International, Inc. 13,378 530
Fifth Third Bancorp 7,400 528
Enron Corp. 9,200 525
MBNA Corp. 20,875 521
Morgan (J.P.) & Co. 4,900 515
Baxter International, Inc. 7,900 508
Gannett Co., Inc. 7,800 503
Lowes Companies, Inc. 9,800 502
Mellon Bank Corp. 7,300 502
Pitney-Bowes, Inc. 7,600 502
Raytheon Co. 9,400 501
Firstar Corp. 5,300 494
Wachovia Corp. 5,600 490
SunAmerica, Inc. 6,000 487
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Lockheed Martin Corp. 5,500 $ 466
Guidant Corp. 4,200 463
Caterpillar, Inc. 10,000 460
ALLTEL Corp. 7,600 455
PNC Bank Corp. 8,400 455
Cendant Corp. 23,685 451
Sears, Roebuck & Company 10,600 451
3Com Corp.* 10,000 448
SunTrust Banks, Inc. 5,800 444
Columbia/HCA Healthcare Corp. 17,900 443
CIGNA Corp. 5,700 441
Applied Materials, Inc.* 10,300 440
Burlington Northern Santa Fe Corp. 13,000 439
Albertson's, Inc. 6,800 433
Costco Companies, Inc.* 6,000 433
Kroger Co.* 7,100 430
ConAgra, Inc. 13,600 428
Bestfoods, Inc. 7,900 421
Cardinal Health, Inc. 5,550 421
Marsh & McLennan Companies, Inc. 7,100 415
Seagram Company Ltd. 10,900 414
KeyCorp 12,600 403
Illinois Tool Works, Inc. 6,900 400
Clear Channel Communications, Inc.* 7,300 398
Ascend Communications, Inc. 6,000 394
May Department Stores Co. 6,500 392
Coca-Cola Enterprises, Inc. 10,900 390
First Data Corp. 12,300 390
Kellogg Co. 11,300 386
International Paper Co. 8,500 381
Aluminum Co. of America 5,100 380
Staples, Inc. 8,700 380
Williams Companies, Inc. 11,900 371
HBO & Co. 12,900 370
Tellabs, Inc.* 5,400 370
FDX Corp. 4,100 365
Texas Utilities Co. 7,800 364
Halliburton Co. 12,200 361
Hartford Financial Services Group 6,500 357
Rite Aid Corp. 7,200 357
Consolidated Edison Co. of N.Y., Inc. 6,500 344
Clorox Co. 2,900 339
Progressive Corp. Ohio 2,000 339
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
PG & E Corp. 10,600 $ 334
Textron, Inc. 4,400 334
Norfolk Southern Corp. 10,500 333
Penney (J.C.) Co., Inc. 7,100 333
IMS Health Inc. 4,400 332
BB and T Corp. 8,200 331
Compuware Corp. 4,200 328
General Mills, Inc. 4,200 327
NIKE, Inc., Class B 8,000 325
Avon Products, Inc. 7,300 323
BankBoston Corp. 8,200 319
AMP, Inc. 6,100 318
Aetna, Inc. 4,000 314
Loews Corp. 3,200 314
State Street Corp. 4,500 313
Interpublic Group of Companies, Inc. 3,900 311
Union Pacific Corp. 6,900 311
FPL Group, Inc. 5,000 308
Solectron Corp. 3,300 307
AMR Corp.* 5,100 303
Phillips Petroleum Co. 7,100 303
Micron Technology, Inc. 5,900 298
Comerica, Inc. 4,350 297
Providian Corp. 3,950 296
Becton, Dickinson and Co. 6,900 295
Boston Scientific Corp.* 10,900 292
- -----------------------------------------------------------------
TOTAL 200-LARGEST STOCKS 236,860
- -----------------------------------------------------------------
Chubb Corp. 4,500 292
Service Corporation International 7,600 289
Corning, Inc. 6,400 288
Wrigley (Wm.) Jr. Company 3,200 287
PPG Industries, Inc. 4,900 285
Archer-Daniels-Midland Co. 16,499 284
Computer Sciences Corp.* 4,400 283
Ralston Purina Co. 8,700 282
American Stores Co. 7,600 281
Weyerhaeuser Co. 5,500 279
McGraw-Hill, Inc. 2,700 275
Edison International 9,800 273
Omnicom Group, Inc. 4,700 273
Northern Trust Corp. 3,100 271
Kohls Corp. 4,400 270
Masco Corp. 9,400 270
Conseco, Inc. 8,757 268
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
BMC Software, Inc. 6,000 $ 267
RJR Nabisco Holdings Corp. 9,000 267
Sprint Corp. PCS Ser 1 11,550 267
Honeywell, Inc. 3,500 264
Aon Corp. 4,700 260
Meyer Fred Inc. 4,300 259
PECO Energy Co. 6,200 258
TJX Companies, Inc. 8,900 258
Rockwell International Corp. 5,300 257
Air Products & Chemicals, Inc. 6,400 256
USX-Marathon Group 8,500 256
Sysco Corp. 9,300 255
Houston Industries, Inc. 7,922 254
CSX Corp. 6,100 253
Dominion Resources, Inc. 5,400 252
Public Service Enterprises Group, Inc. 6,300 252
American Electric Power Co., Inc. 5,300 249
Hershey Foods Corp. 4,000 249
Federated Department Stores, Inc.* 5,700 248
Regions Financial Corp. 6,100 246
Unisys Corp.* 7,100 245
Fort James Corp. 6,100 244
AES Corp. 5,000 237
Paychex, Inc. 4,500 231
Unicom Corp. 6,000 231
Lincoln National Corp. 2,800 229
Dover Corp. 6,200 227
St. Paul Companies, Inc. 6,528 227
Quaker Oats Co. 3,800 226
Tenet Healthcare Corp. 8,600 226
Franklin Resource, Inc. 7,000 224
United Healthcare Corp. 5,200 224
Bankers Trust New York Corp. 2,600 222
UNUM Corp. 3,800 222
Jefferson-Pilot Corp. 2,950 221
SLM Holding Corp. 4,600 221
Gateway 2000, Inc. 4,300 220
Deere & Co. 6,600 219
Tribune Co. 3,300 218
Goodyear Tire & Rubber Co. 4,300 217
Ingersol-Rand Co. 4,600 216
First Energy Corp. 6,600 215
Entergy Corp. 6,800 212
Kmart Corp. 13,700 210
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Summit Bancorp. 4,800 $ 210
Tricon Global Restaurants 4,190 210
Southwest Airlines Co. 9,325 209
Delta Air Lines, Inc. 4,000 208
Capital One Financial Corp. 1,800 207
Coastal Corp. 5,900 206
Seagate Technology, Inc.* 6,800 206
General Dynamics Corp. 3,500 205
Barrick Gold Corp. 10,400 203
Mercantile Bancorp. 4,400 203
Danaher Corp. 3,700 201
Marriott International, Inc. 6,900 200
Carolina Power & Light Co. 4,200 198
Transamerica Corp. 1,700 196
Unocal Corp. 6,700 196
Nextlevel System, Inc.* 8,000 189
Dana Corp. 4,601 188
Newell Company 4,500 186
TRW, Inc. 3,300 185
MBIA, Inc. 2,800 184
Winn-Dixie Stores, Inc. 4,100 184
Limited, Inc. 6,300 183
Mattel, Inc. 8,000 183
Synovus Corp. 7,450 182
HealthSouth Corp.* 11,700 181
Pioneer Hi-Bred International, Inc. 6,700 181
UST, Inc. 5,200 181
Huntington Bancshares, Inc. 5,910 178
Novell, Inc.* 9,800 178
New York Times Co., Class A 5,100 177
Burlington Resources, Inc. 4,910 176
PacifiCorp 8,300 175
Union Planters Corp. 3,800 172
DTE Energy Co. 4,000 171
Alcan Aluminum Ltd. 6,300 170
Sempra Energy Corp. 6,655 169
Cincinnati Financial Corp. 4,600 168
Genuine Parts Co. 5,000 167
Donnelley (R.R.) & Sons Co. 3,800 166
Frontier Corp. 4,800 163
SAFECO Corp. 3,800 163
- -----------------------------------------------------------------
TOTAL 300-LARGEST STOCKS 259,779
- -----------------------------------------------------------------
Ameren Corp. 3,800 162
Central & Southwest Corp. 5,900 162
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Occidental Petroleum Corp. 9,600 $ 162
Baker Hughes, Inc. 9,040 160
Tenneco, Inc. 4,700 160
GPU, Inc. 3,600 159
Provident Cos. Inc. 3,800 158
Union Carbide Corp. 3,700 157
Countrywide Credit Industries, Inc. 3,100 156
General Instrument Corp. 4,600 156
Maytag Corp. 2,500 156
New Century Energies, Inc. 3,200 156
Praxair, Inc. 4,400 155
VF Corp. 3,300 155
Apple Computer, Inc. 3,700 151
Cinergy Corp. 4,400 151
Fortune Brands, Inc. 4,700 149
Golden West Financial Corp. 1,600 147
Consolidated Natural Gas Co. 2,700 146
Dun & Bradstreet Corp. 4,600 145
Avery Dennison Corp. 3,200 144
Brown-Forman Corporation, Class B 1,900 144
Johnson Controls, Inc. 2,400 142
Nordstrom, Inc. 4,100 142
Eaton Corp. 2,000 141
Georgia-Pacific Corp. 2,400 141
Lehman Brothers Holdings, Inc. 3,200 141
Sherwin-Williams Co. 4,800 141
Ceridian Corp.* 2,000 140
Circuit City Stores, Inc. 2,800 140
Equifax, Inc. 4,100 140
Northrop Grumman Corp. 1,900 139
Rohm & Haas Co. 4,600 139
Autozone, Inc. 4,200 138
Cooper Industries, Inc. 2,900 138
Hilton Hotels Corp. 7,200 138
Torchmark Corp. 3,900 138
Perkin-Elmer Corp. 1,400 137
Republic New York Corp. 3,000 137
Browning-Ferris Industries, Inc. 4,800 136
Black & Decker Corp. 2,400 135
Columbia Energy Group. 2,300 133
Owens-Illinois, Inc.* 4,300 132
Rubbermaid, Inc. 4,200 132
Ecolab, Inc. 3,600 130
Hasbro, Inc. 3,600 130
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
International Flavors & Fragrances, Inc. 2,900 $ 128
Union Camp Corp. 1,900 128
Baltimore Gas & Electric Co. 4,100 127
Block (H & R), Inc. 2,800 126
ALZA Corp.* 2,400 125
Biomet, Inc. 3,100 125
Dow Jones & Co., Inc. 2,600 125
US Airways Group, Inc.* 2,400 125
Amerada Hess Corp. 2,500 124
Parametric Technology Corp.* 7,600 124
Peoplesoft, Inc. 6,500 123
Times Mirror Co., Class A 2,200 123
Toys 'R' Us, Inc.* 7,300 123
Dollar General Corp. 5,175 122
MGIC Investment Corp. 3,000 119
Allergan, Inc. 1,800 117
Northern States Power Co. 4,200 117
PP & L Resources, Inc. 4,200 117
Sealed Air Corp. 2,296 117
Advanced Micro Devices, Inc.* 4,000 116
Bear Stearns & Companies, Inc. 3,100 116
Whirlpool Corp. 2,100 116
ITT Industries, Inc. 2,900 115
Knight-Ridder, Inc. 2,200 112
Tandy Corp. 2,700 111
Allegheny Teledyne, Inc. 5,400 110
Champion International Corp. 2,700 109
Grainger (W.W.), Inc. 2,600 108
Harcourt General, Inc. 2,000 106
Crown Cork & Seal Co., Inc. 3,400 105
KLA Tencor Corp.* 2,400 104
Nucor Corp. 2,400 104
Willamette Industries, Inc. 3,100 104
Anadarko Petroleum Corp. 3,300 102
Ashland, Inc. 2,100 102
Parker-Hannifin Corp. 3,050 100
Eastman Chemical Co. 2,200 98
Bausch & Lomb, Inc. 1,600 96
Reynolds Metals Co. 1,800 95
Sunoco, Inc. 2,600 94
Laidlaw, Inc. 9,200 93
SuperValu, Inc. 3,300 92
HCR Manor Care, Inc. 3,100 91
PACCAR, Inc. 2,200 90
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Fluor Corp. 2,100 $ 89
Temple-Inland, Inc. 1,500 89
Pall Corp. 3,400 86
Dillard, Inc., Class A 3,000 85
Mead Corp. 2,900 85
Adobe Systems, Inc. 1,800 84
Niagara Mohawk Power Co. 5,200 84
Sonat, Inc. 3,100 84
Morton International, Inc. 3,400 83
Newmont Mining Corp. 4,600 83
- -----------------------------------------------------------------
TOTAL 400-LARGEST STOCKS 272,246
- -----------------------------------------------------------------
American Greetings Corp., Class A 2,000 82
Humana, Inc.* 4,600 82
Sigma-Aldrich Corp. 2,800 82
Harris Corp. 2,200 81
Phelps Dodge Corp. 1,600 81
Deluxe Corp. 2,200 80
Placer Dome, Inc. 6,900 79
Engelhard Corp. 4,000 78
Hercules, Inc. 2,800 77
Wendy's International, Inc. 3,500 76
Goodrich (B.F.) Co. 2,100 75
Mirage Resorts, Inc.* 5,000 75
Thermo Electron Corp.* 4,400 75
Westvaco Corp. 2,800 75
Bard (C. R.), Inc. 1,500 74
Centex Corp. 1,600 72
Raychem Corp. 2,200 71
Darden Restaurants, Inc. 3,900 70
Stanley Works (The) 2,500 69
Thomas & Betts Corp. 1,600 69
Apache Corp. 2,700 68
Brunswick Corp. 2,700 67
Silicon Graphics, Inc.* 5,200 67
Armstrong World Industries, Inc. 1,100 66
Great Lakes Chemical Corp. 1,600 64
St. Jude Medical, Inc. 2,300 64
LSI Logic Corp.* 3,900 63
Union Pacific Resources Group, Inc. 7,000 63
Mallinckrodt Group, Inc. 2,000 62
National Semiconductor Corp.* 4,600 62
Consolidated Stores Corp. 3,000 61
Homestake Mining Co. 6,600 61
King World Productions, Inc.* 2,000 59
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998 (Continued)
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
USX-U.S. Steel Group 2,500 $ 58
Bemis Company, Inc. 1,500 57
Crane Co. 1,900 57
Liz Claiborne, Inc. 1,800 57
Meredith Corp. 1,500 57
Coors (Adolph) Co., Class B 1,000 56
Nalco Chemical Co. 1,800 56
Snap-On, Inc. 1,600 56
Autodesk, Inc. 1,300 55
Louisiana-Pacific Corp. 3,000 55
NICOR, Inc. 1,300 55
Navistar International Corp.* 1,900 54
Owens-Corning Fiberglas Corp. 1,500 53
Ryder System, Inc. 2,000 52
Boise Cascade Corp. 1,600 50
FMC Corp.* 900 50
Kerr-McGee Corp. 1,300 50
Inco Ltd. 4,600 49
Freeport McMoRan Copper & Gold, Inc., Class B 4,600 48
Scientific Atlanta, Inc. 2,100 48
National Service Industries, Inc. 1,200 46
Case Corp. 2,000 44
Harrah's Entertainment, Inc.* 2,800 44
Cooper Tire & Rubber Co. 2,100 43
Cummins Engine Co., Inc. 1,200 43
Ball Corp. 900 41
Longs Drug Stores Corp. 1,100 41
Tektronix, Inc. 1,350 41
Alberto-Culver Co., Class B 1,500 40
Andrew Corp.* 2,400 40
McDermott International, Inc. 1,600 40
Oryx Energy Co. 3,000 40
Peoples Energy Corp. 1,000 40
Cabletron Systems, Inc.* 4,600 39
Fleetwood Enterprises, Inc. 1,000 35
Shared Medical Systems Corp. 700 35
Millipore Corp. 1,200 34
EG & G, Inc. 1,200 33
Great Atlantic & Pacific Tea Co., Inc. 1,100 33
ONEOK, Inc. 900 33
Pulte Corp. 1,200 33
Worthington Industries, Inc. 2,600 33
Ikon Office Solutions, Inc. 3,800 32
Kaufman & Broad Home Corp. 1,100 32
MARKET
NUMBER OF VALUE
SHARES (000)
- -----------------------------------------------------------------
Sealed Air Corp. New 617 $ 32
Timken Co. 1,700 32
Grace (W.R.) & Co. 2,000 31
Bethlehem Steel Corp.* 3,600 30
Briggs & Stratton Corp. 600 30
Potlatch Corp. 800 30
Fruit of the Loom, Inc., Class A* 2,000 28
Moore Corporation Ltd. 2,500 28
Pep Boys-Manny, Moe & Jack 1,800 28
Helmerich & Payne, Inc. 1,400 27
Battle Mountain Gold Co. 6,400 26
Eastern Enterprises 600 26
Jostens, Inc. 1,000 26
Tupperware Corp. 1,600 26
Cyprus Amax Minerals Co. 2,500 25
Aeroquip-Vickers, Inc. 800 24
Reebok International Ltd. 1,600 24
Data General Corp.* 1,400 23
Rowan Companies, Inc.* 2,300 23
Polaroid Corp. 1,200 22
Milacron, Inc. 1,100 21
Nielsen Media Inc. 1,166 21
Springs Industries, Inc., Class A 500 21
Russell Corp. 1,000 20
Waddell & Reed Financial, Inc. Class B 832 19
NACCO Industries, Inc., Class A 200 18
Inland Steel Industries, Inc. 1,000 17
Asarco, Inc. 1,100 16
Corn Products International, Inc. 500 15
Foster Wheeler Corp. 1,100 14
Harnischfeger Industries, Inc. 1,300 13
R.H. Donnelley Corp. 740 11
Safety Kleen Corp. 560 8
ChoicePoint, Inc.* 110 7
Agribands International, Inc. 190 6
CommScope, Inc.* 333 6
Harland (J.H.) Co. 400 6
Abercombie & Fitch Co. 65 5
Waddell & Reed Financial, Inc. Class A 193 5
Octel Corp. 275 4
General Semiconductor, Inc.* 250 2
Allergan Specialty, Inc., Class A 45 1
Crescendo Pharmaceuticals, Inc. 45 1
----------
TOTAL COMMON STOCKS - 95.2%
(Cost $232,430,471) 277,382
----------
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
- --------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND INVESTMENTS IN SECURITIES December 31, 1998 (Continued)
MARKET
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------
SHORT-TERM OBLIGATIONS - 16.5%
COMMERCIAL PAPER - 3.3%
Ford Motor Credit Co.
5.76%, 1/5/99 $ 3,896 $ 3,896
General Electric Capital Corp.
6.10%, 1/4/99 5,758 5,758
----------
9,654
----------
REPURCHASE AGREEMENTS - 13.0%
Repurchase Agreement with Goldman Sachs
& Co., entered into 12/31/98 at 4.50%,
maturing 1/4/99 at $37,713,848
(collateralized by U.S. Treasury Bonds,
10.75%, due 2/15/03 with a face value
of $30,525,000 and a value of
$38,474,092) 37,695 37,695
----------
U.S. GOVERNMENT AND AGENCIES - 0.2%
U. S. Treasury Bills,
5.01%, 1/7/99** 100 100
4.00%, 3/11/99** 105 104
4.28%, 4/1/99** 408 404
----------
608
----------
TOTAL SHORT-TERM OBLIGATIONS
(Cost $47,956,746) 47,957
----------
TOTAL INVESTMENT IN SECURITIES - 111.7%
(Total Cost $280,387,217) 325,339
Liabilities, Less Cash and Other Assets - (11.7)% (34,074)
----------
NET ASSETS - 100.0% $291,265
==========
* Non-income producing securities.
** Pledged as collateral for Stock Index Futures Contracts. At December 31,
1998, the Fund was long 43 S&P 500 Futures Contracts expiring in March
1999. Unrealized gain amounted to $748,738. Underlying face value was
$12,640,387, and underlying market value was $13,389,125.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA INCOME FUND
INVESTMENTS IN SECURITIES
DECEMBER 31, 1998
MARKET
PRINCIPAL VALUE
(000) (000)
- -----------------------------------------------------------------
BONDS AND NOTES - 95.5%
FOREIGN GOVERNMENTS - 7.6%
Israel (The State of), 5.75%, 2000 $ 100 $ 101
--------
U.S. GOVERNMENT & AGENCIES - 87.9%
Federal Home Loan Banks,
7.37%, 2002 100 107
5.125%, 2003 25 25
Federal Home Loan Mortgage Corp.,
7.75%, 2001 100 107
Federal National Mortgage Assoc.,
5.89%, 2002 30 31
7.4%, 2004 100 110
Student Loan Marketing Assoc.,
6.6%, 1999 100 101
Tennessee Valley Authority,
6.375%, 2005 100 106
United States Treasury Bonds,
Stripped-Principal Only, Zero
Coupon, 2008 65 41
8.125%, 2019 35 47
6.5%, 2005 145 169
United States Treasury Notes
6.5%, 2005 300 330
--------
1,174
--------
Total Bonds and Notes
(Cost - $1,223,077) 1,275
--------
TOTAL INVESTMENTS IN SECURITIES
(Total Cost $1,223,077) 1,275
Cash and Other Assets, Less Liabilities - 4.5% 56
--------
NET ASSETS - 100.0% $ 1,331
========
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
<TABLE>
<CAPTION>
(IN THOUSANDS)
S&P 500
INDEX INCOME
------------- ------------
<S> <C> <C>
ASSETS:
Investments in securities at value (Cost - $280,387,217
and $1,223,077, respectively) $ 325,339 $1,275
Cash 67 54
Receivable for Investments sold 1,493 -
Interest and dividends receivable 269 19
Investment for Trustees' deferred compensation plan 2 12
Receivable from advisor 9 5
Other 38 -
------------- ------------
Total assets 327,217 1,365
------------- ------------
LIABILITIES:
Payable for investments purchased 35,792 -
Payable for Trustees' deferred compensation plan 2 12
Audit fee payable 41 9
Registration fees payable 17 -
Other accrued expenses (including $77,501 and
$7,179 payable to affiliates) 100 13
------------- ------------
Total liabilities 35,952 34
------------- ------------
NET ASSETS $ 291,265 $1,331
============= ============
Shares outstanding 21,047 1,322
============= ============
NET ASSET VALUE PER SHARE $ 13.84 $ 1.01
============= ============
COMPONENTS OF NET ASSETS:
Paid in capital $ 244,683 $1,279
(Overdistributed) undistributed net investment income (2) 2
Accumulated net realized gain (loss) on investments and futures 884 (2)
Unrealized appreciation of investments and futures 45,700 52
------------- ------------
NET ASSETS $ 291,265 $1,331
============= ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
(IN THOUSANDS)
S&P 500
INDEX INCOME
-------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Interest $ 299 $ 77
Dividends (net of foreign taxes withheld of $14,512,
and $0, respectively) 2,498 -
-------------- -------------
2,797 77
EXPENSES:
Investment advisory fees 431 6
Custodian fees and expenses 164 19
Administrative services 66 16
Registration fees 41 -
Auditing and legal fees 26 11
Trustees' fees 2 1
Shareholder reports 1 -
Transfer agent fees and expenses - 3
Other 17 -
-------------- -------------
Total expenses 748 56
Less expenses waived by advisor (145) (44)
-------------- -------------
Net expenses 603 12
-------------- -------------
NET INVESTMENT INCOME 2,194 65
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from securities transactions 542 10
Net realized gain from futures contracts 1,718 -
Net unrealized gain from futures contracts 738 -
Unrealized appreciation of investments 39,830 34
-------------- -------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS 42,828 44
-------------- -------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 45,022 $ 109
============== =============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
(IN THOUSANDS)
S&P 500
INDEX INCOME
--------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,194 $ 65
Net realized gain from securities transactions 542 10
Net realized gain from futures contracts 1,718 -
Unrealized gain from futures contracts 738 -
Unrealized appreciation of investments 39,830 34
--------------- ------------
Net increase in net assets from operations 45,022 109
--------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (2,809) (66)
From net realized capital gains (893) (3)
--------------- ------------
Total distributions to shareholders (3,702) (69)
--------------- ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 140,398 -
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 3,702 69
--------------- ------------
144,100 69
Cost of shares redeemed - -
--------------- ------------
Net increase from Fund share transactions 144,100 69
--------------- ------------
NET INCREASE IN NET ASSETS 185,420 109
NET ASSETS:
Beginning of period 105,845 1,222
--------------- ------------
End of period (including (overdistributed) undistributed net investment
income of $(1,554) and $1,524, respectively) $ 291,265 $1,331
=============== ============
TRANSACTIONS IN CAPITAL STOCK:
Shares sold 11,107 -
Shares issued in reinvestment of dividends and distributions 270 69
--------------- ------------
11,377 69
Shares redeemed - -
--------------- ------------
Net increase in shares outstanding 11,377 69
=============== ============
</TABLE>
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD ENDED DECEMBER 31, 1997*
<TABLE>
<CAPTION>
(IN THOUSANDS)
S&P 500
INDEX INCOME
--------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 520 $ 63
Net realized gain from securities transactions 30 3
Net realized gain from futures contracts 97 -
Unrealized gain from futures contracts 11 -
Unrealized appreciation of investments 5,122 35
--------------- ------------
Net increase in net assets from operations 5,780 101
--------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (510) (61)
From net realized capital gains (8) (3)
--------------- ------------
Total distributions to shareholders (518) (64)
--------------- ------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares 100,065 -
Net asset value of shares issued to shareholders
in reinvestment of dividends and distributions 518 64
--------------- ------------
100,583 64
Cost of shares redeemed - -
--------------- ------------
Net increase from Fund share transactions 100,583 64
--------------- ------------
NET INCREASE IN NET ASSETS 105,845 101
NET ASSETS:
Beginning of period - 1,121
--------------- ------------
End of period (including undistributed net investment
income of $10,089 and overdistributed net
investment income of $6,744, respectively) $ 105,845 $1,222
=============== ============
TRANSACTIONS IN CAPITAL STOCK:
Shares sold 9,621 -
Shares issued in reinvestment of dividends and distributions 49 66
--------------- ------------
9,670 66
Shares redeemed - -
--------------- ------------
Net increase in shares outstanding 9,670 66
=============== ============
</TABLE>
* From January 1, 1997, except for S&P 500 Index Fund which commenced operations
on July 1, 1997.
The Notes to Financial Statements are an integral part of these statements.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements
1. SIGNIFICANT ACCOUNTING POLICIES. CIGNA S&P 500 Index Fund and CIGNA Income
Fund are separate series of CIGNA Funds Group, a Massachusetts business trust
(the "Trust"). The funds are referred to collectively as "CIGNA Funds Group" or
the "Funds." The Trust is registered under the Investment Company Act of 1940,
as amended, as a diversified, open-end management investment company. The
objective of the S&P 500 Index Fund is to achieve long-term growth of capital by
investing principally in common stocks of companies in the Standard & Poor's 500
Composite Stock Price Index ("S&P 500"), an index emphasizing
large-capitalization stocks. The objective of the Income Fund is to provide as
high a level of current income as possible consistent with reasonable concern
for safety of principal by investing primarily in investment grade corporate
debt securities and U.S. Government securities. The preparation of financial
statements in accordance with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates. The following is a summary of significant accounting policies
consistently followed by the Funds in the preparation of financial statements.
A. SECURITY VALUATION - Equity securities, including warrants, that are listed
on a national securities exchange or part of the NASDAQ National Market System
are valued at the last sale price or, if there has been no sale that day, at the
last bid price. Debt securities traded in the over-the-counter market, including
listed securities whose primary markets are believed to be over-the-counter, are
valued on the basis of valuations furnished by a pricing service, which
determines valuations for normal, institutional-size trading units of such
securities using market information, transactions for comparable securities and
various relationships between securities which are generally recognized by
institutional traders. Short-term investments with remaining maturities of up to
and including 60 days are valued at amortized cost, which approximates market.
Short-term investments that mature in more than 60 days are valued at current
market quotations. Other securities and assets of the Funds are appraised at
fair value as determined in good faith by, or under the authority of, the Board
of Trustees.
FUTURES CONTRACTS - The S&P 500 Index Fund may purchase Standard & Poor's 500
futures contracts with the objective of earning returns on its short-term
investments equivalent to returns on the Standard & Poor's 500 Composite Stock
Price Index. As a result, the purchase of futures contracts simulates a fully
invested position in the underlying index while maintaining liquidity. Upon
entering into a futures contract, the Fund is required to pledge to the broker
an amount of cash and/or securities equal to the initial margin requirements.
During the period a futures contract is open, changes in the value of a contract
are recognized as unrealized gains or losses by "marking to market" on a daily
basis to reflect the market value of the contract at the end of each day's
trading. Daily variation margin payments are received or made, depending on
whether there were unrealized gains or losses. When a contract is closed, the
Fund records a realized gain or loss equal to the difference between the value
of the contract at the time it was opened and the value at the time it was
closed. Futures contracts include the risk that a change in the value of the
contract may not correlate with the value of the underlying securities.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME - Security transactions
are accounted for on the trade date (date the order to buy or sell is executed).
Dividend income is recorded on the ex-date, and interest income is recorded on
the accrual basis. Securities gains and losses are determined on the basis of
identified cost.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
C. FEDERAL TAXES - For Federal income tax purposes, each fund in the Trust is
taxed as a separate entity. It is each fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income and capital gains to its
shareholders. Therefore, no Federal income or excise taxes on realized income or
net capital gains have been accrued.
D. DIVIDENDS - For the S&P 500 Index Fund and the Income Fund, dividends from
net investment income and net capital gains, to the extent such gains would
otherwise be taxable to the Fund, are declared and distributed annually.
Dividends and distributions are recorded by the Funds on the ex-dividend date.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with Federal tax regulations which
may differ from generally accepted accounting principles. To the extent that
such differences are permanent, a re-class to paid in capital may be required.
2. INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES. Investment
advisory fees were paid or accrued to CIGNA Investments, Inc. ("CII"), certain
officers and directors of which are affiliated with the Funds. Such advisory
fees are based on annual rates of 0.25% and 0.50% applied to the average daily
net assets of the S&P 500 Index Fund and Income Fund, respectively. CII has
voluntarily agreed to reimburse each Fund for any amount by which its expenses
(including the advisory fee but excluding interest, taxes, amortized
organization expenses, transaction costs incurred in acquiring and disposing of
portfolio securities, and extraordinary expenses) exceed 0.35% and 1.00% of
average daily net assets of the S&P 500 Index Fund and Income Fund,
respectively.
Each fund reimburses CII for a portion of the compensation and related expenses
of the Trust's Treasurer and Secretary and certain persons who assist in
carrying out the responsibilities of those offices. For the year ended December
31, 1998, the S&P 500 Index Fund and Income Fund paid or accrued $66,143 and
$16,065, respectively.
CII is an indirect, wholly owned subsidiary of CIGNA Corporation.
3. TRUSTEES' FEES. Trustees' fees represent remuneration paid or accrued to
trustees who are not employees of CIGNA Corporation or any of its affiliates.
Trustees may elect to defer all or a portion of their fees which are invested in
mutual fund shares in accordance with a deferred compensation plan.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
4. PURCHASES AND SALES OF SECURITIES. Purchases and sales of securities,
excluding short-term obligations, for the year ended December 31, 1998 were as
follows (shown in thousands):
FUND PURCHASES SALES
- ----------------------------- ------------------- -------------------
S&P 500 Index Fund $ 137,744 $ 4,345
Income Fund 721 652
There were $721,041 of purchases and $652,232 of sales of U.S. Government
obligations for the Income Fund as of December 31, 1998. There were $1,424,408
of purchases of U.S. Government obligations for the S&P 500 Index Fund in 1998.
5. AGGREGATE GROSS UNREALIZED APPRECIATION/DEPRECIATION. The Funds had aggregate
gross and net unrealized appreciation and depreciation for Federal income tax
purposes as follows (shown in thousands):
UNREALIZED UNREALIZED NET UNREALIZED
FUND APPRECIATION DEPRECIATION APPRECIATION
- -------------------- -------------- -------------- ----------------
S&P 500 Index Fund $ 52,969 $ 8,022 $ 44,947
Income Fund 55 3 52
As of December 31, 1998, the S&P 500 Index and Income Funds' cost of securities
for Federal income tax purposes was $280,391,738, and $1,223,077, respectively.
6. CAPITAL STOCK. Each fund is a separate series of the Trust which offers an
unlimited number of shares of beneficial interest, without par value. At
December 31, 1998, affiliates of CIGNA Corporation were the only shareholders of
the Funds.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
7. FINANCIAL HIGHLIGHTS. The following per share data is computed on the basis
of a share outstanding throughout the period:
- --------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1998 1997*
- ------------------------------------------------------------------------------
CIGNA S&P 500 INDEX FUND
- ------------------------
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.
<PAGE>
CIGNA FUNDS GROUP Notes to Financial Statements (Continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CIGNA INCOME FUND
- -----------------
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.
<PAGE>
REPORTS OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
CIGNA Funds Group
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of CIGNA Income Fund and CIGNA S&P 500
Index Fund (each a series of CIGNA Funds Group, hereafter referred to as the
"Funds") at December 31, 1998, and the results of each of their operations, the
changes in each of their net assets and the financial highlights for each of the
periods indicated, in conformity with generally accepted accounting principles.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with generally accepted auditing standards which we require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of securities at
December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 12, 1999
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CIGNA FUNDS GROUP
<S> <C> <C>
TRUSTEES Thomas C. Jones OFFICERS
Hugh R. Beath PRESIDENT, CIGNA INVESTMENT Richard H. Forde
ADVISORY DIRECTOR, MANAGEMENT AND CIGNA CHAIRMAN OF THE BOARD
ADMEDIA CORPORATE ADVISORS, INC. INVESTMENTS, INC. AND PRESIDENT
Paul J. McDonald
Richard H. Forde SENIOR EXECUTIVE VICE PRESIDENT
SENIOR MANAGING DIRECTOR, AND CHIEF ADMINISTRATIVE OFFICER, Alfred A. Bingham III
CIGNA INVESTMENTS, INC. FRIENDLY ICE CREAM CORPORATION VICE PRESIDENT AND TREASURER
Russell H. Jones
VICE PRESIDENT AND TREASURER, Jeffrey S. Winer
KAMAN CORPORATION VICE PRESIDENT AND SECRETARY
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"500" are trademarks of the Standard & Poor's Corporation (S&P) and have been
licensed for use by CIGNA S&P 500 Index Fund. The Fund is not sponsored,
endorsed, sold or promoted by S&P, and S&P makes no representation regarding the
advisability of investing in the Fund.
