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________________________________________________________________________________
CHARTER FUNDS /SM/
PROSPECTUS
JANUARY 1, 2000
CORE PLUS FIXED INCOME 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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INTRODUCTION
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CHARTER FUNDS/SM/ ARE SERIES OF CIGNA FUNDS
GROUP, A FAMILY OF MUTUAL FUNDS. EACH
SERIES, OR PORTFOLIO, HAS ITS OWN INVESTMENT
STRATEGY AND RISK/RETURN PROFILE. THIS
PROSPECTUS DESCRIBES THE INSTITUTIONAL CLASS
OF THE CORE PLUS FIXED INCOME FUND.
TABLE OF CONTENTS
PAGE NUMBER
Summary........................................................................3
Fees and Expenses of the Fund..................................................5
Investment Information.........................................................6
Management of the Fund.........................................................7
Pricing of Shares..............................................................9
Purchase and Redemption of Shares..............................................9
Dividends and Distributions...................................................11
Tax Matters...................................................................11
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FUND SUMMARY
INVESTMENT SUMMARY
CORE PLUS FIXED INCOME
FUND INVESTMENT OBJECTIVE:
o Seeks a high level of total return.
PRINCIPAL INVESTMENT STRATEGIES:
o The fund invests primarily in fixed income
securities that, at the time of purchase, are
rated investment-grade by either Moody's
Investor Services, Inc. or Standard and
Poor's Corporation or a similar rating agency
or, if unrated, are judged by CIGNA
Investments to be of comparable quality.
Normally, the fund will invest at least 65%
of its assets in these securities.
o While seeking high total return, CIGNA
Investments will also seek to maintain an
average portfolio yield consistent with the
Lehman Brothers Aggregate Bond Index. CIGNA
Investments will seek capital appreciation by
identifying securities (primarily fixed
income securities) through its sector
allocation and security selection process
which, in its opinion, may increase in value.
o The fund may invest up to 25% of its assets
in high-yield, below investment-grade bonds
(which may include securities in default).
These securities are commonly called "junk
bonds."
o Up to 20% of fund assets may be invested in
foreign debt securities of private and
governmental issuers denominated in foreign
currencies. Dollar denominated foreign
securities do not count against this
limitation.
o When purchasing or selling securities, CIGNA
Investments will analyze market themes,
individual security structural features,
pricing, trading opportunities and issuer
credit quality.
o CIGNA Investments may allocate fund assets
across different market sectors and
maturities. The average portfolio duration of
this fund normally varies between 85% and
115% of the duration of the Lehman Brothers
Aggregate Bond Index. As of November 30,
1999, the duration of the index was 4.94
years. Duration is a measure of the expected
life of a fixed income security that is used
to determine the sensitivity of the
security's price to changes in interest
rates.
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PRINCIPAL RISKS OF INVESTING IN THE FUND:
The fund is subject to the following principal
investment risks:
o This fund's principal risk factor is market
risk.
o Market risk associated with bonds is related
to the level of interest rates. Generally, as
interest rates rise, the market price of a
bond falls. (A 7% bond is less valuable once
interest rates have risen to 8% and an
investor can get a higher return elsewhere.)
As interest rates fall, however, the market
price of a bond rises. This "inverse"
relationship is magnified for bonds with
longer maturities. (A bond's maturity is the
length of time remaining before the borrower
must pay the bondholder the face amount of
the bond.)
o Compared to higher-quality debt securities,
below investment-grade bonds involve greater
risk of default or price changes due to
changes in the credit quality of the issuer.
The value of below investment-grade bonds
often fluctuates in response to company,
political or economic developments and can
decline significantly over short periods of
time or during periods of general or regional
economic difficulty. During those times, the
bonds could be difficult to value or sell.
These risks are greater for securities in
default.
o There are additional risks with investing in
foreign countries, such as economic,
currency, information, political and
transaction risks. As a result of these
additional risks, the fund may be more
volatile than a fund that invested in
domestic fixed income securities only.
o Credit risk, which is the risk that the
issuer or guarantor of a fixed income
security is unable or unwilling to meet its
obligations to pay principal and interest.
o Manager risk, which is the chance that poor
security selection will cause the fund to
underperform other funds with similar
investment objectives.
o Investment style risk, which is the risk that
returns from investment grade and below
investment-grade fixed income securities will
trail returns from other asset classes or the
overall securities markets.
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o Sector allocation risk, which is the risk
that returns from certain sectors of fixed
income securities will trail the returns from
other sectors.
o Currency risk, which is the risk that when
the fund invests in securities denominated in
foreign currencies, those currencies will
decline in value relative to the U.S. dollar,
or in the case of hedging positions, that the
U.S. dollar will decline in value relative to
the currency being hedged. Currency rates in
foreign countries may fluctuate significantly
over short periods of time for reasons such
as changes in interest rates, government
intervention or political developments. As a
result, the fund's investments in foreign
currency-denominated securities may reduce
the returns of the fund.
You can lose money by investing in the fund. The fund may not achieve its
investment objective.
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)
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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)
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Management Fees .60%
Distribution & Service (12b-1) Fee None
Other Expenses/1/ .20%
Total Annual Fund Operating Expenses .80%
Waiver of Fund Expenses /2/ (.35%)
Total Actual Fund Operating Expenses .45%
(1) Other expenses are based on estimated amounts for the current fiscal
year.
(2) CIGNA Investments has contractually agreed, until April 30, 2001, to
waive management fees and reimburse the fund if and to the extent
total fund operating expenses exceed .45% of average daily net
assets. Reimbursement arrangements can decrease the fund's expenses
and boost its performance.
CIGNA Investments retains the ability to be repaid by the fund if the fund's
expenses fall below the specified operating expense limit prior to the end of
the fiscal year or within three years after CIGNA Investments waives management
fees or reimburses fund operating expenses.
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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:
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 only for the first year. After the first year, the
example does not take into consideration CIGNA Investment's
agreement to reduce fund expenses, and assumes that the fund's
operating expenses remain the same in each year of the applicable
period.
Although your actual costs may be higher or lower, based on these
assumptions, your costs would be:
1 YEAR 3 YEARS
$46 $221
INVESTMENT INFORMATION - OBJECTIVES, STRATEGIES AND RELATED RISKS
CORE PLUS FIXED INCOME FUND
STRATEGY/PHILOSOPHY
CIGNA Investments' fixed income investment philosophy is based on our belief
that market inefficiencies exist due to varying investor objectives and time
horizons. The fund capitalizes on market inefficiencies by identifying market
cycles, making tactical and decisive sector allocations, and selecting
securities through a disciplined process.
The Core Plus Fixed Income Fund will invest in a broad array of fixed income
sectors including government and agency securities, corporate bonds, and
securitized bonds such as mortgage-backed and asset-backed securities, and may
also invest in other instruments such as convertible bonds and preferred stock.
Investing in mortgage related securities carries prepayment risk, which is the
risk that the issuer of the security repays principal prior to a security's
maturity. When interest rates decline, borrowers may pay off their mortgages
sooner than expected. This can reduce the returns of a fund because the fund
will have to reinvest that money at the lower prevailing interest rates.
The Core Plus Fixed Income Fund invests primarily in investment-grade bonds,
which include corporate bonds rated Baa3 or higher by Moody's Investor Services,
Inc. or BBB- by Standard & Poor's Corporation or, if not rated, in CIGNA
Investment's opinion, having similar investment characteristics to bonds rated
Baa3 or BBB- or higher, and in obligations of the U.S. government and its
agencies. The Core Plus Fixed Income Fund may invest up to 25% of its assets in
below investment grade securities. The fund may also invest up to 20% of its
assets in foreign debt securities denominated in foreign currency.
The fund may invest in derivative instruments, such as options, futures
contracts or swap agreements. The fund typically uses derivatives as a
substitute for taking a position in the underlying asset and/or as a part of a
strategy designed to reduce exposure to other risks, such as interest rate or
currency risk. The fund may hedge currency risk (risk associated with rises in
the value of the U.S. dollar versus foreign currencies) through the use of
forward foreign currency contracts and options. The fund may also use futures
contracts and options to keep cash on hand to meet shareholder redemptions or
other needs while simulating full investment in securities. A derivative is a
financial contract whose value is based on (or "derived" from) a traditional
security (such as a stock or bond), an asset (such as a commodity like gold), a
foreign currency or a market index (such as the S&P 500).
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Investing in derivatives carries the risk that the fund could lose more than the
principal amount invested in the derivative instrument. Derivatives are subject
to a number of risks, such as interest rate, credit and liquidity risk, which is
the risk that a particular investment may be difficult to purchase or sell. They
also involve the risk of improper valuation. Changes in the value of a
derivative may not correlate perfectly with the underlying asset, rate or
currency.
DECISION MAKING PROCESS
Investment decisions for the fund follows a three-stage process.
First, the portfolio managers and the strategy team identify key global and
macroeconomic themes they anticipate will drive the fixed income markets. For
example, the team analyzes liquidity trends, monetary and fiscal policy, capital
flows, business cycles, and global indicators such as yield curves and currency
dynamics.
Next, the market themes are translated into portfolio strategies and sector
allocations that are designed to add value and diversify risk. Various
strategies are analyzed and the investment team selects the appropriate
allocation within the risk/reward tolerances for the fund.
Finally, sector specialists buy or sell securities to implement the sector
allocations. The specific investment choices are based on fundamental industry
analysis (such as company business prospects, earnings, credit risk and
evaluation of management), independent research, and assessment of credit
spreads, liquidity and risk associated with ratings changes.
OTHER INVESTMENT INFORMATION
TEMPORARY, DEFENSIVE POSITIONS. The fund may from time to time, take temporary
defensive positions that are inconsistent with its principal investment
strategies by investing in cash and short-and medium-term fixed income
securities and, as described below, in the Money Market Fund, another Charter
Fund/sm/ series of CIGNA Funds Group, in attempting to respond to adverse
market, economic, political or other conditions. If the fund takes a temporary
defensive position it may not achieve its investment objective.
SHORT-TERM INVESTMENTS. The fund may, pursuant to an order obtained by CIGNA
Funds Group from the Securities and Exchange Commission, invest its cash
balances that have not been invested in portfolio securities in the Money Market
Fund. To avoid double advisory fees, CIGNA Investments will waive or credit its
advisory fee by the amount of the advisory fee incurred by the fund in
connection with its investment in the Money Market Fund.
PORTFOLIO TURNOVER. Consistent with its investment policies, the fund will
purchase and sell securities without regard to the effect on portfolio turnover.
Higher portfolio turnover (e.g. over 100% per year) will cause the fund to incur
additional transaction costs and may result in taxable gains being passed
through to shareholders.
CHANGES IN POLICIES. The fund's Trustees may change the fund's investment
strategies and other policies without shareholder approval. The fund may not
change its investment objective or certain restrictions identified as
fundamental in the statement of additional information without shareholder
approval.
MANAGEMENT OF THE FUND
The investment adviser to the fund is CIGNA Investments, Inc., 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.
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CIGNA Investments determines what investments shall be purchased, held and sold
by the fund. As full compensation for the investment management and all other
services rendered by CIGNA Investments, the fund pays CIGNA Investments .60% of
the fund's average net assets on an annual basis.
PORTFOLIO MANAGERS:
These are the individuals primarily responsible for management of the fund. They
have had this responsibility since inception of the fund.
ROBERT J. MOORE, ROBERT W. JUSTICH, PH.D., IRA EDELBLUM AND KEVIN
BARRY.
ROBERT J. MOORE. Mr. Moore is Chief Investment Officer of CIGNA
Investments. He previously had been co-head of global fixed income
at Credit Suisse Asset Management where he oversaw the U.S. fixed
income team and chaired its sector allocation committees. Prior to
joining Credit Suisse in 1987, he was head of a fixed income sales
research group at Salomon Brothers. Mr. Moore holds a B.S. in
Finance from Lehigh University and is a member of the Advisory
Council for the Lehigh University Business School.
ROBERT W. JUSTICH. Mr. Justich is Managing Director and senior
member of the Global Fixed Income portfolio management team of
CIGNA Investments. Previously, Mr. Justich was a Managing Director
at Credit Suisse Asset Management, where he led the organization's
global fixed income credit function and was directly responsible
for approximately $6 billion in fixed income assets. Prior to
joining Credit Suisse in 1995, he spent seven years as Director,
Corporate Bond Trading at Merrill Lynch, focusing on credit
research and leading the development of Merrill's first
proprietary corporate bond trading desk. Mr. Justich holds a B.A.
degree and M.B.A. in Finance from Rutgers University.
IRA EDELBLUM. Mr. Edelblum is Managing Director and Core Fixed
Income Portfolio Manager of CIGNA Investments. Previously, Mr.
Edelblum was with Credit Suisse Asset Management where he was a
portfolio manager specializing in corporate bonds. Mr. Edelblum is
a graduate of the State University of New York (Albany) and holds
an M.B.A. from New York University.
KEVIN D. BARRY, CFA. Mr. Barry is Managing Director and Core Fixed
Income Portfolio Manager of CIGNA Investments. His
responsibilities include managing public mortgage and asset-backed
securities. Previously, Mr. Barry was with 1838 Investment
Advisers. Mr. Barry received his bachelor's degree in Finance,
Summa Cum Laude, from LaSalle College in 1981.
Messrs. Moore, Justich and Edelblum joined CIGNA Investments in
1999. Mr. Barry joined CIGNA Investments in 1997.
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PRICING OF SHARES
The price of fund shares is based on the fund's net asset value. The fund's
custodian, State Street Bank and Trust Company ("State Street") calculates the
net asset value 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 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.
The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will mature
within 60 days at amortized cost, which approximates market value. It values all
other investments and assets at their fair values. The fund translates prices
for its 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 the fund's net asset value. Because
foreign markets may be open at different times than the New York Stock Exchange,
the value of the fund's shares may change on days when shareholders are not able
to buy or sell them. If events materially affecting the values of the 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.
PURCHASE AND REDEMPTION OF SHARES
GENERAL INFORMATION-INSTITUTIONAL CLASS SHARES
The institutional class does not impose any distribution or service fees, and is
generally offered to institutional investors such as corporations, endowments,
foundations and employer-sponsored retirement or savings plans that maintain an
omnibus or pooled account with one or more Charter Funds/SM/.
HOW TO PURCHASE SHARES
Shares of the fund are sold on a continuous basis without any initial sales
charge or contingent deferred charge at the net asset value per share of the
fund next determined after we receive your purchase order (see "Pricing of
Shares"). The fund does not issue share certificates.
ELIGIBLE PURCHASERS
Institutional class shares are available to:
o Separate accounts of Connecticut General Life Insurance Company ("CG
Life") or other insurance companies that are offered to qualified
employer-sponsored retirement plans, and to other employer-sponsored
plans. To be eligible for the institutional class, the employer's plans
must invest over $100 million in Charter Funds/SM/ and other CIGNA
managed assets with record keeping provided by CG Life or its affiliate.
For the purpose of determining the amount of CIGNA managed assets, life
insurance and annuity products offered by CG Life may be included. CIGNA
managed assets do not include investments in separate accounts that
purchase mutual fund shares other than Charter Funds/SM/. Also, these
plans are eligible to purchase institutional class shares if the plan
sponsor confirms a good faith expectation that investments in CIGNA
managed assets by the sponsor and its plans will attain $100 million
(using the higher of purchase price or current market value) within one
year of initial purchase and if the plan sponsor agrees that
institutional class shares may be redeemed and premier class shares
purchased if that level is not attained.
o Other institutional investors investing over $25 million ($5 million for
the Core Plus Fixed Income Fund) in the specific Charter Fund/SM/ in
which the investor wishes to invest and who do not receive record keeping
services from CG Life or its affiliate.
o Subsidiaries and affiliates of CIGNA Corporation.
MAINTENANCE OF CLASS ELIGIBILITY
In the event an investor does not maintain the minimum investment amounts for
the institutional class, (as a result of shareholder redemption, not loss in
market value changes of fund shares) the fund may redeem the
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investor's shares and purchase shares of the appropriate class of the fund. This
transfer will have tax consequences unless the shares are owned in a
tax-advantaged retirement account.
INSTITUTIONAL INVESTORS
Institutional investors investing in the institutional class of the fund (other
than retirement or savings plan participants) should call CIGNA Funds Services
at 1-800-528-6718 to place orders. Purchase orders are priced as of the close of
business on the day the order is received by CIGNA Funds Services, provided it
receives the order by 4:00 p.m. Eastern Time.
ADDITIONAL INFORMATION:
The fund reserves the right to limit purchases of shares, or may refuse to sell
shares (including purchases by exchange) of a fund to any person, if in the
judgment of fund management, this is in the best interest of the fund.
The fund may convert from a portfolio directly holding investment securities to
a "feeder" fund of a "master" fund having substantially the same objectives,
policies and strategies as described in this prospectus if the Board of Trustees
of the fund determines it is in the best interests of the fund and its
shareholders to do so. If this were to happen, the fund would seek to achieve
its investment objective by owning shares of a corresponding master fund, which
in turn would own the types of securities and employ the types of policies and
strategies described in this prospectus.
HOW TO REDEEM SHARES
INSTITUTIONAL INVESTORS
Institutional investors in the institutional class (other than retirement or
savings plan participants) should call CIGNA Funds Services at 1-800-528-6718.
Shares will be redeemed at the net asset value next determined after CIGNA Funds
Services receives the redemption request.
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, the investor 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 shares are issued before the
investor's check has cleared, the transmittal of any proceeds from the
redemption of the shares will occur upon clearance of the check, which may take
up to 15 days.
The fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other
periods as the 1940 Act or Securities and Exchange Commission may permit.
If the sale of fund shares you make during a 90-day period reaches the lesser of
$250,000 or 1% of fund assets, we can give you liquid securities from the fund's
portfolio instead of cash. If you want to sell the securities for cash, you
would have to pay the costs charged by a broker.
HOW TO EXCHANGE SHARES
If you want to switch your investment from one Charter Fund/SM/ to another, you
can exchange your fund shares for shares of the same class of another fund at
the respective net asset values of the funds involved.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have an
adverse effect on all shareholders. In order to limit excessive exchange
activity and otherwise promote the best interests of the Charter Funds, the fund
reserves the right to revise or terminate the exchange privilege, limit the
amount or number of exchanges or reject any exchange. The Charter Fund/SM/ into
which you would like to exchange may also reject your exchange.
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DIVIDENDS AND DISTRIBUTIONS
The fund declares and distribute income dividends monthly and capital gain
dividends, if any, annually.
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
As with any investment, your investment in a fund could have tax consequences
for you. If you are not investing through a tax-advantaged retirement account,
you should consider these tax consequences.
TAXES ON DISTRIBUTIONS. Distributions you receive from the fund are subject to
federal income tax, and may also be subject to state or local taxes.
For federal tax purposes, the fund's dividends and distributions of income and
short-term capital gains are taxable to you as ordinary income. The fund's
distributions of long-term capital gains are taxable to you generally as capital
gains. The rates that you will pay on any capital gains distributions will
depend on how long the fund holds its portfolio securities. This is true no
matter how long you have owned your shares in the fund and even though your
distributions are reinvested in shares of the fund.
If you buy shares when the fund has realized but not yet distributed income or
capital gains, you will be "buying a dividend" by paying the full price for the
shares and then receiving a portion of the price back in the form of a taxable
distribution.
Any taxable distributions you receive from the fund will normally be taxable to
you when you receive them, even though your dividends will be reinvested into
the fund.
TAXES ON TRANSACTIONS. Your redemptions, including exchanges, may result in a
capital gain or loss for federal tax purposes. A capital gain or loss on your
investment in the fund is the difference between the cost of your shares and the
price you receive when you sell them.
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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 funds= performance
during their last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the funds and is incorporated into this prospectus by
reference.
Information about the fund (including the SAI) can be reviewed and copied at the
Commission's Public Reference Room in Washington, D.C. You can get free copies
of reports and SAIs, request other information and discuss your questions about
the fund by contacting the fund at:
CIGNA Financial Services
P.O. Box 150476
Hartford, CT 06115-0476
Telephone: 1-800-528-6718
Reports and other information about the funds are available on the EDGAR
Database on the Commission's Internet site at HTTP://WWW.SEC.GOV. Copies of this
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information may be obtained, after paying a duplicating fee, by electronic
request at the following E-mail address: [email protected], or by writing the
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Commission's Public Reference Section, Washington, D.C. 20549-0102.
Information on the operation of the public reference room may be obtained by
calling the Commission at:
1-202-942-8090.
CHARTER FUNDS /SM/
CORE PLUS FIXED INCOME FUND
(Investment
Company Act
File No. 811-1646)
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